Hazar Enterprises LLC d/b/a 7th Heaven, DAB TB5255 (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 $570 against Respondent, Hazar Enterprises LLC d/b/a 7th Heaven, for committing three violations within a 24-month period 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.  Specifically, CTP alleges that Respondent unlawfully sold covered tobacco products to a minor.

Respondent denies all allegations in the Complaint, raises several defenses to liability, and argues that the proposed CMP is too high and inappropriate.  Specifically, Respondent challenges the validity of the alleged prior violations and contends that the most recent alleged violation is inaccurate and did not occur because it has strictly-followed training and protocols for checking identification before tobacco sales.  Respondent also contends that the proposed CMP is excessive because the evidence of record is insufficient to prove liability for any prior or current violations, the first

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violation should not be counted in the total number of violations for the purpose of enhancing the CMP, and the proposed CMP would hamper the Respondent's business and indicate culpability where it is unproven.  For the reasons discussed below, I reject Respondent's arguments and, based on the evidence of record and applicable law, find Respondent liable for the violations alleged in the Complaint and conclude that a CMP of $570 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, 7th Heaven, located at 1602 Cherry Street, Toledo, Ohio, 43608, by United Parcel Service on July 8, 2019.  See DAB E-File Docket  No. T-19-3641 (Dkt.) Entry Nos. 1, 1a-1b.  The Complaint alleges that Respondent committed at least three violations of the Act and its implementing regulations over a 24-month period.  Complaint ¶ 1.  In the previous action that resulted in a default judgment, Respondent was found to have committed two violations of the Act and implementing regulations on October 5, 2017, and May 4, 2018.  Id. ¶¶ 11-12 (citing Initial Decision and Default Judgment, Hazar Enterprises LLC d/b/a 7th Heaven, DAB TB2999 (Aug. 15, 2018),CRD Docket No. T-18-2613, FDA Docket No. FDA-2018-H-2355).  CTP also alleged that "a person younger than 18 years of age was able to purchase a Black & Mild cigar on April 9, 2019, at approximately 8:10 PM."  Id. ¶ 9.

Respondent electronically filed a timely Answer on August 6, 2019.  Dkt. Entry No. 3a (Answer).  In its Answer, Respondent denied the allegations of liability, admitted to owning the establishment, which receives and sells tobacco products, and raised a few specific defenses, including having "specific training and protocols with regard to the checking of identification of all individuals who appear to be under the age of twenty-seven for sale of tobacco products."  Answer at 1-2.  Respondent also asserted that the requested CMP in the amount of $570 "is too high and inappropriate because the incident complained of in the Complaint . . . are inaccurate and did not occur."  Id. at 2.

On August 13, 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.  The APHO established a September 19, 2019, discovery deadline and the following pre-hearing exchange deadlines:  November 4, 2019, for CTP and November 25, 2019, for Respondent.

On October 22, 2019, CTP filed contemporaneous motions to extend deadlines, Dkt. Entry No. 7, and to compel discovery stating that Respondent had failed to respond to CTP's Request for Production of Documents served on September 12, 2019, Dkt. Entry Nos. 8, 8a-8b.  On October 28, 2019, I issued an Order extending the pre-hearing exchange deadlines by 30 days and allowing Respondent until November 6, 2019, to file a response to CTP's motion to compel discovery.  Dkt. Entry No. 9.  On November 19,

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2019, after no response was received from Respondent, I granted CTP's motion to compel discovery and directed Respondent to produce responsive documents by December 4, 2019.  Dkt. Entry No. 10.  The Order also extended the pre-hearing exchange deadlines to January 3, 2020, for CTP and to January 27, 2020, for Respondent.  Id.  On November 25, 2019, Respondent filed a notice stating that Respondent served its response to CTP's Request for Production of Documents on November 7, 2019.  Dkt. Entry No. 11.

CTP timely filed its pre-hearing exchange, consisting of a pre-hearing brief, a proposed witness list and exhibit list, and proposed exhibits (CTP Exs. 1-13), including the written direct testimony of two proposed witnesses, CTP's Senior Regulatory Counsel, Laurie Sternberg (CTP Ex. 3), and FDA-commissioned Inspector, Marcus Kelly (CTP Ex. 5).  Dkt. Entry Nos. 12, 12a-12n.  Respondent also timely filed a pre-hearing exchange, consisting of a pre-hearing brief (R. Brief) and a list of proposed witnesses and exhibits.  Dkt. Entry Nos. 13-14.  Respondent proposed a single witness, Mr. Steven Ozbay, but did not submit a witness summary or written direct testimony for its proposed witness or submit any other proposed exhibits.  Dkt. Entry No. 14.  CRD received a duplicate, mailed copy of Respondent's pre-hearing exchange on February 4, 2020.  Dkt. Entry No. 16.

On February 4, 2020, I ordered a pre-hearing conference to resolve certain issues and to schedule the hearing.  Dkt. Entry No. 15.  At the pre-hearing conference, Respondent identified Mr. Ozbay as the Respondent's proprietor, and CTP objected to Respondent's proposed witness, arguing that Respondent failed to comply with the APHO requirement to provide a sworn declaration for Mr. Ozbay.  Respondent argued that its proposed witness should not be excluded because Respondent's counsel lacked experience in these cases and CTP would not be disadvantaged by the admission of Respondent's proposed witness' testimony.  Although CTP could not confirm whether it wished to cross-examine Respondent's proposed witness because Respondent had not submitted the witness' written direct testimony, CTP reserved the right to cross-examine the witness if the witness was permitted to testify and the late submission of written direct testimony was allowed.  Respondent did not move to supplement its pre-hearing exchange with Mr. Ozbay's written direct testimony.  21 C.F.R. § 17.25(b); APHO ¶ 8.

On February 25, 2020, I issued the Summary of February 19, 2020 Pre-Hearing Conference and Order Scheduling In-Person Telephone Hearing for March 17, 2020.  Dkt. Entry No. 17.  As Respondent did not object, CTP Exhibits 1-13 were admitted into the record, and the parties were instructed that the testimony at the hearing would be limited to the cross-examination and re-direct testimony of Ms. Laurie Sternberg (CTP Exs. 3-4) and Inspector Marcus Kelly (CTP Exs. 5, 7-10).  Id. at 1-2.  I also sustained CTP's objection and excluded the testimony of Respondent's proposed witness because Respondent did not comply with requirements of the regulations and APHO.  I also found Respondent's arguments concerning its counsel in experience and lack of prejudice

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towards CTP to be unpersuasive.  Id. at 2-3.  However, as I indicated at the pre-hearing conference, I would permit Respondent's proposed witness to testify as a rebuttal witness at hearing in accordance with 21 C.F.R. § 17.39(g).  Id. at 3.

On March 16, 2020, I issued an Order rescheduling the hearing for April 14, 2020, due to circumstances concerning the coronavirus pandemic.  Dkt. Entry No. 18.  On April 2, 2020, I issued another Order rescheduling the hearing for June 23, 2020.  Dkt. Entry No. 19.  On June 12, 2020, I issued an Order Revising Toll-Free Line Details for the June 23, 2020, Telephone Hearing.  Dkt. Entry No. 22.

On June 23, 2020, I held a telephone hearing in this case.  During the hearing, Respondent waived the opportunity to cross-examine Ms. Sternberg.  Dkt. Entry No. 25 (Transcript (Tr.)) at 4.  Respondent cross-examined Inspector Kelly for the rest of the hearing.  Id. at 5-30.  CTP declined to question Inspector Kelly on redirect examination, and Respondent did not call on its rebuttal witness, Steven Ozbay, to rebut Inspector Kelly's testimony.  Id. at 30.

The parties made the following objections during the telephone hearing:

• CTP's objection that Respondent's question about ISN, an FDA contractor who performs retail inspections, determining the minor's eligibility to work was outside the scope.  Tr. at 6-8.  I overruled this objection.  Id. at 8.  Respondent also rephrased the question.  Id.
• CTP's objection that Respondent's question as to whether Mr. Kelly had personal knowledge of the minor's eligibility was asked and answered and an incorrect summary of the witness' testimony.  Id. at 10.  I sustained this objection.  Id.
• CTP's objection that Respondent's question as to whether Inspector Kelly had an opportunity to take a photograph of the minor's eligibility card was irrelevant to the issues in this case.  Id. at 11-12.  I sustained this objection and added that the question is outside the scope of Mr. Kelly's declaration.  Id. at 12-13.
• CTP's objection to the form of Respondent's question as a compound question.  Id. at 14-15.  I sustained this objection, adding that it was also speculative.  Id. at 15.
• CTP's objections that Respondent's questioning of the inspector's process and ability to take videos or photographs while inside the store was asked and answered, as well as beyond the scope and not relevant.  Id. at 16.  I sustained these objections.  Id.

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• CTP's objections that Respondent's questions about the narrative report assisting Mr. Kelly in substantiating CTP's Complaint lacked foundation and the timing was off.  Tr. at 19-20.  I overruled this objection, and Respondent's counsel rephrased the question.  Id.
• CTP's objections that Respondent's questions about Mr. Kelly only including part of his observations during the inspection in the narrative report were characterizations and speculative.  Id. at 23.  I sustained these objections and noted that the questions were argumentative and would be more appropriate for briefing.  Id.
• CTP's objections that Respondent's questions regarding the minor's narrative report are beyond the scope and not relevant because CTP is not relying on the minor's narrative report in this case.  Id. at 25-26.  I sustained these objections and added that the questions may concern attorney-client privilege.  Id. at 26.  Furthermore, I also note here that Respondent's questions appear to ask about CTP's prosecutorial discretion and litigation strategy.
• CTP's objection that Respondent's question concerning "these reports" was unclear.  Id. at 27.  Respondent rephrased the question.  Id.
• CTP's objection that Respondent's question if Mr. Kelly could have gone back to the store and issued a citation was beyond the scope.  Id. at 28.  I sustained this objection.  Id.
• CTP's objection that Respondent's question about the inspector's opportunity to issue a citation on any of the inspections Mr. Kelly conducted at the time the observation was made or at the creation of the report was irrelevant and beyond the scope.  Id. at 29.  I sustained this objection.  Id.
• CTP's objection that Respondent's question about whether the inspector had notified individuals at the stores or retail locations about his observations at the time of that he conducted any of the "thousand" inspections was irrelevant.  Id.  I sustained this objection.  Id.
• CTP's objection that Respondent's question about why the inspector did not notify Respondent that there was a violation on the evening of the inspection had been asked and answered because Mr. Kelly already explained his process.  Id. at 29-30.  I sustained this objection.  Id. at 30.

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On July 13, 2020, I informed the parties of the receipt of the hearing transcript and that they could file any proposed corrections to the transcript by July 31, 2020, as well as any objections to any proposed transcript corrections by August 7, 2020.  Dkt. Entry No. 24; see also Dkt. Entry No. 25 (Hearing Transcript).  I also set the deadline for the parties' simultaneous post-hearing briefs at August 10, 2020, and simultaneous post-hearing responsive briefs at August 25, 2020.  Dkt. Entry No. 24 at 2.  Finally, I reiterated the issues I must decide and advised the parties of settlement procedures.  Id. at 3-4.

On July 31, 2020, Respondent filed a notice stating that it had no proposed transcript corrections.  Dkt. Entry No. 26.  CTP did not file any notices concerning transcript corrections.  On August 10, 2020, Respondent filed a post-hearing brief containing closing arguments (R. Closing Argument).  Dkt. Entry No. 27.  CTP did not file a post-hearing brief.  On August 25, 2020, CTP filed a notice of waiver in lieu of filing a post-hearing responsive brief.  Dkt. Entry No. 28.  As CTP did not file a post-hearing brief, Respondent did not file a post-hearing responsive brief.  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).

II.  Issues

The issues in this case are:

1. Whether Respondent 7th Heaven sold a covered tobacco product to a minor on April 9, 2019, in violation of 21 C.F.R. § 1140.14(b)(1);
2. Whether the Respondent is liable for a civil money penalty; and
3. If so, whether the CMP of $570 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 years old 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

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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), (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 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)).

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IV.  Analysis

A.  Violations

Upon consideration of the applicable law and evidence of record, I conclude that Respondent committed at least two previous violations of the Act and implementing regulations on October 5, 2017, and May 4, 2018.  I also find that the evidence is sufficient to establish that Respondent sold a covered tobacco product to a minor on April 9, 2019, at approximately 8:10 P.M., in violation of 21 C.F.R. § 1140.14(b)(1).  Consequently, Respondent is liable for committing three violations within a 24-month period.

1.  Respondent's Prior Violations

This is not the first case that CTP has pursued against Respondent.  Respondent received a Warning Letter for selling cigars to a minor and failing to check identification to verify a purchaser's age on October 5, 2017.  CTP Ex. 13.  Subsequently, CTP filed its first CMP action, Hazar Enterprises LLC d/b/a 7th Heaven, CRD Docket No. T-18-2613, FDA Docket No. FDA 2018-H-2355, against Respondent on June 20, 2018, for committing at least two violations of the Act within a 12-month period.  CTP Ex. 1 at 1 (Prior Complaint).  The Prior Complaint alleged that Respondent sold covered tobacco products to a minor, in violation of 21 C.F.R. § 1140.14(b)(1), on May 4, 2018.  Id. at 3-4.  It further alleged that Respondent sold covered tobacco products to a minor, in violation of 21 C.F.R. § 1140.14(b)(1), and failed to verify the age of a person purchasing covered tobacco products by means of photographic identification, in violation of 21 C.F.R. § 1140.14(b)(2)(i), on October 5, 2017.  Id. at 4.

Respondent did not file an answer to the Prior Complaint.  CTP Ex. 2 (Initial Decision and Default Judgment, CRD Decision No. TB2999) at 3.  Consequently, the prior CMP action resulted in a default judgment issued on August 15, 2018, finding Respondent liable for two violations of the Act and implementing regulations in a 12-month period and imposing the requested CMP of $279.  Id.  Respondent did not move to reopen the case, and the default judgment became administratively final after 30 days.  21 C.F.R. § 17.11(b).

In this case, Respondent now challenges the finality of one of the prior violations.  In its pre-hearing brief, Respondent argues that "the prior allegation on October 5, 2017 was merely an allegation and not proven."  R. Brief at 3.  Respondent raises a similar argument in its post-hearing brief, asserting that it was not a "proven violation" because "only a warning letter was issued on October 5, 2017 regarding an alleged incident at that time."  R. Closing Argument at 2.  These arguments lack merit.

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Contrary to Respondent's assertions, the violation on October 5, 2017, was a proven violation.  Respondent failed to answer CTP's Prior Complaint concerning the violations on October 5, 2017, and May 4, 2018.  When a respondent fails to answer a properly served complaint, it waives its right to a hearing and to contest the amount of the CMP.  21 C.F.R. § 17.11(b).  Moreover, the regulations direct the "presiding officer," defined by 21 C.F.R. § 17.3(c) as "an administrative law judge qualified under 5 U.S.C. [§] 3105," to "assume the facts alleged in the complaint to be true, and, if such facts establish liability under the relevant statute, the presiding officer shall issue an initial decision . . . ."  21 C.F.R. § 17.11(a).  Thus, Respondent forfeited its right to challenge either the October 5, 2017, violation or the May 4, 2018, violation when it failed to answer CTP's Prior Complaint concerning these alleged violations.  CTP Ex. 2 at 8.  Consistent with the regulations, Administrative Law Judge Richard C. Goodwin assumed the facts alleged in the Prior Complaint to be true and determined that Respondent was liable for committing two violations of the Act and implementing regulations within a 12-month period.  Id. at 4-5, 10.  Judge Goodwin explicitly addressed the warning letter and October 5, 2017, violation:

Because no opportunity for a hearing was provided before the Warning Letter was issued, Respondent had a right to challenge the allegations in the Warning Letter in the instant case.  See Orton Motor Co. d/b/a Orton's Bagley v. HHS, 884 F.3d 1205 (D.C. Cir. 2018).

Id. at 4.  However, as noted previously, Respondent did not answer the Prior Complaint, and Judge Goodwin issued an Initial Decision and Default Judgment.  Respondent did not seek reopening, and Judge Goodwin's Initial Decision and Default Judgment became final after thirty days.  Therefore, I conclude that Respondent's prior violation on October 5, 2017 – as well as the prior violation on May 4, 2018, which Respondent does not dispute (see R. Brief at 2-3; R. Closing Argument at 2) – was adjudicated and, thus, "proven," as explained in Judge Goodwin's August 15, 2018, decision.

Furthermore, CTP's issuance of a Warning Letter for the October 5, 2017, incident does not prevent it from being considered a violation.  The Act expressly considers inspections resulting in warning letters to be a "first violation," stating that, for retailers with approved training programs,2 the "[CMP] shall not exceed . . . in the case of the first violation, $0.00 together with the issuance of a warning letter to the retailer . . . ."  21 U.S.C. § 333 note (2)(A)(i)(I) (emphasis added).  Accordingly, a warning letter does not absolve Respondent of liability for the October 5, 2017, violation.

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In summary, I conclude that Respondent has two prior violations of the Act and implementing regulations on October 5, 2017, and May 4, 2018, from a prior CMP action.  CTP Exs. 1-2.  These violations are administratively final.  21 C.F.R. § 17.11(b).

2.  Evidence and Legal Arguments Regarding the Alleged April 9, 2019, Inspection Involving a Tobacco Sale to a Minor

In addition to Respondent's prior violations, CTP alleges that Respondent committed a third violation for selling covered tobacco products to a minor on April 9, 2019.  Complaint ¶ 9.  To support its claims, CTP submitted the declarations of CTP Senior Regulatory Counsel Laurie Sternberg and FDA-commissioned Inspector Marcus Kelly.  CTP Exs. 3, 5.  CTP also submitted reports, photographs, and other documentation.  CTP Exs. 4, 6-13.

Inspector Kelly testified that he conducted the undercover buy (UB) inspection of Respondent's establishment located at 1602 Cherry Street, Toledo, Ohio, 43608, on April 9, 2019, at approximately 8:10 P.M.  CTP Ex. 5 at 2.  At the time of the inspection, Inspector Kelly was an FDA-commissioned officer with the state of Ohio where his duties included performing UB inspections.  Id. at 1-2.  UB inspections are conducted primarily to determine whether retailers are compliant with the age and photo identification requirements relating to the sale of tobacco products.  Id.  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, he confirmed that Minor A did not have any tobacco products in his/her possession and possessed a state-issued photographic identification of his/her date of birth reflecting his/her actual age.  Id.; see CTP Ex. 6.  During the inspection, Inspector Kelly testified that he parked his car near Respondent's establishment, and he and Minor A exited the car.  CTP Ex. 5 at 3.  Inspector Kelly observed Minor A enter the front door of the establishment and entered himself moments after.  Id.  Inspector Kelly from his location had a clear, unobstructed view of the sales counter and Minor A.  Id. Inspector Kelly testified that he observed Minor A purchase a single individual cigar from an employee; that Minor A did present identification to the employee; and that the employee did not provide Minor A with a receipt after the purchase.  Id.; see CTP Ex. 7 at 1; CTP Ex. 8 at 1.

Inspector Kelly also testified that after Minor A exited the store, they returned to the vehicle where Minor A handed Inspector Kelly the single individual cigar, which he observed was a Black & Mild cigar.  CTP Ex. 5 at 3; see CTP Ex. 7 at 1; CTP Ex. 8 at 2.  Inspector Kelly labeled the single individual cigar as evidence, photographed the panels of the package, and processed the evidence in accordance with standard procedures at the

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time of the inspection, which entailed completing several contemporaneous reports.  CTP Ex. 5 at 3; see CTP Exs. 7-10.  These contemporaneous photographs and reports were admitted into evidence and corroborate Inspector Kelly's testimony.  CTP Exs. 7-10.  CTP issued a Notice of Compliance Check Inspection informing Respondent of the April 9, 2019, inspection and reported violation, which was served at Respondent's address on April 15, 2019.  CTP Ex. 11 at 1; CTP Ex. 12.

For the majority of the hearing Respondent cross-examined Inspector Kelly extensively concerning the UB inspection and the compliance check inspection process.  Tr. at 5-30.  At the hearing and in post-hearing briefing, Respondent challenged the FDA's inspection process, including which photos or videos the inspector took, what information was entered into the various reports, and whether notice of the violation was given at the time of the inspection.  Tr. at 15-16, 23, 26, 28-30; R. Closing Argument at 2-3.  Respondent also questioned whether the inspector had an opportunity to create additional photographic, video, or documentary evidence during the inspection.  Tr. at 11-12, 15-17, 29.  CTP objected to several of Respondent's questions as being outside the scope, not relevant, and asked and answered.  Tr. at 10, 12-13, 15-16, 23, 26, 28-30.  I sustained many of these objections and allowed Respondent to continue cross-examining Inspector Kelly at length.  Id.

Respondent argues that the inspector's testimony is not credible because ISN is a third-party contractor.  Tr. at 7-10; R. Closing Argument at 3.  However, this argument fails because the Act authorizes the FDA to contract with states to perform retail inspections "to the extent feasible."  21 U.S.C. § 372(a)(1)(B)(i); see also https://www.fda.gov/tobacco-products/retail-sales-tobacco-products/fda-tobacco-retail-inspection-contracts.  Thus, the FDA may contract with third parties where they have been unable to enter into a contract with the state.  The mere fact that the FDA uses contractors instead of state agencies or its own employees in certain states is insufficient to impugn the credibility of the inspector in a particular case.  As a contractor, ISN and its employees are agents of the FDA that are responsible for carrying out the duties and responsibilities of the FDA.  Accordingly, they are no different than the FDA's own inspectors.

To be clear, I find Inspector Kelly's testimony credible because he has personal knowledge and professional experience concerning the April 9, 2019, UB inspection and the FDA's processes for regulating tobacco products.  Inspector Kelly testified that he has conducted over 1,000 UB inspections and personally "observed Minor A purchase a single individual cigar from an employee at [Respondent's] establishment."  Tr. at 29; CTP Ex. 5 at 3.  I also find Inspector Kelly's testimony to be persuasive because it is supported by photos and reports created contemporaneously to document the April 9, 2019, sale to the minor.  CTP Exs. 7-10.  For example, Inspector Kelly testified that he completed the narrative report based on his observation of what happened at the time of the inspection, with no influence from others or under any time constraints.  Tr. at 20;

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CTP Ex. 7.  The fact that Inspector Kelly could have created additional evidence by taking more pictures or videos or by writing more details in the contemporaneous reports does not impeach his testimony or otherwise question the credibility of his testimony or other evidence presented in CTP's case-in-chief.  Although Respondent's witness, Steven Ozbay, was excluded from providing direct testimony, I note that, Respondent did not call him as a witness to rebut Inspector Kelly's testimony, even though Mr. Ozbay was present at the hearing.  Tr. at 29-31.

Respondent claims that the April 9, 2019, sale to a minor "did not actually take place" and "[t]he evidence offered and contained within the Complaint is not properly supported."  Answer at 2; see also R. Closing Argument at 2 (asserting that the "Complaint is not provable as there is insufficient evidence, or indicia of accuracy . . . ."); R. Brief at 2.  Respondent also argues that CTP's failure to submit additional evidence, such as the narrative report of the minor purchaser, the minor's ISN eligibility card, an unredacted copy of the minor's identification, or other photographic or video evidence, despite their availability or Inspector Kelly's opportunity to create it, prevents CTP from meeting its burden of proof.  R. Closing Argument at 3-4; Tr. at 11-17, 29.  I disagree.  I am tasked with weighing the evidence presented in this case and rendering a decision.  Based on the case before me, I find that CTP has established by a preponderance of the evidence that Respondent sold a covered tobacco product to a minor on April 9, 2019.  The fact that CTP could have created a better case with additional evidence of the violation at issue does not mean the evidence submitted is insufficient.  For strategic, financial, or other reasons, CTP decided to present the case that it presented to me.  It had no obligation to present a perfect case, but only to establish by a preponderance of evidence that the violation occurred.  Had Respondent requested these documents in discovery and CTP failed to produce them, there might be a reason to make a negative inference based on CTP's failure to submit additional evidence that was available, but that scenario did not occur in this case.  Accordingly, I find Respondent's arguments to be without merit.

In its defense, Respondent also states that "the establishment has specific training and protocols with regard to the checking of identification of all individuals who appear to be under the age of twenty-seven for sale of tobacco products," which "is followed strictly."  Answer at 2.  However, Respondent submitted no documentation or evidence in support of this claim and argument.  See Answer; R. Brief; R. Closing Argument.  Respondent did not submit any exhibits of its tobacco policies or procedures, training program, employee handbook, signage, remedial actions, or other documents concerning its protocols for complying with tobacco sales laws.  Respondent had ample opportunity before the hearing to proffer evidence and testimony that would support its defense.  However, Respondent has not proffered any evidence that would rebut CTP's evidence.  As explained above, I excluded Respondent's proposed witness, Mr. Ozbay, but would have considered allowing his testimony as a rebuttal witness in accordance with 21

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C.F.R. § 17.39(g).  Id.  Yet, Respondent chose not to call him as a rebuttal witness at the hearing.

In summary, I find that the evidence of record is sufficient to establish that Respondent unlawfully sold a covered tobacco product to a minor on April, 9, 2019.  Here, Inspector Kelly testified about and submitted contemporaneous evidence of the UB inspection conducted on April 9, 2019.  Respondent, who extensively cross-examined Inspector Kelly at the hearing, failed to rebut CTP's 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 April 9, 2019.  Based on this violation and the prior violations on October 5, 2017, and May 4, 2018, Respondent is liable for committing three violations of the Act and implementing regulations within a 24-month period.

B.  Civil Money Penalty

I have determined that Respondent committed three violations of the Act and its implementing regulations within a 24-month period.  Pursuant to 21 U.S.C. § 333(f)(9), Respondent 7th Heaven is liable for a CMP not to exceed the amounts listed in FDA's CMP regulations.  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 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 civil money penalty amount of $570 against Respondent.  Complaint ¶ 1.  Respondent argues that the requested CMP is "too high and inappropriate because the incident complained of in the Complaint and allegations concerning the sale of tobacco products to a minor are inaccurate and did not occur."  Answer at 2; see also R. Brief at 2.  This argument lacks merit considering my finding that the evidence of record is sufficient to establish liability.  See supra Part IV.A.2.  Thus, the requested CMP of $570 is appropriate.  However, I will, in accord with the regulations, give fair treatment to any mitigating factors that Respondent has proven.

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

Respondent committed at least three violations of the Act within a 24-month period.  It sold covered tobacco products to minors on three separate occasions:  October 5, 2017; May 4, 2018; and April 9, 2019.  Respondent also failed to verify, by means of photo identification containing a date of birth, that the October 5, 2017, purchaser was 18 years of age or older.  Notably, all of Respondent's violations occurred within a two-year time period.  After the initial violation on October 5, 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. 13, at 1-2.  CTP also brought a prior CMP action against Respondent, where Respondent was found liable for committing two violations within a 12-month period.  CTP Exs. 1-2.  Despite these warnings from CTP and the prior CMP action, Respondent committed an additional violation on April 9, 2019.  The repeated inability of Respondent to comply with federal tobacco laws is serious in nature and the CMP amount should be set accordingly.

Respondent asks that I disregard the October 5, 2017, violation because it was a mere allegation that was not proven.  R. Brief at 3; R. Closing Argument at 3.  As discussed above, I rejected that argument.  See supra Part IV.A.1.  Respondent also argues that this violation should not be counted for the purpose of enhancing the CMP, and I should utilize the guidelines for only one proven prior violation that occurred on May 4, 2018.  R. Closing Argument at 2, 6.  I also reject that argument.  As discussed in detail above, the preponderance of evidence in the record establishes that Respondent committed three violations within a 24-month period, on October 5, 2017, May 4, 2018, and April 9, 2019.  See supra Part IV.A.

2.  Respondent's Ability to Pay

Despite claiming that the requested CMP amount is too high and "would hamper the Respondent's business," Respondent has not presented any indicia of evidence to support this claim or otherwise demonstrate that it does not have the ability to pay the $570 CMP sought by CTP.  R. Brief at 3; see Answer at 2; R. Closing Argument at 6.  Therefore, I must conclude that Respondent has failed to show or prove that it does not have the ability to pay the requested CMP.

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

Although Respondent claimed the CMP would hamper its business, it has not presented any supporting evidence that the $570 CMP sought by CTP will negatively affect sales or

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his ability to continue to do business.  See R. Brief at 3; R. Closing Argument at 6.  Therefore, I conclude that Respondent has failed to show or prove that the CMP will impact its 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 a CMP action, CRD Docket Number T-18-2613, FDA Docket Number FDA-2018-H-2355, against Respondent for two violations of 21 C.F.R. pt. 1140 within a 12-month period.  CTP Ex. 1 at 1.  As noted above, this action resulted in a default judgment finding Respondent liable for selling covered tobacco products to persons younger than 18 years of age on October 5, 2017, and May 4, 2018, and failing to verify, by means of photo identification containing a date of birth, that a purchaser was 18 years of age or older on October 5, 2017.  21 C.F.R. § 1140.14(b)(1) and (b)(2)(i).

Respondent argues that the prior violations do not count because they were not proven and one was a warning.  R. Closing Argument at 6.  However, the prior violations were proven by default judgment and are administratively final.  CRD Decision No. TB2999; 21 C.F.R. § 17.11(a)-(b).  The first violation counts, even though no CMP can be assessed and a warning letter is issued.  21 U.S.C. § 333 note (2)(A)(1)(i)(I).  Additionally, the methodology for counting violations has been upheld.  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).  Accordingly, Respondent has a history of committing two prior violations.

5.  Degree of Culpability

Based on my finding that Respondent committed the violation as alleged in the Complaint, I hold it fully culpable for three violations of the Act and its implementing regulations.  I cannot find otherwise given that Respondent has not presented any evidence or testimony in support of its defenses or arguments.

6.  Employee Training Program

Respondent claimed that it has a program and training in place that is strictly followed.  Answer at 2.  However, this claim is not supported in the record.  Respondent did not present any evidence to corroborate its claims or to 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 has committed another violation 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

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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 Ohio for the same violation.  21 C.F.R. § 17.34(b).

8.  Other Matters as Justice May Require

In summary, Respondent failed to meet its burden to establish that the 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, its business would be hampered, or it has a strictly-followed training program and protocol for tobacco sales.  Thus, I find no basis for mitigating the CMP sought, which I find proportional and appropriate in this case.  Based on the foregoing reasoning, I find the penalty amount of $570 to be appropriate under 21 U.S.C. § 333(f)(5)(B) and (f)(9).

Conclusion

Pursuant to 21 C.F.R. § 17.45, I enter judgment in the amount of $570 against Respondent, Hazar Enterprises LLC d/b/a 7th Heaven, for three 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 24-month period.  Pursuant to 21 C.F.R. § 17.45(d), this Order becomes final and binding upon both parties 30 days after it is issued.

1. On December 20, 2019, the legal age to purchase tobacco products changed to 21 years old.  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 discussed below, FDA has not promulgated regulations establishing standards for approved retailer training programs, and CTP has decided to seek CMPs using the lower schedule for all retailers until such regulations are promulgated.  See discussion infra Part IV.B.6.
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