Kartar One LLC d/b/a Kartar Food Mart/Phillips 66, DAB TB5276 (2021)

INITIAL DECISION AND DEFAULT JUDGMENT

Found:

1) Respondent violated 21 U.S.C. § 331, specifically  21 C.F.R. § 1140.14(a)(1) and 21 C.F.R. § 1140.14(a)(2)(i), as charged in the Complaint; and
2) Respondent violated 21 U.S.C. § 331, specifically  21 C.F.R. § 1140.14(a)(1) and 21 C.F.R. § 1140.14(a)(2)(i), as charged in the prior complaint; and
3) Respondent committed six repeated violations in a 36-month period as set forth hereinabove.
4) Respondent is hereby assessed a 30-day No-Tobacco-Sale Order (NTSO).

Glossary:

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I.  JURISDICTION

I have jurisdiction to hear this case pursuant to my appointment by the Secretary of Health and Human Services and my authority under the Administrative Procedure Act (5 U.S.C. §§ 554-556), 5 U.S.C.A. § 3106, 21 U.S.C. § 333(f)(5), 5 C.F.R. §§ 930.201 et seq. and 21 C.F.R. Part 17.  See also Butz v. Economou, 438 U.S. 478 at 513 (1978); Marshall v. Jerrico, Inc., 446 U.S. 238 (1980); Federal Maritime Com’n v. South Carolina State Ports Authority, 535 U.S. 743, 744 (2002).

II.  PROCEDURAL BACKGROUND

The Center for Tobacco Products (CTP/Complainant) filed a Complaint on December 17, 2019, against Kartar One LLC d/b/a Kartar Food Mart / Phillips 66 (Respondent or Kartar Food Mart / Phillips 66), at 1631 North Wheeling Avenue, Muncie, Indiana 47303, alleging that FDA documented six repeated violations within a 36-month period.  CRD Docket (Dkt.) Entry No. 1.

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Kartar Food Mart / Phillips 66 was served with process on December 16, 2019 by United Parcel Service.  Dkt. Entry No. 2.  On January 10, 2020, via email transmission, Respondent requested an extension of time in which to file an Answer.  I noted that Respondent mistakenly submitted its request for an extension to CTP instead of the Civil Remedies Division.  CTP in turn forwarded Respondent’s email to this office.  Dkt. Entry Nos. 4, 4a.  Subsequently, on January 13, 2020, Respondent refiled an extension request via the DAB E-File System.  Dkt. Entry No. 5.   Dkt. Entry Nos. 4, 4a.  On January 16, 2020, I issued an Order granting Respondent’s request and extended the deadline for filing an Answer to February 14, 2020.  Dkt. Entry No. 6.  In the Order, I also extended CTP’s deadline to file its Motion for Default Judgment to March 2, 2020.  Id.  Respondent filed an Answer on February 14, 2020.  Dkt. Entry No. 7.  On February 18, 2020, I issued a Pre-Hearing Order (PHO) setting a schedule for filings and procedures.  Dkt. Entry No. 8.  Pursuant to my PHO, CTP served Respondent’s counsel with a Request for Production of Documents on March 12, 2020.  Dkt. Entry No. 9b.

On May 4, 2020, CTP filed its Motion to Compel Discovery averring Respondent failed to comply with its request for production of documents.  Dkt. Entry No. 9.  On May 6, 2020, in response to the COVID-19 pandemic, I stayed this case until further notice.  Dkt. Entry No. 10.

On July 6, 2020, I issued an Order lifting the stay entered on May 6, 2020.  Dkt. Entry No. 11.  My July 6, 2020 Order also granted CTP’s Motion to Compel Discovery  In my Order, I stated “[b]ecause Respondent has failed to comply with the procedural rules, I will construe CTP’s motion as a request for an Order to Show Cause and will instruct Respondent to comply with CTP’s Request for Production of Documents . . . .”

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and giving Respondent until July 21, 2020 to “. . . comply with CTP’s Request for Productions of Documents.”  Id. at 2.  I further warned Respondent “[f]ailure to comply will result in sanctions, which may include issuance of an Initial Decision and Default Judgment finding Respondent liable for the violations listed in the Complaint and imposing a civil money penalty.”  Id.  In the Order, I also extended the simultaneous pre-hearing exchange deadlines.  Respondent did not respond to my July 6, 2020 Order by the deadline established.  Id. 

On October 29, 2020, I issued an Order giving the parties until November 13, 2020 to file a joint report advising of the status of the case.  Dkt. Entry No. 12.  My Order noted “[t]o date, neither party has provided this office with a status update with regard to Respondent’s production of the requested documents to CTP.  Nor have the parties submitted their respective pre-hearing exchanges.”  Id.  The Order also warned “[s]hould the parties fail to file a joint report by the established deadline, this matter may be dismissed at that time.  See 21 C.F.R. § 17.35.”  Id. 

On November 13, 2020, CTP filed its Status Report and Motion to Impose Sanctions against Respondent asserting that Respondent failed to respond to CTP’s request for production of documents or comply with my July 6, 2020 Order.  Dkt. Entry No. 13.  In the Motion to Impose Sanctions, CTP asked that I strike Respondent’s Answer and issue a Default Judgment against Respondent as a sanction for failing to comply with my Orders.  Id. at 2.  On November 17, 2020, I issued an Order directing Respondent to respond to CTP’s Motion to Impose Sanctions by November 23, 2020.  Dkt. Entry No. 14.  I again warned Respondent:  “[f]ailure to comply may result in

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sanctions, including the issuance of an Initial Decision and Default Judgment finding Respondent liable for the violations listed in the Complaint and imposing a No-Tobacco-Sale Order . . . .”  Id. at 2.  Lastly, my Order stayed “the pre-hearing deadlines pending resolution of the Motion to Impose Sanctions.”  Id.

To date, Respondent’s counsel has failed to respond.

Pursuant to 21 C.F.R. § 17.35(a), I may sanction a person, including any party or counsel for:

(1) Failing to comply with an order, subpoena, rule, or procedure governing the proceeding;

(2) Failing to prosecute or defend an action; or

(3) Engaging in other misconduct that interferes with the speedy, orderly, or fair conduct of the hearing.

In this case, Respondent failed to comply with my orders and procedures governing this proceeding.

III.  STRIKING RESPONDENT’S ANSWER

Respondent failed to comply with my February 18, 2020 PHO, and failed to comply with my July 6, 2020 and November 17, 2020 Orders.  In fact, Respondent has not made any contact with this Court since the filing of its February 14, 2020 Answer.

Due to Respondent’s noncompliance, I am striking Respondent’s Answer, issuing this default decision, and assuming the facts alleged in CTP’s Complaint to be true.  21 C.F.R. §§ 17.35(c)(3), 17.11(a).  The harshness of the sanctions I impose upon either party must relate to the nature and severity of the misconduct or failure to comply.  21

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C.F.R. § 17.35(b).  Respondent failed to comply with my February 18, 2020 PHO and my July 6, 2020 and November 17, 2020 Orders.   

I find and conclude Respondent’s repeated failure to comply with my orders is sufficiently egregious to warrant striking Respondent’s Answer and issuing a decision without further proceedings.  21 C.F.R. §§ 17.35(b), (c)(3), 17.11(a).

IV.  BURDEN OF PROOF

CTP as the petitioning party has the burden of proof.  21 C.F.R. § 17.33.

V.  LAW

21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(a)(1) and 1140.14(a)(2)(i).

VI.  ISSUE

Did Respondent violate 21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(a)(1) and 1140.14(a)(2)(i) as alleged in the Complaint?

VII.  DEFAULT

I find Respondent was served and is subject to the jurisdiction of this forum, as established by the UPS Delivery Notification and Notice of Filing filed by CTP.

Striking Respondent’s Answer leaves the Complaint unanswered. 

My July 6, 2020 and November 17, 2020 Orders are incorporated herein by reference.  My Orders instructed Respondent to comply with CTP’s request for document production, and to respond to CTP’s Motion to Impose Sanctions, on or before close of business on July 21, 2020 and November 23, 2020, respectively.  Respondent failed to file any pleading in response or otherwise comply with my July 6, 2020 and November 17, 2020 Orders.

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Pursuant to 21 C.F.R. § 17.35(c)(3), I struck Respondent’s Answer as a sanction.

It is Respondent’s right to participate in the legal process.

It is Respondent’s right to request a hearing or to waive a hearing. 

I find Respondent waived its right to a hearing pursuant to 21 C.F.R. § 17.11(b).

VIII. ALLEGATIONS

A. Agency’s recitation of facts

CTP alleged that Respondent owns an establishment, doing business under the name Kartar Food Mart / Phillips 66, located at 1631 North Wheeling Avenue, Muncie, Indiana 47303.  Respondent's establishment receives tobacco products in interstate commerce and holds them for sale after shipment in interstate commerce.

During an inspection of Kartar Food Mart / Phillips 66 conducted on May 29, 2019, an FDA-commissioned inspector documented the following violations:

1. Selling a tobacco product to a minor, in violation of 21 C.F.R. § 1140.14(a)(1).  Specifically, a person younger than 18 years of age was able to purchase a package of Pall Mall 100’s cigarettes on May 29, 2019, at approximately 2:15 PM; and
2. Failing to verify the age of a person purchasing a regulated tobacco product by means of photographic identification containing the bearer's date of birth, as required by 21 C.F.R. § 1140.14(a)(2)(i).  Specifically, the minor’s identification was not verified before the sale, as detailed above, on May 29, 2019, at approximately 2:15 PM.

B. Respondent’s recitation of facts

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I struck Respondent’s Answer filed on February 14, 2020.

Accordingly, Respondent filed no responsive pleadings that I may consider.

IX.  PRIOR VIOLATIONS

On January 22, 2019, CTP initiated a previous civil money penalty action, CRD Docket Number T-19-1238, FDA Docket Number FDA-2019-H-0288 (see also CRD Docket Number T-17-6481, FDA Docket Number FDA-2017-H-5607; CRD Docket Number T-17-389, FDA Docket Number FDA-2015-H-4091), against Respondent for seven   Two violations were documented on March 27, 2015; two on July 27, 2015; two on May 31, 2017; and two on October 22, 2018.  When determining the number of violations for a civil money penalty, CTP counted the violations at the initial inspection as a single violation, and all subsequent violations as separate individual violations, in accordance with customary practice.  When determining the number of violations for a No-Tobacco-Sale Order, CTP counted both of the March 27, 2015 violations (sale to a minor and failure to verify identification) as Respondent’s original violations.  The NTSO Complaint does not include the July 27, 2015 violations as “repeated violations” because they fall outside the specified 36-month timeframe.  See Complaint ¶ 1 fn.2. violations of 21 C.F.R. pt. 1140 within a 48-month period.  CTP alleged those violations to have occurred at Respondent’s business establishment, 1631 North Wheeling Avenue, Muncie, Indiana 47303, on March 27, 2015, July 27, 2015, May 31, 2017, and October 22, 2018.

The previous action concluded when an Initial Decision and Default Judgment was entered by an Administrative Law Judge, “finding that all of the violations alleged in the Complaint occurred.”

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I find and conclude Respondent committed six repeated violations of 21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(a)(1) and 21 C.F.R. § 1140.14(a)(2)(i) within a 36‑month period as set forth in the Complaint.

X.  FAMILY SMOKING PREVENTION AND TOBACCO CONTROL ACT

The “relevant statute” in this case is actually a combination of statutes and regulations:  The Family Smoking Prevention and Tobacco Control Act, Pub. L. No. 111‑31, 123 Stat. 1776 (2009) (TCA), amended the Food, Drug, and Cosmetic Act (21 U.S.C.A. Chap. 9) (FDCA) and created a new subchapter of that Act that dealt exclusively with tobacco products, (21 U.S.C. §§ 387-387u), and it also modified other parts of the FDCA explicitly to include tobacco products among the regulated products whose misbranding can give rise to civil, and in some cases criminal, liability.  The 2009 amendments to the FDCA contained within the TCA also charged the Secretary of Health and Human Services with, among other things, creating regulations to govern tobacco sales.  The Secretary’s regulations on tobacco products appear in Part 1140 of title 21, Code of Federal Regulations.

Under the FDCA, “[a] tobacco product shall be deemed to be misbranded if, in the case of any tobacco product sold or offered for sale in any State, it is sold or distributed in violation of regulations prescribed under section 387f(d).”  21 U.S.C. § 387c(a)(7)(B) (2012).  Section 387 a‑1 directed FDA to re-issue, with some modifications, regulations previously passed in 1996.  21 U.S.C. § 387 a-1(a)(2012).  These regulations were passed pursuant to section 387f(d), which authorizes FDA to promulgate regulations on the sale

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and distribution of tobacco products; 75 Fed. Reg. 13,225 (March 19, 2010), codified at 21 C.F.R. Part 1140 (2015); 21 U.S.C. § 387f(d)(1) (2012).  Accordingly, 21 C.F.R. 1140.1(b) provides that “failure to comply with any applicable provision in this part in the sale, distribution, and use of cigarettes and smokeless tobacco renders the product misbranded under the act.”

Under 21 U.S.C. § 331(k), “[t]he alteration, mutilation, destruction, obliteration, or removal of the whole or any part of the labeling of, or the doing of any other act with respect to, a food, drug, device, tobacco product, or cosmetic, if such act is done while such article is held for sale (whether or not the first sale) after shipment in interstate commerce and results in such article being adulterated or misbranded” is a prohibited act under 21 U.S.C. § 331.  Thus, when a Retailer such as Respondent misbrands a tobacco product by violating a requirement of 21 C.F.R. Part 1140, that misbranding in turn violates the FDCA, specifically 21 U.S.C. § 331(k).  FDA may seek a civil money penalty or No-Tobacco-Sale Order from “any person who violates a requirement of this chapter which relates to tobacco products.”  21 U.S.C. § 333(f) (2012).  Penalties are set by 21 U.S.C. § 333 note and 21 C.F.R. § 17.2.  Under current FDA policy, the first time FDA finds violations of 21 C.F.R. Part 1140 at an establishment, FDA only counts one violation regardless of the number of specific regulatory requirements that were actually violated, but if FDA finds violations on subsequent occasions, it will count violations of specific regulatory requirements individually in computing any civil money penalty sought.  This policy is set forth in detail, with examples to illustrate, at U.S. Food & Drug

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Admin., Guidance for Industry and FDA Staff, Civil Money Penalties and No-Tobacco-Sale Orders for Tobacco Retailers, Responses to Frequently Asked Questions (Revised) (2016), available at http://www.fda.gov/downloads/TobaccoProducts/Labeling/RulesRegulationsGuidance/UCM447310.pdf [hereinafter Guidance for Industry], at 13-14.  So, for instance, if a retailer sells a tobacco product on a particular occasion to a minor without checking for photographic identification, in violation of 21 C.F.R. §§ 1140.14(a)(1) and (a)(2)(i), this will count as two separate violations for purposes of computing the penalty, unless it is the first time violations were observed at that particular establishment.  This policy of counting violations has been determined by the District of Columbia Circuit to be consistent with the language of the FDCA and its implementing regulations, see Orton Motor Co. d/b/a Orton’s Bagley v. HHS, 884 F.3d 1205 (D.C. Cir. 2018).

XI.  LIABILITY

When a retailer such as Respondent is found to have “misbranded” a tobacco product in interstate commerce, it can be liable to pay a CMP.  21 U.S.C. §§ 331, 333.  A retailer facing such a penalty has the right, set out in statute, to a hearing under the Administrative Procedure Act.  21 U.S.C. § 333(f)(5)(A).  A retailer can forfeit its rights under the statute and regulations by failing to participate in the process, a failure known as a “default.”  21 C.F.R. § 17.11. 

As set forth above, it is Respondent’s right to decide whether to participate in the legal process.  It is Respondent’s right to decide to request a hearing and it is Respondent’s right to waive a hearing.

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In that I have stricken Respondent’s Answer from the record as a sanction for failing to respond to my orders and directives, I find Respondent has failed to answer the Complaint and, therefore, has waived its right to a hearing.

XII.  IMPACT OF RESPONDENT’S DEFAULT

When a Respondent defaults by failing to answer the complaint, or respond to a OSC, an ALJ must assume as true all factual allegations in the complaint and issue an initial decision within thirty (30) days of the answer’s due date, imposing “the maximum amount of penalties provided for by law for the violations alleged” or “the amount asked for in the complaint, whichever is smaller” if “liability under the relevant statute” is established.  21 C.F.R. § 17.11(a)(1), (2).  But see 21 C.F.R. § 17.45 (initial decision must state the “appropriate penalty” and take into account aggravating and mitigating circumstances).

Two aspects of Rule 17.11 are important in default cases. 

First, the Complainant benefits from a regulatory presumption (the ALJ shall assume that the facts alleged in the complaint are true) that relieves it from having to put on evidence.

The presumption affords a party, for whose benefit the presumption runs, the luxury of not having to produce specific evidence to establish the point at issue.  When the predicate evidence is established that triggers the presumption, the further evidentiary gap is filled by the presumption.  See 1 Weinstein's Federal Evidence § 301.02[1], at 301‑7 (2d ed.1997); 2 McCormick on Evidence § 342, at 450 (John W. Strong ed., 4th ed.

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1992); Routen v. West, 142 F.3d 1434, 1440 (Fed. Cir. 1998).  However, when the opposing party puts in proof to the contrary of that provided by the presumption, and that proof meets the requisite level, the presumption disappears.  See Texas Dept. of Community Affairs v. Burdine, 450 U.S. 248, 254–55, 101 S.Ct. 1089, 1094–95, 67 L.Ed.2d 207 (1981); A.C. Aukerman, 960 F.2d at 1037 (“[A] presumption . . . completely vanishes upon the introduction of evidence sufficient to support a finding of the nonexistence of the presumed fact.”); see also Weinstein’s Federal Evidence § 301App.100, at 301App.–13 (explaining that in the “bursting bubble” theory once the presumption is overcome, then it disappears from the case); 9 Wigmore on Evidence § 2487, at 295–96 (Chadbourn rev.1981).  See generally Charles V. Laughlin, In Support of the Thayer Theory of Presumptions, 52 Mich. L.Rev. 195 (1953); Routen v. West, 142 F.3d 1434, 1440 (Fed. Cir. 1998).

Second, as far as the penalty is concerned, my discretion is limited by the language of the regulation.  I may not tailor the penalty to address any extenuation or mitigation, for example, nor, because of notice concerns, may I increase the penalty beyond the smaller of (a) the Complainant's request or (b) the maximum penalty authorized by law.

XIII.  LIABILITY UNDER THE RELEVANT STATUTE

Taking the CTP’s allegations as set forth in the Complaint as true, the next step is whether the allegations make out “liability under the relevant statute.”  21 C.F.R. § 17.11(a).

Based on Respondent’s failure to answer I assume all the allegations in the Complaint to be true.

I find and conclude that the evidentiary facts, by a preponderance of the evidence standard, support a finding Respondent repeatedly violated 21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(a)(1) in that persons younger than 18 years of age were able to

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purchase regulated  tobacco products on May 31, 2017, October 22, 2018, and May 29, 2019. 

I find and conclude that the evidentiary facts, by a preponderance of the evidence standard, support a finding Respondent repeatedly violated 21 U.S.C. § 331, specifically 21 C.F.R. § 1140.14(a)(2)(i) on those same dates in that Respondent also violated the requirement that retailers verify, by means of photo identification containing a purchaser’s date of birth, that no regulated tobacco product purchasers are younger than 18 years of age.

The conduct set forth above on May 31, 2017, October 22, 2018, and May 29, 2019 counts as six repeated violations under FDA policy for purposes of computing the No-Tobacco-Sale Order.  Under 21 U.S.C. § 333(f)(8), a No-Tobacco-Sale Order is permissible for six repeated violations of the regulations found at 21 C.F.R. pt. 1140.  The maximum period of time for the first No-Tobacco-Sale Order received by a retailer is 30 consecutive calendar days.  See Pub. L. 111–31, div. A, title I, § 103(q)(1)(A), June 22, 2009, 123 Stat. 1838, 1839; Food & Drug Admin., Civil Money Penalties and No-Tobacco-Sale Orders For Tobacco Retailers at 5-6, available at http://www.fda.gov/downloads/TobaccoProducts/Labeling/RulesRegulationsGuidance/UCM252955.pdf  (last updated Dec. 15, 2016); Determination of the Period Covered by a No-Tobacco-Sale Order and Compliance with Order at 3-4, available at https://www.fda.gov/downloads/TobaccoProducts/Labeling/RulesRegulationsGuidance/UCM460155.pdf (last updated August 2015).  While the CTP guidance documents are

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not binding, as a matter of law, I consider them to be persuasive when interpreting the statutory factors that must be considered in determining the length of an NTSO.

XIV.  PENALTY

There being liability under the relevant statute, I must now determine the amount of penalty to impose.  My discretion regarding a penalty is constrained by regulation.  I must impose either the maximum amount permitted by law or the amount requested by the Center, whichever is lower.  21 C.F.R. § 17.11(a)(1), (a)(2).

In terms of specific punishments available, the legislation that provides the basis for assessing civil monetary penalties divides retailers into two categories:  those that have “an approved training program” and those that do not.  Retailers with an approved program face no more than a warning letter for their first violation; retailers without such a program begin paying monetary penalties with their first.  TCA § 103(q)(2), 123 Stat. 1839, codified at 21 U.S.C. § 333 note.  See 21 C.F.R. § 17.2.  The FDA has informed the regulated public that “at this time, and until FDA issues regulations setting the standards for an approved training program, all applicable CMPs will proceed under the reduced penalty schedule.”  FDA Regulatory Enforcement Manual, Aug. 2015, ¶ 5‑8‑1.  Because of this reasonable exercise of discretion, the starting point for punishments and the rate at which they mount are clear – the lower and slower schedules.

XV.  MITIGATION

It is incumbent upon Respondent to present any factors that could result in mitigation of CTP’s proposed penalty.  Specifically, it is Respondent’s burden to

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provide mitigating evidence.  In a default, Respondent has failed to participate and has failed to present any evidence regarding potential mitigation.  Accordingly, I have no reason to mitigate the penalty.

XVI.  CONCLUSION

Respondent committed six repeated violations in a 36‑month period and so, Respondent is liable for a No-Tobacco-Sale Order of 30 days.  See 21 C.F.R. § 17.2.

WHEREFORE, evidence having read and considered it be and is hereby ORDERED as follows:

1. I find Respondent has been served with process herein and is subject to this forum.
2. I find Respondent failed to respond to my July 6, 2020 and November 17, 2020 Orders.
3. I strike Respondent’s Answer filed on February 14, 2020 as a sanction pursuant to 21 C.F.R. § 17.35(c)(3).
4. I find Respondent is in default.
5. I assume the facts alleged in the Complaint to be true.
6. I find the facts set forth in the Complaint establish liability under the relevant statute.
7. I assess a 30-day No-Tobacco-Sale Order.