Kedzie Services, Inc. d/b/a Amoco, DAB TB7085 (2023)

INITIAL DECISION

The Center for Tobacco Products (“CTP”), of the United States Food and Drug Administration (FDA), seeks a civil money penalty against Respondent, Kedzie Services, Inc. d/b/a Amoco,¹ 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 a $12,794 civil money penalty against Respondent for six violations of the Act within a 48-month period.²  For the reasons discussed below,

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I find that Respondent violated the Act as alleged in the Complaint and conclude that a civil money penalty of $12,794 against Respondent is appropriate.

Background and Procedural History

CTP began this matter by serving an administrative complaint on Respondent at 3144 West 147th Street, Posen, Illinois 60469 by United Parcel Service (UPS), and by filing a copy of the complaint with the FDA’s Division of Dockets Management.  CRD Dkt. Entry Nos. 1 (Complaint), 1b (Proof of Service).

On October 24, 2022, Respondent timely filed its Answer to CTP’s Complaint.  CRD Dkt. Entry No. 3a (Answer).³  In its Answer, Respondent requested a reduced settlement amount.  Id.  In its Answer, Respondent did not admit or deny the allegations in the Complaint.  Id.  Specifically, Respondent stated:

I am formally requesting a reduced settlement of $3,500.  If the Appeals Board does not wish to settle at the reduced settlement, then I would like to request a hearing in front of an Administrative Law Judge . . . .

Id.

On October 25, 2022, I issued an Acknowledgment and Pre-Hearing Order (APHO) in this case acknowledging receipt of Respondent’s Answer.  CRD Dkt. Entry No. 5.  In the APHO, in addition to establishing procedural deadlines, I reminded the parties that, as the Administrative Law Judge assigned to this matter, I do not have the authority to settle this case.  Id. at 1.  I also indicated that if Respondent wished to clarify its response to the allegations in the Complaint, Respondent may do so in its pre-hearing brief.  Id. at 2.

On November 18, 2022, CTP filed an Unopposed Motion to Extend Deadlines and Notice of Pending Settlement stating that, “the parties agreed to settle this matter,” and that “CTP understands that payment is forthcoming from Respondent.”  CRD Dkt. Entry No. 7 at 1.  On that same date, I issued an Order granting CTP’s unopposed motion, and extending the pre-hearing exchange deadlines for both parties by 30 days.  CRD Dkt. Entry No. 8 at 2.

On January 9, 2023, CTP filed a Motion to Compel Discovery asserting that Respondent had not responded to CTP’s Request for Production of Documents (RFP).  CRD Dkt. Entry Nos. 9, 9a, 9b.  On that same date, CTP also requested an extension of the pre-hearing exchange deadlines.  CRD Dkt. Entry No. 10.  On January 9, 2023, I issued an Order, which advised Respondent that it had until January 24, 2023, to file a

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response to CTP’s Motion to Compel Discovery.  CRD Dkt. Entry No. 11 at 2.  My Order also granted CTP’s Motion to Extend Deadlines.  Id. at 2.

On January 10, 2023, Respondent filed a document captioned “Pre-Hearing Brief of Respondent Response.”  CRD Dkt. Entry No. 12 (Respondent’s January 10, 2023 Response).  In Respondent’s January 10, 2023 Response, Respondent denied the allegations in the Complaint, asserted some arguments and defenses, and contested the appropriateness of the civil money penalty sought by CTP.  Id.  Respondent asserted that CTP’s allegations regarding the sale of regulated tobacco products and the failure to verify the age of the purchaser are “untrue due to lack of sufficient evidence.”  Id. at 1-2.

On January 11, 2023, a letter by my direction (January 11, 2023 By Direction Letter) issued and stated: “it is unclear as to whether or not Respondent’s January 10, 2023 Response is responsive to CTP’s Request for Production of Documents.”  CRD Dkt. Entry No. 13 at 1.  The January 11, 2023 By Direction Letter gave CTP until January 18, 2023 to “confirm whether or not Respondent’s January 10, 2023 Response is responsive to CTP’s Request for Production of Documents.”  Id. at 2.

On January 11, 2023, shortly following the issuance of the January 11, 2023, By Direction Letter, Respondent filed a document captioned “Production of Documents” (Respondent’s January 11, 2023 Filing).  CRD Dkt. Entry No. 14.  In its responsive filing, Respondent acknowledged CTP’s RFP, and stated that it had no documents responsive to most of CTP’s RFP.  Id.  However, with regard to the documents identified at #9 of CTP’s Request for Production, Respondent expressly took issue with CTP’s request for: “. . . [d]ocuments such as federal and/or state tax returns, sufficient to identify Respondent’s reported income and assets for 2021 . . . .”  CRD Dkt. Entry No. 9a at 5.  Respondent asserted: “[t]his in no way correlates to accusations against Respondent.”  Id.

On January 17, 2023, CTP filed a timely Response to the January 11, 2023 By Direction Letter and Withdrawal of Motion to Compel Discovery (CTP’s Response and Notice of Withdrawal).  CRD Dkt. Entry No. 15.  In its Response and Notice of Withdrawal, CTP stated:

. . . CTP does not believe Respondent’s January 10 Response to CTP under Dkt. Entry 12 is responsive to CTP’s Request for Production of Documents . . . CTP will accept Respondent’s January 11 filing under Dkt. Entry 14 as a response to CTP’s Request for Production of Documents.

CRD Dkt. Entry No. 15 at 2-3.

CTP’s Response and Notice of Withdrawal further stated:

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Although CTP accepts Respondent’s January 11 filing under Dkt. Entry 14 as a response to CTP’s Request for Production of Documents, the January 11 filing under Dkt. Entry 14 is not very responsive. CTP is willing to withdraw its January 9 Motion and proceed to a hearing in this matter. However, it is CTP’s position that Respondent should be estopped from presenting new evidence at a hearing on this matter without a showing of extraordinary circumstance for not producing said documents when responding to CTP’s Request for Production of Documents.

Id. at 3.

On January 18, 2023, I issued an Order which acknowledged and accepted CTP’s withdrawal of its Motion to Compel Discovery.  CRD Dkt. Entry No. 16.  In the January 18, 2023 Order, pursuant to 21 C.F.R. § 17.39(a), I determined that, absent a showing of extraordinary circumstance, Respondent may not present new evidence at a later date concerning the documents previously requested by CTP in the Request for Production of Documents, and which Respondent failed to produce or otherwise provide in response to the RFP.  Id. at 3.  Further, in the January 18, 2023 Order, I also drew an adverse inference that, if provided, the information would not support any argument or assertions by Respondent of its inability to pay the civil money penalty.  Id.

On March 20, 2023, CTP timely filed its pre-hearing exchange, consisting of a pre-hearing brief (CTP Br.), list of proposed witnesses and exhibits, and 15 proposed exhibits (CTP Exhibits (Exs.) 1-15).  CRD Dkt. Entry Nos. 17, 17a 17p.  CTP’s pre-hearing exchange included the written direct testimony of two proposed witnesses, CTP’s Senior Regulatory Counsel Loretta Chi (CTP Ex. 5), and Inspector Jason Dansby (CTP Ex. 6).  By Order dated April 10, 2023, I scheduled a pre-hearing conference for May 25, 2023, at 2:30 PM Eastern Time.  CRD Dkt. Entry No. 18 (Order Scheduling Pre-Hearing Conference).

On May 25, 2023, I held a virtual prehearing conference (PHC) in this case.  CRD Dkt. Entry No. 22 (Summary of May 25, 2023 Pre-Hearing Conference and Order Following Pre-Hearing Conference).  During the PHC, we discussed the procedural history of the case, the administrative record, and the parties’ pre-hearing submissions.  Id. at 1.  During the pre-hearing conference, I also apprised Respondent of CTP’s proposed witnesses - Loretta Chi, Senior Regulatory Counsel, Office of Compliance and Enforcement, CTP, FDA, and Inspector Jason Dansby, FDA-commissioned officer with the state of Illinois.  CRD Dkt. Entry No. 22 at 2.  I asked Respondent of its intent to cross-examine any or all of CTP’s witnesses.  Id.  Respondent advised that, considering the arguments already asserted, and for which it intends to further elaborate in a final brief, Respondent did not need to cross-examine CTP’s witnesses at a hearing.  Id.

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During the PHC, I gave Respondent until June 30, 2023, to submit a final written brief.  Id.  Additionally, I gave CTP until July 21, 2023, to submit a response, if any, to Respondent’s final brief.  Id. at 3.

In addition to summarizing the PHC, my May 26, 2023 Order confirmed that both parties waived the right to a hearing in this case, and agreed to proceed to a decision based on the written record.  Id. at 2.

On June 1, 2023, Respondent filed a final brief (R’s Final Br.).  CRD Dkt. Entry No. 23.  On July  17, 2023, CTP filed its response to Respondent’s final brief (CTP’s Final Br.).  CRD Dkt. Entry No 24.

As previously discussed, the parties waived the right to a hearing in this case and agreed that the matter could be decided based on the written record.  Accordingly, the record is now closed, and I am issuing a decision on the record in this case.

Issues

• Whether Respondent sold regulated tobacco products to an underage purchaser on August 10, 2022, and failed to verify, by photo identification, that the regulated tobacco product purchaser was of sufficient age, on that same date, in violation of Section 906(d)(5) of the Act; and
• If so, whether the civil money penalty amount of $12,794 that CTP seeks is an appropriate penalty.

Preliminary Matters

Admissibility of CTP’s Written Testimony

In its Final Brief, Respondent seems to challenge the admissibility and reliability of the direct testimony submitted by CTP.  Specifically, Respondent argues: “[w]ritten testimonies without sufficient evidence hold no merit” and that “written testimony can be easily fabricated.”  CRD Dkt. Entry No. 23 at 2.  In response, CTP rebuts Respondent’s objection, stating:

. . . [u]nder FDA’s regulations, the presiding officer determines the admissibility of evidence, and has the discretion to apply the Federal Rules of Evidence when appropriate. 21 C.F.R. §§ 17.39(a) and (b).  Thus, as the DAB has reiterated in several cases, the hearsay rules do not directly apply here.  See Monroe Mobil, Inc. d/b/a BP, DAB No. 2918, at 6 (2018); see also Three Star Market, DAB No. 2906, at 7 n.4 (2018) (“The ALJ and the

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Board are not bound by the [Federal Rules of Evidence], but may apply the [Federal Rules of Evidence] when appropriate”) (citing J. Peaceful, L.C. d/b/a Town Market, DAB No. 2742, at 10 n.7 (2016) (“[T]he rules governing this proceeding provide that the ALJ is not bound by the [Federal Rules of Evidence].”)).

CRD Dkt. Entry No. 24 at 4.

CTP’s argument has merit.  Under 21 C.F.R. § 17.39(a)-(b), “[t]he presiding officer shall determine the admissibility of evidence [and] shall not be bound by the ‘Federal Rules of Evidence[.]’”  See Deli-Icious Catering, Inc. d/b/a Convenient Food Mart, DAB No. 2812 at 6 (2017).  Further, the direct testimony of both of CTP’s witnesses, Senior Regulatory Counsel Loretta Chi, and Inspector Jason Dansby, are sworn statements submitted under penalty of perjury.  See CTP Ex. 5 at 3; see also CTP Ex. 6 at 3.  Lastly, Respondent has offered no evidence to support its assertion that the direct testimony submitted by CTP is unreliable.  Therefore, I find that the direct testimony of CTP’s witnesses, Senior Regulatory Counsel Loretta Chi (Chi), and Inspector Jason Dansby (Inspector Dansby), is both admissible and reliable.

Admissibility of the Photographs of the Incorrectly Labeled Cigarettes Submitted by CTP

In Respondent’s Final Brief, Respondent also argues that “[t]he Cigarettes submitted [by CTP] as evidence is not labeled correctly.”  CRD Dkt. Entry No. 23 at 1.  Respondent further asserts:

. . . [u]nder “Name of Establishment” the word “Clark” is written. Kedzie Services has been doing business under the name “Milen’s Amoco” or “Amoco” for short since the 20th of November 2019. While Kedzie Services did do business under “Clark on Kedize” that has been over two and a half years since the name has been used.

Id.

In Respondent’s January 10, 2023 Response, Respondent also stated that, the “[p]ack of Cigarettes in [the] [p]hoto have no clear indication that it was purchased at Respondents Business.”  CRD Dkt. Entry No. 12 at 1.

In response, CTP contends:

. . . [b]y Respondent’s own admission, Kedzie Services, Inc. operated under the business name “Clark” prior to November 2019.  Id.  The business was operating under the name Clark at the time of the Respondent’s previous

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violations on April 12, 2019.  Furthermore, “Clark” was the business name listed in FDA records at the time of the August 2022 Inspection. August 2022 TIMS Assignment Form, CTP Ex. 8 at 1, Docket Entry 17i.

CTP’s Final Br. At 6.

I am persuaded by CTP’s argument.  In addition to Respondent’s own admission, the evidence in the record clearly shows that Respondent’s establishment previously operated under the name “Clark,” but has been owned and operated by Kedzie Services, Inc. during the relevant timeframe.  See CRD Dkt. Entry No. 23 at 1; see also Complaint ¶ 11, CRD Dkt. Entry No. 17i.  Lastly, Respondent has offered no evidence which suggests that any business other than Respondent’s is operating at 3144 West 147th Street, Posen, IL 60469.  Therefore, I find that the photographs of the cigarettes in the evidence bag are both reliable evidence and admissible.

Admission of Evidence into the Administrative Record

Based on Respondent’s arguments discussed above, it is reasonable to presume that Respondent objects to CTP’s exhibits generally and in their totality.  I have considered Respondent’s arguments and objections to CTP’s exhibits.  Based on the foregoing, however, I find it appropriate to accept and consider the submissions of both CTP and Respondent in their entirety.  Accordingly, I admit into the administrative record CTP Exs. 1-15 (CRD Dkt. Entry Nos. 17b-17p).  Further, Respondent’s submissions filed on October 24, 2022 (Answer), January 10, 2023 (Respondent’s January 10, 2023 Response), January 11, 2023 (Respondent’s January 11, 2023 Response), and June 1, 2023 (Respondent’s Final Brief) (CRD Dkt. Entry Nos. 3a, 12, 14, 23) are admitted into the record and will be considered in deciding this case.

Respondent’s Request to “Dismiss the Hearing”

In its January 10, 2023 Response, Respondent states, “. . . I ask that this Hearing be dismissed due to lack of evidence.”  CRD Dkt. Entry No. 12 at 3.  In Respondent’s January 11, 2023 Response, Respondent further asserted: “[e]xpressed in my Previous Letter, without proper proof of purchase or receipt there is no reason to proceed any further with these allegations.”  CRD Dkt. Entry No. 14.  I infer Respondent’s request for dismissal of the hearing to be a Motion to Dismiss this case.

In addressing Respondent’s Motion to Dismiss, I must first consider whether I have regulatory authority to dismiss a complaint on the basis alleged.  The regulations at 21 C.F.R. § 17.19 identify the general authority of the presiding officer.  A review of that section does not provide any authority to dismiss a complaint under any circumstances. 

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Section 17.19(b)(17) allows the presiding officer to waive, suspend, or modify any rule in the governing regulations if the presiding officer determines, among other provisions, that no party would be prejudiced.  However, dismissal of the complaint filed by CTP would certainly result in prejudice to that party.  As a result, those provisions do not provide authority to grant Respondent’s motion.

The only specific provision in the governing regulations authorizing the ALJ to issue a dismissal is contained in 21 C.F.R. § 17.35(e), which provides that the presiding officer may “dismiss the action” if a party fails to prosecute or defend an action after service of a notice of hearing.  Those specific circumstances are not present in this case.  Both parties have filed their exchanges and no notice of hearing has been served.  Accordingly, because I do not have regulatory authority to dismiss a complaint on the basis alleged by Respondent, nor has Respondent cited to any such authority,⁴ the Motion to Dismiss is DENIED. ⁵

Although I have interpreted Respondent’s motion as a motion to dismiss the case, I would also deny the motion if Respondent intended this request as a motion for summary judgment.  Pursuant to 21 C.F.R. § 17.17(b), I am authorized to grant summary decision only “if the pleadings, affidavits, and other materials filed in the record, or matters officially noticed, show that there is no genuine issue as to any material fact and that the party is entitled to summary decision as a matter of law.”  Here, to the extent that Respondent’s request to dismiss the hearing might otherwise be construed as a motion for summary decision, I rule that the evidence admitted into the administrative record does not show that there is no genuine issue as to any material fact in this case.  Therefore, any request for summary judgment is also DENIED.

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 re Winship, 397 U.S. 358, 371-72 (1970); Concrete Pipe and Prods. of Cal., Inc. v. Constr. Laborers, 508 U.S. 602, 622 (1993).

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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).

I.  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, that a regulated tobacco product purchaser is of sufficient age are violations of implementing regulations.  Act, section 906(d)(5);⁶ 21 U.S.C. § 387f(d)(5).

A. 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-19-1623 (FDA Docket Number FDA-2019-H-0741); see also CRD Docket Number T-19-3698 (FDA Docket Number FDA-2019-H-3248).  The most recent prior Complaint alleged: (1) selling regulated tobacco products to minors on November 21 2018, and April 12, 2019,

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in violation of 21 C.F.R. § 1140.14(a)(1), (b)(1); and (2) failing to verify photographic identification of the regulated tobacco product purchasers on those same dates, in violation of 21 C.F.R. § 1140.14(a)(2)(i), (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.

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 constitute complete or partial resolution of the administrative case as so designated by the settlement agreement.”).  Accordingly, I conclude that Respondent has four prior violations of the Act and implementing regulations.

B. Current Violations

In addition to the prior violations, CTP alleges that Respondent committed two additional violations on August 10, 2022.  To support its claims, CTP submitted the declarations of Senior Regulatory Counsel Loretta Chi and FDA-commissioned Inspector Jason Dansby.  CTP Exs. 5, 6.  CTP also submitted corroborating evidence, which includes reports, photographs, and other documentation.  CTP Exs. 7-13.  Respondent denies the allegations, but has not submitted any documentation in support of its assertions.

In this instance, CTP’s case against Respondent rests on the written direct testimony of Loretta Chi (Chi) and Inspector Jason Dansby (Inspector Dansby).  Loretta Chi is a Senior Regulatory Counsel with the Center for Tobacco Products.  CTP Ex. 5 ¶ 1.  Chi testified that, as Senior Regulatory Counsel, she has gained knowledge of the processes used by the FDA regarding the establishment registration and product listing requirements.  Id. ¶¶ 3, 4.  Chi further testified that the package of Newport Box cigarettes purchased on August 10, 2022 at Respondent’s establishment was manufactured by R.J. Reynolds Tobacco Company in the State of North Carolina.  Id. ¶¶ 6,7.  Chi confirmed that the package of Newport Box cigarettes was not manufactured in the state of Illinois.  Id. ¶ 8.

Respondent does not dispute Chi’s testimony and does not dispute that it sold Newport Box cigarettes for sale at its establishment on August 10, 2022.  Accordingly, I find that Respondent’s establishment received Newport Box cigarettes in interstate commerce, and held them for sale on August 10, 2022, after shipment in interstate commerce.

Inspector Dansby is an FDA-commissioned officer whose duties include determining whether retailers are in compliance with the age and photo identification requirements relating to the sale of regulated tobacco products.  CTP Ex. 6 ¶¶ 2, 3.  Inspector Dansby’s inspections entail accompanying underage purchasers who attempt to purchase tobacco products from retail establishments such as the one operated by Respondent.  Id. at 4.

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Inspector Dansby testified that, before the inspection, he confirmed that Underage Purchaser A (UP A) did not have any tobacco products in his/her possession and possessed an accurate photographic identification of his/her date of birth.  Id. ¶ 7; see also CTP Ex. 9.  Inspector Dansby testified that, during the inspection, he parked his car near Respondent’s establishment), and exited the vehicle with UP A.  Id. ¶ 8.  Inspector Dansby testified that he and UP A entered Respondent’s establishment.  Id.  Inspector Dansby testified that, from his location, he had a clear, unobstructed view of the sales counter and UP A.  Id.  During the inspection, he observed UP A purchase cigarettes in a package from an employee at Respondent’s establishment.  Id.  Inspector Dansby testified that prior to the purchase, he observed that UP A did not present any identification to the employee, and the employee did not provide UP A a receipt after the purchase.  Id.

Inspector Dansby testified that, after UP A completed his/her purchase, UP A and Inspector Dansby returned to the vehicle, where UP A immediately handed Inspector Dansby the cigarettes in a package.  CTP Ex. 6 ¶ 9.  Inspector Dansby testified that he observed that the package of cigarettes was Newport Box cigarettes.  Id.  Inspector Dansby labeled the Newport Box cigarettes as evidence and photographed all of the panels of the package.  Id.  Inspector Dansby then processed the evidence in accordance with standard procedures at the time of the inspection, which entailed completing the Tobacco Inspection Management System (TIMS) Form and creating a Narrative Report.  Id.  ¶¶ 9-11.  UP A’s redacted identification and Inspector Dansby’s contemporaneous photographs and reports were admitted into evidence and corroborate Inspector Dansby’s testimony.  CTP Exs. 9-11, 15; see also CTP Ex. 12 (Notice of Compliance Check Inspection).

Respondent did not cross-examine or otherwise impeach Inspector Dansby’s testimony concerning the inspection on August 10, 2022.  In fact, as indicated above, during the PHC, Respondent waived its right to cross-examine Inspector Dansby concerning the inspection on August 10, 2022.  See CRD Dkt. Entry No. 22 at 2.  In Respondent’s Final Brief filed, Respondent reiterated that he believed “that a hearing is not required . . . .” CRD Dkt. Entry No 23 at 2.  Accordingly, I find Inspector Dansby’s testimony persuasive because it is supported by corroborating evidence documenting that the August 10, 2022 violations for selling regulated tobacco products to an underage purchase and failing to verify the age of the purchaser before the sale actually occurred.

C. Respondent’s Defenses

Although Respondent denies the allegations regarding the August 10, 2022 violations, I find that Respondent has failed to prove any affirmative defenses or to rebut CTP’s evidence regarding the August 10, 2022 violations for selling a regulated tobacco product

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to an underage purchaser, and failing to verify the purchaser’s age with photographic identification.  See generally CRD Dkt. Entry Nos. 3a, 12, 14, 23.

As to the August 10, 2022 violation, Respondent raises several defenses in its multiple written submissions.  Specifically, Respondent argues:

• that CTP is required to produce a receipt or proof of purchase in order to prove that an underage purchaser purchased the package of Newport Box cigarettes from Respondent’s establishment on August 10, 2022;
• that the written testimony of Inspector Dansby is insufficient evidence, and holds no merit, with regard to proving that an underage purchaser purchased the package of Newport Box cigarettes from Respondent’s establishment on August 10, 2022;
• that the package of Newport Box cigarettes is unreliable evidence, because the evidence bag containing the cigarettes was incorrectly labeled; and
• that there is no evidence that indicates that Inspector Dansby entered Respondent’s establishment in order to conduct the August 10, 2022 inspection.

See CRD Dkt. Entry Nos. 12 at 1-2; 14, 23.

I have considered Respondent’s arguments but find them to be unpersuasive.

1. Receipt of Proof of Purchase

Respondent has consistently argued that, without providing a receipt or proof of purchase, CTP has not proven that the underage purchaser purchased the Newport Box cigarettes from Respondent’s establishment.  Specifically, in Respondent’s January 10, 2023 Response, Respondent states, the “[e]vidence provided to me does not show a Proof of Purchase or Receipt.”  CRD Dkt. Entry No. 12 at 1.  In Respondent’s January 11, 2023 Response, Respondent reiterates its previous argument stating: “[e]xpressed in my Previous Letter, without proper proof of purchase or receipt there is no reason to proceed any further with these allegations.”  CRD Dkt. Entry No. 14.  Further, in Respondent’s Final Brief, Respondent asserts: “[t]he evidence submitted shows no proof of purchase.”  CRD Dkt. Entry No. 23 at 1.

In its Final Brief, CTP responds to Respondent’s argument, stating:

. . . [i]ndeed, the DAB has found that “there is nothing in the Act or regulations . . . requiring CTP to provide a receipt showing proof of purchase.”  CTP v. Madison-Food-Mart-Inc. d/b/a Madison Food Mart, 2022 WL 2197296, at *7 (H.H.S. March 28, 2022) (citing Kuma H. Mamie d/b/a 7-Eleven Store 22921A, DAB No. 2877, at 7 (2018)).  According to the DAB, “even without a receipt, an ALJ may reasonably credit an FDA-commissioned inspector’s testimony that a sale occurred unless there is

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evidence that the inspector testified falsely about whether a receipt was given to the undercover purchaser.”  See id. (citing J. Peaceful, L.C. d/b/a Town Market, DAB No. 2742, at 9 (2016)).

CRD Dkt. Entry No. 24 at 2.

As discussed above, Inspector Dansby’s declaration is sworn testimony submitted under penalty of perjury.  CTP Ex. 6 at 3.  Inspector Dansby stated that, from his location, he had a clear, unobstructed view of the sales counter and UP A.  CTP Ex. 6 ¶ 8.The Inspector further stated, under oath that, during the inspection, he observed UP A purchase cigarettes in a package from an employee at Respondent’s establishment.  Id.  As mentioned above, Respondent declined to cross-examine Inspector Dansby, and has not presented any evidence to rebut, or otherwise impeach, the testimony of Inspector Dansby.  As CTP references in its Final Brief, an appellate panel of the DAB (the Board) has found that:

. . . even without a receipt, an ALJ may reasonably credit an FDA-commissioned inspector’s testimony that a sale occurred unless there is evidence that the inspector testified falsely about whether a receipt was given to the undercover purchase . . . .

CRD Dkt. Entry No. 24 at 2; citing J. Peaceful, L.C. d/b/a Town Market, DAB No. 2742, at 9 (2016).

Again, I find Inspector Dansby’s testimony, supported by corroborating evidence, to be credible and unbiased.  Inspector Dansby testified convincingly and comprehensively about his observations during the August 10, 2022 inspection.

2. The Merit of Inspector Dansby’s Written Testimony

In its Final Brief, Respondent also contends that, “[w]ritten testimonies without sufficient evidence hold no merit” and that “written testimony can be easily fabricated.”  CRD Dkt. Entry No. 23 at 2.  Again, Respondent is questioning the credibility of the sworn testimony of CTP’s witness, Inspector Dansby.  Respondent’s argument implies that the direct testimony of Inspector Dansby, provided in the form of a written declaration submitted under the penalty of perjury, is not reliable evidence.  CTP responds to Respondent’s argument stating:

. . . the DAB has reiterated in several cases, the hearsay rules do not directly apply here. See Monroe Mobil, Inc. d/b/a BP, DAB No. 2918, at 6 (2018); see also Three Star Market, DAB No. 2906, at 7 n.4 (2018) (“The ALJ and the Board are not bound by the [Federal Rules of Evidence], but may apply the [Federal Rules of Evidence] when appropriate”) (citing J. Peaceful,

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L.C. d/b/a Town Market, DAB No. 2742, at 10 n.7 (2016) (“[T]he rules governing this proceeding provide that the ALJ is not bound by the [Federal Rules of Evidence].”)).

CRD Dkt. Entry No. 24 at 4.

I find CTP’s argument to be persuasive.  In fact, as discussed previously in this decision, pursuant to 21 C.F.R. § 17.39(a)-(b), “the presiding officer shall determine the admissibility of evidence [and] shall not be bound by the ‘Federal Rules of Evidence.”  21 C.F.R. § 17.39(a)-(b).  Again, I find Inspector Dansby’s testimony, supported by corroborating evidence, to be credible, unbiased, and to have merit.

3. The Incorrect Labeling of the Evidence Bag Containing the Newport Box Cigarettes

Next, Respondent argues that “[t]he Cigarettes submitted as evidence is not labeled correctly.”  CRD Dkt. Entry No. 23 at 1.  Respondent further states:

. . . [u]nder “Name of Establishment” the word “Clark” is written. Kedzie Services has been doing business under the name “Milen’s Amoco” or “Amoco” for short since the 20th of November 2019. While Kedzie Services did do business under “Clark on Kedize” that has been over two and a half years since the name has been used.

Id.

I find Respondent’s argument to be unpersuasive.  As previously established, in addition to Respondent’s own admission, the evidence in the record clearly shows that Respondent’s establishment previously served as “Clark,” but has been owned and operated by Kedzie Services, Inc. during the relevant timeframe.  See CRD Dkt. Entry No. 23 at 1; see also Complaint ¶ 11, CRD Dkt. Entry No. 17i.

4. Respondent Asserts that There Is No Evidence That Indicates That Inspector Dansby Entered Its Establishment

Lastly, Respondent argues:

[t]he Pictures of the Front of the Store and Street Sign were both taken from inside a vehicle with the windows rolled up. None of the evidence submitted indicates that an agent even stepped foot outside of the vehicle. There are no interior photos of the store submitted as evidence.

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CRD Dkt. Entry No. 23 at 2.
In Response to Respondent’s argument, CTP states:

. . . [t]his statement ignores the entire body of evidence contained in the Complainant’s Informal Brief showing that Inspector Dansby entered the store and watched closely with a clear and unobstructed view while an underage purchaser working with him purchased cigarettes from Respondent.

CRD Dkt. Entry No. 24 at 7.

I find CTP’s response to be persuasive.  As previously discussed, Inspector Dansby testified that, during the inspection, he parked his car near Respondent’s Establishment, and Inspector Dansby and UP A exited the vehicle before they both entered Respondent’s establishment.  CTP Ex. 6 ¶ 8.  Inspector Dansby further testified that, from his location, he had a clear, unobstructed view of the sales counter and UP A.  Id.  The Inspector testified that, during the inspection, he observed UP A purchase cigarettes in a package from an employee at Respondent’s establishment.  Id.  Again, Respondent declined to cross-examine Inspector Dansby, and has not presented any evidence to rebut, or otherwise impeach, the testimony of Inspector Dansby.  I find Inspector Dansby’s declaration to be credible.

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 August 10, 2022, in violation of Section 906(d)(5) of the Act.  Based on the arguments advanced in Respondent’s various pleadings, it is apparent that Respondent considers CTP’s evidence, including sworn testimony, to be insufficient without a purchase receipt.  In discounting CTP’s evidence, Respondent further relies on the labeling of the purchased cigarettes and the absence of any photographs taken by the inspector from inside Respondent’s facility rather than outside the facility.  While I understand that Respondent is convinced that these factors sufficiently contradict  Respondent’s liability, I do not find Respondent’s arguments sufficient to merit an affirmative defense to negate liability.  21 C.F.R. § 17.33(c).

In summary, the evidence in the record establishes to my satisfaction that the two violations alleged in the Complaint in fact occurred on August 10, 2022, in violation of section 906(d)(5) of the Act.⁷  The unrebutted testimony of Loretta Chi and Inspector

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Dansby, and the corroborating exhibits are sufficient 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 find that Respondent failed to meet the requirements of section 906(d)(5) of the Act when it sold regulated tobacco products to an underage purchaser and failed to verify that the purchaser was of sufficient age on August 10, 2022.  Thus, Respondent is liable for two violations on August 10, 2022.  Respondent previously admitted to committing one violation of 21 C.F.R. § 1140.14(b)(1) and one of 21 C.F.R. § 1140.14(b)(2)(i) on November 21, 2018; and one violation of 21 C.F.R. § 1140.14(a)(1) and one of 21 C.F.R. § 1140.14(a)(2)(i) on April 12, 2019, for a total of four prior violations.  CTP Exs. 2, 4.  Therefore, I conclude that the facts as outlined above establish that Respondent is liable for six violations within a 48-month period.  Accordingly, CTP is entitled to a civil money penalty from Respondent.  21 U.S.C. § 333(f)(9).

II.  Civil Money Penalty

I have found that Respondent committed six violations of the Act and its implementing regulations within a 48-month period.  Pursuant to 21 U.S.C. § 333(f)(9), Respondent 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 an appropriate penalty, I am required to evaluate 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), (b).  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).  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 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 the Complaint, CTP seeks to impose the maximum penalty amount of $12,794 against Respondent.  Complaint ¶ 1.  For the reasons explained below, I find that a CMP of $12,794 is appropriate.

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

Respondent committed six violations of selling regulated tobacco products to underage purchasers and failing to verify, by means of photo identification containing a date of

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birth, that the purchasers were of sufficient age.  The most recent violations on August 10, 2022, are particularly serious because Respondent, for the third time in a 48-month period sold regulated tobacco products to an underage purchaser, and failed to verify the age of the purchaser, and committed these violations despite warnings from FDA that additional violations would result in more serious consequences, CTP Br. At 11; see also CTP Ex. 14.

The repeated inability of Respondent to comply with federal tobacco regulations is serious in nature and the civil money penalty amount should be set accordingly.

B. Respondent’s Ability to Pay and Effect on Ability to Do Business

In Respondent’s January 10, 2023 Response, it states, “[w]hile the Respondent has Revenue from the sales of Cigarettes, the Margins are dangerously low (under 4% GPM) no business model can survive on margins such as that. Pending the outcome of Hearing the Respondent may quit selling Tobacco Products indefinitely to avoid future conflict.”  CRD Dkt. Entry No. 12 at 2-3.  However, Respondent has not presented any evidence concerning its financial situation which would indicate that it does not have the ability to pay the $12,794 CMP.  For example, in response to CTP’s Request for Production of Documents, Respondent declined to provide CTP with Respondent’s federal and state tax documents for tax year 2021.  Such documentation would have sufficiently demonstrated Respondent’s ability or inability to pay the CMP sought by CTP.  Nor has Respondent presented any evidence indicating that the penalty would affect its ability to continue to do business.

In my January 18, 2023 Order, I stated:

. . . [p]ursuant to 21 C.F.R. § 17.39(a), I determine that Respondent may not present new evidence at a hearing concerning the documents that Respondent did not provide to the [Request For Production of Documents] (RFP) without a showing of extraordinary circumstance for not producing said documents when responding to CTP’s RFP.  Further, I also draw an adverse inference that, if provided, the information would not support any argument or assertions by Respondent of its inability to pay the civil money penalty.

CRD Dkt. Entry No. 16 at 3.

Based on the foregoing, I find that Respondent has failed to show that it cannot afford to pay the $12,794 CMP sought by CTP. In Respondent’s Final Brief, Respondent asserts that “Pending the outcome of the Hearing the respondent may quit selling Tobacco Products indefinitely to avoid future conflict.” There is,

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however, no evidence to show that the $12,794 CMP will affect Respondent’s ability to continue to do business.

C. History of Prior Violations

The current action is the third CMP action brought against Respondent for violations of the Act and its implementing regulations.  As noted above, Respondent previously admitted to four violations of the prohibitions against selling regulated tobacco products to underage purchasers and failing to verify, by means of photo identification containing a date of birth, that the purchasers were of sufficient age.  CTP Exs. 2, 4.  Despite the previous CMP actions, I have concluded that Respondent committed two additional violations, resulting in six violations within a 48-month period.  Act, section 906(d)(5); 21 C.F.R. § 1140.14(a)(1). (a)(2)(i), (b)(1), (b)(2)(i).  Respondent’s history of prior violations warrants a progressively larger CMP.  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 continued⁸ inability to comply with FDA tobacco regulations supports the imposition of a civil money penalty.

D. Degree of Culpability

As previously discussed, Respondent failed to prove any affirmative defenses.  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.  Therefore, I find Respondent fully culpable for six violations of the Act and its implementing regulations, as alleged in the Complaint.

E. Employer Training Program

Respondent has not presented any evidence that it has an approved training program that complies with standards developed by the Food and Drug Administration.  21 U.S.C. § 333 (quoting Tobacco Control Act § 103(q)(2)(A)-(B)); see also 45 C.F.R. § 102.3.

F. State Penalties

Respondent has not alleged or presented any evidence that it has paid any penalty to the State of Illinois for the same violations.  21 C.F.R. § 17.34(b).

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G. 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).

After reviewing Respondent’s submissions admitted into the administrative record, I do not find any evidence or legal support to support any additional mitigating circumstances.  Respondent failed to prove that the requested CMP is too high and should be reduced or not assessed.  Respondent did not present any persuasive evidence to support that it is not fully culpable, cannot afford the proposed CMP, or would be forced out of business.

Based on the foregoing, I find a CMP in the amount of $12,794 to be appropriate under 21 U.S.C. §§ 333(f)(5)(B) and 333(f)(9).

Conclusion

Pursuant to 21 C.F.R. § 17.45, I impose a civil money penalty of $12,794 against Respondent, Kedzie Services, Inc. d/b/a Amoco, for six violations within a 48-month period.  Pursuant to 21 C.F.R. §§ 17.11(b), 17.45(d), this decision becomes final and binding upon both parties after 30 days of the date of its issuance.

Endnotes

¹ Respondent’s establishment previously served as “Clark,” but has been owned and operated by Kedzie Services, Inc. during the relevant timeframe.  See Civil Remedies Division (CRD) Docket (Dkt.) Entry No. 1, ¶ 11 (Complaint).

² In the Complaint, CTP stated that any violations that occurred outside the relevant timeframe were not included.  See Complaint ¶ 1 fn.1.

³ I note that the CRD Docket Entry No. 4a is a duplicative filing by Respondent of its Answer.  Compare CRD Dkt. Entry Nos. 3a and 4a.

⁴ 21 C.F.R. § 17.32(a) requires that motions state the relief sought and “the authority relied upon” in making that motion.

⁵ To date, CTP has not filed a response to Respondent’s Motion.  In part, the regulations at 21 C.F.R. § 17.32(d) provide that a presiding officer “may overrule or deny such motion without awaiting a response.”

⁶ 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).  Prior to December 20, 2019, the sale of regulated tobacco products was only prohibited to any person younger than 18 years of age, 21 C.F.R. § 1440.14(a)(1), (b)(1), and retailers were only required to verify, by means of photographic identification containing a purchaser’s date of birth, that no regulated tobacco product purchasers were younger than 18 years of age, 21 C.F.R. § 1140.14(a)(2)(i), (b)(2)(i).

⁷ The identification violation alleged by CTP on August 10, 2022, 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)(2)(i), which has not been updated to reflect the age change.  See Complaint ¶ 15.b; see also supra fn.4.

⁸ Respondent’s prior Administrative Complaints were filed on February 21, 2019, and July 12, 2019.