THREE STAR MARKET INC v. UNITED STATES FOOD AND DRUG ADMINISTRATION CENTER FOR TOBACCO CONTROL (2020)

ORDER

Three Star Market, Inc., dba Three Star Market, petitions for review of the decision of the Departmental Appeals Board of the United States Department of Health and Human Services (the “Board”) imposing a six-month “No Tobacco Sale Order” (“NTSO”) against it for violations of the Tobacco Control Act (“TCA”). The parties have waived oral argument, and this panel unanimously agrees that oral argument is not needed. See Fed. R. App. P. 34(a).

The TCA established the Center for Tobacco Products (“CTP”) within the Food and Drug Administration and authorized the Secretary of Health and Human Services to issue regulations restricting the sale and distribution of tobacco products. 21 U.S.C. §§ 387a(e), 387f(d). The resulting regulations prohibit the sale of cigarettes or smokeless tobacco “to any person younger than 18 years of age” and require retailers to “verify by means of photographic identification containing the bearer's date of birth that no person purchasing the product is younger than 18 years of age” except that “[n]o such verification is required for any person over the age of 26[.]” 21 CFR § 1140.14(a), (b)(1), (2) (2015). The CTP may seek to impose civil monetary penalties or an NTSO for any person who violates a requirement of the TCA. See 21 U.S.C. § 333(f)(8), (9).

Three Star Market is a retailer located in Detroit, Michigan. The CTP learned that, in February 2014, an employee at the market failed to verify the age of a purchaser by means of photographic identification and sold cigarettes or smokeless tobacco to a minor, in violation of the TCA. See 21 C.F.R. § 1140.14. The market admitted the violation and paid a $500 penalty. In November 2014, the market again sold tobacco products to a minor and failed to verify the purchaser's age; the market admitted the violation and paid a $5000 penalty. In August 2015, the market committed another violation by failing to verify the age of a purchaser of tobacco products and selling tobacco products to a minor. As the result of three repeated violations of the sale of cigarettes or smokeless tobacco to a minor and three repeated violations of failing to verify the age of a tobacco purchaser in a three-year period, the CTP requested that an NTSO issue. Three Star Market admitted the violations and agreed to an NTSO for twenty-one days.

In January 2017, an employee at the market sold cigarettes or smokeless tobacco to a minor and failed to verify the age of the purchaser of tobacco products. That sale prompted an administrative complaint against Three Star Market, requesting that the Administrative Law Judge (“ALJ”) impose an NTSO for six months as the result of Three Star Market's seven total violations within a three-year period. The market requested a hearing before the ALJ.

At the hearing, CTP presented the testimony of a Food and Drug Administration (“FDA”) commissioned inspector, YaShica Ramsey, who stated that she went to Three Star Market with a female minor who had photographic identification establishing her birthdate. Ramsey accompanied the minor into the store and watched the minor purchase cigarettes from the clerk. The ALJ also admitted evidence in the form of photographs that Ramsey took of the outside of the market and of the cigarettes purchased by the minor. The market offered no witnesses or evidence of its own but argued that the minor may have looked older than her actual age, that the employee was entrapped into selling tobacco products to a minor, that CTP should have been ordered to produce the minor purchaser as a witness, that it was the victim of targeted inspections, and that it posts signs announcing that it will not sell to minors in an effort to prevent unlawful sales.

After consideration, the ALJ determined that the evidence proved that the market repeatedly violated the regulations relating to the sale of tobacco products to minors and its conduct merited the six-month NTSO. Further, the ALJ concluded that an NTSO of six months was reasonable given that the prior penalties had not deterred the market's conduct. Finally, the ALJ rejected the arguments that the market set forth.

Three Star Market appealed, arguing that its due process rights were violated because the minor purchaser did not testify before the ALJ and its rights to confront and cross-examine witnesses against it were violated. The market also argued that a six-month NTSO was inappropriate because it would severely impact the market's business. The Board rejected these arguments, finding that the market's right to due process was not violated by the ALJ's failure to compel the minor purchaser to testify. The Board also concluded that the six-month NTSO was appropriate. The Board affirmed the ALJ's decision in its entirety.

Three Star Market now petitions for review, raising similar arguments to the ones it raised before the Board: whether the ALJ erred by failing to consider the nature, circumstances, extent and gravity of the violations when it issued a six-month NTSO; and whether the market's constitutional right to confrontation was violated when the minor purchaser was not compelled to testify and be subjected to cross-examination and no discovery related to the minor was allowed.

We will sustain the factual findings of the Board “if supported by substantial evidence on the record considered as a whole[.]” Woodstock Care Ctr. v. Thompson, 363 F.3d 583, 588 (6th Cir. 2003) (quoting 42 U.S.C. § 1320a-7a(e)). We will overturn the Board's interpretation of its regulations only where such interpretation is “arbitrary, capricious, an abuse of discretion or otherwise not in accordance with the law.” Id. (quoting St. Francis Health Care Ctr. v. Shalala, 205 F.3d 937, 943 (6th Cir. 2000)). “Substantial evidence is defined as ‘such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.’ ” Myers v. Sec'y of Health & Human Servs., 893 F.2d 840, 842 (6th Cir. 1990) (quoting Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 28 L.Ed.2d 842 (1971)). We do “not consider the case de novo, nor resolve conflicts in the evidence, nor decide questions of credibility.” Id.

When determining the period to be covered by an NTSO, the ALJ is required to 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). In its first claim on appeal, Three Star Market argues that the ALJ erred by failing to make these considerations, asserting that the six-month prohibition would seriously affect its business and that it would be impossible to get back customers it would lose during that six months. The Board disagreed, finding that there was no basis for the market's assertion that the ALJ did not give the issue full consideration.

In the ALJ's decision, he stated that the purpose of NTSOs is to deter retailers from unlawfully selling tobacco products and to protect the public “from a retailer that has shown indifference to regulatory requirements.” He explained that Three Star Market was a repeat violator of the TCA which had admitted and settled three prior violations, which included two monetary penalties and a 30-day NTSO. Despite these past violations, the market persisted in selling tobacco products to minors. The ALJ reasoned that, because two monetary penalties and a prior thirty-day NTSO had not deterred the market from making unlawful sales, a substantial NTSO of six months was necessary. Although the ALJ recognized Three Star Market's argument that a six-month NTSO would effectively put it out of business, the ALJ noted that the market did not provide any evidence to substantiate that assertion. In any event, “the need to protect the [minors] outweighs the adverse effects that an NTSO may have on an individual retailer's business, especially in light of the fact that imposition of this remedy is reserved only for those retailers who demonstrate indifference to the requirements of law.” Ctr. for Tobacco Prods. v. L & J Fill Up Inc., DAB No. TB2105, 2017 WL 6014089, at *6 (H.H.S. Oct. 20, 2017) (quoting Kat Party Store, Inc., CRD No. T-16-1684, at 3-4 (2016)). The Board's determination of the reasonableness of the six-month NTSO does not therefore appear to be arbitrary or capricious or result from an abuse of discretion.

Three Star Market next argues that its Sixth Amendment rights were violated when the minor purchaser was not compelled to testify before the ALJ and be subjected to cross-examination and when no discovery was allowed related to the minor. In its petition for review, Three Star Market argues that cross-examination of the minor purchaser was necessary to investigate her history as a paid agent and how she was trained to go into stores; the market asserts that the minor was “hand selected” for the job because of her appearance and because she could communicate confidently so as to appear as a much older person.

Three Star Market's arguments do not provide a basis to overturn the Board's decision. As the Board explained regarding the ALJ's failure to compel the minor purchaser to testify, the Confrontation Clause speaks only of “all criminal prosecutions”; that constitutional right does not apply to civil administrative matters generally. Hannah v. Larche, 363 U.S. 420, 440 n.16, 80 S.Ct. 1502, 4 L.Ed.2d 1307 (1960); see also Golden Living Ctr. v. Sec'y of Health & Human Servs., 656 F.3d 421, 426 (6th Cir. 2011). Further, while the regulations governing the proceedings allow for a party to cross-examine witnesses, see 21 C.F.R. § 17.37, CTP did not offer the testimony of the minor such that she would have been subject to cross-examination. Rather, CTP presented the testimony of Inspector Ramsey who testified to her personal observations of the transaction between the minor and the market's employee and the market was allowed to cross-examine Ramsey about the minor's training and appearance. On these points, Ramsey testified that a supervisor selects the minor, the minor must be under eighteen years old, the minor is instructed to dress appropriately, and this particular minor looked “like a teenager.”

The Board's decision was neither arbitrary, capricious, nor an abuse of discretion. As a result, Three Star Market's petition for review is DENIED.

ENTERED BY ORDER OF THE COURT

Deborah S. Hunt, Clerk