MJ Mart, LLC d/b/a MJ Mart / BP, DAB TB5609 (2022)

INITIAL DECISION

The Center for Tobacco Products (“CTP”), of the United States Food and Drug Administration (“FDA”), seeks a civil money penalty against Respondent, MJ Mart, LLC, d/b/a MJ Mart / BP, for violations of the Federal Food, Drug, and Cosmetic Act (“Act”), 21 U.S.C. § 301 et seq., and its implementing regulations, 21 C.F.R. pt. 1140.  CTP alleges that Respondent violated the Act by impermissibly selling regulated tobacco products to underage purchasers and failing to verify that the purchasers were 21 years of age or older.  Therefore, CTP seeks an $11,904 civil money penalty against Respondent for six violations of the Act within a 48-month period.¹  For the reasons set forth in this decision, I find that Respondent violated the Act as CTP alleged and impose a reduced $8,900 civil money penalty against Respondent. 

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The Complaint 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 of sufficient age during the sales on July 9, 2018, and July 23, 2019, which constituted four violations of the Act and implementing regulations.  The Complaint further alleges that Respondent subsequently committed two additional violations of the Act and regulations when it sold regulated tobacco products to an underage purchaser, and failed to verify, by means of photo identification containing a date of birth, that the purchaser was 21 years of age or older on December 10, 2021.

I. Background

CTP began this matter by serving an administrative complaint on Respondent at 9775 Charlotte Highway, Fort Mill, South Carolina 29707, and by filing a copy of the complaint with the FDA’s Division of Dockets Management.

Respondent timely filed a narrative statement which I presume to be Respondent’s answer to CTP’s Complaint.  CRD Dkt. Entry No. 3 (“Answer”).  In the answer, Respondent admitted the violations alleged.  Id. at 1.  On April 25, 2022, I issued an Acknowledgment and Pre-Hearing Order (“APHO”) which set out procedures and deadlines in this case. 

On May 31, 2022, Respondent filed a submission which consisted of a letter from the Counseling Center of Lancaster and Respondent’s completed Answer form which was not previously submitted as part of its April 18, 2022 Answer filing.  CRD Dkt. Entry Nos. 8, 8a.  On July 15, 2022, CTP timely filed its pre-hearing exchange.  CTP’s exchange included: a pre-hearing brief (“CTP Br.”); a list of proposed witnesses and exhibits; and 16 numbered proposed exhibits (“CTP Exs. 1-16”).  CTP’s exhibits included written direct testimonies of two witnesses: Loretta Chi, Senior Regulatory Counsel, Office of Compliance and Enforcement, CTP, FDA (“CTP Ex. 5”); and FDA-commissioned Inspector Brandy Lee Spears (“CTP Ex. 6”).  By Order dated August 15, 2022, I scheduled a pre-hearing conference (PHC) for August 31, 2022, at 10:00 AM.  CRD Dkt. Entry No. 11. 

During the August 31, 2022 PHC, I noted that there had been no objections to any proffered exhibits.  Further, Respondent’s representative confirmed he did not intend to cross-examine CTP’s witnesses.  Further, as neither party sought the opportunity to cross-examine any witnesses, I determined that a hearing in this matter was unnecessary, and the case would be decided based on the written record.  See CRD Dkt. Entry No. 12 at 2; see also APHO ¶ 17.  On September 2, 2022, I issued an Order summarizing the PHC.   I admitted CTP’s Exhibits 1 through 16 into evidence and established a supplemental briefing schedule.  CRD Dkt. Entry No. 12 at 2. 

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Neither Respondent nor CTP filed a supplemental, post-hearing brief, or responsive brief by the October 3, 2022, deadline.  Accordingly, the record is now closed, and I am issuing a decision on the record in this case.

II. Issues

1. Whether Respondent sold regulated tobacco products to an underage purchaser and failed to verify, by photo identification, that the tobacco product was of sufficient age, on December 10, 2021, in violation of Section 906(d)(5) of the Act; and
2. If so, whether the civil money penalty amount of $11,904 that CTP seeks is an appropriate penalty.

III. Analysis, Findings of Facts and Conclusions of Law

In order to prevail, CTP must prove Respondent’s liability by a preponderance of the evidence.  The U.S. Supreme Court 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 not before finding in favor of the party that had the burden to persuade the judge of the fact’s existence.  In reWinship, 397 U.S. 358, 371-72 (1970); Concrete Pipe and Prods. of Cal., Inc. v. Constr. Laborers, 508 U.S. 602, 622 (1993).

CTP has the burden to prove Respondent’s liability and 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).

1. Violations

CTP determined to impose a civil money penalty against Respondent pursuant to the authority conferred by the Act and implementing regulations at Part 21 of the Code of Federal Regulations.  The Act prohibits the misbranding of tobacco products while they are held for sale after shipment in interstate commerce.  21 U.S.C. § 331(k).  A tobacco product is misbranded if distributed or offered for sale in any state in violation of regulations issued under section 906(d) of the Act.  21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b).  FDA and its agency, CTP, may seek civil money penalties from any person who violates the Act’s requirements as they relate to the sale of tobacco products.  21 U.S.C. § 333(f)(9). 

The sale of regulated tobacco products to an individual who is under the age of 21 and failure to verify, by means of photo identification containing the bearer's date of birth,

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that a regulated tobacco product purchaser is of sufficient age are violations of implementing regulations.  Act, Section 906(d)(5)²; 21 U.S.C. § 387f(d)(5).

1. 1. Prior Violations

This is the third civil money penalty action CTP has brought against Respondent.  CTP Exs. 1, 3; CRD Dkt. Entry No. 1 (Complaint); see CRD Docket Number T-19-732 (FDA Docket Number FDA-2018-H-4592); see also CRD Docket Number T-20-332 (FDA Docket Number FDA-2019-H-4939).  The most recent prior Complaint alleged: (1) selling regulated tobacco products to minors on July 9, 2018, and July 23, 2019, in violation of 21 C.F.R. §1140.14(b)(1); and (2) failing to verify photographic identification of the regulated tobacco product purchasers on July 9, 2018, and July 23, 2019, in violation of 21 C.F.R. § 1140.14(b)(2)(i).  CTP Exs. 1, 3; Complaint ¶ 15.  The previous action concluded when Respondent admitted the allegations contained in the Complaint issued by CTP, and paid the agreed upon CMP in settlement of that claim.  Complaint ¶ 16; CTP Ex. 4.

In settling the prior Complaint, Respondent expressly waived its right to contest these violations in subsequent actions.  CTP Ex. 3 ¶ 12; CTP Exs. 2, 4.

1. 2. Current Violations

I now turn to whether the remaining allegations in the Complaint are true and, if so, whether Respondent’s actions constitute violations of law.  21 C.F.R. § 17.45(b).

Accordingly, I must determine whether on December 10, 2021, at approximately 10:46 AM, Respondent:

• sold a package of two White Owl Silver cigars to an underage purchaser and failed to verify, by means of photographic identification containing date of birth, that a purchaser was 21 years of age or older, in violation of Section 906(d)(5) of the Act.

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2. Analysis

In the case presently before me, at approximately 10:46 AM on December 10, 2021, an FDA-commissioned inspector conducted an inspection of MJ Mart / BP, located at 9775 Charlotte Highway, Fort Mill, South Carolina 29707.  CTP alleges that during the inspection, Respondent committed violations of selling regulated tobacco products to a purchaser younger than 21 years of age and failed to verify the age of the purchaser by means of photographic identification containing the bearer’s date of birth, in violation of Section 906(d)(5) of the Act.³  Specifically, a purchaser younger than 21 years of age was able to purchase a package of two White Owl Silver cigars, and the underage purchaser’s age was not verified before the sale.  Complaint ¶ 13. 

In support of its allegations, CTP submitted evidence including the declarations of Inspector Spears and Senior Regulatory Counsel Chi, Inspector Spears’ narrative report of the alleged incident, and photographs of the package of White Owl Silver cigars allegedly purchased on December 10, 2021.  CTP Exs. 5, 6, 7, 9, 11.  CTP’s case against Respondent rests on the testimony of Inspector Spears.  Inspector Spears is an FDA-commissioned officer for the state of South Carolina who is commissioned by FDA to perform undercover buy (UB) and advertising and labeling (A & L) inspections in the state of South Carolina under FDA’s Tobacco Retail Contract.  Inspector Spears duties during the relevant period, included determining whether retail outlets unlawfully sell tobacco products to underage purchasers.  CTP Ex. 6 ¶¶ 1-3.  Inspector Spears’s inspections entailed accompanying underage purchasers who attempt to purchase tobacco products from retail establishments such as the one operated by Respondent.  Id. ¶¶ 4, 5.  Inspector Spears testified that she and an underage purchaser (UP A) conducted a follow-up undercover buy compliance check inspection at Respondent’s establishment, located at 9775 Charlotte Highway, Fort Mill, South Carolina 29707, on December 10, 2021.  Id. ¶ 8. 

Inspector Spears testified that she went to Respondent’s establishment accompanied by UP A, who was employed for the purpose of attempting to purchase tobacco products from business establishments under inspection.  CTP Ex. 6 ¶ 7.  Inspector Spears testified that prior to the inspection on December 10, 2021, she verified that UP A carried photographic identification that included UP A’s true age, and that UP A did not have any tobacco products in his/her possession.  Id. ¶ 8.  During this inspection, Inspector Spears parked her vehicle directly in front of Respondent’s establishment and remained in the vehicle during the inspection, because she felt her presence would compromise the undercover nature of the inspection.  Id. ¶¶ 9‑10.   Inspector Spears had an unobstructed

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view of UP A exiting the vehicle, entering Respondent’s establishment, exiting the establishment minutes later, and immediately returning to the vehicle.  Id.  Inspector Spears testified that upon entering the vehicle, UP A handed her a package of cigars.  Id. at ¶ 10.   Inspector Spears observed the package of cigars as White Owl cigars.  Id.

Inspector Spears testified that UP A immediately reported that during the inspection, UP A was able to purchase a package of cigars directly from an employee at Respondent’s establishment.  Id. ¶ 10.  UP A also reported to Inspector Spears that prior to the purchase, UP A did not present any identification to the employee, and the employee did not provide UP A with a receipt for the purchase.  Id.

Inspector Spears further stated that she drove to a nearby safe location, labeled the cigars as evidence, photographed the evidence (CTP Exs. 9, 11), and “processed the evidence according to standard procedures at the time of the inspection.”  CTP Ex. 6 ¶ 10.  Shortly after the inspection, Inspector Spears recorded the inspection in the FDA’s Tobacco Inspection Management System (“TIMS”)(CTP Ex. 8) and created a Narrative Report (CTP Ex. 7).  CTP Ex. 6 ¶ 11.  Both the TIMS and Narrative Report describe the employee who sold the cigars to UP A on December 10, 2021, as an adult male with black/dark brown hair.  See CTP Ex. 7 ¶ 18; CTP Ex. 8 ¶ 18.  In the written declaration, Inspector Spears testified that “Exhibits 7 and 8 are true and accurate redacted copies of the Narrative Report and the TIMS Form, respectively,” and “Exhibits 9 and 11 are true and accurate copies [taken] during the December 10, 2021 inspection.”  CTP Ex. 6 ¶¶ 11, 12. 

Respondent did not file a pre-hearing exchange, submit written direct testimony, or submit any other documentary evidence, in accordance with my APHO dated April 25, 2022.  Nor did Respondent offer any evidence to rebut the testimony and evidence presented by Inspector Spears.  Although Respondent acknowledges the allegations asserted in the Complaint, Respondent argues that Respondent’s employee is responsible for the violation because the employee “runs the store.”   R. Answer.

Respondent submitted documentation to demonstrate successful completion of a Merchant Education Program on August 16, 2019, and that it also passed an audit conducted by Counseling Services of Lancaster, an independent counseling service.  CRD Dkt. Entry No. 8.  Even though these are commendable accomplishments, complying with the FDA regulations requires total compliance by verifying the age of each purchaser to ensure that every underage person is unable to purchase regulated tobacco products.  As encouraging as this document is, it does not influence or negate the violations at hand.

I find Inspector Spears’s testimony to be credible and unbiased.  Inspector Spears testified convincingly and comprehensively about her observations during the December 10, 2021, inspection.  She testified that she observed UP A enter Respondent’s

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establishment and exit the establishment with a package of two White Owl Silver cigars, which UP A affirmed were sold to him/her by Respondent’s employee.  See CTP Ex. 6 at ¶¶ 9-10.  Inspector Spears’ testimony was supported by contemporaneous records and supporting evidence.  Id. ¶ 11.

CTP has the burden of proving Respondent’s liability by a preponderance of the evidence.  21 C.F.R. § 17.33.  I find that CTP has provided sufficient evidence to support its allegations that Respondent sold regulated tobacco products to an underage purchaser and failed to verify, by means of photo identification, that the underage purchaser was of sufficient age on December 10, 2021, in violation of Section 906(d)(5) of the Act.  Respondent failed to provide evidence sufficient to rebut CTP’s allegations.

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

IV. Appropriateness of the Civil Money Penalty

I have found that Respondent committed six violations of the Act and its implementing regulations within a 48-month period.  The FDA, and CTP, may seek civil money penalties from any person who violates the Act’s requirements as they relate to the sale of regulated tobacco products.  21 U.S.C. § 333(f)(9).  In its Complaint, CTP sought to impose the maximum penalty amount of $11,904 against Respondent.  Complaint ¶ 1.    When determining an appropriate penalty, the presiding officer must evaluate any circumstances that mitigate or aggravate the violation. 21 C.F.R. § 17.34(a).  Under the applicable statute, I must “take into account the nature, circumstances, extent, and gravity of the violation or violations and, with respect to the violator, ability to pay, effect on ability to continue to do business, any history of prior such violations, the degree of culpability, and such other matters as justice may require.”  21 U.S.C. § 333(f)(5)(B); see also 21 C.F.R. § 17.34.

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

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

1. B. Respondent’s Ability to Pay

Respondent has not provided any evidence with regard to its ability or inability to pay the $11,904 penalty.  However, in Respondent’s Answer, it states: “We have been facing hard time for last two years due to COVID …. [and] We [are] hardly able to stay above

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red right now.”  R. Answer (CRD Dkt. Entry No. 3).  I am persuaded by Respondent’s contention and take notice that the COVID-19 pandemic placed a strain on small businesses, and I find this supports Respondent’s inability to pay the $11,904 penalty.

1. C. Effect on Ability to do Business

Similarly, Respondent contends, though does not present any evidence, that the COVID-19 pandemic strains its ability to stay operational and retain competent employees.  CRD Dkt. Entry No. 8a.  While the record does not include specific evidence to show the effects that the imposition of an $11,904 civil money penalty would have on Respondent’s ability to conduct business, it is reasonable to assume that the penalty amount sought by CTP would have a substantial impact on that ability.

1. D. History of Prior Violations

As noted, Respondent has six times violated the prohibition against selling regulated tobacco products to underage persons and failing to verify, by means of photo identification contains the purchasers’ date of birth, that regulated tobacco product purchasers are of sufficient age.  Act, Section 906(d)(5); 21 C.F.R. § 1140.14(b)(1); 21 C.F.R. § 1140.14(b)(2)(i).  As stated by CTP, Respondent’s “repeated violations show an unwillingness or inability to sell tobacco products in accordance with federal tobacco laws.”  CTP Br. at 15-16.  Respondent’s continued⁴ inability to comply with FDA tobacco regulations supports the imposition of a civil money penalty.

1. E. Degree of Culpability

Respondent admitted to four violations of the Act and its implementing regulations in the settlement agreements of the prior actions.  In addition, based on the evidence presented, I found Respondent committed the two most recent violations in the current Complaint.  Furthermore, Respondent admitted the two most recent violations in its Answer.  However, Respondent suggests its employees should be held responsible for the violations.  Specifically, Respondent asserts:

MJ Mart are not responsible or liable for allegations [because the] [s]tore is run by employees and absentee owner.

R. Answer. Although I understand Respondent cannot be on-site at the establishment all of the time, it is Respondent’s responsibility to ensure its employees comply with the law. Respondent cannot circumvent its responsibility under the Act by blaming its employees

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who are entrusted to perform Respondent’s business functions.  Therefore, I find Respondent fully culpable for six violations of the Act and its implementing regulations.  

1. F. Additional Mitigating Factors

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).  After reviewing Respondent’s Answer and supporting documents, I find there are several mitigating factors.   While admitting the most recent allegations, Respondent argued that the penalty sought is too high and should be waived or reduced because Respondent has taken actions to facilitate employees checking for identification by providing training, a surveillance system, and installation of the latest ID checking point of sale system.  R. Answer.  In addition, Respondent examines the establishment’s surveillance recordings and penalizes any employee who is not seen checking identification.  Respondent argues that “Employees don’t care and quit if penalized especially in this current market.”  Id.  Unfortunately, Respondent did not provide any evidence in support of the assertions presented.

Based on the discussion above, I find that a large penalty amount will have a negative financial impact on Respondent’s small business.  The circumstances surrounding the COVID-19 pandemic and other possible community restrictions have likely affected Respondent’s financial situation.  I have considered statutory factors, most of which support imposition of a penalty.  In particular, Respondent has a history of violations of tobacco regulations.  A warning from CTP and two previous CMP actions did not prevent the current violations.  However, at least two statutory factors as discussed above suggest a somewhat lower penalty amount would be sufficient.

V. Penalty

I recognize the financial impact a large penalty amount will have on a Respondent’s small business, as well as the impact the COVID-19 pandemic has had on small businesses like Respondents.  Based on the foregoing reasoning, I find a reduced penalty amount of $8,900 to be appropriate under 21 U.S.C. §§ 333(f)(5)(B) and 333(f)(9).

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Conclusion

Pursuant to 21 C.F.R. § 17.45, I impose a civil money penalty of $8,900 against Respondent, MJ Mart, LLC d/b/a MJ Mart / BP, for six violations of the Act, 21 U.S.C. 301 et. seq., within a 48-month period. Pursuant to 21 C.F.R. § 17.45(d), this decision becomes final and binding upon both parties after 30 days of the date of its issuance.

Endnotes

¹  Notably, CTP asserts that it does not include any violations that occurred outside the relevant timeframe in this Complaint.  See CRD Docket (Dkt.) Entry No. 1, ¶ 1 n.1 (Complaint).  

²  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).

³  The identification violation alleged by CTP on December 10, 2021, 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(b)(2)(i), which has not been updated to reflect the age change.  See Complaint ¶ 13.b; see also supra fn.2.

⁴  Respondent’s prior Administrative Complaints were filed on December 7, 2018, and October 30, 2019.