Go-Mart, Inc. d/b/a Go Mart 35, DAB TB5167 (2020)

INITIAL DECISION

The Center for Tobacco Products (CTP) of the Food and Drug Administration (FDA) seeks to impose a No-Tobacco-Sale Order (NTSO) for a period of six consecutive months against Respondent, Go-Mart, Inc. d/b/a Go Mart 35 (Respondent).  CTP alleges that Respondent committed seven repeated 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 36-month period.  Respondent admits that the alleged violations occurred, but offers defenses and argues that a shorter NTSO period of 28 days would be appropriate, considering its efforts to prevent underage sales of tobacco products, the negative financial impact of a six-month NTSO, and other mitigating circumstances.  For the reasons discussed below, I find Respondent liable for seven repeated violations over a period of 36 months and conclude that an NTSO of three consecutive months is appropriate.

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I.  Background and Procedural History

As provided in 21 C.F.R. §§ 17.5 and 17.7, CTP served the Complaint on Respondent at 1425 Milford Street, Clarksburg, West Virginia 26301,1 by United Parcel Service, on June 28, 2019.  CTP also filed a copy of the Complaint with the Civil Remedies Division (CRD) of the Departmental Appeals Board (DAB) on July 1, 2019.  See Docket Entry Nos. 1 (Complaint), 1b (Proof of Service).  CTP's Complaint alleges that Respondent settled two prior civil money penalty (CMP) actions and one prior NTSO action for selling cigarettes or smokeless tobacco to a minor and failing to verify the age of the purchaser, in violation of the of the regulations found at 21 C.F.R. pt. 1140.  Complaint ¶¶ 8-12.  CTP asserts that Respondent admitted all of the allegations in the previous complaints, paid the agreed-upon CMPs, agreed to an NTSO for an agreed-upon period, and expressly waived its right to contest these prior violations in subsequent actions.  Id.

Specifically, CTP asserts that Respondent previously admitted to one original violation on August 20, 2014, and three repeated violations on December 7, 2015, August 10, 2016, and November 18, 2017, for selling cigarettes to minors, in violation of 21 C.F.R. § 1140.14(a)(1).2   Id. ¶ 11.  Further, Respondent also admitted to one original violation and three repeated violations on the same dates listed above, respectively, for failing to verify the age of the cigarette purchasers by means of photographic identification containing the bearer's date of birth, in violation of 21 C.F.R. § 1140.14(a)(2)(i).3   Id.  CTP also alleges that Respondent subsequently sold cigarettes to a minor on August 12, 2018, in violation of 21 C.F.R. § 1140.14(a)(1).  Id. ¶ 6.  Accordingly, CTP alleges that Respondent had six repeated violations from the previous CMP and NTSO actions and an additional repeated violation on August 12, 2018.  Id. ¶¶ 11-12.  Therefore, CTP contends that Respondent has committed seven repeated violations within a 36-month period and is subject to an NTSO.  Id. ¶ 12.

On July 23, 2019, Respondent, through counsel, timely filed an Answer admitting the Complaint's "Current Allegations," raising several defenses, and stating that the

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requested six-month NTSO is inappropriate.  See Docket Entry No. 3a (Answer).  Specifically, Respondent admits that it sold cigarettes or smokeless tobacco to a minor on August 12, 2018, in violation of 21 C.F.R. § 1140.14(a)(1).  Answer ¶ 1.  In its Answer, Respondent asserts that it "has implemented procedures that go above and beyond the law in its efforts to prevent the sale of tobacco to minors."  Id. ¶ 2.  However, a cashier "chose to override those procedures, despite the cashier having received rigorous training" on Respondent's tobacco sale policies.  Id.  Respondent further asserts that the "cashier was terminated" and "the West Virginia Unemployment Compensation Division denied the cashier unemployment benefits on the grounds that the cashier had engaged in 'actions of gross misconduct.'"  Id.  Respondent also stated that it wished to present evidence on the "substantial impact that the proposed penalty would have on [Respondent]."  Id. Accordingly, Respondent contends that "the exceptional facts in this matter do not justify the penalty sought by the CTP. . ."  Id. ¶ 3.  Finally, Respondent argues that "[w]hile CTP's policy is to seek a six-month suspension for a second NTSO, that policy is neither a requirement of the law nor binding on this Board."  Id. On July 29, 2019, I issued an Acknowledgment and Pre-Hearing Order (APHO) that established a deadline for discovery and a schedule for pre-hearing exchanges between the parties.  Docket Entry No. 4.

On September 16, 2019, CTP filed a Motion for a Protective Order seeking to limit discovery of documents requested by Respondent.  Docket Entry Nos. 8, 8a.  On October 4, 2019, CTP filed a Memorandum of Law in Support of Its Motion for a Protective Order indicating that document request number 1 was the sole remaining issue between the parties.  Docket Entry Nos. 9, 9a-9d.  On October 21, 2019, Respondent filed a Response in Opposition to Complainant's Motion for Protective Order confirming that the only request still at issue was document request number 1, in which it sought settlements since August 2015 where CTP resolved a second NTSO violation with an NTSO of less than six months.  Docket Entry No. 11.

On November 12, 2019, CTP moved for leave to file a reply in support of its Motion for a Protective Order and filed a proposed reply.  Docket Entry Nos. 12-13.  On that same date, Respondent moved for leave to file a surreply in further support of its Response in Opposition to Complainant's Motion for Protective Order and submitted a proposed surreply.  Docket Entry Nos. 14-15.  On November 26, 2019, I issued an order denying both motions for leave to file additional briefs, striking CTP's reply and Respondent's surreply from the record, denying CTP's motion for a protective order, and directing CTP to serve on Respondent all documents responsive to document request number 1 by December 4, 2019.  Docket Entry No. 17.

The parties timely filed their respective pre-hearing exchanges, and I held a pre-hearing conference (PHC) by telephone on January 10, 2020.  CTP's pre-hearing exchange included an Informal Brief of Complainant, Complainant's List of Proposed Witnesses and Exhibits, and exhibits 1 through 17 (CTP Exs. 1-17, respectively).  Docket Entry

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Nos. 16, 16a-16r.  CTP's exhibits included the declaration of one witness, William Bennett, FDA-Commissioned inspector for the state of West Virginia (CTP Ex. 7).  Docket Entry No. 16h).  Respondent's pre-hearing exchange consisted of an Informal Brief of Respondent, Respondent's Exhibit List, Respondent's Witness List, and exhibits 1 through 11 (R. Exs. 1-11, respectively).  Docket Entry No. 18.  Respondent's exhibits included the declaration of one witness, Terry Smith, Respondent's Assistant General Manager (R. Ex. 1).  Id.  At the PHC, both parties agreed that Respondent does not contest the allegations in the Complaint concerning the violation on August 12, 2018, and the only remaining issue in dispute is whether a NTSO for a period of six months is appropriate.  Respondent's counsel raised no objection to the admission of Complainant's proffered exhibits.  Likewise, Complainant's counsel raised no objection to the admission of Respondent's proffered exhibits.  Neither party raised any motions concerning the admission or exclusion of other evidence or the amendment of pleadings.  Respondent's counsel confirmed that he did not need to cross-examine Inspector Bennett.  Complainant's counsel stated that he did not wish to cross-examine Ms. Smith.  Complainant's counsel agreed to proceed to a decision based on the written record.  See Docket Entry No. 20, at 2 (Summary of January 10, 2020 Pre-Hearing Conference and Order Establishing Deadlines for Supplemental Briefs).

On January 14, 2020, I issued an order summarizing the PHC, finding a hearing unnecessary because neither party requested to cross-examine the other party's witness, and establishing a supplemental briefing schedule.  Id. In that order, I also admitted Complainant's exhibits into evidence as CTP Exhibits 1 through 17, and admitted Respondent's exhibits into evidence as Respondent Exhibits 1 through 11.  Id.

The parties timely filed their respective supplemental and responsive briefs.  Docket Entry Nos. 21-24.  The administrative record is now complete and this matter is ready for a decision.  21 C.F.R. § 17.41; 21 C.F.R. § 17.45(c).  I decide this case based on the evidence in the administrative record.  21 C.F.R. § 17.19(b)(11), (17).

II.  Issue

The issue in this case is whether an NTSO for a period of six consecutive months is appropriate, pursuant to the provisions of 21 C.F.R. § 17.34(a)-(c).

III.  Applicable Law and CTP's Policy Guidance

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).  Tobacco products are misbranded if they are sold or distributed in violation of the applicable regulations.  21 U.S.C. §§ 387c(a)(7)(B), 387f(d)(1); see also 21 C.F.R. pt. 1140.  FDA and its agency, CTP, may seek the imposition of remedies against any person who violates the Act's requirements as they relate to the sale of tobacco products.  21 U.S.C. § 333(f)(5) and

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(f)(9).  Under 21 C.F.R. § 1140.14(a)(1), no retailer may sell cigarettes or smokeless tobacco to any person younger than 18 years of age.  Under 21 C.F.R. § 1140.14(a)(2)(i), retailers must verify, by means of photographic identification containing a purchaser's date of birth, that no cigarette or smokeless tobacco purchasers are younger than 18 years of age.

The Act authorizes CTP to assess a CMP and, in the case of "repeated violations," to impose an NTSO against retailers.  See 21 U.S.C. § 333(f)(8)-(9)(A).  The term "repeated violations" is defined as "at least 5 violations of particular requirements over a 36-month period at a particular retail outlet that constitute a repeated violation . . . ."  See 21 U.S.C. § 333 note, at (1)(A).  The Act also provides that "[p]rior to the entry of a no-sale order under this paragraph, a person shall be entitled to a hearing . . . ."  21 U.S.C. § 333(f)(8); see also 21 U.S.C. § 333(f)(5)(A).

The Act establishes the factors that must be considered in deciding the length of an NTSO:

In determining the . . . period to be covered by a no-tobacco-sale order, the Secretary shall 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 Kat Party Store, Inc. d/b/a Mr. Grocer Liquor Store, CRD No. TB509, at 2 (2016).

The Act does not establish specific durations for NTSOs, but it does contemplate permanent NTSOs, which may be compromised, modified, or terminated.  See 21 U.S.C. § 333(f)(5)(B) & (D).  Likewise, the applicable regulations do not outline specific durations for NTSOs.  However, CTP's non-binding guidance document establishes the maximum periods of time that FDA would seek for an NTSO, ranging from 30 calendar days to an indefinite period of time (i.e., a permanent NTSO).  See Determination of the Period Covered by a No-Tobacco-Sale Order and Compliance with an Order: Guidance for Tobacco Retailers, at 3-4 (Aug. 2015), http://www.fda.gov/downloads/TobaccoProducts/Labeling/RulesRegulationsGuidance/UCM460155.pdf.  The maximum duration of a proposed NTSO increases based on the number of NTSOs previously imposed on a retailer.  Specifically, the maximum period of time for the second NTSO that FDA would seek is six months.  Id. at 4.  The guidance document also states that, "[i]n general, FDA intends to file a complaint seeking the maximum time period."  Id. at 3.  However, "FDA may reduce the time period taking into consideration the factors [in the Act] described above and information regarding whether the retailer has taken effective steps to prevent selling tobacco products to minors."  Id.

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When determining whether a retailer has taken effective steps to prevent tobacco sales to minors, FDA will consider whether the retailer has taken the following actions:

• adopting and enforcing a written policy against sales to minors;
• informing its employees of all applicable laws;
• establishing disciplinary sanctions for employee noncompliance; and
• requiring its employees to verify age by way of photographic identification or electronic scanning device.

Id. at 3-4; see also Civil Money Penalties and No-Tobacco-Sale Orders for Tobacco Retailers:  Guidance for Industry, at 10-11 (rev. Dec. 2016), https://www.fda.gov/media/80888/download; Civil Money Penalties and No-Tobacco-Sale Orders for Tobacco Retailers, Responses to Frequently Asked Questions:  Guidance for Industry, at 15 (rev. Dec. 2016), https://www.fda.gov/media/92558/download.

CTP has the burden to prove Respondent's liability under the Act and the appropriateness of the proposed NTSO by a preponderance of the evidence.  21 C.F.R. § 17.33(b).  Respondent has the burden to prove any affirmative defenses and any mitigating factors, likewise by a preponderance of the evidence.  21 C.F.R. § 17.33(c).  The Supreme Court of the United States 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 its nonexistence before finding in favor of the party that had the burden to persuade the judge of the fact's existence.  Concrete Pipe and Prods. of Cal., Inc. v. Constr. Laborers, 508 U.S. 602, 622 (1993) (citing In re Winship, 397 U.S. 358, 371-72 (1970) (Harlan, J., concurring).

IV.  Analysis

A. Violations

Upon consideration of the entire administrative record and applicable law, I find that Respondent committed seven repeated violations of the Act and tobacco regulations over a 36-month period, as alleged in the Complaint.  Complaint ¶¶ 9-11.  In three previous administrative proceedings, including two CMP actions and one NTSO action, Respondent admitted to multiple violations of selling cigarettes to minors and failing to verify the age of the cigarette purchasers, in violation of 21 C.F.R. § 1140.14(a)(1) and 21 C.F.R. § 1140.14(a)(2)(i), respectively.  Each of the three previous actions concluded by settlement.  See CTP Ex. 2 (Acknowledgment Form); CTP Ex. 4 (Acknowledgment Form), CTP Ex. 6 (Notice of Settlement Agreement for No-Tobacco-Sale Order). In each settlement agreement, Respondent acknowledged that all of the violations in the respective complaints occurred as alleged, waived the Respondent's ability to contest the violations in the future, and acknowledged that the violations may be counted in

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determining the total number of violations for purposes of future enforcement actions.  CTP Exs. 2, 4; see also CTP Ex. 6, at 2.

Accordingly, based on these settlement agreements, Respondent previously admitted to selling cigarettes to minors on August 20, 2014, December 7, 2015, August 10, 2016, and November 18, 2017, in violation of 21 C.F.R. § 1140.14(a)(1).  CTP Exs. 1-6.  Respondent also admitted to committing additional violations on the same dates listed above, respectively, for failing to verify the age of the cigarette purchasers by means of photographic identification containing the bearer's date of birth, in violation of 21 C.F.R. § 1140.14(a)(2)(i).  Id.  These prior violations are administratively final and may not be challenged by Respondent.  21 C.F.R. § 17.15(b) (stating that a "settlement agreement shall be filed in the docket and shall constitute complete or partial resolution of the administrative case as so designated by the settlement agreement").

In this proceeding, Respondent admitted in its Answer that it sold cigarettes to a minor on August 12, 2018, in violation of 21 C.F.R. § 1140.14(a)(1).  Answer ¶ 1 (admitting all of the "Current Allegations" of liability made in paragraphs 5, 6, and 7 of the Complaint).  Similarly, in its Informal Brief, Respondent stated that it "does not dispute the . . . allegation that a tobacco sale was made to a minor on August 12, 2018" and "the only contested issue in this case is the appropriate remedial measure for this infraction."  Informal Brief of Respondent, at 1; see also id. at 6.  Consistently, Respondent's counsel confirmed during the PHC on January 10, 2020, that Respondent does not contest the allegations in the Complaint concerning the violation on August 12, 2018.  Accordingly, I conclude that Respondent violated the law by selling cigarettes to a minor on August 12, 2018, as alleged in the Complaint.

Even if Respondent had not conceded that the unlawful sale to a minor occurred on August 12, 2018, the unrebutted record evidence compels me to find by a preponderance of evidence that the violation occurred as alleged in the Complaint.  Specifically, I find credible the testimony of Inspector Bennett.  CTP Ex. 7.  He testified that before the inspection at Respondent's establishment on August 12, 2018, he confirmed that Minor A had a true and accurate photographic identification showing the minor's actual date of birth (January 31, 2002), Minor A was 16 (under the age of 18) at the time of the inspection, and Minor A had no tobacco products in his/her possession.  CTP Ex. 7 ¶ 8; see also CTP Ex. 13 (Minor A's redacted identification).

Inspector Bennett also testified that he observed Respondent's employee sell Minor A a package of Marlboro cigarettes and provide a receipt after the purchase.  CTP Ex. 7 ¶ 9.  After the inspection, Inspector Bennett retrieved the package of cigarettes and the receipt from Minor A.  Id. ¶ 10.  Inspector Bennett then labeled the cigarettes as evidence, photographed the evidence, and processed the evidence according to standard procedures, which entailed completing several contemporaneous reports.  Id. ¶¶ 10-12.  These photographs and reports document the inspection and corroborate Inspector Bennett's

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testimony.  See CTP Ex. 8 (Narrative Report); CTP Ex. 9 (Tobacco Inspection Management System (TIMS) Assignment Form); CTP Ex. 10 (Photographs of the cigarettes sold by Respondent to Minor A); CTP Ex. 11 (Photographs of the cigarettes sold by Respondent to Minor A and receipt in evidence bag); CTP Ex. 12 (Photograph of the receipt); and CTP Ex. 13 (Minor A's redacted identification).  As indicated above, Respondent has not challenged Inspector Bennett's testimony or any of this documentary evidence.

Indeed, Respondent's Assistant General Manager, Terry Smith, testified that an employee "sold tobacco to an underage person" on August 12, 2018.  R. Ex. 1 ¶ 12.  Although the cashier "asked to see the minor's driver's license, which was clearly marked with a red border, indicating that the person was underage . . . , [the cashier] entered a random date into the register, showing the minor to be 31 years of age."  Id.; see also R. Ex. 6 (Aug. 12, 2018, spot-check footage showing age entered for underage tobacco sale).  Therefore, aside from Respondent's admission, I also find that the weight of the evidence in the record establishes that Respondent sold cigarettes to a minor on August 12, 2018, in violation of 21 C.F.R. § 1140.14(a)(1).

Given Respondent's admissions in prior settlement agreements, admissions in this proceeding, and the evidence of record, I conclude that Respondent committed seven repeated violations of the Act and its implementing regulations over a 36-month period, as alleged in the Complaint.  See Complaint ¶ 1 n.1; see also id. ¶ 1 (table).  When determining the number of repeated violations for an NTSO, each regulatory requirement at 21 C.F.R. pt. 1140 is viewed separately and each "repeated violation" represents the second or subsequent violation of a particular requirement over a 36-month period.  See 21 U.S.C. § 333 note at (1)(A); see also Civil Money Penalties and No-Tobacco-Sale Orders for Tobacco Retailers:  Guidance for Industry, at 5-6 (rev. Dec. 2016), https://www.fda.gov/media/80888/download.  Thus, for purposes of imposing an NTSO under 21 U.S.C. § 333(f)(8), the original violations are not included when determining whether a Respondent has committed at least five "repeated violations" over a 36-month period.  Id. Accordingly, Respondent originally violated the prohibition against selling cigarettes to persons younger than 18 years of age, 21 C.F.R. § 1140.14(a)(1), on August 20, 2014, and repeated those violations four times on December 7, 2015, August 10, 2016, November 18, 2017, and August 12, 2018.  Respondent also originally violated the requirement that retailers verify, by means of photo identification containing a purchaser's date of birth, that no cigarette purchasers are younger than 18 years of age, 21 C.F.R. § 1140.14(a)(2)(i), on August 20, 2014, and repeated those violations three times on December 7, 2015, August 10, 2016, and November 18, 2017.  Therefore, I conclude that Respondent is liable for seven repeated violations of law over a 36-month period, from December 7, 2015, through August 12, 2018.

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B. No-Tobacco-Sale-Order

Having determined that Respondent is liable for committing seven repeated violations over a 36-month period, I conclude that I have the authority to impose an NTSO, under 21 U.S.C. § 333(f)(8).  However, the primary issue before me is whether the requested NTSO for a period of six consecutive months is appropriate.  21 C.F.R. § 17.34.

As explained above, the Act and regulations do not establish specific durations for NTSOs.  However, CTP's non-binding guidance document states that the maximum period of time that FDA would seek for a second NTSO is six months.  See Determination of the Period Covered by a No-Tobacco-Sale Order and Compliance with an Order:  Guidance for Tobacco Retailers, at 4-5 (Aug. 2015), http://www.fda.gov/downloads/TobaccoProducts/Labeling/RulesRegulationsGuidance/UCM460155.pdf.  While the CTP guidance documents are not regulations and thus, are not binding, as a matter of law, I find that CTP has provided a reasonable explanation for its policy determinations and find them persuasive, particularly with respect to the need to protect the public health and gradually increasing the NTSO's duration when imposing subsequent NTSOs.  Id. at 3-5.  I may, however, "compromise, modify, or terminate, with or without conditions, any no-tobacco-sale order."  21 U.S.C. § 333(f)(5)(D).  When determining the appropriate period to be covered by an NTSO, I am required to take into account "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."  21 U.S.C. § 333(f)(5)(B).

Consistent with its guidance document, CTP seeks to impose the maximum NTSO period of six consecutive months against Respondent.  Complaint ¶ 1.  In its Informal Brief, CTP asserts that "[g]iven Respondent's apparent unwillingness and/or inability to comply with the tobacco regulations, an NTSO is necessary and appropriate to protect the public health."  Informal Brief of Complainant, at 3.  CTP notes that this is the fourth administrative action that it has brought against Respondent for violating the FDA's tobacco regulations, despite previous warnings and directing Respondent to information on the FDA's website to help tobacco retailers understand and comply with the part 1140 regulations.  Id. 2, 12 (citing 2014 Warning Letter to Respondent at CTP Ex. 16); see also Complainant's Supplemental Brief, at 3 (contending that Respondent "has had ample warning that these continued violations could lead to a six-month NTSO").  CTP asserts that Respondent's most recent violation on August 12, 2018, "is particularly egregious because it occurred after two prior civil money penalty actions and one NTSO action . . ."  Informal Brief of Complainant, at 12.  Indeed, "Respondent committed its seventh violation on August 12, 2018, despite having served a 22-day NTSO only a few months earlier."  Complainant's Supplemental Brief, at 3.  CTP argues that this is Respondent's second NTSO, and a consecutive six-month NTSO is appropriate and fully consistent

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with the legislative intent and statutory scheme for Respondent's seven repeated violations in a 36-month period.  Informal Brief of Complainant, at 11, 14.

Respondent argues for mitigation of the NTSO period because of its "significant efforts to prevent the sale of tobacco to minors, the acts of gross misconduct by the cashier; and the substantial impact that the proposed [NTSO] would have on [Respondent]."  Answer ¶ 2.  Specifically, Respondent requests an NTSO period no longer than 28 days, arguing that:  (1) Respondent has a robust training program in place for all employees, and has consistently implemented measures to ensure compliance, including mandatory identification checks on all purchasers regardless of age; (2) the employee checked the minor's identification on August 12, 2018, but entered a random date of birth into the register in order to complete the sale; and (3) Respondent terminated the employee conducting the sale.  See Informal Brief of Respondent, at 7; see also Answer ¶ 2.  Respondent also claims that a six-month NTSO "would not advance the purposes of the act" and "has the potential to result in the closing of the [Respondent's] location."  Informal Brief of Respondent, at 2, 8.

For the following reasons, I reject both parties' proposed durations of the NTSO and conclude that an NTSO for three consecutive months is appropriate based upon the record evidence, applicable law, and aggravating and mitigating circumstances in this case.

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

I have found that Respondent committed four repeated violations of selling cigarettes to minors and three repeated violations for failure to verify, by means of photo identification containing a purchaser's date of birth, that no cigarette purchasers are younger than 18 years of age, totaling seven repeated violations of the tobacco regulations within a 36-month period.  This is a second NTSO action against Respondent.  Notably, Respondent's previous 22-day NTSO ended on July 9, 2018, and the seventh repeated violation at issue in this case occurred only weeks later on August 12, 2018.  CTP Ex. 6 ¶ 1.  Additionally, as CTP emphasizes, the "August 12, 2018 violation is particularly egregious because it occurred after two prior civil money penalty actions and one NTSO action were brought by CTP against Respondent."  Informal Brief of Complainant, at 12.  Moreover, "the August 12, 2018 violation occurred despite warnings from FDA that additional violations would result in more serious consequences, and even after FDA pointed Respondent to information and resources designed to help retailers comply with tobacco regulations."  Informal Brief of Complainant, at 11; see also CTP Ex. 16, at 2.  The repeated inability of Respondent to comply with federal tobacco regulations is serious in nature and warrants a proportionate NTSO duration.

Respondent attempts to blame its terminated employee for proceeding with a sale of cigarettes to a minor on August 12, 2018, but ultimately, an employer is liable for

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violations of 21 C.F.R. part 1140 committed by employees acting in the scope of their employment.  Although Respondent's employee violated company policy by entering a random date into the register and selling cigarettes to a minor, he was acting within the scope of his employment as a cashier for the Respondent.  See R. Ex. 1 ¶ 12; R. Ex. 7.  Moreover, the employee's apparent "gross misconduct" disqualified him from receiving unemployment benefits, but state laws concerning unemployment benefits are not applicable in these proceedings.  See R. Ex. 7.  Additionally, neither the Act nor the tobacco regulations at 21 C.F.R. part 1140 state that an employee's gross misconduct constitutes an action outside the scope of employment or otherwise absolve the Respondent of responsibility.  Indeed, "Respondent's employees are its agents and Respondent bears the onus for assuring that these employees comply with legal requirements."  Kat Party Store, Inc. d/b/a Mr.  Grocer Liquor Store, DAB No. TB509, at 4 (2016).  This remains true even if the employee is acting against company policy.  See TOH, Inc. d/b/a Ridgeville Service Center, DAB No. 2668, at 17-18 (2015) ("The mere fact that Respondent instructed its clerks not to sell to minors is . . . an inadequate defense because the [business is] obligated to ensure that its policies are enforced and effective.").

2. Respondent's Ability to Pay

This factor does not apply to the circumstances here because CTP seeks an NTSO, not a civil money penalty.

3. Effect on Respondent's Ability to Continue to Do Business

Respondent argues that a six-month NTSO "will unquestionably have a significant negative impact on [Respondent's] ability to continue to do business."  Informal Brief of Respondent, at 12; see also Supplemental Brief of Respondent, at 9.  In support, Respondent submitted its financial statements summary spreadsheet (R. Ex. 9), its 2018 sales summary (R. Ex. 10), and its 2017 sales summary (R. Ex. 11).  Respondent also submitted the declaration of its Assistant General Manager, Terry Smith, (R. Ex. 1) to testify concerning  2019 sales data, the overall financial health of Respondent's location, sales trends since the first NTSO, and her opinion regarding the potential impact of a six-month NTSO.  Informal Brief of Respondent, at 13.

Specifically, Ms. Smith testified that tobacco sales account for over 50% of Respondent's total annual revenue.  R. Ex. 1 ¶ 4.In 2017, before the first NTSO, tobacco-related revenues were $1,257,453.00, which accounted for 64.96% of Respondent's sales revenue.  R. Ex. 1 ¶ 4; R. Ex. 11.  Ms. Smith also testified that, after serving a 22-month NTSO in 2018, tobacco-related revenues were $959,137.00 for 2018, which represents a 24% decrease in tobacco sales compared to 2017.  R. Ex. 1 ¶¶ 5-7; R. Ex. 10.

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Further, Ms. Smith testified that the first 22-day NTSO resulted in a substantial number of customers permanently shifting their business to other establishments.  R. Ex. 1 ¶ 7; see also Supplemental Brief of Respondent, at 9.  Moreover, "[due] to this shift in customer routines resulting from the 22-day NTSO in 2018, 2019 tobacco sales are still down 34%" in 2019 from their pre-NTSO 2017 levels.  R. Ex. 1 ¶ 7.  According to Ms. Smith, "[t]obacco-buying customers take their other purchases, such as food and beverages, to other stores as well."  Id.  As a result, gross revenue from sales at the store is down 37% compared to the 2017 levels.  Id.  According to Ms. Smith,

a[n] NTSO of any duration would impose severe economic hardship upon [Respondent].  However, given the enduring adverse impact of the 2018 22-day NTSO, the six[]-month NTSO sought by the CTP would be financially devastating to [Respondent].  Without tobacco sales, [Respondent] would simply not be profitable to operate.  Although it survived the prior 22-day NTSO—albeit with what appears to be permanently diminished revenue—a 6-month NTSO would likely force the closure of [Respondent's establishment].

R. Ex. 1 ¶ 15.  Respondent further asserts that restricting the sale of tobacco products for six months "threatens to permanently decrease revenues in a significant way . . . ."  Respondent's Response to Complainant's Supplemental Brief, at 8.

In opposition, CTP argues that Respondent failed to provide evidence that the decline in 2018 sales was due to the NTSO.  Complainant's Supplemental Brief, at 6; see also Informal Brief of Complainant, at 12 ("Respondent has not submitted any evidence regarding the effect a consecutive six-month period NTSO will have on its continued ability to do business.").  CTP further avers that "Respondent's analysis of its sales figures does not account for any other factors that might affect sales, such as the existence of new competitors or broader changes in consumer preferences and behavior."  Complainant's Supplemental Brief, at 7.  CTP also states that Respondent failed to "break down its 2018 sales to show how much of the decline in sales occurred after the NTSO as opposed to before it."  Id. According to CTP, "Respondent simply assumes that the entire decline in its tobacco sales is attributable to a 'shift in customer routines resulting from the 22-day NTSO in 2018."  Id. CTP also argues that "the mere fact that Respondent lost customers as a result of an NTSO is not a reason for declining to impose an NTSO here."  Id. Indeed, "the need to protect the [minors] outweighs the adverse effects that an NTSO may have on an individual retailer's business, especially in light of the fact that imposition of this remedy is reserved only for those retailers who demonstrate indifference to the requirements of law."  Id. (citing Kat Party Store, Inc. d/b/a Mr. Grocer Liquor Store, DAB No. TB509, at 3-4 (2016)).  Further, CTP asserts that "Respondent has no right to continue to operate its business in violation of the Act."  Complainant's Informal Brief, at 13 (citing United States v. Diapulse Corp. of Am., 457

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F.2d 25, 29 (2d Cir. 1972); United States v. Ellis Research Labs., Inc., 300 F.2d 550, 554 (7th Cir. 1962), and United States v. Walsh, 331 U.S. 432 (1947)).

While the record does not include specific evidence to show a breakdown of Respondent's 2018 sales before and after the 22-day NTSO, and might not account for all potential factors affecting Respondent's sales, I find Ms. Smith's testimony to be credible and Respondent's arguments persuasive.  In her role as Respondent's Assistant General Manager, Ms. Smith is involved in managing the operations at all of Respondent's locations, is responsible for Respondent's compliance with the FDA's tobacco regulations, and has knowledge regarding the sales, revenue trends, and financial performance of each retail location.  R. Ex. 1 ¶ 3.  Consequently, Ms. Smith is particularly knowledgeable about the Respondent's financial status, the impact that the previous NTSO had on Respondent's finances, and the projected impact that an NTSO resulting from this proceeding may have on Respondent's business.

Furthermore, I find that the evidence in the record corroborates Ms. Smith's testimony that customers permanently shifted their business to other stores.  According to the Financial Report for December 2018, Respondent continued to experience decreased sales in tobacco products and other purchases in December 2018, more than five months after the NTSO period ended on July 9, 2018.  See R. Ex. 9.For example, Cigarettes sales were down to $62,515 in December 2018, compared to $90,883 during the same period in the prior year (December 2017), representing a 31.10% decline in sales.  Although Grocery and Lottery sales were up slightly, sales of Soft Drinks, Beer/Wine, other Tobacco products, and Fountain-Hot/Cold drinks were also down 2.56% to 13.06% compared to the previous year.  R. Ex. 9.  With the exception of Lottery sales, which increased from $77,208 to $80,611, every remaining category of product sales experienced a decrease in annual revenue in 2018 compared to 2017.  R. Exs. 9-11.  In contrast, CTP has not presented any evidence to rebut Ms. Smith's testimony or to support its speculation and conjecture that Respondent's loss in revenue in 2018, as compared to 2017, was due primarily to other factors rather than the 22-day NTSO.  Therefore, based on the record evidence, I conclude that a six-month NTSO is not appropriate because it unavoidably will have a significant effect on Respondent's ability to continue to do business.

An NTSO should sting, but not be so punitive that it puts a retailer out of business or threatens its viability.  See 21 U.S.C. § 387 note (explaining that one of the purposes of the Tobacco Control Act is "to continue to permit the sale of tobacco products to adults in conjunction with measures to ensure that they are not sold or accessible to underage purchasers").  However, the purpose of the NTSO is to promote compliance by penalizing for non-compliance and deterring future violations.  Consequently, I also conclude that an NTSO is warranted and should be longer than Respondent's proposed 28 days.

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4. History of Prior Violations

The current action is the second NTSO action against Respondent.  Respondent, therefore, has a significant history of prior repeated violations, including two previous CMP actions.  Neither the CMPs nor the NTSO, however, deterred Respondent from continuing to violate the tobacco regulations by unlawfully selling tobacco products to minors.

The first $500 CMP action, CRD Docket Number T-16-772, FDA Docket Number FDA-2016-H-1410, was brought against Respondent for violations of 21 C.F.R. § 1140.14(a)(1) and (a)(2)(i) on August 20, 2014, and December 7, 2015.  See CTP Ex. 1.  Respondent settled the first complaint with CTP for an undisclosed penalty amount.  See CTP Ex. 2.

The second $5,501 CMP action, CRD Docket Number T-17-2161, FDA Docket Number FDA-2017-H-0772, was brought against Respondent for two additional violations on August 10, 2016—one violation of 21 C.F.R. § 1140.14(a)(1) and one violation of 21 C.F.R. § 1140.14(a)(2)(i).  See CTP Ex. 3.  Respondent settled the second complaint with CTP for an undisclosed penalty amount.  See CTP Ex. 4.

The first 30-day NTSO action, CRD Docket Number T-18-2027, FDA Docket Number FDA-2018-R-1619, was brought against Respondent alleging that on November 18, 2017, Respondent violated 21 C.F.R. § 1140.14(a)(1) and (a)(2)(i), when Respondent sold cigarettes to a minor and failed to verify the identification of the purchaser.  See CTP Ex. 5.  Respondent settled the first NTSO action and agreed to a 22-day NTSO period that lasted from June 18, 2018, through July 9, 2018.  CTP Ex. 6.

The current NTSO action was brought against Respondent for a violation of 21 C.F.R. § 1140.14(a)(1) on August 12, 2018, when Respondent sold cigarettes to a minor.  Notably, the August 12, 2018, violation occurred a little over a month after the 22-day NTSO period ended.  I agree with CTP that "[t]hese repeated violations show an unwillingness or inability to sell tobacco products in accordance with federal tobacco regulations."  Informal Brief of Complainant, at 15.  While Respondent already paid for its previous violations and served a 22-day NTSO, its continued inability to comply with the federal tobacco regulations calls for a more severe NTSO.

Respondent relies heavily on Mike Petroleum Inc. d/b/a Plaza BP, DAB TB2306 (2017), to support its argument that a 28-day NTSO is appropriate.  Informal Brief of Respondent, at 7-8; Supplemental Brief of Respondent, at 10; Respondent's Response to Complainant's Supplemental Brief, at 8-9.  In that case, the respondent also committed seven repeated violations within a 36-month period and made similar arguments concerning its ability to continue to do business and the efficacy of its training program, among others.  Although CTP sought a six-month NTSO, the Administrative Law Judge

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imposed a $9,575 CMP and a 28-day NTSO.  Notably, Respondent omits the CMP and only argues that a 28-day NTSO would be appropriate in this case.  As such Mike's Petroleum Inc. is distinguishable and unpersuasive.

Additionally, Mike's Petroleum Inc. has been questioned by the Departmental Appeals Board in another case in which the Administrative Law Judge also imposed an unsought CMP and reduced the NTSO period sought by CTP.  See Sinjil, Inc. d/b/a/ Sunoco, DAB No. 2920, at 13 n.16 (2019).  In Sinjil, the Board reversed the Administrative Law Judge's decision to impose a shorter NTSO period, imposed the 30-day NTSO originally requested by CTP, and remanded the CMP determination for the Administrative Law Judge to explain the legal authority and evidentiary basis for imposing a CMP that CTP did not request.  The Board noted that the Administrative Law Judge took a similar approach of reducing the requested NTSO period and imposing an unsought CMP in Mike's Petroleum Inc., but neither party had appealed that decision to the Board.  Id.  Therefore, the Board did not have jurisdiction to address Mike's Petroleum Inc.  Nevertheless, the Board's reference to Mike's Petroleum Inc. in Sinjil, Inc. suggests that the penalties imposed by the Administrative Law Judge in Mike's Petroleum Inc. are not appropriate and would not have been upheld on appeal.

Respondent also relies on BKD Oil, Inc. d/b/a Maplecrest Marathon / Food Center, DAB TB2957 (2018), in which the Administrative Law Judge reduced the requested 30-day NTSO to 20 days, to support its request for a 28-day NTSO.  Informal Brief of Respondent, at 8-9; Supplemental Brief of Respondent, at 11-12.  However, that case was CTP's first NTSO action against the respondent for five repeated violations within a 36-month period, whereas this case concerns a second NTSO action against the Respondent for seven repeated violations within a 36-month period.  As reflected in the statutory factors, the appropriateness of an NTSO is necessarily a fact-specific determination.  Therefore, I reject Respondent's argument that BKD Oil, Inc. supports the imposition of a 28-day NTSO.  Respondent's history of prior violations warrants a longer NTSO period.

5. Degree of Culpability

Respondent admitted to six repeated violations of the Act and its implementing regulations in the settlement agreements of the prior actions.  Likewise, Respondent admitted the violation in the current Complaint.  As discussed above, Respondent attempts to shift blame to its terminated employee, but Respondent is responsible for the actions of its employees, even if their actions are against company policy.  See supra Part IV.B.1.  Although the actions of Respondent's terminated employee violated Respondent's policies and prevented him from receiving unemployment benefits under state law, they do not absolve Respondent of responsibility.  See R. Ex. 1 ¶ 13.  Therefore, I hold Respondent fully culpable for seven repeated violations of the Act and its implementing regulations.

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6. Other Matters as Justice May Require / Additional Mitigating Factors

In its Answer, Respondent asserts that it "has implemented procedures that go above and beyond the law in its efforts to prevent the sale of tobacco to minors."  Answer ¶ 2.  Respondent presented evidence that it "uses an interactive computer training program called 'Responsible Tobacco Sales' to train its employees."  R. Ex. 1 ¶ 8.  Ms. Smith testified that this training program "is aimed at ensuring employees understand tobacco access, advertising, and promotion restrictions of the Tobacco Control Act and implementing regulations."  Id. Respondent's "[e]mployees are trained on verifying that customers are of legal age to purchase tobacco products and on refusing purchase attempts by underage buyers."  Id. This training program also includes "detailed information on laws and regulations prohibiting the sales of tobacco products to minors, as well as how to ask for and verify the age of customers."  Id. Additionally, the training program includes information relevant to compliance with the Tobacco Control Act.  Id. Respondent requires "all current and new employees to take [a] computer-based test prior to selling tobacco products" and "[e]mployees must achieve a score of 70% or higher on the test to qualify for a position whose job duties include the sale of tobacco products."  Id.

In its Informal Brief, Respondent asserts that "[a]fter the 2018 NTSO, [Respondent] directed its employees to check the identification of all persons purchasing tobacco . . . ."  Informal Brief of Respondent, at 10 (emphasis in original); see also R. Ex. 1 ¶ 9; R. Ex. 2 (May 14, 2018, Memorandum to Respondent's employees concerning "Mandatory Tobacco Products Carding").  In 2018, Respondent also implemented a system that allows supervisors to spot check tobacco sales by cashiers by allowing them to compare dates of birth information entered by the cashier against photographic evidence of the tobacco sale.  R. Ex. 1 ¶ 10; see also; R. Ex. 3 (Screen-grab example of age-verification spot-check system); Informal Brief of Respondent, at 10.  Respondent also asserts that, consistent with its "zero-tolerance policy with regard to underage tobacco sales, [the cashier] was terminated immediately upon discovery of his misconduct."  Informal Brief of Respondent, at 5; see also R. Ex. 1 ¶ 13.

Ms. Smith also testified that Respondent continues to work on its compliance.  R. Ex. 1 ¶ 14.  After receiving a notice of the August 12, 2018, violation, Ms. Smith obtained and distributed materials from West Virginia's "See Red?" initiative to all of its West Virginia stores, including educational pamphlets and signage designed to remind its employees that no tobacco products may be sold without appropriate age verification.  R. Ex. 1 ¶ 14; see also R. Ex. 8; Informal Brief of Respondent, at 10.  Respondent also posted the "See Red?" signage at its store.  R. Ex. 8; Informal Brief of Respondent, at 10.

CTP argues that Respondent has not met its burden of establishing "mitigating factors justifying either of its preferred outcomes (no NTSO or a 28-day NTSO) or any other penalty."  Complainant's Supplemental Brief, at 4.  CTP notes that the specific content of

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Respondent's computer training program has not been received into evidence to assess its merit.  Id. at 5.  CTP also challenges the phrasing of Respondent's memorandum establishing guidelines for tobacco sales and the frequency and manner in which Respondent's spot-check system is used.  Id. CTP also asserts that the "See Red?" material "provides at best minimal mitigation" of the August 12, 2018, violation.  Id. at 6.

Although CTP argues that Respondent has not provided certain details about the specific content of its computer training program, the Act and regulations do not require retailers' training programs to include specific content or other details.  Likewise, there are no specific requirements for the phrasing used in retailers' written tobacco policies, procedures, or communications concerning such policies and procedures.  Similarly, there are no requirements concerning the frequency of audits or spot-checks to ensure compliance with the tobacco laws.  FDA has issued non-binding guidance recommending that certain elements are included in retailers' training programs, but those recommendations are not mandatory and are described in very general terms that give retailers wide latitude in designing and implementing an appropriate training program.  Tobacco Retailer Training Programs (Revised): Guidance for Industry, at 2 (Aug. 2018), https://www.fda.gov/media/79013/download (explaining that "FDA's guidance documents, including this guidance, do not establish legally enforceable responsibilities"); see also id. at 10-18.  For example, FDA's guidance document recommends that retailers require employees to take a written test "using any content, format, and method determined by the retailer to be appropriate."  Id. at 15.  Although employees "should attain a score sufficient to demonstrate that he or she possesses the knowledge necessary to comply with the law," FDA does not recommend a minimum score.  Thus, I reject CTP's arguments and conclude that the record evidence concerning Respondent's efforts to prevent tobacco sales to minors is sufficient for mitigation purposes.

Even though Respondent's efforts did not prevent the August 12, 2018, violation from occurring, I find that Respondent has made significant efforts to prevent tobacco sales to minors.  The record evidence establishes that Respondent has taken the following steps:

• adopting and enforcing a written policy against sales to minors;
• informing its employees of all applicable laws;
• establishing disciplinary sanctions for employee noncompliance; and
• requiring its employees to verify age by way of photographic identification or electronic scanning device.

R. Ex. 1 ¶¶ 8-14.  Specifically, Respondent established a training program informing employees about their obligation to comply with laws prohibiting the sale of tobacco to minors, distributed educational pamphlets and a memorandum concerning its tobacco sales policies and procedures, tested employees to ensure they had sufficient knowledge to comply with tobacco laws, posted signs to remind employees about the legal

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requirements for tobacco sales, implemented a policy requiring employees to verify tobacco purchasers' age using photographic identification, and enforced its tobacco policies and procedures.  Id.; see also R. Exs. 2, 3, 5-6, 8.  More importantly, Respondent has demonstrated that it takes its responsibility to prevent underage sales of tobacco seriously by terminating a noncompliant employee and making improvements and appropriate adjustments to its training program and procedures.  R. Ex. 1 ¶¶ 9-10, 14.  I also note that Respondent's original violations and six repeated violations in prior proceedings involved both the sale of tobacco to minors and the failure to check the purchaser's identification during the same inspection, whereas the current, seventh repeated violation, only concerns the sale of tobacco to minors during the inspection.  Therefore, I also conclude that Respondent's efforts, while not perfect, have been effective to some degree.  Accordingly, I find that this factor weighs in favor of a reduced NTSO.  See Determination of the Period Covered by a No-Tobacco-Sale Order and Compliance with an Order:  Guidance for Tobacco Retailers, at 3-4 (Aug. 2015), http://www.fda.gov/downloads/TobaccoProducts/Labeling/RulesRegulationsGuidance/UCM460155.pdf (stating that the FDA may reduce the duration of an NTSO if the "retailer has taken effective steps to prevent selling tobacco products to minors").

In sum, I have considered the statutory factors, and conclude that Respondent's request for an NTSO period no longer than 28 days is not appropriate.  Rather, most of the statutory factors support imposition of a longer NTSO.  In particular, Respondent has an extensive history of repeated violations of the tobacco regulations and is fully culpable for seven repeated violations of the Act and its implementing regulations.  Moreover, Respondent committed the most recent violation despite warnings from CTP, two previous CMP actions with progressively larger penalties, and an agreed-upon, 22-day NTSO.  However, at least two statutory factors, as discussed above, indicate that CTP's requested six-month NTSO is not appropriate either.  To ensure that justice is served, I find persuasive Respondent's arguments and evidence that a six-month NTSO will have a severe financial strain on Respondent's business and will threaten its ability to continue to do business.  I also find that Respondent has taken significant steps to prevent tobacco sales to minors.  Respondent submitted evidence to show that it has a robust training program in place, has directed employees to check the identification of all customers purchasing tobacco products, has implemented a system allowing supervisors to spot check on tobacco sales by cashiers, and has distributed "See Red?" materials and posted the "See Red?" signage at the store.  For these reasons, after considering all statutory factors and the evidence of record, I find a reduced NTSO of three months to be appropriate under 21 U.S.C. § 333(f)(5)(B) and (f)(5)(D).

V.  Conclusion

For the reasons detailed above, I impose a No-Tobacco-Sale Order against Respondent Go-Mart, Inc. d/b/a Go Mart 35, for a period of three consecutive months.  During this period of time, Respondent shall stop selling cigarettes, cigarette tobacco, roll-your-own

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tobacco, smokeless tobacco, and covered tobacco products regulated under the Federal Food, Drug, and Cosmetic Act.  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. According to the Complaint, "Respondent's street address was renumbered to 1425 Milford Street for emergency service (911) purposes.  Previous [civil money penalty] Complaints listed the establishment address as 900 Milford Street.  During all relevant times, the establishment has remained at the same physical location."  Complaint ¶ 5 n.4.
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2. At the time of the FDA inspections leading to some of Respondent's prior violations, this regulation was codified at 21 C.F.R. § 1140.14(a).  Effective August 8, 2016, the regulations were recodified without any substantive changes.  81 Fed. Reg. 28,973, 28,974, 29,103 (May 10, 2016), https://federalregister.gov/a/2016-10685.
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3. Before August 8, 2016, the regulation was codified at 21 C.F.R. § 1140.14(b)(1).  See supra n.2.
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