Nehmat, LLC d/b/a Shell, DAB TB5218 (2020)

INITIAL DECISION

The Center for Tobacco Products (CTP) of the Food and Drug Administration (FDA) seeks to impose a $5,705 civil money penalty (CMP) against Respondent, Nehmat, LLC d/b/a Shell (Respondent).  CTP alleges that Respondent committed 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.1   Respondent denies the allegations in the Complaint, offers defenses, and argues that a lower CMP would be appropriate.  For the reasons discussed below, I find Respondent liable for five violations over a period of 36 months and conclude that a CMP in the amount of $4,000 is appropriate.

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I.  Background and Procedural History

On November 15, 2019, CTP served the Complaint on Respondent at 13200 Laurel Bowie Road, Laurel, Maryland 20708, by United Parcel Service, as provided in 21 C.F.R. §§ 17.5 and 17.7.  CTP also filed a copy of the Complaint with the Civil Remedies Division (CRD) of the Departmental Appeals Board (DAB) on November 18, 2019.  See Docket Entry Nos. 1 (Complaint), 1b (Proof of Service).  CTP's Complaint alleges that Respondent settled a prior CMP action for selling cigarettes to minors and failing to verify the age of a purchaser, in violation of the regulations found at 21 C.F.R. pt. 1140.  Complaint ¶¶ 9-10; see also Docket Entry No. 12b (Prior Complaint).  CTP asserts that Respondent admitted all of the allegations in the Prior Complaint, paid the agreed-upon CMP, and expressly waived its right to contest these prior violations in subsequent actions.  Complaint ¶ 10; see also Docket Entry No. 12c (Acknowledgement Form).

Specifically, CTP asserts that Respondent previously admitted to violations on May 17, 2018, and September 11, 2018, for selling cigarettes to minors, in violation of 21 C.F.R. § 1140.14(a)(1).  Complaint ¶ 9.  Further, Respondent also admitted to a violation on September 11, 2018, for failing to verify the age of the cigarette purchaser, by means of photographic identification containing the bearer's date of birth, in violation of 21 C.F.R. § 1140.14(a)(2)(i).  Id.  CTP also alleges that Respondent subsequently sold cigarettes to a minor on October 15, 2019, in violation of 21 C.F.R. § 1140.14(a)(1), and failed to verify the age of the cigarette purchaser, in violation of 21 C.F.R. § 1140.14(a)(2).  Id. ¶ 7.  Accordingly, CTP contends that Respondent has committed five violations within a 36-month period and is subject to a CMP.  Id. ¶ 13.

On December 10, 2019, Respondent registered for the DAB E-File system and timely filed an Answer.  Docket Entry No. 3, at 4-7 (Answer).  In its Answer, Respondent denied the allegations in the Complaint and stated that Respondent did not sell any tobacco product to a minor intentionally, CTP did not provide a proof of transaction, the inspector did not issue a citation or ticket to the cashier at the time of the violation, and CTP did not include a copy of the minor's identification.  Id. ¶ 1. In its defense, Respondent stated, in essence, that according to the cashier and video footage, the purchaser appeared to be 25 to 30 years old and used a thick voice to place the order and it could have been a case of wrong judgment of the age by the cashier.  Id. ¶ 2.  Respondent further stated that the requested CMP is too high because Respondent is running a small business with lots of overhead, it cannot afford a penalty that high, and it is unfair for the owner to pay a penalty for the mistakes made by different cashiers at different times.  Id. ¶ 3.  Respondent further alleged that this is a 24-hour business and the owner cannot be there for 24 hours.  Id.  On December 17, 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.

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On February 1, 2020, Respondent filed a Production of Documents Requested by CTP, consisting of its responses to CTP's Request for Production of Documents, a picture of the Point of Sale age verification system, pictures of the warning signs at the store, a copy of training certificate of Respondent's employee signed on October 23, 2019, a copy of Respondent's Tobacco Sales Policy and Employee Acknowledgement of Company Policy signed by Respondent's employee on October 23, 2019, and a copy of the Age Verification Report listing verifications conducted between 4 PM and 7 PM on October 15, 2019.  Docket Entry No. 8.  Respondent also filed a video of the October 15, 2019 transaction, which was subsequently sealed from public disclosure.  Docket Entry Nos. 8a, 8b, 13.

On February 2, 2020, Respondent filed a pre-hearing exchange consisting of an Informal Brief of Respondent.  Docket Entry No. 9.  In its brief, Respondent argued that "there was no s[a]l[e] of tobacco to Minor or underage of 18 as described by CTP, [i]ntentionally or knowingly."  Id. at 4.  Respondent also again stated that the purchaser looked to be over 26 years old and used a thick voice to place the order, it could have been a case of bad judgement by the cashier who was a trainee, and the other attendant was distracted and fixing a drawer and did not look at the purchaser.  Id.  Respondent stated that the inspector did not issue a citation or ticket and, if they had not had the video, they would not have known about this event or inspection.  Id.  Respondent also asserted that Respondent has a store policy and training for all level employees in place referring to the store policy and training certificate provided in its Production of Document filed on February 1, 2020.  Id. at 5.  Respondent argued that the purchaser appeared to be over 26 years old by showing the confidence to place the order, product knowledge, and body language, was well trained to attempt to trap the cashier, and was not scared or confused when placing the order.  Id. at 6.  Respondent also indicated that to avoid future violations, they would use the electronic age verification scanner all the time, with more training, no more guessing games or good faith sales, and zero tolerance for employees.  Id. at 7.  Respondent stated that the CMP is too high, that it had no idea the violation was counted as two violations, and the penalty would have a huge impact on the ability to run this business with lots of operating expenses.  Id.  Respondent argued it is "unfair and harsh to the owner/operator to pay this much penalty for the mistakes/bad judgment by the different employees, different times for the subsequent violations which increase the penalty amount 10 times more for every violation."  Id. at 8.  Respondent averred that "since there is no certification or training required by the law (government enforced) for the employees to sell tobacco to minor this type of incident can happen anytime [e]specially with new employees and they have no responsibility or penalty on them."  Id.  Respondent further explained that it is a 24-hour business and the owner cannot be there 24 hours to watch employees so the only thing he can do is fire them but sometimes it is too late.  Id.  Respondent requested a reduction of the CMP and promised to put efforts into prevention of any such incident in the future.  Id.

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On March 9, 2020, CTP filed a pre-hearing exchange consisting of an Informal Brief of Complainant, Complainant's List of Proposed Witnesses and Exhibits, and exhibits 1 through 13 (CTP Exs. 1-13, respectively).  Docket Entry Nos. 12, 12a-12n.  CTP's exhibits included the declaration of two witnesses: (1) Laurie Sternberg, Senior Regulatory Counsel in the Office of Compliance and Enforcement, CTP, FDA (CTP Ex. 3), and (2) Francis Devell Forney, FDA-Commissioned inspector for the state of Maryland (CTP Ex. 4).  Docket Entry Nos. 12d, 12e.

I held a pre-hearing conference (PHC) by telephone on April 21, 2020.  See Docket Entry No. 15, at 1-2.  At the PHC, Respondent confirmed that he does not contest the sale on October 15, 2019, but requested a lower CMP.  Id. at 2.  Respondent raised no objection to the admission of Complainant's proffered exhibits.  Id.  Respondent also confirmed he did not need to cross-examine Ms. Sternberg or Inspector Forney.  Id.  Both parties waived their rights to a hearing and agreed to proceed to a decision based on the written record.  Id.  On April 21, 2020, I issued an Order summarizing the PHC, admitting Complainant's exhibits into evidence as CTP Exhibits 1 through 13, finding a hearing unnecessary because both parties waived their rights to a hearing, stating I will proceed to decide this case based on the evidence of record, and establishing a supplemental briefing schedule.  Id.

Respondent timely filed a Supplemental Brief.  Docket Entry No. 16.  In its Supplemental Brief, Respondent stated that on October 15, 2019, around 5:50 PM, "a young girl who appeared to be over 26 years of age . . . came to our store and bought a cigarette pack, she was very confident and well trained to do this type of transaction to trap the cashier."  Id. at 1.  Respondent argued that the "cashier did not verify the age because [the minor] looked over the legal age limit to purchase the tobacco product."  Id.  Respondent explained that the "cashier may have made mistake because of his bad judgment of age behind the 1" thick glass and he is surprise[d] and sorry to know that the customer was only 16 years of age."  Id. at 1-2.  According to Respondent, the cashier's "intention was not to sell tobacco to any minor."  Id. at 2.  Respondent indicated that "[w]e have made all the necessary measures to make sure this type of mistake will not happen again."  Id.  Respondent also stated that "because of COVID 19, we have lost 60% of our business for the last three months."  Id.  According to Respondent, "[i]n this condition it's going to be very hard to stay in business for too long, we have applied for financial help to state of Maryland but no response yet."  Id.  Respondent argued that "[w]e are not in position to pay any fine or penalty at this stage."  Id.  Respondent requested a waiver of all penalties "considering the business situation of this world wide pandemic event."  Id.  CTP did not file a supplemental or responsive brief.

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).

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II.  Issues

A. Whether Respondent sold cigarettes to a minor and failed to verify, by means of photographic identification, that the cigarette purchaser was of sufficient age, on October 15, 2019, in violation of 21 C.F.R. § 1140.14(a)(1) and (a)(2)(i); and

B. If so, whether the CMP amount of $5,705 sought by CTP is an appropriate amount, pursuant to the provisions of 21 C.F.R. § 17.34(a)-(c).

III.  Analysis

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.  FDA and its agency, CTP, may seek the imposition of remedies 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 sale of cigarettes 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(a)(1).2  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 purchasers are younger than 18 years of age.

In order to prevail, CTP must prove Respondent's liability by a preponderance of the evidence.  21 C.F.R. § 17.33(b).  Respondent has the burden to prove any affirmative defenses, likewise by a preponderance of the evidence.  21 C.F.R. § 17.33(c).  The United States Supreme Court has described the preponderance of the evidence standard as requiring that the trier-of-fact believe that the existence of a fact is more probable than 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,

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508 U.S. 602, 622 (1993) (citing In re Winship,397 U.S. 358, 371-72 (1970) (Harlan, J., concurring)).

A. Violations

Upon consideration of the entire administrative record and applicable law, I find that Respondent committed five violations of the Act and tobacco regulations over a 36-month period, as alleged in the Complaint.  Complaint ¶¶ 7-10.  In the previous CMP action, Respondent admitted to violations of selling cigarettes to minors and failing to verify the age of a purchaser, in violation of 21 C.F.R. § 1140.14(a)(1) and 21 C.F.R. § 1140.14(a)(2)(i), respectively.  The previous CMP action concluded by settlement, in which Respondent acknowledged that all of the violations in the Prior Complaint occurred as alleged, waived the Respondent's ability to contest the violations in the future, and acknowledged that the violations may be counted in determining the total number of violations for purposes of future enforcement actions.  See CTP Ex. 2.

Accordingly, based on the settlement agreement, Respondent previously admitted to selling cigarettes to minors on May 17, 2018 and September 11, 2018, in violation of 21 C.F.R. § 1140.14(a)(1).  CTP Exs. 1-2.  Respondent also admitted to committing an additional violation on September 11, 2018 for failing to verify the age of the cigarette purchaser, by means of photographic identification containing the bearer's date of birth, in violation of 21 C.F.R. § 1140.14(a)(2)(i).  Id.  These prior violations are administratively final and may not be challenged by Respondent.  21 C.F.R. § 17.15(b).

In this proceeding, CTP's case against Respondent rests on the testimony of Ms. Sternberg (CTP Ex. 3) and Inspector Forney (CTP Ex. 4), supported by corroborating evidence.  Ms. Sternberg testified that the Newport cigarettes purchased during the October 15, 2019 inspection were manufactured or processed for commercial distribution at facilities in North Carolina.  CTP Ex. 3 ¶¶ 7-8; see also CTP Ex. 13.  The manufacturer of Newport cigarettes does not have production facilities in Maryland, where the cigarettes were purchased.  CTP Ex. 3 ¶ 9.  Respondent did not challenge Ms. Sternberg's testimony and did not dispute that Respondent held Newport cigarettes for sale at its business establishment on October 15, 2019.  Accordingly, I find that Respondent's establishment received Newport cigarettes in interstate commerce and held them for sale on October 15, 2019, after shipment in interstate commerce.

Inspector Forney is an FDA-commissioned officer with the state of Maryland whose duties include determining a retailer's compliance with the age and photo identification requirements relating to the sale of tobacco products.  CTP Ex. 4 ¶¶ 2-3.  Inspector Forney testified that on October 15, 2019, he and Minor A conducted a follow-up undercover buy compliance check inspection at Respondent's place of business, located at 13200 Laurel Bowie Road, Laurel, Maryland 20708.  Id. ¶ 7. Before the inspection, Inspector Forney confirmed that Minor A had a true and accurate photographic

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identification showing the minor's actual date of birth (February 26, 2003), Minor A was under the age of 18 at the time of the inspection, and Minor A had no tobacco products in his/her possession.  Id. See also CTP Ex. 8 (Minor A's redacted identification).3

During the inspection, Inspector Forney parked his car near Respondent's establishment.  Inspector Forney watched Minor A enter Respondent's establishment first, and he entered the establishment moments after.  CTP Ex. 4 ¶ 8.  Inspector Forney stated he took a position where he had a clear, unobstructed view of the sales counter and Minor A.  Id.  He observed the employee of the establishment sell Minor A a package of cigarettes and provide no receipt after the purchase.  Id. ¶ 8.  He also observed that prior to the purchase Minor A did not present any identification to the employee.  Id.  After Minor A exited the store, Inspector Forney and Minor A returned to the vehicle, and Minor A handed the inspector the package of cigarettes.  Id. ¶ 9.  Inspector Forney observed that the package of cigarettes was Newport cigarettes.  Id.  Inspector Forney then drove to a nearby safe location, labeled the cigarettes as evidence, photographed the evidence, and processed the evidence according to standard procedures.  Id.  Shortly after the inspection, Inspector Forney recorded the inspection in FDA's Tobacco Inspection Management System (TIMS) and created a Narrative Report.  Id. ¶¶ 10-11.  These photographs and reports document the inspection and corroborate Inspector Forney's testimony.  See CTP Ex. 5 (Narrative Report); CTP Ex. 6 (TIMS Assignment Form); CTP Ex. 7 (Photographs of the cigarettes sold by Respondent to Minor A); CTP Ex. 9 (Photographs of the cigarettes sold by Respondent to Minor A in evidence bag).

Respondent offered no testimony to refute the testimony of Inspector Forney that it sold cigarettes to a minor and failed to verify the minors' identification on October 15, 2019.  However, Respondent did raise a number of arguments in response to the Complaint.  Respondent initially argued that CTP failed to provide a proof of transaction.  Answer ¶ 1.  Certainly, a receipt would be dispositive proof that the transaction occurred, but Inspector Forney's observations of the transaction and the physical evidence that was obtained on October 15, 2019 are, in and of themselves, adequate to prove that a sale occurred.  The absence of receipt does not derogate from that evidence.

Respondent also asserted in its Answer and Informal Brief that it did not intentionally sell cigarettes to a minor on October 15, 2019.  Answer ¶ 1; Informal Brief of Respondent, at 4.  A violation of 21 C.F.R. § 1140.14(a)(1) only requires that a sale to a minor occurred, and does not take into account a retailer's intent to determine liability.  Intent, therefore, is not a necessary element to prove a violation of this regulation.  Indeed, the cashier not intentionally selling cigarettes to a minor is not inconsistent with a finding

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that the cashier in fact sold cigarettes to a minor.  Respondent further argued that any employee who is unhappy at the job can put the owner in this situation.  Answer ¶ 3.  Arguing that Respondent's employees committed the act to hurt the owner would actually prove that the acts were intentional.  Respondent, however, is liable for the violations committed by its employees, whether or not the act was intentional.  Kat Party Store, Inc. d/b/a Mr.  Grocer Liquor Store, DAB No. TB509, at 4 (2016) ("Respondent's employees are its agents and Respondent bears the onus for assuring that these employees comply with legal requirements."); TOH, Inc. d/b/a Ridgeville Serv. Ctr.,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.").

During the PHC, Respondent confirmed that it does not contest the sale on October 15, 2019.  See April 21, 2020 Order, at 2.  Consistently, in its Supplemental Brief, Respondent stated that on October 15, 2019, around 5:50 PM, a young girl bought cigarettes from Respondent.  Supplemental Brief of Respondent, at 1.  Respondent argues that the purchaser appeared to be over 26 years old.  Answer ¶ 2; Informal Brief of Respondent, at 4, 6; Supplemental Brief of Respondent, at 1.  In support of its argument, Respondent submitted a video allegedly showing that Minor A appeared to be over the legal age limit.  Answer ¶ 2; Supplemental Brief of Respondent, at 2; Docket Entry No. 8a (video footage date-stamped 10/15/2019 PM 05:51:08 showing the transaction at issue).

Under 21 C.F.R. § 1140.14(a)(2)(i), "[e]ach retailer must verify by means of photographic identification containing the bearer's date of birth that no person purchasing the product is younger than 18 years of age."  Section 1140.14(a)(2)(ii) further provides that "[n]o such verification is required for any person over the age of 26."  Section 1140.14(a)(2)(i) is purely objective, it does not consider a retailer's subjective inquiry about the appearance of tobacco product purchasers.  Auto Valet, Inc. d/b/a Finest Car Wash, DAB No. 2915, at 8 (2018) (there is no subjective appearance exception to the requirement that retailers check the photo identification of tobacco purchasers who appear to be older than age 26 but are actually under 26); Deli-Icious Catering. Inc. d/b/a Convenient Food Mart, DAB No. 2812, at 11 (2017) (the regulations "do not incorporate any 'appearance' or 'judgment' standard and instead require that retailers check photo IDs of all persons aged 26 and younger who seek to purchase cigarettes.").  Indeed, "requiring age verification if a person "looked" like he or she was a particular age would be difficult to administer and to enforce."  Deli-Icious, at 11.  Respondent, therefore, must check the identifications of every purchaser age 26 years and younger notwithstanding their appearances.  See 61 Fed. Reg. 44396, at 44439 (Aug. 28, 1996) ("By requiring age verification if a purchaser is 26 years old or younger, regardless of his or her appearance, the retailer foregoes age verification at its own risk.").

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Respondent further argued that the minor "looked/appeared to be over 26 years old by physical manner/act such as showing the confidence to place the order, product knowledge body language, well trained to attempt to trap the cashier, not confused or scared to place the order."  Informal Brief of Respondent, at 6.  Respondent also stated that Minor A "was very confident and well trained to do this type of transaction to trap the cashier."  Supplemental Brief, at 1.  To the extent Respondent attempted to raise an entrapment defense, the Departmental Appeals Board found this argument to be speculative stating that "entrapment would not appear to be available in a federal enforcement action for sale of tobacco products to minors."  TOH, Inc. d/b/a Ridgeville Serv. Ctr., DAB No. 2668, at 14-15 (2015).  Moreover, Respondent offered no evidence to support its assertions or show that its entrapment defense is anything more than speculation.  The record clearly shows that Minor A had a valid identification showing her age.  CTP Ex. 4 ¶ 7 (stating, in part, that Inspector Forney confirmed that  Minor A had in his or her possession a photographic identification showing the minor's "actual date of birth" before entering Respondent's establishment); see also CTP Ex. 8 (Minor A's redacted identification).

Respondent also argued that Inspector Forney did not issue a citation or ticket at the time of the violation.  Answer ¶ 2; see also Informal Brief of Respondent, at 4 ("The inspector did not issue any citation or ticket at the time of violation, if we had no video footage available, we would not have known about this event or inspection.").  There is no requirement to notify Respondent of alleged violations at the time of the inspection.  Instead, the Family Smoking Prevention and Tobacco Control Act (TCA) Pub. L. No. 111-31, 123 Stat. 1776 (2009), requires "timely and effective notice by certified or registered mail or personal delivery to the retailer of each alleged violation at a particular retail outlet prior to conducting a follow-up compliance check" and notice of "all previous violations at the outlet" prior to charging a person with a violation.  TCA § 103(q)(1)(B), (D).

With respect to the first requirement, the Departmental Appeals Board found that it "may reasonably be read as requiring only that, having found the retailer to be committing acts in violation of law, CTP must so inform the retailer before returning to the establishment to conduct another inspection . . . ." Orton Motor Co. d/b/a Orton's Bagley, DAB No. 2717, at 19 (2016), aff'd, Orton Motor Co. d/b/a Orton's Bagley v. HHS, 884 F.3d 1205 (D.C. Cir. 2018).  Here, CTP complied with the first requirement by sending Respondent a July 5, 2018 Warning Letter notifying it of the illegal sale of tobacco to a minor and failure to check the purchaser's identification found during the inspection on May 17, 2018, and advising that failure to correct the violations "may lead to federal enforcement actions, including monetary penalties."  CTP Ex. 12.  Respondent has not raised any issue about the service of the Warning Letter in this case.  The second requirement also is not at issue here since there is no dispute that the Complaint initiating this enforcement action seeking penalties was properly served, and that the Complaint gave notice of all previous violations at Respondent's establishment.  See Docket Entry No. 1b (Proof of Service).

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Still further, based on the evidence of record, CTP issued a Compliance Check Inspection Notice (Notice) to Respondent, stating that an inspection was conducted on October 15, 2019, and that during the inspection, a minor was able to enter the establishment and purchase cigarettes in a package.  CTP Ex. 10, at 1.  The Notice also stated that "[o]ther potential violations of federal tobacco laws may have also been reported" and that violations "may result in a Warning Letter, a Civil Money Penalty, or No-Tobacco-Sale Order."  Id.  The UPS Delivery Notification shows that the Notice was shipped on October 17, 2019, and delivered to Respondent's address of 13200 Laurel Bowie Road, Laurel, Maryland 20708, on October 18, 2019, three days after the inspection. CTP Ex. 11.  I, therefore, find that notices provided by CTP to Respondent satisfy the TCA requirements.

Respondent further indicated that it did not know that a sale to a minor would count as two violations.  Informal Brief of Respondent, at 7.  However, Respondent was notified of this fact in the prior CMP, when it was charged with two violations on September 11, 2018.  Complaint ¶ 9.  Moreover, Respondent's argument is inconsistent with the applicable case law.  In Orton Motor, the District of Columbia Circuit stated that "[g]enerally speaking, a retailer who sells a tobacco product to a minor, in violation of 21 C.F.R. § 1140.14(a)(1), likely only would do so without checking identification first, in violation of 21 C.F.R. § 1140.14(a)(2)."  Orton Motor Co. d/b/a Orton's Bagley v. HHS,884 F.3d 1205, 1212 (D.C. Cir. 2018).  The Court further indicated that the sale and verification each has independent significance explaining that "the requirement that a retailer verify age applies with respect to prospective tobacco purchasers up to 26 years old, while the sales restriction relates only to would-be purchasers under the age of 18."  Id.  Accordingly, Respondent in this case first committed a violation of section 1140.14(a)(2) when it failed to verify the purchaser's age, and then, since the minor was permitted to purchase a package of cigarettes, Respondent committed a violation of section 1140.14(a)(1).

The unrebutted record evidence compels me to find by a preponderance of evidence that the violations occurred, as alleged in the Complaint.  I find Inspector Forney's testimony to be credible and concise as to his observations during the October 15, 2019 inspection. Inspector Forney's testimony was that before the inspection, he confirmed that Minor A had photographic identification showing his/her actual date of birth and had no cigarettes in his/her possession before entering the store.  CTP Ex. 4 ¶ 8.  Inspector Forney watched Minor A enter Respondent's establishment first, and he entered the establishment moments after.  CTP Ex. 4 ¶ 8.  Inspector Forney stated he took a position where he had a clear, unobstructed view of the sales counter and Minor A.  Id.  He observed the employee of the establishment sell Minor A a package of cigarettes and provide no receipt after the purchase.  Id.  He also observed that prior to the purchase Minor A did not present any identification to the employee.  Id.

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The testimony of Inspector Forney, supported by corroborating evidence, is sufficient to establish that it is more likely than not that on October 15, 2019, Respondent unlawfully sold cigarettes to Minor A, in violation of 21 C.F.R. § 1140.14(a)(1), and failed to verify the photographic identification of Minor A, in violation of 21 C.F.R. § 1140.14(a)(2)(i).  21 C.F.R. § 17.33(b).  Further, Respondent failed to provide evidence to rebut CTP's allegations or to establish any affirmative defense by a preponderance of the evidence.  21 C.F.R. § 17.33(c).  Accordingly, I find that the weight of the evidence in the record establishes that Respondent sold cigarettes to a minor on October 15, 2019, and failed to verify the purchaser's age, in violation of 21 C.F.R. § 1140.14(a)(1) and (a)(2).  Given Respondent's admissions in the prior settlement agreement and the evidence of record, I conclude that Respondent committed five violations of the Act and its implementing regulations over a 36-month period, as alleged in the Complaint.

B. Civil Money Penalty

Having determined that Respondent is liable for committing five violations over a 36-month period, I conclude that I have the authority to impose a CMP, under 21 U.S.C. § 333(f)(9).  Pursuant to 21 U.S.C. § 333(f)(9), Respondent 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.  In its Complaint, CTP sought to impose the penalty amount of $5,705 against Respondent for five violations of the Act and its implementing regulations within a 36-month period.  Complaint ¶ 1.  In its pre-hearing brief, CTP continued to assert that a $5,705 CMP is appropriate.  Informal Brief of Complainant, at 10.  Respondent's position is that the CMP is unfair and should be reduced.  Answer ¶ 3; Informal Brief of Respondent, at 7-8; Supplemental Brief, at 2.

So now I turn to determine whether a $5,705 CMP is appropriate.  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 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); 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.  Respondent must prove any mitigating factors by a preponderance of the evidence.  21 C.F.R. § 17.33(c).  For the following reasons, I conclude that a $4,000 CMP 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 three violations of selling cigarettes to minors, and two violations for failure to verify, by means of photo identification containing a date

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of birth, that no cigarette purchasers are younger than 18 years of age, totaling five violations of the tobacco regulations.  After the May 17, 2018 violation, 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. 12, at 1-2.  Despite these warnings from CTP and a subsequent CMP action, Respondent committed two additional violations on October 15, 2019.  The regulations governing the sale of tobacco products are set forth to protect public health, in particular the health of minors.  The repeated inability of Respondent to comply with federal tobacco regulations is serious in nature and demands a proportional CMP amount.

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

CTP is seeking a $5,705 CMP against Respondent asserting that the CMP will not affect Respondent's ability to do business, because "Respondent may continue to sell tobacco products and other products at the establishment."  Informal Brief of Complainant, at 11.  In its Answer, Respondent indicated that the CMP is too high because Respondent is running a small business and cannot afford to pay the CMP.  Answer ¶ 3.  In its Informal Brief, Respondent argued that the CMP "will have huge impact to run this small business with lots of operating expenses."  Informal Brief of Respondent, at 7.  Respondent further stated that it is unfair and harsh to pay a CMP that is 10 times higher than the $559 CMP in the Prior Complaint.  Id. at 8.  In its Supplemental Brief, Respondent argued that because of COVID 19, it lost 60% of its business in the last three months.  Supplemental Brief, at 2.  According to Respondent, it petitioned the state of Maryland for financial aid and is not in a position to pay a CMP at this time.  While the record does not include specific evidence to show the effects of a $5,705 CMP on Respondent's small business, I find Respondent to be sincere and credible on that issue, and a CMP of this amount will likely have a significant effect on Respondent's ability to continue to do business, particularly in light of the current economic conditions triggered by the COVID-19 pandemic.  Moreover, the purpose of the penalty is to promote compliance and deter future violations by penalizing for non-compliance, but not to put a retailer out of business or threaten 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").

3. History of Prior Violations

The current action is the second CMP action brought against Respondent since November 30, 2018 for violations of the Act and its implementing regulations.  In the first CMP action, CRD Docket Number T-19-666, FDA Docket Number FDA-2018-H-4514, Respondent twice violated the prohibition against selling cigarettes to persons

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younger than 18 years of age, 21 C.F.R. § 1140.14(a), and once 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).  See CTP Ex. 1.  Respondent settled the prior complaint with CTP for an undisclosed penalty amount on February 2, 2019.  See CTP Ex. 2.  Yet, on October 15, 2019, Respondent once again sold cigarettes to a minor and failed to verify the identification of the purchaser.  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 12.  While Respondent has already paid a CMP for its previous violations, its continued inability to comply with the federal tobacco regulations calls for a more severe penalty.

4. Degree of Culpability

Respondent admitted to three violations of the Act and its implementing regulations in the settlement agreement of the prior action.  In addition, based on the evidence presented, I found that Respondent committed the two most recent violations in the current Complaint.  As discussed above, Respondent attempts to shift blame to its employee, but Respondent is responsible for the actions of its employees, even if their actions were unintentional or against company policy.  See supra Part III.A.  Although the actions of Respondent's employee might have been a result of wrong judgment or mistake, they do not absolve Respondent of responsibility.  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 October 15, 2019, was still in training.  Informal Brief of Respondent, at 4.  Respondent is responsible for training its employees and complying with the Act at all times.  Therefore, I hold Respondent fully culpable for five violations of the Act and its implementing regulations.

5. State Penalties

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

6. Employee Training Program and Other Matters as Justice May Require / Additional Mitigating Factors

As part of its Production of Documents, Respondent submitted a picture of the Point of Sale age verification system, pictures of the warning signs at the store, a copy of the training certificate of Respondent's employee signed on October 23, 2019, a copy of Respondent's Tobacco Sales Policy and Employee Acknowledgement of Company Policy signed by Respondent's employee on October 23, 2019, and a copy of the Age Verification Report listing verifications conducted between 4 PM and 7 PM on October 15, 2019.  Docket Entry No. 8.  In its Informal Brief, Respondent explained that it has a

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store policy and training for all level employees in place, referring to the store policy and training certificate provided in Production of Documents.  Informal Brief of Respondent, at 5; see also Docket Entry No. 8, at 7-9.  Respondent also indicated that "[f]or avoiding/preventing of future violation we are going to use electronic age verification scanner all the time and more training of employees, no more guessing game or good faith to the customer, checking ID is must no matter how many times they buy tobacco[,] zero tolerance policy for employees."  Informal Brief of Respondent,at 7.  Respondent promised to put efforts into prevention of any such incident in the future.  Id. at 8.  In its Supplemental Brief, Respondent stated that "[w]e have made all the necessary measures to make sure this type of mistake will not happen again."  Supplemental Brief, at 2.  Although Respondent provided no evidence in support of these statements, CTP failed to refute Respondent's assertions.  To ensure that justice is served, I find Respondent's assertions on this issue persuasive.

IV.  Penalty

I find that a large penalty amount will have a financial strain on Respondent's small business.  The circumstances surrounding the COVID-19 pandemic and other possible community restrictions have likely affected Respondent's financial situation.  I have considered statutory factors, most of which support imposition of a penalty.  In particular, Respondent has a history of violations of tobacco regulations.  A warning from CTP and a previous CMP action did not prevent the current violations.  However, at least two statutory factors as discussed above suggest a somewhat lower penalty amount would be sufficient.  For these reasons, after considering all statutory factors, I find a reduced penalty amount of $4,000 to be appropriate under 21 U.S.C. § 333(f)(5)(B), (f)(5)(C), and (f)(9).

V.  Conclusion

Pursuant to 21 C.F.R. § 17.45, I enter judgment in the amount of $4,000 against Respondent, Nehmat, LLC d/b/a Shell, for five violations of the 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. Notably, CTP did not include violations that occurred outside the relevant timeframe for this Complaint.  See Complaint, at 1 n.1.
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2. 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 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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3. In its Answer, Respondent stated that CTP did not provide a copy of the minor's identification.  See Answer ¶ 1.  Subsequently, CTP filed a redacted copy of the minor's identification as part of its pre-hearing exchange and Respondent did not offer any objection to the admission of this document, so the issue is now resolved.  See CTP Ex. 8.
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