Shelby's, Inc. d/b/a Shelby's, DAB TB5256 (2020)

INITIAL DECISION

The Center for Tobacco Products (“CTP”), of the United States Food and Drug Administration (“FDA”), seeks a civil money penalty against Respondent, Shelby’s, Inc., d/b/a Shelby’s, for 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.  CTP alleges that Shelby’s violated the Act by impermissibly selling regulated tobacco products to minors.  Therefore, CTP seeks a $285 civil money penalty against Respondent Shelby’s for two violations of the Act within a 12-month period.  For the reasons set forth in this decision, I find that Shelby’s violated the Act as CTP alleged and impose a $285 civil money penalty against Respondent.

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I.       Background

CTP began this matter by serving an administrative complaint on Respondent, Shelby’s, Inc. d/b/a Shelby’s, at 303 South Highway 13, Lowry City, Missouri 64763, and by filing a copy of the complaint with the FDA’s Division of Dockets Management.

Respondent timely filed an answer to CTP’s complaint; however, Respondent did not specifically deny the allegations.  Answer ¶ 1.  On August 30, 2019, I issued an Acknowledgment and Pre-Hearing Order (“APHO”) that set out the deadlines for the parties’ submissions in this case, and informal briefs for the parties to complete and submit.  CTP filed a Motion to Compel Discovery and a Motion to Extend Deadlines on October 30, 2019.  I issued an Order on November 1, 2019, granting CTP’s motion to extend deadlines for all pre-hearing exchanges and set a deadline for Respondent to file a response to CTP’s Motion to Compel Discovery.

Respondent timely submitted a response describing his conversation with Mr. Thomas J. Laubacher.  Again, Respondent conveyed his disapproval of the investigation process, focused more on how to improve the process, and did not address the  allegations.  

On November 22, 2019, I issued an Order to Show Cause after Respondent’s response did not explain why it did not provide documents in response to CTP’s Request for Production of Documents.  Respondent was given until November 27, 2019 to provide an adequate response.

On December 2, 2019, I issued an Order to Compel Discovery after Respondent failed to file a timely response to CTP’s Motion to Compel Discovery, CTP’s Request for Production of Documents, and my Orders issued on November 1, 2019 and November 22, 2019.  After granting the Order to Compel Discovery, I gave Respondent until December 9, 2019 to provide CTP with all necessary documents.

Respondent filed a second response and affirmed that there were no known witnesses to the alleged incident.  In addition, Respondent stated the “video evidence has long since been erased and recorded over” thus, “Shelby’s has no documentation to produce.”

On December 19, 2019, CTP timely filed its pre-hearing exchange.  CTP’s exchange included an informal brief (“CTP Br.”), a list of proposed witnesses and exhibits, and 19 numbered exhibits (“CTP Ex. 1-19”).  CTP’s exhibits included written direct testimonies of two witnesses, Laurie Sternberg, Senior Counsel, Office of Compliance and Enforcement, CTP, FDA (“CTP Ex. 4”), and FDA-commissioned Inspector Nicholas Huckstep (“CTP Ex. 5”).  Respondent did not submit a pre-hearing exchange.

On January 29, 2020, I held a pre-hearing conference in this case.  During the pre-hearing conference, I explained that the sole purpose of a hearing under the applicable regulations

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was to allow for the cross-examination and re-direct of any witnesses who had provided sworn testimony in pre-hearing exchanges, and only if the opposing party elected to cross-examine the witness.  Respondent communicated his desire to cross-examine Inspector Nicholas Huckstep, and declined to cross-examine Ms. Laurie Sternberg.

On March 3, 2020, I conducted a hearing for the purpose of cross-examination and for the admission of the parties’ proffered exhibits.  During the hearing, I received into evidence CTP’s Exs. 1-19, absent objection and Respondent’s answer and filed submissions, absent objection.  Transcript (Tr.) at 11.  Respondent cross-examined Inspector Nicholas Huckstep. Id. at 16-30.

On March 26, 2020, this case was stayed because of COVID-19; that stay was lifted on June 26, 2020.  On June 26, 2020, I informed the parties that the Court had received the transcript of the hearing, and set the deadline of August 28, 2020, for the parties’ post-hearing brief submissions.  CTP filed a post-hearing brief. (CTP Post-Hrg. Br.).  Respondent did not file a post-hearing brief.

II.       Pending Motions

On September 6, 2019, CTP filed a Motion for a Protective Order in response to Respondent’s Request for Production of Documents contained in Respondent’s Answer.   For the reasons stated below, I hereby grant CTP’s Motion for a Protective Order.  In granting the motion, it is apparent that Respondent’s statements may be construed as rhetorical in nature rather than definitive requests for specific documents. Respondent confirmed that CTP’s representative answered some of Respondent’s questions and  provided Respondent a copy of the minor’s narrative.  I further note that during the March 3, 2020 hearing, Respondent had the opportunity to cross-examine the inspector and to address all of the points that it wished to make.  Finally, even if Respondent’s statements could be construed as requests for documents, the underlying documents would be privileged as CTP argues in the motion and the motion is granted.

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III.       Issues

1. Whether Respondent sold regulated tobacco products to minors on November 9, 2018 and May 10, 2019, in violation of 21 C.F.R. § 1140.14(a)(1).
2. Whether the civil money penalty of $285 that CTP seeks is an appropriate penalty.

IV.       Applicable Regulations

The Act prohibits the misbranding of tobacco products held for sale after shipment in interstate commerce.  21 U.S.C. § 331(k).  The FDA and its agency, CTP, may seek the imposition of remedies against any person who violates the Act’s requirements as they relate to the sale of tobacco products.  21 U.S.C. § 333(f)(9).  Under 21 C.F.R. § 1140.14(a)(1), no retailer may sell regulated tobacco products to any person younger than 18 years of age.

The Act establishes factors that a presiding officer must consider in determining the civil money penalty amount.  The presiding officer 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).

V.       Analysis, Findings of Facts and Conclusions of Law

CTP determined to impose a civil money penalty against Respondent pursuant to the authority conferred by the Act and implementing regulations at Part 21 of the Code of Federal Regulations.  The Act prohibits the misbranding of tobacco products while they are held for sale after shipment in interstate commerce.  21 U.S.C. § 331(k).  FDA and its agency, CTP, may seek civil money penalties from any person who violates the Act’s requirements as they relate to the sale of tobacco products.  21 U.S.C. § 333(f)(9).  The sale of tobacco products to an individual who is under the age of 18 is a violation of implementing regulations. 21 C.F.R. § 1140.14(a)(1).

CTP premises its case on the results of inspections of Respondent’s establishment, conducted on November 9, 2018 and May 10, 2019.  CTP’s case against Respondent rests on the testimony of Inspector Nicholas Huckstep and Laurie Sternberg; which are supported by corroborating evidence.  CTP Exs. 1-19.  Inspector Huckstep is an FDA-commissioned officer for the state of Missouri whose duties include determining whether retail outlets unlawfully sell tobacco products to minors.  CTP Ex. 5 at 1-2.  Inspector Huckstep’s inspections entail accompanying minors who attempt to purchase tobacco

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products from retail establishments such as the one operated by Respondent. Id.  Inspector Huckstep testified that he conducted such an inspection of Respondent’s establishment on November 9, 2018, and May 10, 2019. CTP Ex. 5 ¶¶ 7, 12. 

Inspector Huckstep testified that on both occasions he went to Respondent’s establishment accompanied by a minor who was employed for the purpose of attempting to purchase tobacco products from business establishments under inspection.  CTP Ex. 5.  Inspector Huckstep testified that on each occasion, he verified that the minor carried photographic identification that included the minor’s true age and that the minor did not have any tobacco products in his possession.  CTP Ex. 5 ¶ 7, 12.  During each inspection, Inspector Huckstep accompanied the minor into the establishment and stood in a location with a clear and unobstructed view of the sales counter.  CTP Ex. 5 ¶¶ 8, 13.  On both occasions, Inspector Huckstep watched the minor provide identification to the Respondent’s employee prior to the employee selling a tobacco product to the minor.  Id.  According to the Inspector, the Respondent’s employee did not provide the minor with a receipt after the purchase of the tobacco product.  Id.

Inspector Huckstep stated that after each purchase, both the minor and he exited the establishment and returned to the vehicle, where the minor immediately handed the inspector the tobacco product.  CTP Ex. 5 ¶¶ 9, 14.  The Inspector then labeled what he observed to be Longhorn Long Cut Wintergreen smokeless tobacco as evidence, photographed all of the panels of the package, and processed the evidence in accordance with standard procedures.  CTP Ex. 5 ¶¶ 9, 14.  Shortly after each inspection, Inspector Huckstep recorded the inspection in the FDA’s Tobacco Inspection Management System and created a Narrative Report. CTP Ex. 5 ¶¶ 10, 15.  CTP corroborated Inspector Huckstep’s testimony by offering as evidence photographs that Inspector Huckstep made of the smokeless tobacco that the minor purchased on the dates in question.  CTP Exs. 10, 16.  CTP also submitted narrative reports by Inspector Huckstep created contemporaneously with each inspection.  CTP Exs. 7-8, 13.

Respondent offered no evidence to rebut Inspector Huckstep’s testimony. Instead, Respondent argues that the inspection procedures are unfair Tr. 11; R. Answer.  During cross-examination, Respondent questioned Inspector Huckstep on protocols, and asked why the Inspector did not identify himself at the establishment and if he asked for a receipt at any time during the inspection. Tr. 16-30.  How CTP conducts its inspections, however, is not an issue before me.

I find Inspector Huckstep’s testimony to be honest and believable.  Inspector Huckstep testified credibly and comprehensively about his observations during both the November 9, 2018 and May 11, 2019 inspections.  He testified that upon both occasions, he observed Respondent’s staff sell a package of Longhorn Long Cut Wintergreen smokeless tobacco to a minor on both occasions.  See CTP Ex. 5 at ¶¶ 8, 13.  His

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testimony was supported by contemporaneous records and supporting evidence.  CTP Exs. 6-19.

CTP has the burden of proving Respondent’s liability by a preponderance of the evidence.  21 C.F.R. § 17.33.  I find that CTP has provided sufficient evidence to support its allegation that Respondent sold regulated tobacco products to a minor on November 9, 2018 and May 10, 2019, in violation of 21 C.F.R. § 1140.14(a)(1).  Respondent has failed to provide evidence sufficient to rebut CTP’s allegations.  

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

VI.       Appropriateness of the Civil Money Penalty of $285

After considering the factors under the applicable statute, I find that the civil money penalty of $285 that CTP seeks against Respondent, for at least two violations of the Act and its implementing regulations over a 12-month period, is an appropriate penalty.  When determining an appropriate penalty, the presiding officer must evaluate any circumstances that mitigate or aggravate the violation. 21 C.F.R. § 17.34.  As noted above, under the applicable statute, 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).

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

Respondent has failed to comply with the Act and its implementing regulations on two occasions.  The repeated inability of Respondent to comply with federal tobacco regulations is serious in nature and the civil money penalty amount should be set accordingly.

b.  Respondent’s Ability to Pay

Respondent has not provided any evidence with regard to its ability or inability to pay the $285 penalty.  As a result, there is no evidence in the written record to establish an inability to pay the penalty.

c.  Effect on Ability to do Business

Similarly, Respondent has not presented any evidence regarding the effect of the civil money penalty on its ability to do business.  Absent evidence in the record to the

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contrary, I find that the $285 penalty will not have a substantial effect on Respondent’s ability to do business.

d.  History of Prior Violations

Respondent is a repeat violator of FDA tobacco regulations prohibiting the sale of regulated tobacco products to minors.  As mentioned previously, Respondent sold a regulated tobacco product to a minor on November 9, 2018 in violation of 21 C.F.R. § 1140.14(a)(1).  On January 17, 2019, CTP issued a warning letter about this violation.  Despite the warning letter, on May 10, 2019, Respondent again sold a regulated tobacco product to a minor.  Respondent’s repeated inability to comply with FDA tobacco regulations supports the imposition of a civil money penalty.

e.  Degree of Culpability

I find Respondent fully culpable for both violations of the Act and its implementing regulations within a 12-month period.

f.  Additional Mitigating Factors

After reviewing Respondent’s Answer, I do not find any mitigating factors.  In addition to not denying the allegations, Respondent stated that he did not have any evidence of the sales on video tape because the request for the video surveillance came after the tapes were cleared.  Answer ¶ 1.  Respondent argues that he has “no way of knowing whether products were sold to a minor” on the date and time in question. Id.

Within four months of the January 17, 2019 Warning Letter concerning the November 9, 2018 violations, Respondent violated the Act again by selling a regulated tobacco product to a minor on May 10, 2019.  I do not find that Respondent took any corrective actions that I may consider as mitigating factors.

VII.       Penalty

Based on the foregoing reasoning, I find a penalty amount of $285 to be appropriate under 21 U.S.C. §§ 333(f)(5)(B) and 333(f)(9).

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VIII.       Conclusion

Pursuant to 21 C.F.R. § 17.45, I impose a civil money penalty of $285 against Respondent, Shelby’s, Inc. d/b/a Shelby’s, for two violations of the Act, 21 U.S.C. § 301 et. seq., within a 12-month period.  Pursuant to 21 C.F.R. § 17.45(d), this decision becomes final and binding upon both parties after 30 days of the date of its issuance.