Baha Enterprises II Inc. d/b/a Mobil, DAB TB5271 (2020)

INITIAL DECISION

The Food and Drug Administration's (FDA) Center for Tobacco Products (CTP) seeks to impose a civil money penalty (CMP) of $11,410 against Respondent, Baha Enterprises II Inc. d/b/a Mobil, for committing at least six 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 48-month period.1   CTP alleges that Respondent previously admitted that it sold regulated tobacco products to minors and failed to verify, by means of photo identification containing a date of birth, that the purchasers were 18 years of age or older during the sales on February 24, 2016, and October 12, 2016, which constituted three violations of the Act and implementing regulations.  CTP further alleges that Respondent

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subsequently committed four additional violations of the Act and regulations when it sold covered tobacco products to minors and failed to verify, by means of photo identification containing a date of birth, that purchasers were 18 years of age or older during the sales on May 5, 2019, and November 24, 2019.2

Respondent denies the violations, raises several defenses to liability, and argues that the proposed penalty amount is too high.  Specifically, Respondent states that the violations did not occur, it has a Point-of-Sale (POS) identification scanner system in place that will not authorize the sale of tobacco products to minors, it has taken several remedial measures to prevent sales of tobacco products to minors, and its employees are responsible to the community and trained to verify the age of tobacco product purchasers.  Respondent also contends that, due to its current financial circumstances resulting from the COVID-19 pandemic, it cannot afford the proposed CMP, and requests a reduction of the penalty.  For the reasons discussed below, I find Respondent liable for the seven violations alleged in the Complaint and conclude that a reduced CMP of $3,500 is appropriate.

I.  Background and Procedural History

As provided in 21 C.F.R. §§ 17.5 and 17.7, CTP served the Complaint on Respondent Mobil, located at 814 Bladensburg Road Northeast, Washington, District of Columbia 20002, by United Parcel Service, on February 10, 2020.  See DAB E-File Docket (Dkt.) No. T-20-1786, Dkt. Entry Nos. 1 (Complaint), 1b (Proof of Service).  Respondent timely filed its Answer, which the Civil Remedies Division (CRD) of the Departmental Appeals Board (DAB) received on March 6, 2020.  Dkt. Entry No. 3 (Respondent's Answer (Answer)).  In its Answer, Respondent denied the allegations, raised several defenses, and attached multiple documents.  Answer, at 1; see also id. at 3-18.  On March 11, 2020, 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.

On March 30, 2020, Respondent filed its pre-hearing exchange before CTP filed its pre-hearing exchange or its time to do so had lapsed.  Dkt. Entry No. 7.  On April 1, 2020, in a letter issued by my direction, I informed Respondent that I would not accept its pre-hearing exchange because it was filed out of order and did not comply with the requirements set out in the APHO.  Dkt. Entry No. 8.  Respondent was instructed to refile

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an amended pre-hearing exchange that complied with the requirements of the APHO by June 22, 2020, after reviewing CTP's pre-hearing exchange.  Id. at 2.

On May 4, 2020, CTP filed a Motion to Compel Discovery asserting that Respondent had not responded to its discovery request.  Dkt. Entry Nos. 10, 10a-10b.  On May 4, 2020, CTP also requested an extension of the pre-hearing deadlines.  Dkt. Entry No. 11.  On May 5, 2020, I issued an Order, which advised Respondent that it had until May 19, 2020, to file a response to CTP's Motion to Compel Discovery.  Dkt. Entry No. 12 at 1-2.  My Order also granted CTP's Motion to Extend Deadlines.  Id. at 2.  On May 15, 2020, Respondent filed a document responding to CTP's Motion to Compel Discovery, which substantively appeared to respond to CTP's discovery request.  Dkt. Entry No. 13 (Response to Motion to Compel Discovery).  On May 20, 2020, I issued an Order advising CTP that it had until May 26, 2020, to inform me whether it still intended to pursue its Motion to Compel Discovery.  Dkt. Entry No. 14.  On May 21, 2020, CTP filed its Order Response to my May 20, 2020 Order, stating that it withdrew its Motion to Compel [Discovery].  Dkt. Entry No. 15.  On May 22, 2020, Respondent filed an acknowledgment that I interpreted as a duplicate response, without any substantive changes, to CTP's Motion to Compel Discovery.  Dkt. Entry No. 16.  On May 28, 2020, I issued an Order on CTP's Motion to Compel Discovery, advising the parties that, in light of CTP's Order Response withdrawing its Motion to Compel Discovery, I determined that CTP's Motion to Compel Discovery was moot.  Dkt. Entry No. 17.

On June 30, 2020, CTP timely filed its pre-hearing exchange, consisting of a pre-hearing brief (CTP Br.), list of proposed witnesses and exhibits, and 23 exhibits (CTP Exhibits (Exs.) 1-23).  CTP's pre-hearing exchange included the written direct testimony of three proposed witnesses, CTP's Senior Regulatory Counsel Laurie Sternberg (CTP Ex. 5), Inspector Dollye McClain (CTP Ex. 6), and Inspector Latasha Kelly (CTP Ex. 7).  Dkt. Entry Nos. 18, 18a-18x.

On July 21, 2020, Respondent timely filed a document that was substantively the same as page 3 of its Answer, which I consider Respondent's pre-hearing brief (R. Br.), and seven photographs (Respondent's Exhibits (R. Exs.) 1-7), constituting Respondent's pre-hearing exchange.  Dkt. Entry Nos. 19-26; see also Dkt. Entry No. 3, at 3.  Respondent did not propose any witnesses or present any witness testimony in its pre-hearing exchange.

On August 5, 2020, I held a prehearing conference call (PHC) in this case.  See Dkt. Entry No. 28 (Summary of August 5, 2020, Pre-Hearing Conference and Order Establishing Deadlines for Supplemental Briefs) (August 6, 2020 Order)).  During the PHC, I explained my role as an impartial Administrative Law Judge, the issues before me, and the parties' respective burdens of proof.  Id. at 1-2.  During the PHC, the parties indicated that they had not agreed to any stipulations.  Id. at 2.  We also discussed both

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parties' proposed witnesses, proposed exhibits, and Respondent's discovery request made during the PHC.  See Dkt. Entry No. 28.

During the PHC, I apprised Respondent of CTP's proposed witnesses:  Ms. Laurie Sternberg; Inspector Dollye McClain; and Inspector Latasha Kelly.  Id. at 2.  I asked Respondent of its intent to cross-examine CTP's witnesses, and Respondent indicated that it did not intend to cross-exam CTP's witnesses.  Id.

During the PHC, I admitted CTP Exhibits 1 through 23 into the record, absent any objection from Respondent.  Id. at 2.  In addition to Respondent's Exhibits submitted with its pre-hearing exchange (Dkt. Entry Nos. 20-26, marked as R. Exs. 1-7, respectively), I marked and admitted non-duplicate exhibits that Respondent submitted with its Answer (Dkt. Entry No. 3, at 4, 5, 6, 11, 12, 13, 18, marked as R. Exs. 8-14, respectively) and its Response to Motion to Compel Discovery (Dkt. Entry No. 13, at 2, 5-13, 15, marked as R. Exs. 15, 16, and 17, respectively).  See Id. at 2-3.  Respondent's Exhibits 1 through 17 consist of photographs of a POS identification scanner and various signs in Respondent's establishment (R. Exs. 1-7, 10-14), notices of inspections (R. Exs. 8-9), a payroll stub (R. Ex. 15), federal and District of Columbia 2018 tax returns (R. Ex. 16), and correspondence regarding a Paycheck Protection Program (PPP) loan application for Respondent (R. Ex. 17).  See id.; see also Dkt. Entry Nos. 3 (Answer), 13 (Response to Motion to Compel Discovery), 19-26 (Respondent's Pre-Hearing Exchange).  CTP did not object to the admission of any of Respondent's exhibits into the record.  See Dkt. Entry No. 28, at 2.

During the PHC, I also made two evidentiary rulings.  First, I sustained CTP's objection to the admission of Respondent's proposed witness, Mr. Mohammed Jamal, and excluded from the record testimony from Mr. Jamal because the witness was not properly proposed in compliance with the clear directives in the regulations and the APHO, and I did not find any extraordinary circumstances necessary for me to overrule CTP's objection.  Id. at 3-4.  Second, I denied Respondent's motion to request the production of documents from CTP because I found that granting Respondent's late request for discovery would delay this proceeding and prejudice CTP.  See Id. at 5.

In addition to summarizing the PHC, my August 6, 2020 Order, confirmed that both parties agreed during the PHC to proceed to a decision based on the written record.  The Order also established a schedule for the parties to file supplemental briefs and supplemental responses.  See id. at 5-6.

Neither party filed supplemental or responsive briefs in this case.  The administrative record is now complete, and this matter is now ripe 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

The issues in this case are:

1. Whether Respondent, Mobil, sold cigarettes to a minor and failed to verify that the cigarette purchaser was of sufficient age on May 5, 2019, in violation of 21 C.F.R. § 1140.14(a)(1) and 21 C.F.R. § 1140.14(a)(2)(i);3
2. Whether Respondent, Mobil, sold a covered tobacco product to a minor and failed to verify that the covered tobacco product purchaser was of sufficient age on November 24, 2019, in violation of 21 C.F.R. § 1140.14(b)(1) and 21 C.F.R. § 1140.14(b)(2)(i); and
3. If so, whether the CMP of $11,410 that CTP seeks is an appropriate amount, pursuant to the provisions of 21 C.F.R. § 17.34(a)-(c).

III.  Analysis, Findings of Fact, and Conclusions of Law

A. Legal Standard

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)).

B. Violations

CTP seeks a CMP against Respondent pursuant to the authority conferred by the Act and implementing regulations at Title 21, Part 1140 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 CMPs from any person who violates the Act's requirements as they relate to the sale

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of tobacco products.  21 U.S.C. § 333(f)(9); see also 21 U.S.C. § 333 note; 21 C.F.R. §§ 17.1(j), 17.2, 17.5.

The sale of cigarettes or smokeless tobacco to an individual who is under the age of 18 is a violation of the implementing regulations.  21 C.F.R. § 1140.14(a)(1).4   The failure to verify, by means of photo identification containing the bearer's date of birth, that no cigarette or smokeless tobacco purchaser is younger than 18 years of age is also a violation of the implementing regulations.  21 C.F.R. § 1140.14(a)(2)(i).  The sale of covered tobacco products, such as cigars, to an individual who is under the age of 18 is a violation of the implementing regulations.  21 C.F.R. § 1140.14(b)(1).  The failure to verify, by means of photo identification containing the bearer's date of birth, that no covered tobacco product purchaser is younger than 18 years of age is also a violation of the implementing regulations.  21 C.F.R. § 1140.14(b)(2)(i).  All violations observed during an 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).

CTP alleges that Respondent committed at least six violations of the Act and its implementing regulations over a 48-month period.  Complaint ¶ 1.  Specifically, CTP asserts that it initiated a previous CMP action against Respondent.  Id. ¶ 13 (citing CRD Dkt. No. T-17-2931, FDA Dkt. No. FDA-2017-H-1633); see also CTP Ex. 1 (Prior Complaint).  The Prior Complaint alleged three violations of 21 C.F.R. pt. 1140 within a 24-month period.  Complaint ¶ 13.  Specifically, CTP alleged violations for selling tobacco products to minors on February 24, 2016, and October 12, 2016, and additional violations for failing to verify the age of purchasers with photographic identification on those same dates.  Id.  The Prior Complaint concluded when Respondent "admitted all of the allegations in the Complaint and paid the agreed upon penalty."  Id. ¶ 14.  Further, "Respondent expressly waived its right to contest such violations in subsequent actions." Id. (citing CRD Dkt. No. T-17-2931, FDA Dkt. No. FDA-2017-H-1633, and CTP Ex. 2).  CTP also asserts that, during subsequent inspections, Respondent sold regulated tobacco

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products to minors and failed to verify the age of the purchasers with photographic identification on May 5, 2019, at approximately 12:50 PM, and on November 24, 2019, at approximately 12:41 PM.  Id. ¶¶ 9, 11.

As detailed below, I find, based on the applicable law and evidence of record, that Respondent admitted that it sold cigarettes to minors and failed to verify the purchasers' ages with photographic identifications on February 24, 2016, and October 12, 2016, in violation of 21 C.F.R. § 1140.14(a)(1) and § 1140.14(a)(2)(i).  Additionally, I find that it is more probable than not that Respondent sold regulated tobacco products and failed to verify the purchasers' ages with photographic identifications on May 5, 2019, in violation of 21 C.F.R. § 1140.14(a)(1) and § 1140.14(a)(2)(i), and on November 24, 2019, in violation of 21 C.F.R. § 1140.14(b)(1) and § 1140.14(b)(2)(i).  Consequently, Respondent is liable for committing seven violations within a 48-month period.5

1. Respondent's Prior Violations

CTP previously initiated the Prior Complaint, against Respondent for three violations of the Act within a 24-month period.  CTP Ex. 1 ¶ 1 (Prior Complaint).  The Prior Complaint alleged that Respondent sold cigarettes to a minor, in violation of 21 C.F.R. § 1140.14(a)(1), on each of the following dates:  February 24, 2016, and October 12, 2016.  Id. ¶¶ 7-10.  CTP further alleged that Respondent failed to verify the age of  persons purchasing cigarettes by means of photographic identification, in violation of 21 C.F.R. § 1140.14(a)(2)(i), on those same dates.  Id.  The Prior Complaint resulted in settlement and concluded after Respondent admitted to at least three violations of the Act.  Respondent "acknowledg[ed] that all of the violations described in the Complaint, FDA-2017-H-1633, occurred," and expressly waived its right to contest such violations in subsequent actions.  See CTP Ex. 2; see also 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).  Respondent has not contested these prior violations, and they are administratively final.  21 C.F.R. § 17.15(b) (stating that a "settlement agreement shall be filed in the docket and shall

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constitute complete or partial resolution of the administrative case as so designated by the settlement agreement").

2. Evidence and Legal Arguments Regarding
the Alleged Current Violations

In addition to Respondent's prior violations, CTP alleges that Respondent committed four new violations in May of 2019 and November of 2019.  To support its claims, CTP submitted the declarations of a CTP Senior Regulatory Counsel, Laurie Sternberg, and FDA-commissioned inspectors, Dollye McClain and Latasha Kelly.  CTP Exs. 5-7.  CTP also submitted reports, photographs, and other documentation.  CTP Exs. 3, 4, 8-23.  Respondent denies the allegations, and submitted documentation consisting of notices of inspection, photographs of signs and displays in its establishment, photographs of a POS identification scanner system, a PPP eligibility document, a payroll document, and tax documents.  R. Exs. 1-17.  As explained above, I excluded Respondent's proposed witness testimony because it was untimely and extraordinary circumstances did not exist to justify Respondent's delay in proposing the witness.

a. May 5, 2019, Inspection Involving
a Tobacco Sale to a Minor

Inspector McClain testified that she conducted a follow-up, undercover buy (UB) compliance check inspection of Respondent's establishment located at 814 Bladensburg Road Northeast, Washington, District of Columbia, 20002.  CTP Ex. 6 ¶ 7; see also CTP Ex. 8 (Narrative Report, at 1); CTP Ex. 9 (TIMS Inspection Details Report, at 1); CTP Ex. 16 (Compliance Check Inspection Notice, at 1); CTP Ex. 17 (UPS Delivery Notification).  She conducted the UB inspection on May 5, 2019, at approximately 12:50 PM.  CTP Ex. 6 ¶ 7.  At the time of the inspection, Inspector McClain was an FDA-commissioned officer with Information Systems and Networks Corporation (ISN), where her duties included performing UB inspections in the District of Columbia.  Id. ¶ 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. ¶ 3.  These inspections entail accompanying undercover minors who attempt to purchase tobacco products from retail establishments, such as the one operated by Respondent.  See id. ¶¶ 4, 7.

Inspector McClain testified that, before the inspection, she confirmed that Minor A did not have any tobacco products in his/her possession and possessed an accurate photographic identification of his/her date of birth (i.e., learner's permit).  Id. ¶ 7; see also CTP Ex. 14.  Inspector McClain testified that, during the inspection, she parked her car near Respondent's establishment, and Minor A exited her vehicle.  CTP Ex. 6 ¶ 8.  Inspector McClain testified that she exited the vehicle shortly thereafter.  Id.  Inspector McClain testified that she watched Minor A approach the walkup window and stood

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behind Minor A in line.  Id.  She testified that, from her location, she had an unobstructed view of the walkup window and Minor A.  Id.  During the inspection, Inspector McClain observed Minor A purchase a package of cigarettes from an employee at Respondent's establishment.  Id.  Inspector McClain testified that, prior to the purchase, she observed that Minor A did not present any identification to the employee, and the employee did not provide Minor A with a receipt after the purchase.  Id. Inspector McClain testified that after Minor A completed the purchase, Minor A returned to the vehicle, and Inspector McClain returned to the vehicle shortly thereafter.  Id. ¶ 9.

After entering the vehicle, Minor A immediately handed Inspector McClain the package of cigarettes.  Id.  Inspector McClain testified that she observed that the cigarettes were Newport cigarettes.  Id.  Inspector McClain labeled the cigarettes as evidence, photographed the panels of the cigarettes package, and processed the evidence in accordance with standard procedures at the time the inspection.  Id.  Inspector McClain testified that, shortly after the inspection, she recorded the inspection in the FDA's Tobacco Inspection Management System (TIMS) and created a Narrative Report.  Id. ¶ 10.  These contemporaneous reports and photographs were admitted into evidence and corroborate Inspector McClain's testimony.  CTP Exs. 8-9, 12, 15; see also CTP Ex. 6 ¶¶ 10-11.  At the PHC, Respondent waived its right to cross-examine Inspector McClain.  See Dkt. Entry No. 28, at 2.

In her declaration, Senior Regulatory Counsel Laurie Sternberg testified that she has personal knowledge of FDA's processes and records regarding tobacco establishment registration and product listing requirements.  CTP Ex. 5 ¶ 4.  Specifically, section 905(i) of the Act requires any person that manufactures, prepares, compounds, or processes tobacco products for commercial distribution to register, provide a list of all tobacco products, and to update the list biannually.  Id. ¶¶ 5-6.  According to Ms. Sternberg, this information is submitted on Form FDA 3741 (OMB approval number 0910-0650) and stored in the Tobacco Registration and Product Listing Module ("TRLM") of the FDA Unified Registration and Listing Systems ("FURLS").  Id.  She testified that the Newport cigarettes purchased during the May 5, 2019, UB inspection at Respondent's establishment were manufactured, prepared, compounded or processed for commercial distribution at R.J. Reynolds' facility in North Carolina, which is corroborated by the applicable FDA Unified Registration and Listing Systems (FURLS) report in the record.  CTP Ex. 5 ¶¶ 7-8; CTP Ex. 22.  R.J. Reynolds does not have any registered tobacco production facilities in the District of Columbia.  CTP Ex. 5 ¶ 9.  As indicated above, at the PHC, Respondent also waived its right to cross-examine Ms. Sternberg.  See Dkt. Entry No. 28, at 2.

I find the testimonies of Inspector McClain and Ms. Sternberg to be credible because they have personal knowledge and professional experience concerning the May 5, 2019, UB inspection and the FDA's processes and systems for listing and regulating tobacco products.  CTP Ex. 6 ¶¶ 2-6; CTP Ex. 5 ¶¶ 2-9.  Additionally, Inspector McClain testified

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that she confirmed that Minor A was under the age of 18 before the inspection and personally observed the violations on May 5, 2019.  CTP Ex. 6 ¶¶ 7-8.  CTP also submitted several exhibits to corroborate Inspector McClain's testimony, including Minor A's redacted learner's permit and contemporaneous photographs and reports.  CTP Exs. 8-9, 12, 14-15; see also CTP Ex. 16 (Notice of Compliance Check Inspection).  Similarly, CTP submitted the FURLS report to support Ms. Sternberg's testimony establishing that the Newport cigarettes were manufactured by R.J. Reynolds in North Carolina and traveled in interstate commerce before Respondent sold them to Minor A in the District of Columbia.  CTP Exs. 12, 15, 22.  Respondent did not cross-examine or otherwise impeach the testimonies of Inspector McClain or Ms. Sternberg concerning the UB inspection on May 5, 2019.  Accordingly, I find their testimonies persuasive because they are supported by corroborating evidence documenting that the May 5, 2019, violations for selling cigarettes to a minor and failing to verify the age of the purchaser before the sale actually occurred.

Although Respondent denies the violations occurred and submitted several exhibits in its defense, I find that Respondent has failed to prove any affirmative defenses or to rebut CTP's evidence regarding the May 5, 2019, violations.  See generally Answer, R. Exs. 1-17, Response to Motion to Compel Discovery, and R. Br; see also 21 C.F.R. § 17.33(c).  As explained below, Respondent's evidence is credible, but it does not absolve it of liability for the violations alleged in the Complaint.  See infra Part III.B.2.c.  However, I find that Respondent has met its burden of proving mitigating circumstances justifying a reduced CMP, which I also explain in detail below.  See infra Part IV.  In summary, I conclude that the preponderance of evidence in the administrative record establishes that Respondent sold cigarettes to a minor and failed to verify the purchaser's age with photographic identification on May 5, 2019, in violation of the Act, 21 C.F.R. § 1140.14(a)(1), and 21 C.F.R. § 1140.14(a)(2)(i).

b. November 24, 2019, Inspection Involving
a Tobacco Sale to a Minor

With regard to the alleged November 24, 2019, violations, I also find the testimonies of Inspector Kelly and Ms. Sternberg to be credible and persuasive.  Similar to Inspector McClain, Inspector Kelly has professional experience and knowledge concerning the FDA's UB inspection processes, confirmed that Minor B was under the age of 18 immediately before the inspection, and personally observed the alleged violations on November 24, 2019.  CTP Ex. 7 ¶¶ 2-8.  Specifically, Inspector Kelly testified that she conducted a follow-up, UB compliance check inspection of Respondent's establishment located at 814 Bladensburg Road Northeast, Washington, District of Columbia, 20002.  Id. ¶ 7; see also CTP Ex. 10 (Narrative Report, at 1); CTP Ex. 11 (TIMS Inspection Details Report, at 1); CTP Ex. 20 (Compliance Check Inspection Notice, at 1); CTP Ex. 21 (UPS Delivery Notification).  Inspector Kelly conducted the UB inspection on November 24, 2019, at approximately 12:41 PM.  CTP Ex. 7 ¶ 7.  At the time of the

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inspection, Inspector Kelly was an FDA-commissioned officer with ISN, where her duties included performing UB inspections in the District of Columbia.  Id. ¶¶ 2-3.  She conducts UB inspections with minors and provides direct field oversight of the minors.  Id. ¶ 4.

Inspector Kelly testified that, before the inspection, she confirmed that Minor B did not have any tobacco products in his/her possession and possessed an accurate photographic identification of his/her date of birth (i.e., learner's permit).  Id. ¶ 7; see also CTP Ex. 18.  Inspector Kelly testified that, during the inspection, she parked her car at a gas pump near Respondent's gas kiosk, and then Inspector Kelly and Minor B exited the vehicle.  CTP Ex. 7 ¶ 8.  Inspector Kelly testified that she approached the kiosk, then returned to her vehicle and stood outside the vehicle.  Id.  Inspector Kelly testified that Minor B then approached the kiosk.  Id.  Inspector Kelly testified that, from her location, she had a clear, unobstructed view of the kiosk and Minor B.  Id.  During the inspection, she observed Minor B purchase a package of cigars from an employee at Respondent's establishment.  Id.  Inspector Kelly testified that prior to the purchase, she observed that Minor B did not present any identification to the employee, and the employee did not provide Minor B a receipt after the purchase.  Id.

Inspector Kelly testified that, after Minor B completed his/her purchase, Minor B and Inspector Kelly returned to the vehicle, where Minor B immediately handed Inspector Kelly the package of cigars.  Id. ¶ 9.  Inspector Kelly testified that she observed that the package of cigars were Backwoods cigars.  Id.  Inspector Kelly labeled the cigars as evidence and photographed all of the panels of the package, before processing the evidence in accordance with standard procedures at the time of the inspection, which entailed completing the TIMS Form and creating a Narrative Report.  CTP Ex. 7 ¶¶ 9-11.  Minor B's redacted identification and Inspector Kelly's contemporaneous photographs and reports were admitted into evidence and corroborate Inspector Kelly's testimony.  CTP Exs. 10-11, 13, 18-19; see also CTP Ex. 20 (Notice of Compliance Check Inspection).  At the PHC, Respondent also waived its right to cross-examine Inspector Kelly.  See Dkt. Entry No. 28, at 2.

As discussed above, Ms. Sternberg testified that she has personal knowledge of FDA's processes and records regarding tobacco establishment registration and product listing requirements.  CTP Ex. 5 ¶¶ 4-6.  She also testified that the Backwoods Original cigars purchased during the November 24, 2019, UB inspection at Respondent's establishment were manufactured, prepared, compounded or processed for commercial distribution at Congar International's facility in Puerto Rico, which is corroborated by the FURLS report in the record.  CTP Ex. 5 ¶¶ 10-11; CTP Ex. 23.  Ms. Sternberg testified that Congar International does not have any registered tobacco production facilities in the District of Columbia.  CTP Ex. 5 ¶ 13.  In addition to the FURLS report, CTP submitted Minor B's redacted learner's permit and photographs of the cigars purchased on November 24, 2019, to corroborate Ms. Sternberg's testimony.  CTP Exs. 13, 18-19, 23.

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As indicated above, Respondent waived its right to cross-examine Ms. Sternberg.  See Dkt. Entry No. 28, at 2.

I also find that Respondent has failed to prove any affirmative defenses or to rebut CTP's evidence regarding the November 24, 2019, violations for selling a covered tobacco product to a minor and failing to verify the purchaser's age with photographic identification.  See generally Answer, R. Exs. 1-17, Response to Motion to Compel Discovery, and Informal Brief of Respondent.  As is the case with the May 5, 2019, allegations, Respondent did not cross-examine or otherwise impeach the testimony of Inspector Kelly or Ms. Sternberg concerning the UB inspection on November 24, 2019.  Their testimonies are credible because they have personal knowledge and professional experience concerning the November 24, 2019, UB inspection and the FDA's processes and systems for listing and regulating tobacco products.  I also find their testimonies to be persuasive because they are supported by corroborating evidence documenting that the November 24, 2019, violations occurred as alleged in the Complaint.  Specifically, Inspector Kelly's testimony is supported by contemporaneous photographs, reports, and Minor B's redacted learner's permit.  CTP Exs. 10-11, 13, 18-19.  Likewise, Ms. Sternberg's testimony is supported by documentary evidence establishing that the Backwoods Original cigars were manufactured in Puerto Rico and traveled in interstate commerce before Respondent sold them to Minor B.  CTP Exs. 13, 19, 23.  Therefore, I conclude that the preponderance of evidence in the administrative record establishes that Respondent sold cigars to a minor and failed to verify the purchaser's age with photographic identification on November 24, 2019, in violation of the Act, 21 C.F.R. § 1140.14(b)(1), and 21 C.F.R. § 1140.14(b)(2)(i).  Respondent's evidence, which I discuss in detail below, does not prevent it from being liable for the November 24, 2019, violations, but it mitigates the CMP.

c. Respondent's Defenses to the Violations
Allegedly Occurring on May 5, 2019,
and November 24, 2019

With regard to the May 5, 2019, and November 24, 2019 violations, Respondent raises various defenses in its Answer, Response to Motion to Compel Discovery, and pre-hearing brief.  See Answer, at 3; Response to Motion to Compel Discovery, at 1-15; R. Br.  Specifically, Respondent claims that the employee responsible for committing the alleged violations denies that they occurred.  Answer, at 3; Response to Motion to Compel Discovery, at 1, 13; R. Br.  However, Respondent's denial of the violations is not supported by the preponderance of evidence in the record.  As explained above, I excluded the proposed testimony of Respondent's employee because it was untimely.  Dkt. Entry No. 28, at 3-5.  Furthermore, Respondent declined to cross-examine CTP's witnesses and has not presented any other evidence to impeach or rebut the testimony of CTP's witnesses.  Indeed, as discussed above, I find the testimonies of Inspector McClain, Inspector Kelly, and Ms. Sternberg to be credible and supported by

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corroborating record evidence.  Thus, based on the record evidence, I reject Respondent's assertion that the alleged violations did not occur.

Respondent also claims that it has implemented an employee training program, consisting of training employees to ask for and check customers' identification cards before selling tobacco products.  See Answer, at 3; see also Response to Motion to Compel Discovery, at 2; R. Br.  According to Respondent, it conducts training orally and posts policies, signs, and other display materials regarding compliance with tobacco regulations for its employees and customers.  Answer, at 3; see also Response to Motion to Compel Discovery, at 2-3; R. Br.  Additionally, Respondent asserts that it utilizes a POS identification scanner system and posts a stand-alone age calculator for tobacco purchases.  Answer, at 3; see also Response to Motion to Compel Discovery, at 3-4; R. Br.  Respondent states that it consistently monitors its employees by checking surveillance cameras and standing near them without their knowledge while selling tobacco products.  Answer, at 3; see also Response to Motion to Compel Discovery, at 2-3, 13; R. Br.  Respondent also asserts that it reminds and corrects employees to ensure compliance with regulations regarding the sale of tobacco products.  Answer, at 3; see also Response to Motion to Compel Discovery, at 2-3; R. Br.  Notably, Respondent contends that it fired the employee responsible for one of the violations in the Prior Complaint.  Id.; see also Response to Motion to Compel Discovery, at 1, 2-3; R. Br.  Finally, Respondent insists that it understands the seriousness of complying with the law and its responsibility to protect the health and safety of its community in regards to tobacco sales.  Answer, at 3; see also Response to Motion to Compel Discovery, at 3; R. Br.  Respondent submitted several exhibits to support these claims, such as photographs of the POS identification scanner and extensive signage posted throughout its establishment concerning requirements for tobacco sales.  R. Exs. 1-7, 10-14.

Based on Respondent's corroborating exhibits, I find Respondent's assertions that it takes its responsibility to comply with the tobacco regulations seriously and has taken measures to ensure compliance – such as utilizing a POS identification scanner, providing an age calculator, and posting signage – to be credible.  R. Exs. 1 (POS identification scanner), 3 (sign regarding required birthdate for purchasing tobacco products), 5 (digital age calculator); R. Exs. 2, 4, 6-7, 10-14 (multiple signs regarding tobacco sale laws and requirements).  Although Respondent did not submit any direct evidence to corroborate its oral employee training program, I am persuaded by other circumstantial evidence that its training program exists and is effective to some degree because Respondent did not have any violations of the tobacco regulations for nearly two years and seven months after the Prior Complaint.  Indeed, Respondent asserts that an "agent" gave him a letter for "doing a good job" on selling tobacco products.  Response to Motion to Compel Discovery, at 13.  I note that Respondent's Exhibit 9 appears to be the first page of a Notice of Inspection dated September 7, 2017.  Although the excerpt does not state the outcome of the inspection, Respondent's Exhibit 9 tends to support Respondent's suggestion that it underwent and passed at least one compliance check inspection around

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September 2017.  Likewise, this documentary and circumstantial evidence leads me to believe that Respondent has taken measures to monitor, remind, and discipline its employees concerning compliance with tobacco laws.  Although I find this evidence of Respondent's efforts to be credible and commendable, it does not rebut CTP's evidence that the alleged violations occurred or absolve Respondent of liability.  However, I find that it does mitigate the amount of the proposed CMP, as discussed in the following section.  See infra Part III.C (Civil Money Penalty).

In summary, the evidence of record establishes to my satisfaction that the violations alleged in the Complaint in fact occurred on the dates in question.  The unrebutted testimony of Ms. Sternberg, Inspector McClain, and Inspector Kelly, and the corroborating exhibits are sufficient to establish that it is more probable than not, that Respondent committed the violations alleged in the Complaint.  Additionally, Respondent failed to prove any affirmative defenses to liability.  Therefore, I hold that Respondent failed to meet the requirements of 21 C.F.R. § 1140.14(a)(1) and 21 C.F.R. § 1140.14(a)(2)(i) when it sold cigarettes to a minor and failed to verify that the cigarette purchaser was of sufficient age on May 5, 2019.  Further, I hold that Respondent failed to meet the requirements of 21 C.F.R. § 1140.14(b)(1) and 21 C.F.R. § 1140.14(b)(2)(i) when it sold a covered tobacco product to a minor and failed to verify that the covered tobacco product purchaser was of sufficient age on November 24, 2019.  Accordingly, Respondent is liable for four violations of the Act and implementing regulations on May 5, 2019, and November 24, 2019.  Orton Motor, Inc., d/b/a Orton's Bagley v. U.S. Dep't of Health & Human Serv., 884 F.3d 1205, 1214 (D.C. Cir. 2018) (upholding FDA's counting methodology for violations of 21 C.F.R. pt. 1140).  Respondent previously admitted to committing three violations of 21 C.F.R. § 1140.14(a)(1) and 21 C.F.R. § 1140.14(a)(2)(i) on February 24, 2016, and October 12, 2016.  CTP Exs. 1-2.  Therefore, I conclude that the facts as outlined above establish that Respondent Mobil is liable under the Act for seven violations within a 48-month period.

C. Civil Money Penalty

I have determined that Respondent committed seven violations of the Act and its implementing regulations within a 48-month period.  Pursuant to 21 U.S.C. § 333(f)(9), Respondent Mobil is liable for a CMP not to exceed the amounts listed in FDA's CMP regulations at 21 C.F.R. § 17.2; see also 45 C.F.R. § 102.3.  When determining the appropriate amount of a CMP, I am required to consider any "circumstances that mitigate or aggravate the violation" and "the factors identified in the statute under which the penalty is assessed . . . ."  21 C.F.R. §§ 17.34(a); 17.34(b).  Specifically, I must take into account "the nature, circumstances, extent and gravity of the violations and, with respect to the violator, ability to pay, effect on ability to continue to do business, any history of prior such violations, the degree of culpability, and such other matters as justice may require."  21 U.S.C. § 333(f)(5)(B).  Also, "for purposes of mitigating a civil penalty . . . [I] shall consider the amount of any penalties paid by the retailer to a State for the same

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violation" and whether the retailer has an "approved training program."  21 U.S.C. § 333 note (Family Smoking Prevention and Tobacco Control Act (Tobacco Control Act), Pub. L. 111–31, div. A, title I, § 103(q)(2)(C)).

In its Complaint, CTP seeks to impose the maximum penalty amount, $11,410, against Respondent.  Complaint ¶ 1.  In its pre-hearing brief, CTP continued to assert that a $11,410 CMP is appropriate.  CTP Br., at 18.  Respondent contends that the CMP sought by CTP is too high because "if we try to pay this [amount of] money we will [be] out of business."  Response to Motion to Compel Discovery, at 15; see also id. at 13-14.  Respondent also asserts that it takes its responsibility to comply with the tobacco regulations seriously, has taken disciplinary action against an employee, provides an age calculator, signs, and display materials for employees and customers, uses a POS identification scanner, conducts employee training, and monitors its employees' tobacco sales to ensure compliance.  For the reasons explained below, I find that Respondent has established several mitigating factors by a preponderance of the evidence and conclude that a reduced CMP of $3,500 is appropriate.  21 C.F.R. §§ 17.33(a), (c); 17.34(a)-(c).

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

Respondent committed seven violations of selling regulated tobacco products to minors and failing to verify, by means of photo identification containing a date of birth, that the purchasers were 18 years of age or older.  As CTP noted, the most recent violations on November 24, 2019, are particularly serious because Respondent, for the fourth time in less than 48-months, directly sold a regulated tobacco product to a minor, failed to verify the age of a purchaser, and committed these violations despite warnings from FDA that additional violations would result in more serious consequences.  CTP Br., at 15; see also CTP Exs. 1-4, 16, 20.  Additionally, these violations occurred after FDA pointed Respondent to information and resources designed to help retailers comply with tobacco regulations.  CTP Ex. 3, at 2.  However, I also find that Respondent had a period of approximately two years and seven months, from October 12, 2016, until May 5, 2019, without any violations.  The record also reflects that, during this period, Respondent underwent and passed a compliance check inspection on or about September 7, 2017.  R. Ex. 9; see also Response to Motion to Compel Discovery, at 13 (Respondent arguing that an "agent" gave him a letter for "doing a good job" on selling tobacco products).  Additionally, I find that Respondent has implemented an employee training program and has taken other measures, such as utilizing a POS identification scanner, terminating non-compliant employees, and posting an age calculator and extensive signage, to comply with the tobacco regulations.  R. Exs. 1-7, 10-14; see also Answer, at 3; Response to Motion to Compel Discovery, at 1-3, 13; R. Br.  The repeated inability of Respondent to comply with federal tobacco regulations is serious in nature, but I also find that Respondent understands its legal responsibility and has taken serious, effective efforts to comply with the law.  The CMP amount should be set accordingly.

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2. Respondent's Ability to Pay

CTP asserts that "Respondent has not provided sufficient evidence to show an inability to pay the $11,410 civil money penalty."  CTP Br., at 16.  I disagree.  Respondent submitted 2018 federal and District of Columbia tax returns to support its claim that it cannot afford to pay the requested CMP.  R. Ex. 16; see also Response to Motion to Compel Discovery, at 13.  According to the federal tax return, Respondent is an S Corporation6 with one shareholder.  Id. at 1.  In 2018, Respondent had gross income of almost [redacted].  Id.  After deductions, which were mainly salaries/wages and rent, Respondent had a net income of only [redacted].  Id.  Respondent claimed no depreciation, employee benefits, or advertising expenses as deductions.  Id.  In terms of assets, Respondent had approximately [redacted] in cash and [redacted] in inventory at the beginning of the tax year and approximately [redacted] in cash and [redacted] in inventory at the end of the tax year.  Id. at 6.  However, according to the balance sheet, Respondent had nearly [redacted] due in accounts payable and other liabilities, and only retained [redacted] in earnings at the beginning of the tax year.  Id.  At the end of the tax year, Respondent had approximately [redacted] in cash, [redacted] in inventory, but almost [redacted] in accounts payable and other liabilities at the end of the tax year.  Id.  After paying only [redacted] in shareholder distributions, Respondent's retained earnings at the end of the tax year were almost [redacted].  Id.; see also id. at 7.The balance sheet information provided on Respondent's 2018 District of Columbia tax return is consistent with the information provided on the federal return.  Id. at 8.  Based on my analysis of Respondent's tax returns, Respondent's financial situation is tenuous, and it cannot afford to pay a CMP of $11,410.  Respondent did not submit any tax returns or other financial information for 2019 in its pre-hearing exchange,7 but, given the COVID-19 national pandemic requiring state and local governments to issue stay-at-home orders and non-essential business closures in order to curtail the spread of the virus, I have no reason to infer that Respondent's financial situation improved.8   Indeed, it most

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likely worsened, as Respondent asserts.  See Response to Motion to Compel Discovery, at 15 (stating that its income is down by almost 60% due to the pandemic).

Respondent also submitted documentation establishing that it applied for a PPP loan through Wells Fargo and was eligible for [redacted].  R. Ex. 17; see also Response to Motion to Compel Discovery (stating that it applied for government support in order for the business to "survive," was approved for the loan, but had not yet received the funds to pay for rent and other business expenses).  In order to provide relief from the economic and public health impacts of the national pandemic, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act.  Pub. L. 116-136, 134 Stat. 281 (Mar. 27, 2020).  Among other things, the CARES Act provides financial assistance to certain small businesses, individuals, and state, local, and Tribal governments to preserve jobs, provide stimulus payments to individuals and families, and address public health initiatives regarding the COVID-19 national pandemic.  Under section 1102 of the CARES Act, certain small business owners are eligible to receive 100% forgivable PPP loans of up to 2.5 times of their average monthly "payroll costs," minus federal payroll taxes (Federal Insurance Contributions Act (FICA) deductions).  Id. § 1102(a)(2) (Section 7(a) of the Small Business Act, 15 U.S.C. § 636(a)(36)(E)(i)(I)(aa)(AA)-(BB), as amended).  The formula for calculating the PPP loan amount is complex, as certain expenses are excluded, but the amount that Respondent qualified for appears to be consistent with 2.5 times the 12-month average of its reported total of [redacted] in annual officer compensation and salaries/wages minus [redacted] in taxes and licenses claimed on its 2018 tax return, i.e., [redacted].  Cf. R. Ex. 17 and R. Ex. 16 at 1.  Therefore, I find Respondent to be sincere, credible, and persuasive on this issue.  In addition, I find that CTP has not presented persuasive evidence to rebut Respondent's claim that it is unable to pay the full CMP sought by CTP.

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

In its pre-hearing brief, CTP asserts that, "[an] $11,410 civil money penalty will not affect the respondent's ability to do business.  Respondent may continue to sell tobacco products and other products at the establishment."  CTP Br., at 17.  As discussed above, Respondent asserts that, in light of the COVID-19 pandemic, if it is required to pay the full CMP sought by CTP, it will have difficulty surviving as a small business.  R. Br. at 14 (stating that it is seeking the federal "government to support us in order to survive in the business"), 15 (stating "if we try to pay this money[,] we will [be] out of business").  As discussed above, Respondent submitted its 2018 federal tax returns and

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correspondence concerning its eligibility for a PPP loan, which I find demonstrates that it cannot afford to pay the proposed CMP.  R. Exs. 15-17.  These documents also establish that paying the proposed CMP would hinder its ability to continue to do business.  Id.  As indicated above, I find Respondent's claims on this issue credible, and that it is likely that by paying the full CMP proposed by CTP, Respondent will be put out of business, particularly in light of the current economic conditions triggered by the COVID-19 national pandemic.  Moreover, the purpose of the CMP is to promote compliance and deter future violations by penalizing retailers for non-compliance.  Thus, a CMP should "sting," but not 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").  Accordingly, this factor weighs in favor of a reduced CMP. 

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.  As noted above, Respondent previously admitted to three violations of the prohibitions against selling cigarettes to persons younger than 18 years of age and failing to verify, by means of photo identification containing a date of birth, that purchasers were 18 years of age or older.  CTP Exs. 1-2.  Despite the previous CMP action, I have concluded that Respondent committed four additional violations, resulting in seven violations within a 48-month period.  21 C.F.R. § 1140.14(a)(1) and 21 C.F.R. § 1140.14(a)(2)(i); 21 C.F.R. § 1140.14(b)(1) and 21 C.F.R. § 1140.14(b)(2)(i).  Respondent's history of prior violations warrants a progressively larger CMP.

5. Degree of Culpability

As discussed above, Respondent failed to prove any affirmative defenses.  Based on my finding that Respondent committed the violations as alleged in the Complaint, I hold it fully culpable for seven violations of the Act and its implementing regulations.  Although Respondent terminated the employee responsible for one of the violations in the Prior Complaint and did not have another violation for almost two years and seven months, it subsequently committed four violations of the Act and implementing regulations on May 5, 2019, and November 24, 2019.  See Answer, at 3; Response to Motion to Compel Discovery, at 3; R. Br.  Thus, I do not find Respondent's arguments regarding remedial actions taken to prevent the sale of regulated tobacco products to minors legally sufficient to reduce Respondent's culpability.

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6. Employee Training Program

For mitigation purposes, I must consider whether the retailer has an "approved training program."  21 U.S.C. § 333 note, § (2)(A)(i)-(ii) (establishing separate CMP schedules for retailers with or without approved training programs).  However, FDA has not promulgated regulations establishing standards for an approved training program.  See 21 U.S.C. § 333 note, § (2)(B).  In the interim, FDA has issued a non-binding guidance document containing various recommendations for retailer training programs.  Guidance for Industry, Tobacco Retailer Trainer Programs, at 1-2, 10-18 (Rev. Aug. 2018), https://www.fda.gov/media/79013/download.  FDA recommends providing training to new employees as soon as possible, along with periodic refresher training.  Id. at 16.  Retailers have flexibility in providing training by any appropriate method, including on-the-job training, among others.  Id.  With regard to substance, FDA recommends that employee training programs include information on the following seven topics:

• Applicable Laws and Penalties
• Health Effects of Youth Tobacco Use
• Written Company Policies
• Comprehensive Description of Tobacco Products Covered by Laws Prohibiting the Sale of Tobacco Products to Youth
• Age Verification Techniques
• Refusing Sales
• Testing to Ensure that Employees Have the Knowledge Required

Id. at 10-16.  Finally, retailers should review and update their training programs, as needed, and take appropriate corrective action for any violations.  Id. at 16.In the absence of a final rule, CTP has decided to seek CMPs using the lower schedule for all retailers until FDA promulgates regulations establishing standards for approved retailer training programs.  Guidance for Industry, Civil Money Penalties and No-Tobacco-Sale Orders for Tobacco Retailers, at 9 (Rev. Dec. 2016), https://www.fda.gov/media/80888/download.

Respondent asserts that it has implemented an oral employee training program consisting of training employees to ask for and check customers' identification cards before selling tobacco products, posting signage and an age calculator, monitoring employee compliance, and reminding, correcting, and disciplining employees who fail to comply with the tobacco regulations.  See Answer, at 3; see also Response to Motion to Compel Discovery, at 1, 2-3, 13; R. Br.; see also R. Exs. 1-7, 10-14.  Respondent's training program includes many of the recommended elements explained in FDA Guidance, including utilizing a POS identification scanner, posting an age calculator, and posting signs and displays describing tobacco laws and regulations, including which products are covered, such as hookah and vapes.  R. Exs. 1-7, 10-14.  I find that Respondent

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understands the health risks and importance of protecting minors, monitors employee compliance, and takes corrective action when appropriate.  Answer, at 3; see also Response to Motion to Compel Discovery, at 1-4, 13; R. Br.  As discussed above, I also find that Respondent's training program is somewhat effective, considering that Respondent passed a compliance check inspection in 2017 and went two years and seven months without any violations.  R. Ex. 9; compare CTP Ex. 1 ¶¶ 7, 9 (alleging violations on February 24, 2016, and October 12, 2016) and Complaint ¶¶ 9-11 (alleging violations on May 5, 2019, and November 24, 2019).  Accordingly, I conclude that this factor serves to mitigate the proposed CMP.

7. State Penalties

Respondent has not alleged or presented any evidence that it has paid any penalty to the District of Columbia for the same violations.  21 U.S.C. § 333 note, § (2)(C); see also 21 C.F.R. § 17.34(b).  Accordingly, the payment of state penalties is not a factor that mitigates the CMP in this case.

8. Other Matters as Justice May Require

The Act gives me discretion to consider any other evidence or arguments to mitigate the amount of the CMP.  21 U.S.C. § 333(f)(5)(B).  Mitigation is an affirmative defense for which Respondent bears the burden of proof.  Respondent must prove any affirmative defenses and any mitigating factors by a preponderance of the evidence.  21 C.F.R. § 17.33(c).

In its Answer, Respondent asserts that it understands the seriousness of these violations "based on the law and concern [for] our community['s] safety . . ."  Answer, at 3.  Further reiterating its understanding, Respondent stated in its Response to Motion to Compel Discovery that, with regard to restricting tobacco sales, it takes "full responsibility to protect the health and safety of [its] community."  Response to Motion to Compel Discovery, at 3.  Respondent also claims that it terminated the employment of the employee responsible for the 2016 violations.  See Answer, at 3; Dkt. Entry No. 19; see also Response to Motion to Compel Discovery, at 3.  I find Respondent to be extraordinarily credible and its statements to be truthful and made in earnest.  Respondent seems to understand the gravity of violating tobacco regulations.  Sales of tobacco products to minors are unlawful because younger individuals are more susceptible to making decisions that will endanger their lives down the road.  See generally, 21 U.S.C. § 387 note, "Findings" and "Purpose."  Retailers who choose to sell such a highly dangerous and addictive product bear a heavy burden to assure that they make their sales in compliance with law.  Id.  I believe that Respondent understands this.

In summary, Respondent has violated the regulations on four separate occasions, constituting seven violations within a 48-month period.  Respondent's violations are

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serious, and it is liable for a substantial and progressively higher CMP.  The purpose of a CMP is to promote compliance by penalizing retailers for non-compliance and deterring future violations.  However, I am sympathetic to the adverse effects of COVID-19 on small business retailers.  Based on the financial documents in the record, I find that the proposed penalty amount of $11,410 will place a significant financial strain on Respondent's small business, resulting in it going out of business.  R. Ex. 16-17.  The circumstances surrounding the COVID-19 pandemic and other possible community restrictions most likely affected Respondent's solvency, as demonstrated by its eligibility for a PPP loan.  R. Ex. 17.  Further, the implementation of additional measures (including posting signs and a stand-alone age calculator, utilizing a POS identification verification system, and implementing an employee training program) to prevent the sale of tobacco products to minors clearly required additional costs, as well as Respondent's time.  I believe Respondent understands the gravity of the violations and is serious about preventing future violations.

I have considered the statutory factors, most of which support imposition of a reduced penalty.  In particular, Respondent has shown that it cannot afford to pay the proposed penalty because it would threaten its ability to continue to do business.  Additionally, Respondent has proven other mitigating circumstances, including implementing an employee training program, utilizing a POS identification scanner, and its history of passing an inspection in 2017 and achieving compliance for two years and seven months.   Although these factors do not absolve it of liability or culpability, they warrant a reduced CMP.  To ensure justice is served, while balancing the need to ensure compliance with the Act and tobacco regulations, the CMP should sting, but not be so punitive that it puts a retailer out of business or threatens its viability.  See 21 U.S.C. § 387 note (explaining that one of the purposes of the Tobacco Control Act is "to continue to permit the sale of tobacco products to adults in conjunction with measures to ensure that they are not sold or accessible to underage purchasers").  For these reasons, after considering the record evidence, applicable law, and aggravating and mitigating circumstances in this case, I find that a reduced penalty amount of $3,500 is appropriate under 21 U.S.C. § 333(f)(5)(B), (f)(5)(C), and (f)(9).

Conclusion

Pursuant to 21 C.F.R. § 17.45, I enter judgment in the amount of $3,500 against Respondent, Baha Enterprises II Inc. d/b/a Mobil, for seven 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 48-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 asserts that it does not include any violations that occurred outside the relevant timeframe in this Complaint, but it did not explain whether any such violations actually exist.  See Docket Entry No. 1 (Complaint), at 1 n.1.
• back to note 1
2. CTP counts the two alleged violations on May 5, 2019, that were the subject of a Warning Letter issued to Respondent as a single violation, even though they arose from a third compliance check inspection conducted after Respondent admitted to three prior violations on February 24, 2016, and October 12, 2016, which are included in the relevant timeframe for this Complaint.  CTP Br. at 15, note 3; see also CTP Ex. 3 at 1, CTP Ex. 2.
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3. At the time of the FDA inspections leading to some of Respondent's prior violations, this regulation was codified at 21 C.F.R. § 1140.14(a).  Effective August 8, 2016, the regulations were recodified without any substantive changes.  81 Fed. Reg. 28,973, 28,974, 29,103 (May 10, 2016), https://federalregister.gov/a/2016-10685.
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4. On December 20, 2019, the legal age to purchase tobacco products changed to 21 years.  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.")  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").  However, each of the violations at issue in this case occurred before these statutory changes.
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5. Although CTP alleges only six violations, based on counting the violations on May 5, 2019, as a single violation because they were the subject of a Warning Letter issued to Respondent, I find that this counting methodology is contrary to law.  21 U.S.C. § 333 note, Guidance § 2(A)(i)(I) (providing that only the first violation is subject to a warning letter); see also Orton Motor, Inc., d/b/a Orton's Bagley, 884 F.3d at 1208-09, 1214; CTP Br. at 15, note 3; CTP Ex. 3.  Indeed, if CTP is alleging a "reset" and treating Respondent's May 5, 2019, inspection as a first violation, then its Complaint should not consider Respondent's prior violations and only allege (and seek a corresponding CMP for) three violations within a 24-month period, i.e., one violation on May 5, 2019, and two violations on November 24, 2019.  See 21 U.S.C. § 333 note, Guidance § 2(A)(i)(III); Orton Motor, Inc., d/b/a Orton's Bagley, 884 F.3d at 1208-09, 1214.
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6. An S corporation is a small business corporation that has elected, under section 1362(a) of the Internal Revenue Code, to pass-through the small business' income, losses, deductions, and credits to its shareholders for federal tax purposes.  26 U.S. Code § 1361(a)(1); see also "S Corporations," Internal Revenue Service, https://www.irs.gov/businesses/small-businesses-self-employed/s-corporations.
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7. I also note that its 2019 federal tax returns were not available when Respondent filed its answer, and, in response to the COVID-19 national pandemic, the Internal Revenue Service extended the filing deadline for federal tax returns from April 15, 2020, to July 15, 2020.  See Filing and Payment Deadline Extended to July 15, 2020 - Updated Statement, https://www.irs.gov/newsroom/payment-deadline-extended-to-july-15-2020 (Mar. 2020).
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8. Pursuant to 21 C.F.R. § 17.19(b)(12), I take official notice of the COVID-19 pandemic, and its adverse effects on the financial conditions of small businesses nationwide.  See, e.g., Mayor's Order 2020-53, Closure of Non-Essential Businesses and Prohibition on Large Gatherings During Public Health Emergency, https://coronavirus.dc.gov/sites/default/files/dc/sites/mayormb/release_content/attachments/Mayor%27s%20Order%202020-053%20Closure%20of%20Non-Essential%20Businesses%20and%20Prohibiti....pdf, (Mar. 24, 2020).
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