Famous Cigar, LLC d/b/a Famous Smoke Shop, DAB TB5199 (2020)

INITIAL DECISION

The Center for Tobacco Products (CTP) of the United States Food and Drug Administration (FDA) seeks a civil money penalty (CMP) of $5,591 against Respondent, Famous Cigar, LLC d/b/a Famous Smoke Shop, for at least five 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.  CTP alleges that Respondent previously admitted to three violations of the Act.  Specifically, Respondent admitted that it sold covered tobacco products to minors on two occasions and failed to verify, by means of photo identification containing a date of birth, that the purchaser was 18 years of age or older during one of the sales.  CTP further alleges that Respondent subsequently committed two additional violations of the Act when it sold a covered tobacco product to a minor and utilized a vending machine in a non-exempt facility.

Respondent denies the most recent violations, raises defenses to liability, and argues that the proposed penalty amount is too high.  Specifically, Respondent states that it has taken

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several remedial measures to prevent sales to minors in the future, and it is an exempt facility.  Respondent also contends that it cannot afford the proposed CMP and requests reduction of the penalty based on the cost of a new Point-of-Sale (POS) system.  For the reasons discussed below, I find Respondent liable for the violations alleged in the Complaint and conclude that a CMP of $5,591 is appropriate.

I.  Background and Procedural History

As provided in 21 C.F.R. §§ 17.5 and 17.7, CTP served a Complaint on Respondent Famous Smoke Shop, located at 1213 East Brady Street, Milwaukee, Wisconsin 53202, by United Parcel Service, on November 23, 2018.  See DAB E-File Docket (Dkt.) No. T-19-610, Dkt. Entry Nos. 1-1b.  CTP's Complaint alleges that Respondent committed five violations of the Act and its implementing regulations over a 36-month period.  Complaint ¶ 1.  Specifically, CTP asserts that Respondent previously admitted to three violations of the Act and implementing regulations.  Id. ¶¶ 11-12.  CTP also asserts that Respondent subsequently committed two additional violations of the Act.  Specifically, Respondent sold a covered tobacco product to a minor on September 4, 2018, at approximately 5:24 PM, and Respondent utilized a vending machine in a non-exempt facility on September 14, 2018.  Id. ¶ 9.  As detailed below, I find, based on the evidence of record, that it is more probable than not that Respondent sold the alleged tobacco product to a minor and utilized a vending machine in a non-exempt facility in violation of 21 C.F.R. § 1140.14(b)(1) and 21 C.F.R. § 1140.14(a)(3).

Respondent timely filed its Answer, which the Civil Remedies Division (CRD) received on December 27, 2018.  Dkt. Entry No. 3 (Answer).  In its Answer, Respondent denied the allegations, raised defenses, and submitted the following documents in its defense:  a December 4, 2018, letter; an employee time card; a payroll register review; an undated POS statement; and a POS register manual instructions.  Answer at 2, 7-16.  On January 3, 2019, I issued an Acknowledgment and Pre-Hearing Order (APHO) acknowledging receipt of Respondent's Answer and establishing procedural deadlines for this case.  Dkt. Entry No. 4.

CTP timely filed its prehearing exchange, consisting of a prehearing brief, list of proposed witnesses and exhibits, and 21 exhibits (CTP Exs. 1-21), including the written direct testimony of two proposed witnesses, CTP's Senior Regulatory Counsel Laurie Sternberg (CTP Ex. 3) and Inspector Felicia Fairfield (CTP Ex. 4-5).  Dkt. Entry Nos. 14-14v.  Respondent did not file a prehearing exchange.

On May 30, 2019, I issued an Order scheduling a prehearing conference for June 27, 2019.  Dkt. Entry No. 15.  On June 25, 2019, Respondent requested a continuance due to a family member's medical emergency and the need to obtain legal counsel.  Dkt. Entry No. 16a.  CTP did not object, and I granted Respondent's motion.  Dkt. Entry. Nos. 17-18.

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On August 14, 2019, I held a prehearing conference call.  Dkt. Entry No. 21.  During the prehearing conference, we discussed CTP's proposed witnesses and exhibits.  As Respondent did not object to CTP's proposed exhibits, I admitted them into the record.  Respondent indicated that it had not reviewed the witness declarations, but wanted to cross-examine both of CTP's witnesses.  CTP did not object to the documents submitted with Respondent's Answer.  I admitted the documents as follows: December 4, 2018, letter (Respondent ("R.") Ex. 1); time card (R. Ex. 2); payroll register review (R. Ex. 3); undated POS statement (R. Ex. 4); and POS register manual instructions (R. Ex. 5).  I scheduled the hearing for December 4, 2019.  Respondent also communicated its desire to propose a witness and provide sworn written testimony in the form of a declaration.  The deadline for such submission had passed, but I allowed Respondent the opportunity to file a written motion to propose a witness out of time.

An August 15, 2019, letter written by my direction gave Respondent until August 28, 2019, to file its motion.  Dkt. Entry Nos. 20-20b.  Respondent filed its motion on August 29, 2019.  Dkt. Entry No. 22.  On September 11, 2019, CTP filed a response opposing Respondent's motion to propose a witness out of time.  Dkt. Entry Nos. 23-23a.  In a September 27, 2019, Order, I denied Respondent's motion to propose a witness and submit sworn written testimony out of time.  Dkt. Entry No. 24.  I denied the motion on three grounds: (1) Respondent's motion was untimely, (2) Respondent's witness testimony did not comply with the written declaration requirements of the regulations or the January 3, 2019, APHO, and (3) Respondent did not establish that extraordinary circumstances prevented it from filing a timely witness list and witness testimony or that admitting the untimely witness testimony would not cause substantial prejudice to CTP.  I also directed Respondent to indicate whether it still intended to cross-examine both of CTP's witnesses by October 14, 2019.

On October 16, 2019, the CRD, received a letter from Respondent dated October 9, 2019, and postmarked on October 13, 2019.  Dkt. Entry No. 25.  In that letter, Respondent requested a "formal appeal" of the evidentiary ruling in the September 27, 2019, Order, and indicated that Respondent intends to cross-examine CTP's witnesses.  Respondent sought to appeal the evidentiary ruling on two grounds: (1) The August 15, 2019, letter enclosing the declaration form was postmarked allegedly on August 22, 2019, and allegedly received by Respondent on August 27, 2019, less than 24 hours before the August 28, 2019, deadline; and (2) Respondent's proposed witness, Mr. Gee, "is being falsely accused and should be allowed to have his day in court."  Id.

I construed Respondent's letter as a request for interlocutory appeal under 21 C.F.R. § 17.18.  On October 25, 2019, in a letter issued by my direction, I declined to certify an interlocutory appeal to the Departmental Appeals Board, Appellate Division.  Dkt. Entry No. 26.  Ordinarily, "rulings of a presiding officer may not be appealed before consideration on appeal of the entire record of the hearing."  21 C.F.R. § 17.18(a).  Additionally, I determined that immediate appellate review of the September 27, 2019, Order was not "necessary to prevent exceptional delay, expense, or prejudice to any participant, or substantial harm to the public interest."  See 21 C.F.R. § 17.18(b).  I noted that CTP filed its Complaint on November 27, 2018, and that an interlocutory review at that stage of the proceedings would cause exceptional delay in resolving the matter and prejudice to CTP.  Furthermore, I found that immediate review of the September 27, 2019,

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Order was not necessary to prevent substantial harm to the public interest because it concerned a discrete evidentiary ruling related to the specific facts of this case.  I reiterated the bases for my ruling excluding Respondent's proposed witness and witness statement.  I also found no delay in mailing the August 15, 2019, letter enclosing the declaration form and APHO.  Finally, I concluded that Respondent's proposed witness is not a party to the hearing, and, therefore, does not have a right to participate at the hearing, under 21 C.F.R. § 17.15(a).  Accordingly, I found that the circumstances of this case did not meet the regulatory requirements for an interlocutory appeal of the evidentiary ruling in the September 27, 2019, Order.

On November 1, 2019, Respondent sent an email to the attorney-advisor assigned to assist me with this case.  Respondent acknowledged receipt of the October 25, 2019, letter issued by my direction, and inquired about the procedures for settling the case.  Dkt. Entry No. 27.  The attorney-advisor referred Respondent to CTP.  Id.

On December 3, 2019, one day before the scheduled hearing, the CRD, received a letter from Respondent, which was postmarked November 29, 2019.  Dkt. Entry No. 28.  In that letter, Respondent noted my rulings denying Respondent's request to propose a witness out of time, asked for additional time to reach a settlement agreement with CTP, and requested to reschedule the December 4, 2019, hearing.  I construed Respondent's letter as a motion for a continuance.

On December 4, 2019, I held a telephone hearing in this case.  At the beginning of the hearing, Respondent also moved orally for a continuance in order to reach a settlement with CTP and to obtain legal counsel.  I denied Respondent's last minute request for a continuance of the hearing.  Transcript (Tr.) at 6-7.  I reminded the parties that this case has been pending for over a year, and the parties have had ample opportunity to engage in settlement discussions and can continue settlement talks after the hearing.  Id. at 6; see also 21 CFR § 17.15(b); APHO ¶ 20.  My APHO also advised the parties of my general rule to not grant extensions for prehearing preparation or settlement discussions.  Tr. at 6; APHO ¶ 18.b.  I also explained that, in addition to engaging in settlement talks, Respondent has had ample opportunity to obtain legal counsel.  Tr. at 8.  Furthermore, I previously continued a scheduled prehearing conference in this matter, at Respondent's request, in part, so Respondent could obtain legal counsel.  Id.; see also Dkt. Entry 18.  Additionally, Respondent has known about the exclusion of its late-proposed witness since my September 27, 2019, Order denying its motion to propose a witness out of time.  See Dkt. Entry No. 24; see also Dkt. Entry No. 30, at 2.  Therefore, I found that settlement discussions and to obtain legal counsel were not sufficient reasons to continue

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the hearing.  Tr. at 6-7.  Accordingly, to prevent further delay, I moved forward with the scheduled hearing.  Id. at 7.

During the hearing, Respondent was given the opportunity to cross-examine Ms. Sternberg, but chose not to ask any questions.  Tr. at 15-16.  I questioned Ms. Sternberg about her direct testimony.  Id. at 16-17.  CTP questioned Ms. Sternberg on redirect examination.  Id. at 18-19.  Respondent cross-examined Inspector Fairfield.  Id. at 19-21.  CTP declined to question Inspector Fairfield on redirect examination.  Id. at 21-22.

In addition to Respondent's Motion for a Continuance, the parties made the following objections during the telephone hearing:

• Respondent's objection that Ms. Sternberg's testimony was not relevant.  Tr. at 17.  I overruled this objection.
• CTP's objection that Respondent was testifying and not posing a question to Inspector Fairfield.  Tr. at 19-20.  I sustained this objection.
• CTP's objection to Respondent's question concerning vending machines.  Tr. at 20-21.  Respondent rephrased the question, and I overruled the objection.

On January 6, 2020, I informed the parties that the Court had received the transcript of the hearing, and set the deadline for the parties' post-hearing brief submissions as February 6, 2020.  Dkt. Entry No. 30; see also Dkt. Entry Nos. 29, 29a.  I also informed the parties that they could file any proposed corrections to the transcript on or before February 6, 2020.  Dkt. Entry No. 30a.  I set the deadline for the parties post-hearing responsive briefs as February 20, 2020.  Id.  Finally, I reiterated the issues I must decide and advised the parties of settlement procedures.  Id. at 4.

Respondent filed a post-hearing brief (R. Brief) on February 5, 2020.  Dkt. Entry No. 32 (single-page letter dated January 28, 2020).  CTP did not file a post-hearing brief and neither party filed a post-hearing responsive brief.  Neither party filed proposed corrections to the transcript.  However, I issued a Notice of Transcript Corrections to ensure an accurate and complete administrative record.  Dkt. Entry No. 33.  On March 26, 2020, I issued an Order staying the deadlines in this case because of the circumstances association with the COVID-19 pandemic.  Dkt. Entry No. 34.  I have determined that it is appropriate to lift the stay in this matter, the administrative record is complete, and this case is now ripe for a decision.  21 C.F.R. § 17.41(a)-(b).  I decide this case based on the evidence in the administrative record.  21 C.F.R. § 17.45(a).

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II.  Issues

The issues in this case are:

1. Whether Respondent sold a covered tobacco product to a minor on September 4, 2018, and utilized a vending machine in a non-exempt facility on September 14, 2018, in violation of 21 C.F.R. § 1140.14(b)(1) and 21 C.F.R. § 1140.14(a)(3); and
2. If so, whether the CMP of $5,591 that CTP seeks is an appropriate amount, pursuant to the provisions of 21 C.F.R. § 17.34(a)-(c).

III.  Applicable Law and Legal Standard

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 it is sold or distributed in violation of section 387f(d) of the Act or implementing regulations.  21 U.S.C. §§ 387c(a)(7)(B) ), 387f(d)(1); see also 21 C.F.R. pt. 1140.  The sale of covered tobacco products to an individual who is under the age of 18 is a violation of the Act and implementing regulations.  21 U.S.C. § 387f (d)(3)(A)(ii); 21 C.F.R. § 1140.14(b)(1).1   Utilizing a vending machine to sell cigarettes in a non-exempt facility is also a violation of the Act and implementing regulations.  21 U.S.C. § 387f(d)(4)(A)(i); 21 C.F.R. § 1140.14(a)(3).  A facility is exempt from 21 C.F.R. § 1140.14(a)(3) if the retailer ensures that no person younger than 18 years of age is present or permitted to enter the facility at any time.  21 C.F.R. § 1140.16(c)(2)(ii).

CTP may seek a CMP against any person who violates any requirement of the Act or regulations concerning the sale of tobacco products by filing an administrative complaint.  21 U.S.C. § 333(f)(5) and (f)(9); see also; 21 C.F.R. §§ 17.1(j), 17.5(a).  The Act and implementing regulations provide limitations on the amount of the CMP based on the number of violations within a certain period of time; 21 U.S.C. § 333(f)(9); 21 U.S.C. 333 note (quoting Family Smoking Prevention and Tobacco Control Act, Pub. L. 111–31, div. A, title I, § 103(q)(2)(C)); 21 C.F.R. § 17.2, 45 C.F.R. § 102.3.  All violations

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observed during the initial failed inspection are counted as a single violation, and each separate violation observed during subsequent failed inspections count as a discrete violation. Orton Motor, Inc., d/b/a Orton's Bagley v. U.S. Dep't of Health & Human Serv., 884 F.3d 1205 (D.C. Cir. 2018).  When determining the appropriate amount of a CMP, I consider any aggravating or mitigating circumstances and the factors listed in the Act.  21 C.F.R. § 17.34(a)-(b).  Specifically, I must "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); 21 C.F.R. § 17.45(b)(1)-(3).  I also must consider whether the respondent has an approved employee training program and has paid a state fine for the same violations.  21 U.S.C. § 333 note.

CTP has the burden to prove Respondent's liability and the appropriateness of the penalty 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 applicable law and evidence of record, I conclude that Respondent committed three previous violations of the Act and implementing regulations on September 21, 2017, and April 19, 2018.  I also find that it is more probable than not that Respondent sold a covered tobacco product to a minor on September 4, 2018, and utilized a vending machine in a non-exempt facility on September 14, 2018, in violation of 21 C.F.R. § 1140.14(b)(1) and 21 C.F.R. § 1140.14(a)(3), respectively.  Consequently, Respondent is liable for committing five violations within a 36-month period.

1. Respondent's Prior Violations

CTP previously initiated a CMP action, CRD Docket Number T-18-2341, FDA Docket Number FDA-2018-H-2037, against Respondent for three violations of the Act within a 24-month period.  CTP Ex. 1, at 1 (Prior Complaint).  The Prior Complaint alleged that Respondent sold tobacco products to a minor, in violation of 21 C.F.R. § 1140.14(b)(1), on each of the following dates:  September 21, 2017, and April 19, 2018.  Id. at 4-5.  CTP further alleged that Respondent failed to verify the age of a person purchasing covered

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tobacco products by means of with photographic identification, 21 C.F.R. § 1140.14(b)(2)(i), on April 19, 2018.  Id.  The prior CMP action resulted in settlement and concluded after Respondent admitted to at least three violations of the Act.  Respondent "acknowledg[ed] that all of the violations described in the Complaint, FDA-2018-H-2037, occurred" and expressly waived its right to contest such violations in subsequent actions.  CTP Ex. 2.  Respondent has not contested these prior violations, and they are administratively final.  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").

2. Evidence and Legal Arguments Regarding
    the Alleged Current Violations

In addition to Respondent's prior violations, CTP alleges that Respondent committed two new violations in September 2018.  To support its claims, CTP submitted the declarations of a CTP Senior Regulatory Counsel, Laurie Sternberg, and an FDA-commissioned inspector, Felicia Fairfield.  CTP Exs. 3-5.  CTP also submitted reports, photographs, and other documentation.  CTP Exs. 6-21.  Respondent denies the allegations and submitted documentation consisting of a letter, timecard, payroll register review, a handwritten statement regarding a POS, and POS manual instructions.  R. Exs. 1-5.  As explained above, I excluded Respondent's proposed witness testimony because it was untimely and did not conform with the requirements for the submission of written testimony.

a. September 4, 2018, Inspection Involving
    a Tobacco Sale to a Minor

Inspector Fairfield testified that she conducted two inspections of Respondent's establishment located at 1213 East Brady Street, Milwaukee, Wisconsin, 53202.  CTP Ex. 4, at 2.  She conducted the first inspection, which involved an undercover buy (UB), on September 4, 2018, at approximately 5:24 PM.  Id.  At the time of the inspection, Inspector Fairfield was an FDA-commissioned officer with the state of Wisconsin where her duties included performing UB inspections.  Id. at 1-2.  UB inspections are primarily conducted to determine whether retailers are compliant with the age and photo identification requirements relating to the sale of tobacco products.  Id. at 1.  These inspections entail accompanying undercover minors who attempt to purchase tobacco products from retail establishments such as the one operated by Respondent.  Id. at 2.

Before the inspection, she confirmed that Minor A did not have any tobacco products in his/her possession and possessed an accurate photographic identification of his/her date of birth.  Id.  During the inspection, Inspector Fairfield testified that she parked her car across the street from Respondent's establishment and observed Minor A exit her vehicle and enter the front door of the establishment.  CTP Ex. 4, at 3.  Inspector Fairfield stayed in the vehicle where she had a clear, unobstructed view of the front door of the

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establishment.  Id.  Inspector Fairfield testified that she observed Minor A exit the establishment and walk directly back to her vehicle.  Id.  Minor A reported to Inspector Fairfield that he/she purchased a package of e-liquid from an employee at the establishment.  Id.  Minor A also reported that he/she presented his/her photographic identification to the employee, and the employee did not provide him/her with a receipt after the purchase.  Id.

After the inspection, Inspector Fairfield retrieved the package of JUUL mango e-liquid from Minor A.  CTP Ex. 4, at 3.  Inspector Fairfield labeled the e-liquid as evidence, photographed the panels of the package, and processed the evidence in accordance with standard procedures at the time of each inspection, which entailed completing several contemporaneous reports.  Id.  These contemporaneous photographs and reports were admitted into evidence and corroborate Inspector Fairfield's testimony.  CTP Exs. 6-10.  Respondent did not cross-examine Inspector Fairfield concerning the UB inspection and conceded that she "was very thorough in her investigation" and "did a good job."  Tr. at 19.

In her declaration, Senior Regulatory Counsel Laurie Sternberg testified that she has personal knowledge of FDA's process and records regarding tobacco establishment registration and product listing requirements.  CTP Ex. 3, at 1-2.  She further testified that the JUUL mango e-liquid product purchased during the September 4, 2018, UB inspection at Respondent's establishment was manufactured, prepared, compounded or processed for commercial distribution in Illinois, California, North Carolina, and Wisconsin, which is corroborated by the FDA Unified Registration and Listing Systems (FURLS) reports in the record.  CTP Ex. 3, at 2-3; CTP Exs. 19-20.

At the hearing, Ms. Sternberg testified that these tobacco products are manufactured through multiple facilities, none of the products are solely manufactured at any one facility, and each of the manufacturing establishments registered with FDA are responsible for a portion of the overall manufacturing process.  Tr. at 16-17.  Although a portion of the manufacturing and packaging process takes place in Wisconsin, Ms. Sternberg testified that no product would be manufactured solely in Wisconsin.  Id. at 18-19.  She explained that her "understanding of the Juul manufacturing process is based on [her] responsibilities as senior regulatory counsel . . . ."  Id. at 17.  Respondent did not cross-examine Ms. Sternberg at the hearing, but argued that where the JUUL were manufactured was irrelevant.  Id.

I find that Respondent has failed to rebut CTP's evidence regarding the September 4, 2018, violation for selling a tobacco product to a minor.  See generally Answer, R. Exs. 1-5, and R. Brief.  Respondent did not cross-examine or otherwise impeach the testimony of Inspector Fairfield or Ms. Sternberg concerning the UB inspection on September 4, 2018.  Accordingly, I find their testimonies credible because they have personal knowledge and professional experience concerning the September 4, 2018, UB inspection

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and the FDA's processes and systems for regulating tobacco products.  I also find their testimonies to be persuasive because they are supported by corroborating evidence documenting that the September 4, 2018, sale to Minor A occurred.  Specifically, Inspector Fairfield's testimony is supported by contemporaneous photographs, reports, and Minor A's redacted identification.  CTP Exs. 6-10.  Likewise, Ms. Sternberg's testimony is supported by documentary evidence establishing that the JUUL e-liquid product traveled in interstate commerce before Respondent sold it to Minor A.  CTP Exs. 9-10, 19.  Contrary to Respondent's assertion, Ms. Sternberg's testimony concerning where the JUUL e-liquid was manufactured is relevant because it establishes that the FDA has authority to regulate the covered tobacco product at issue in this case – and that I have authority to adjudicate this case.  21 U.S.C. §§ 331(k) and 333 (authorizing the FDA to impose certain remedies against any person who violates any prohibition concerning regulated tobacco products that are held for sale after shipment in interstate commerce); see also 21 U.S.C. § 333(f)(5)(a) (entitling a person to an opportunity for a hearing before imposing a CMP for violating the Act).

I also find that Respondent has failed to prove any affirmative defenses concerning the September 4, 2018, violation.  Respondent's Answer and subsequent filings focus primarily on the September 14, 2018, violation, remedial actions taken, and mitigation evidence to reduce the amount of the CMP.  Answer at 6-16; R. Brief; Tr. at 14-15.  To the extent Respondent argues that this evidence absolves it of liability for the September 4, 2018, unlawful sale to a minor, I find it unpersuasive.  Respondent argues that it has "done everything possible to rectify the problem," including retraining employees, conducting secret tests, and firing employees to ensure compliance with the tobacco regulations.  Answer at 6.  However, Respondent did not submit any testimony or documentation to corroborate these claims.  Similarly, Respondent contends that it purchased a POS system to scan driver's licenses before tobacco sales.  Id.  In its Answer, Respondent stated the POS system would be installed on January 1, 2019.  Id.  Although Respondent submitted an undated, unsworn statement concerning the POS system (R. Ex. 4) and POS register manual instructions (R. Ex. 5), it did not submit any documentation confirming that the POS system was actually installed and when it was installed.  Therefore, I conclude that Respondent failed to prove that it took any remedial actions to correct the September 4, 2018, violation or to prevent future violations.

Respondent also takes issue with several of my procedural rulings in this proceeding, which excluded the untimely, unsworn testimony of a proposed witness and denied a continuance of the hearing.  Dkt. Entry Nos. 25, 27, 28 (correspondence from Respondent); R. Brief.  For the reasons previously stated in my written rulings and verbal ruling at the hearing, I reject those arguments.  Dkt. Entry Nos. 24, 26, 30; Tr. at 6-8, 10, 15.

As indicated above, Respondent did not present any witness testimony.  Here, Inspector Fairfield testified and submitted corroborating evidence demonstrating that a minor

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entered Respondent's establishment and purchased a tobacco product during the UB inspection conducted on September 4, 2018.  Respondent failed to rebut this evidence or prove any alleged defenses.  Therefore, I hold that Respondent failed to meet the requirements of 21 C.F.R. § 1140.14(b)(1) when it sold covered tobacco products to a minor on September 4, 2018.

b. September 14, 2018, Inspection Involving
    a Vending Machine

In her declaration, Inspector Fairfield testified that her duties as an FDA-commissioned officer with the state of Wisconsin also included performing advertising and labeling (A&L) inspections.  CTP Ex. 5, at 1.  Inspector Fairfield testified that she conducted an A&L compliance check inspection at Respondent's establishment on September 14, 2018, at approximately 4:01 PM.  Id. at 2.  A&L inspections are conducted to determine whether retailers are complaint with tobacco product requirements other than age and photo identification verification.  Id. at 1-2.

Upon entering the establishment, Inspector Fairfield identified herself as an FDA-commissioned officer to the most responsible person present in the establishment and informed the person that she was conducting an A&L inspection.  Id. at 2.  During the inspection, Inspector Fairfield observed and photographed a vending machine containing tobacco products, including Marlboro Menthol and Camel Crush cigarettes, in an area accessible to customers.  Id.; CTP Ex. 15.  Inspector Fairfield asked the employee on duty if minors are permitted to enter the establishment.  Tr. at 21.  The employee told Inspector Fairfield that minors are permitted to enter the establishment when accompanied by an adult and that there are no age-restricted areas in the establishment.  CTP Ex. 5, at 2.  After the inspection, Inspector Fairfield recorded the inspection in FDA's Tobacco Inspection Management System and created a Narrative Report.  Id.; CTP Exs. 13-14.  The contemporaneous photographs and reports were admitted into evidence and corroborate Inspector Fairfield's testimony.  CTP Exs. 13-16.

Respondent cross-examined Inspector Fairfield at the hearing regarding the A&L inspection.  Tr. at 19-22.  Respondent asked what its employee said to Inspector Fairfield that made her determine that the vending machine was illegal.  Id. at 21.  Inspector Fairfield replied that that the only question she asked was whether minors were permitted to enter the establishment.  Id.

With regard to the A&L inspection, Ms. Sternberg testified that the Marlboro Menthol cigarettes observed in the vending machine during the September 14, 2018, inspection of Respondent's establishment were manufactured, prepared, compounded or processed for commercial distribution outside of Wisconsin, which is corroborated by the FURLS reports in the record.  CTP Ex. 3, at 3-4; CTP Ex. 15; CTP Ex. 20.  Ms. Sternberg also testified that the Camel Crush cigarettes observed in the vending machine are

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manufactured, prepared, compounded, or processed by RJ Reynolds at facilities located in North Carolina.  CTP Ex. 3, at 3-4; CTP Ex. 15; CTP Ex. 21.  As indicated above, Respondent did not cross-examine Ms. Sternberg at the hearing.

I find the testimonies of both Inspector Fairfield and Ms. Sternberg regarding the alleged vending machine violation to be credible, supported by evidence in the record, and persuasive.  They submitted corroborating photographs and reports to support their testimony.  CTP Exs. 13-16, 20-21.  Additionally, Respondent does not dispute that its establishment is located in Wisconsin and has not presented any evidence contradicting Ms. Sternberg's testimony that the cigarettes at issue were manufactured, prepared, compounded or processed for commercial distribution outside of Wisconsin.

Respondent also does not dispute that it had a vending machine in its facility on September 14, 2018.  Respondent's only contentions are that, during the September 14, 2018, inspection, its employee was on his second day of employment, still in training, and may have misspoken or misunderstood Inspector Fairfield's questioning regarding the establishment's age restrictions.  Answer at 6.  Although record evidence shows that a new employee was working at Respondent's establishment on the date at issue, it does not absolve it of liability.  R. Exs. 1-3.  Respondent submitted evidence showing that the employee was hired on September 8, 2018 (R. Ex. 3), and actually was on his fourth day of work when the September 14, 2018, A&L inspection occurred (R. Ex. 2).  However, Respondent is responsible for properly training its employees to comply with the law at all times.

Respondent also claims its employee explained to Inspector Fairfield that "no one under the age of 21 is allowed in the establishment" and "there are multiple signs posted on the entryway and inside the store stating no entrance allowed to anyone under the age of 21."  Answer at 6.  Respondent argues, based on this alleged miscommunication, it could not have violated 21 C.F.R. § 1140.14(a)(3) for utilizing a vending machine to sell cigarettes because minors are not allowed in its establishment.  Respondent also mistakenly believes it received, "two violations in the same day, partially due to the aforementioned [employee's] misrepresented statement."  R. Brief.   There is nothing in the record to support Respondent's claims.  Respondent did not submit any evidence rebutting Inspector Fairfield's testimony that the employee stated that minors are allowed in the store.2   Likewise, Respondent did not submit any evidence of signage restricting the age of customers in its establishment.  Even if Respondent was able to prove there was a miscommunication between its employee and Inspector Fairfield, Respondent was still in violation of 21 C.F.R. § 1140.14(a)(3).  Section 1140.14(a)(3) limits the sale of cigarettes or smokeless tobacco to direct, face-to-face exchanges without the assistance of any electronic or mechanical device (such as a vending machine).  However, a retailer may

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utilize a vending machine to sell cigarettes if the retailer ensures that no person younger than 18 years of age is present or permitted to enter the facility at any time.  21 C.F.R. § 1140.16(c)(2)(ii) (emphasis added).  Respondent's September 4, 2018, violation for selling a covered tobacco product to a minor clearly proves otherwise.  Therefore, Respondent has failed to establish that it is an exempt facility where minors are not allowed to enter at any time.  Id.  Respondent is prohibited from utilizing a vending machine to sell cigarettes in its establishment, and was in violation of 21 C.F.R. § 1140.14(a)(3) when Inspector Fairfield observed the vending machine during the A&L inspection on September 14, 2018.  I also note that CTP's Complaint does not allege Respondent committed two violations on the same day.  Rather, it alleges Respondent committed one violation on two separate dates, September 4, 2018, and September 14, 2018.

In summary, the evidence of record establishes to my satisfaction that the violations alleged in the Complaint in fact occurred on the dates in question.  The unrebutted testimony of Ms. Sternberg, Inspector Fairfield, and corroborating exhibits are sufficient to establish by a preponderance of evidence that it is more probable than not that Respondent unlawfully sold a tobacco product to a minor on September 4, 2018, and utilized a vending machine in a non-exempt facility on September 14, 2018, in violation of 21 C.F.R. § 1140.14(b)(1) and (a)(3), respectively.  Additionally, I find that the tobacco product sold on September 4, 2018, and the tobacco products observed in Respondent's vending machine on September 14, 2018, were offered for sale after shipment in interstate commerce.  The record also establishes that Respondent previously committed one violation of the Act on September 21, 2017, and two violations of the Act on April 19, 2018.  Therefore, I conclude that the facts as outlined above establish that Respondent Famous Smoke Shop is liable under the Act for five violations within a 36-month period.

B.  Civil Money Penalty

I have determined that Respondent committed five violations of the Act and its implementing regulations within a 36-month period.  Pursuant to 21 U.S.C. § 333(f)(9), Respondent Famous Smoke Shop is liable for a CMP not to exceed the amounts listed in FDA's CMP regulations at 21 C.F.R. § 17.2; see also 45 C.F.R. § 102.3.  When determining the appropriate amount of a CMP, I am required to consider any "circumstances that mitigate or aggravate the violation" and "the factors identified in the statute under which the penalty is assessed . . . ." 21 C.F.R. §§ 17.34(a); 17.34(b).  Specifically, I must 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).  Also, "for purposes of mitigating a civil penalty . . . [I] shall consider the amount of any penalties paid by the retailer to a State for the same violation" and whether the retailer has an "approved

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training program."  21 U.S.C. § 333 note.  Respondent must prove any mitigating factors by a preponderance of the evidence.  21 C.F.R. § 17.33(c).

In its Complaint, CTP seeks to impose the maximum penalty amount, $5,591, against Respondent.  Complaint ¶ 1.  Respondent argues that the requested CMP is too high.  Answer at 2, 6.  For the reasons explained below, I find that a CMP of $5,591 is appropriate.

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

Respondent committed five violations of the Act.  It sold covered tobacco products to minors on three separate occasions:  September 21, 2017, April 19, 2018, and September 4, 2018.  Respondent also failed to verify, by means of photo identification containing a date of birth, that the April 19, 2018, purchaser was 18 years of age or older.  Further, it utilized a vending machine to sell cigarettes in a non-exempt facility on September 14, 2018.  Notably, all five of Respondent's violations occurred within a one-year time period.  After the first violation on September 21, 2017, CTP warned Respondent that failure to correct the violation could result in enforcement action, such as a CMP, informed Respondent that periodic inspections would continue, and directed Respondent to retailer education materials and other resources to ensure compliance.  CTP Ex. 17, at 1-2.  Despite these warnings from CTP and a subsequent CMP action, Respondent committed two additional violations on September 4, 2018, and September 14, 2018.  The repeated inability of Respondent to comply with federal tobacco regulations is serious in nature and the CMP amount should be set accordingly.

2. Respondent's Ability to Pay

Although Respondent claims it cannot afford the requested CMP amount, it has not presented any evidence supporting this claim or otherwise demonstrating that it does not have the ability to pay the $5,591 CMP sought by CTP.  See Answer at 6.  Respondent also requests that the CMP be offset by the cost of a new POS system.  However, Respondent has not submitted a receipt, purchase order, or other documentation showing that it purchased or intends to purchase the POS system and the total cost of its installation.  Respondent only submitted an unsworn statement and manual concerning the POS system.  R. Exs. 4-5.  Therefore, I conclude that Respondent has failed to show that it does not have the ability to pay the requested CMP.

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

Likewise, Respondent has not presented any evidence to support its claim that the requested CMP amount would put Respondent out of business and cause its employees to

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lose their jobs or that the $5,591 CMP sought by CTP would have a negative effect on his ability to continue to do business.  See Answer at 6.  These unsupported assertions are not sufficient to find that the requested CMP would have a deleterious effect on Respondent's ability to continue to do business.

4. History of Prior Violations

The current action is the second CMP action brought against Respondent for violations of the Act and its implementing regulations.  CTP previously initiated CMP action, CRD Docket Number T-18-2341, FDA Docket Number FDA-2018-H-2037, against Respondent for three violations of 21 C.F.R. pt. 1140 within a 24-month period.  CTP Ex. 1, at 1.  As noted above, Respondent admitted that it violated the prohibition against selling covered tobacco products to persons younger than 18 years of age on September 21, 2017, and April 19, 2018, and failed to verify, by means of photo identification containing a date of birth, that a purchaser was 18 years of age or older on April 19, 2018.  21 C.F.R. § 1140.14(b)(1); 21 C.F.R. § 1140.14(b)(2)(i).

5. Degree of Culpability

Based on my finding that Respondent committed the violations as alleged in the Complaint, I hold it fully culpable for five violations of the Act and its implementing regulations.  Additionally, I am not persuaded by Respondent's argument that it is less culpable because the employee who sold the cigarettes to the minor on September 4, 2018, was new and still in training.  Answer at 6.  Respondent is responsible for training its employees and complying with the Act at all times.  Furthermore, I do not find Respondent's argument that no one under the age of 21 is allowed in its establishment reduces its culpability for the September 14, 2018, vending machine violation because it is not supported by the evidence of record or persuasive.  Id.  Finally, I find that Respondent has failed to prove any alleged remedial actions to correct or prevent future violations.  Id.

6. Employee Training Program

After the first violation, Respondent informed CTP that it planned to institute an ongoing training program, including FDA education materials and state-offered testing to ensure compliance with tobacco laws.  CTP Ex. 18.  Respondent also claims it has "monthly retraining of employees specific to rules, laws, and compliance with the FDA."  Answer at 6.  Respondent further claims it conducts "secret tests of employees to make sure they are complying with the laws."  Id.  However, Respondent has not presented any evidence to corroborate these claims or demonstrate that it has an approved training program that complies with standards developed by the Food and Drug Administration.  21 U.S.C. § 333 note; see also 45 C.F.R. § 102.3.  To the extent Respondent has implemented an employee training program, I note that it has been ineffective because Respondent

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committed five violations of the Act and implementing regulations.  Therefore, I accord little weight to Respondent's unsupported claims.  Nevertheless, CTP has decided to seek CMPs using the lower schedule for all retailers until FDA promulgates regulations establishing standards for approved retailer training programs.  Guidance for Industry, Civil Money Penalties and No-Tobacco-Sale Orders for Tobacco Retailers, https://www.fda.gov/regulatory-information/search-fda-guidance-documents/civil-money-penalties-and-no-tobacco-sale-orders-tobacco-retailers-revised, at 9 (Dec. 2016).

7. State Penalties

Respondent has not alleged or presented any evidence that it has paid any penalty to the state of Wisconsin for the same violations.  21 C.F.R. § 17.34(b).

8. Other Matters as Justice May Require

In its Answer, Respondent stated it purchased a new POS system to help negate underage sales.  Answer at 6.  The new system scans customers' driver's license to verify a tobacco purchaser's age and prevents the cash register from functioning if a license is not scanned.  Id.; R. Ex. 4.  Respondent planned to have the new POS system installed on January 1, 2019.  Answer at 6.  Respondent also claims it has "multiple signs posted on the entryway and inside the store stating no entrance allowed to anyone under the age of 21."  Id.

I am not persuaded by Respondent's unsupported claims.  Respondent has not submitted any proof that the POS system was actually installed as scheduled.  The only evidence submitted was an undated, unsigned letter that briefly described the POS system and a copy of the POS manual instructions.  R. Exs. 4, 5.  Additionally, Respondent has not submitted any proof of the alleged age-restricting signage in its entryway.  Accordingly, I find no basis for mitigating the proposed CMP based on any other matters that just may require.

In summary, Respondent failed to meet its burden to establish that requested CMP is too high and should be reduced or not assessed.  Respondent did not present any corroborating or persuasive evidence to support its claims that it is not fully culpable, cannot afford the proposed CMP, or would be forced out of business.  Respondent also did not submit and corroborating or persuasive evidence of corrective measures taken.  Thus, I find no basis for mitigating the CMP sought by CTP, which I find proportional and appropriate in this case.  Based on the foregoing reasoning, I find the penalty amount of $5,591 to be appropriate under 21 U.S.C. §§ 333(f)(5)(B) and 333(f)(9).

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Conclusion

Pursuant to 21 C.F.R. § 17.45, I enter judgment in the amount of $5,591 against Respondent, Famous Cigar, LLC d/b/a Famous Smoke Shop, for five 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 36-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. On December 20, 2019, the legal age to purchase tobacco products changed to 21.  Further Consolidated Appropriations Act, 2020, Pub. L. 116–94, div. N, title I, subtitle F, § 603(a)(1) (substituting "21 years" for "18 years") and § 603(a)(2) (adding subsection 387f(d)(5), which states "[i]t shall be unlawful for any retailer to sell a tobacco product to any person younger than 21 years of age.")  However, each of the violations at issue in this case occurred before these statutory changes.  The corresponding regulations have not been updated yet.  See Id. § 603(b) (authorizing the Secretary to "to update all references to persons younger than 18 years of age in subpart B of part 1140 of title 21, Code of Federal Regulations, and to update the relevant age verification requirements under such part 1140 to require age verification for individuals under the age of 30").
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2. As indicated above, I excluded Respondent's proposed witness and denied a continuance of the hearing for the reasons stated in my rulings.
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