ESE Energy Corporation d/b/a Gulf Express, DAB TB5586 (2022)

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) began this matter by serving an administrative complaint on Respondent, ESE Energy Corporation d/b/a Gulf Express, at 525 Lynnway, Lynn, Massachusetts 01905, and by filing a copy of the complaint with the Food and Drug Administration’s (FDA) Division of Dockets Management.  The complaint alleges that Gulf Express impermissibly sold regulated tobacco products to underage purchasers and failed to verify, by means of photo identification containing a date of birth, that purchasers were of age, thereby violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations, 21 C.F.R. pt. 1140.¹

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CTP seeks a civil money penalty of $601, for at least three² violations of the regulations within a 24-month period. 

During the course of this administrative proceeding, Respondent failed to comply with orders and procedures governing this proceeding and failed to defend its actions, which interfered with the speedy, orderly, or fair conduct of this proceeding.  21 C.F.R. § 17.35(a).  Accordingly, pursuant to 21 C.F.R. § 17.35(c)(3), I strike Respondent’s Answer and issue this decision of default judgment.

I.     Procedural History

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on April 20, 2022, CTP served the complaint on Respondent Gulf Express by United Parcel Service.  On May 12, 2022, Respondent filed a timely Answer to CTP’s complaint.  On May 24, 2022, I issued an Acknowledgment and Pre-Hearing Order (APHO) that set deadlines for the parties’ filings and exchanges, including a schedule for discovery.  I directed that a party receiving a discovery request must provide the requested documents within 30 days of the request.  APHO ¶ 4; see 21 C.F.R. § 17.23(a).  I warned that I may impose sanctions if a party failed to comply with any order, including the APHO.  APHO ¶ 21. 

On July 19, 2022, CTP filed a Motion to Compel Discovery, asserting that Respondent did not respond to its discovery request as required by my APHO and regulations.  By Order of July 21, 2022, I informed Respondent of its deadline to file a response and warned that if Respondent failed to respond, “I may grant CTP’s motion in its entirety.”  Order at 2.  See also 21 C.F.R. § 17.32(c); APHO ¶ 20.  Respondent did not respond.

On August 31, 2022, I issued an Order Granting Motion to Compel in which I ordered Respondent to produce documents responsive to CTP’s discovery request by September 15, 2022.  I warned Respondent that, “Failure to do so may result in sanctions, including the issuance of an Initial Decision and Default Judgment finding Respondent liable for the violations listed in the Complaint and imposing a civil money penalty.”  Order Granting Motion to Compel at 1-2 (emphasis removed).

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On September 16, 2022, CTP filed a Status Report and Motion to Impose Sanctions (Motion to Impose Sanctions) stating that, as of its filing, Respondent had not produced documents in response to CTP’s request for production of documents in compliance with my Order Granting Motion to Compel.  On September 16, 2022, CTP also moved to extend the October 17, 2022 pre-hearing exchange deadline by 30 days – until November 16, 2022.  By Order of September 19, 2022, I informed Respondent that it had until October 5, 2022, to file a response to CTP’s Motion to Impose Sanctions.  I warned Respondent that if it failed to file a response, “I may grant CTP’s motion in its entirety.”  Order at 2, September 19, 2022.  I also extended all the pre-hearing deadlines.  To date, Respondent has not responded. 

II.     Striking Respondent’s Answer

I may sanction a party 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.

21 C.F.R. § 17.35(a).

Respondent failed to comply with the following orders and procedures governing this proceeding:

• Respondent failed to comply with 21 C.F.R. § 17.23(a) and paragraph 4 of my APHO, when Respondent failed to respond to CTP’s Request for Production of Documents within 30 days; and
• Respondent failed to comply with my Order Granting Motion to Compel when it failed to produce documents responsive to CTP’s Request for Production of Documents by September 15, 2022.

Respondent also failed to defend its action, despite my Orders dated July 21, 2022, and September 19, 2022, informing Respondent that it may file a response to CTP’s motions and warning Respondent of the consequences if it failed to do so.

I find that Respondent failed to comply with orders and procedures governing this proceeding, failed to defend its case, and, as a result, interfered with the speedy, orderly, or fair conduct of this proceeding.  I conclude that Respondent’s conduct establishes a basis for sanctions pursuant to 21 C.F.R. § 17.35, and that sanctions are warranted.

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The harshness of the sanctions I impose must relate to the nature and severity of the misconduct or failure to comply.  21 C.F.R. § 17.35(b).  When a party fails to comply with a discovery order, including the discovery provisions under the regulations, I may strike any pleadings or submissions of the party failing to comply.  21 C.F.R. § 17.35(c)(3).  Here, Respondent failed to comply with a procedural rule (21 C.F.R. § 17.23(a)), and two of my orders (APHO ¶ 4; Order Granting Motion to Compel), under 21 C.F.R. § 17.35(a)(1), despite my explicit warnings that its failure could result in sanctions (APHO ¶ 21; Order Granting Motion to Compel at 1-2; Order at 1, September 19, 2022).  I specified that, “Failure to do so may result in sanctions, including the issuance of an Initial Decision and Default Judgment finding Respondent liable for the violations listed in the Complaint and imposing a civil money penalty.”  Order Granting Motion to Compel at 1-2 (emphasis removed).  Respondent also failed to defend its actions, under 21 C.F.R. § 17.35(a)(2), despite my orders expressly reminding Respondent that it may file a response.  Order at 1-2, July 21, 2022; Order at 2, September 19, 2022.  In fact, Respondent has not participated in this action in any meaningful fashion since filing its Answer.  Respondent’s repeated misconduct interfered with the speedy, orderly, or fair conduct of this proceeding, under 21 C.F.R. § 17.35(a)(3). 

I find that imposing the sanction of striking Respondent’s Answer and issuing a decision by default, without further proceedings, reasonably relates to the severity and nature of Respondent’s misconduct.  21 C.F.R. § 17.35(b), (c)(3).  Accordingly, I strike Respondent’s Answer.  21 C.F.R. § 17.35(c)(3). 

III.    Default Decision

Striking Respondent’s Answer leaves the complaint unanswered.  Therefore, I am required to issue an initial decision by default, provided that the complaint is sufficient to justify a penalty.  21 C.F.R. § 17.11(a).  Pursuant to 21 C.F.R. § 17.11(a), I am required to “assume the facts alleged in the complaint to be true” and, if those facts establish liability under the Act, issue a default judgment and impose a civil money penalty.  Accordingly, I must determine whether the allegations in the complaint establish violations of the Act. 

Specifically, CTP alleges the following facts in its complaint:

• At approximately 10:28 AM on February 19, 2020, at Respondent’s business establishment, 525 Lynnway, Lynn, Massachusetts 01905, an FDA‑commissioned inspector conducted an inspection.  During this inspection, a person younger than

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18 years of age was able to purchase a package of Marlboro cigarettes.³  Additionally, Respondent’s staff failed to verify, by means of photographic identification containing a date of birth, that the purchaser was 18 years of age or older.⁴

• In a warning letter dated March 5, 2020, CTP informed Respondent of the inspector’s February 19, 2020 documented violations, and that such actions violate federal law.  The letter further warned that Respondent’s failure to correct its violations could result in a civil money penalty or other regulatory action;
• At approximately 10:07 AM on January 6, 2022, at Respondent’s business establishment, 525 Lynnway, Lynn, Massachusetts 01905, an FDA-comissioned inspector conducted an inspection.  During this inspection, a person younger than 21 years of age was able to purchase a package of Newport Non-Menthol Box cigarettes.  Additionally, Respondent’s staff failed to verify, by means of photographic identification containing a date of birth, that the purchaser was 21 years of age or older.

These facts establish Respondent Gulf Express’ liability under the Act.  The Act prohibits misbranding of a regulated tobacco product.  21 U.S.C. § 331(k).  A regulated tobacco product is misbranded if sold or distributed in violation of regulations issued under section 906(d) of the Act.  21 U.S.C. § 387f(d); see also 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b).  The Secretary issued the regulations at 21 C.F.R. pt. 1140 under section 906(d) of the Act.  21 U.S.C. § 387a‑1; see also 21 U.S.C. § 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010); 81 Fed. Reg. 28,974, 28,975-76 (May 10, 2016); see also 21 U.S.C. § 387f (note) (directing the Secretary to change references to persons younger than 18 to younger than 21, and to change the age verification requirements from individuals under the age of 26 to under the age of 30, in 21 C.F.R. subpart B of part 1140).  Under section 906(d)(5) of the Act, no retailer may sell regulated tobacco products to any person younger than 21 years of age and retailers must verify, by means of photographic identification containing a purchaser’s date of birth, that no regulated tobacco product purchasers are younger than 21 years of age.  For violations prior to

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December 20, 2019, regulated tobacco products may not be sold to any person younger than 18 years of age, 21 C.F.R. § 1140.14(a)(1), and retailers must verify, by means of photographic identification containing a purchaser’s date of birth, that no regulated tobacco product purchasers are younger than 18 years of age, 21 C.F.R. § 1140.14(a)(2)(i).

Under 21 C.F.R. § 17.2, a $601 civil money penalty is permissible for three violations of the regulations found at 21 C.F.R. pt. 1140 within a 24-month period.

Order

For these reasons, I enter default judgment in the amount of $601 against Respondent, ESE Energy Corporation, d/b/a Gulf Express.  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.

Endnotes

¹  On December 20, 2019, the Act was amended by the Further Consolidated Appropriations Act, 2020, Pub. L. No. 116–94, § 603(a)-(b), to raise the federal minimum age for sale of tobacco products to 21, and directed the Secretary of the U.S. Department of Health and Human Services (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.”  21 U.S.C. § 387f (note).

²  The complaint alleges two violations were committed on February 19, 2020, and two on January 6, 2022.  In accordance with customary practice, CTP counted the violations at the initial inspection as a single violation, and all subsequent violations as separate individual violations.  See 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).

³  I note that the violation alleged by CTP on February 19, 2020, regarding the sale of a regulated tobacco product to an underage purchaser, is governed by section 906(d) of the Act, which went into effect as of December 20, 2019, although CTP cites 21 C.F.R.
§ 1140.14(a)(1), which has not been updated to reflect the age change.  See Complaint
¶ 15; see also supra fn.1.

⁴  I note that the identification violations alleged by CTP on February 19, 2020, and January 6, 2022, are governed by section 906(d) of the Act, which went into effect on December 20, 2019, although CTP cites 21 C.F.R. § 1140.14(a)(2)(i), which has not been updated to reflect the age change.  See Complaint ¶¶ 13.b, 15.b; see also supra fn. 1.