Orton Motor, Inc. v. U.S. Dep't of Health & Human Servs.
Opinion
*1207 Orton Motor, Inc. d/b/a Orton's Bagley ("Orton") is a gas station and convenience store in Bagley, Minnesota, that sells cigarettes and tobacco products, among other sundries. The Food and Drug Administration ("FDA") levied civil money penalties in the amount of $500 against Orton following two inspections in which Orton sold cigarettes to a minor without first checking identification to verify age. As a policy, if a retailer fails an inspection for the first time, the FDA's Center for Tobacco Products (the "Center") charges all violations observed during that inspection as a single violation. However, the Center charges each separate violation of a regulation as a discrete violation during subsequent failed inspections. Accordingly, the FDA counted both the sale to a minor and the failure to verify age as two separate violations on Orton's second failed inspection and assessed the maximum penalty of $500 for three violations within a 24-month period under the civil money penalty schedule.
Orton challenges this determination on two principal grounds: that the Tobacco Control Act precludes the FDA's methodology of charging multiple violations in a single inspection, and that the FDA violates the law by failing to provide a process for retailers to challenge first violations before the issuance of a warning letter. We find no merit in either contention, and accordingly, we deny Orton's petition.
I.
In 2009, Congress passed the Family Smoking Prevention and Tobacco Control Act ("TCA"), which "g[ave] the FDA broad regulatory authority over tobacco products, including, for instance, authority to impose restrictions on their sale, and on the advertising and promotion of such products ...."
Sottera, Inc. v. Food & Drug Admin.
,
Relevant to this case, the TCA prohibits the "misbranding of any ... tobacco product ... in interstate commerce,"
(1) No retailer may sell cigarettes or smokeless tobacco to any person younger than 18 years of age;
(2) (i) Except [through mail-order and in locations admitting only adults], each retailer must 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;
(ii) No such verification is required for any person over the age of 26;
(3) Except as otherwise provided in [regulations about self service], a retailer may sell cigarettes or smokeless tobacco only in a direct, face-to-face exchange without the assistance of any electronic or mechanical device (such as a vending machine);
(4) No retailer may break or otherwise open any cigarette or smokeless tobacco package to sell or distribute individual cigarettes [or a quantity of cigarettes or smokeless tobacco smaller than that contained in a manufacturer-distributed package];
(5) Each retailer must [bring into compliance] all self-service displays, advertising, labeling, and other items, that are located in the retailer's establishment.
The TCA created civil monetary penalties for violations related to tobacco. Section 333 provides for civil money penalties "in an amount not to exceed $15,000 for each such violation, and not to exceed $1,000,000 for all such violations adjudicated in a single proceeding," with enhanced penalties available for intentional violations.
(I) in the case of the first violation, $0.00 together with the issuance of a warning letter to the retailer;
(II) in the case of a second violation within a 12-month period, $250;
(III) in the case of a third violation within a 24-month period, $500;
(IV) in the case of a fourth violation within a 24-month period, $2,000;
(V) in the case of a fifth violation within a 36-month period, $5,000; and
(VI) in the case of a sixth or subsequent violation within a 48-month period, $10,000 as determined by the Secretary on a case-by-case basis.
The TCA requires the Secretary of Health and Human Services to issue guidance regarding a variety of topics and procedures for the assessment of violations and civil money penalties. Codified at
*1209
(B) providing for timely and effective notice ... to the retailer of each alleged violation at a particular retail outlet prior to conducting a followup compliance check ....;
(C) providing for a hearing pursuant to the procedures established through regulations of the Food and Drug Administration for assessing civil money penalties, including at a retailer's request a hearing by telephone or at the nearest regional or field office of the Food and Drug Administration, and providing for an expedited procedure for the administrative appeal of an alleged violation;
(D) providing that a person may not be charged with a violation at a particular retail outlet unless the Secretary has provided notice to the retailer of all previous violations at that outlet;
(E) establishing that civil money penalties for multiple violations shall increase from one violation to the next violation pursuant to [the penalty schedule] within the time periods provided for in such [schedule].
TCA § 103(q)(1); Pub. Law No. 111-31,
The Center published two guidance documents explaining its approach to enforcement of the tobacco retail regulations. One was entitled "Civil Money Penalties and No-Tobacco-Sale Orders for Tobacco Retailers" and the other offered "Responses to FAQs" about the same. See Ctr. for Tobacco Prods., Food & Drug Admin., U.S. Dep't of Health & Human Servs., Civil Money Penalties and No-Tobacco-Sale Orders for Tobacco Retailers: Guidance for Industry (" CMP Guidance ") (rev. Dec. 2016), available at www.fda.gov/TobaccoProducts/Labeling/RulesRegulationsGuidance/ucm447308.htm (last visited Mar. 19, 2018); Civil Money Penalties and No-Tobacco-Sale Orders for Tobacco Retailers, Responses to Frequently Asked Questions (" FAQs ") (rev. Dec. 2016), available at www.fda.gov/TobaccoProducts/Labeling/RulesRegulationsGuidance/ucm252810.htm (last visited Mar. 19, 2018). The guidance documents bear a banner announcing that they are "not binding on FDA or the public." See CMP Guidance at 1; FAQs at 1. Substantively, the guidance sets forth the Center's approach to actions for civil money penalties. The CMP Guidance provides significant detail about the Center's enforcement approach, including follow-up visits to inspect retailers after violations. The Center's "FAQ" document explains the Center's enforcement position of counting multiple regulation violations on subsequent visits, while "count[ing] only one regulation violation from the first inspection." See FAQs , Question 43 at 13 ("[The Center] counts only one regulation violation from the first inspection at a retail outlet, regardless of the number of regulation violations that were noted and included in a Warning Letter. For any subsequent inspections, [the Center] may count any or all violations and its general policy is to count all of them individually.").
II.
The parties do not disagree about the facts underlying this dispute. On July 10, 2013, an FDA inspector visited Orton and observed that a minor was permitted to purchase cigarettes, in violation of then-current
On May 16, 2015, the FDA again inspected Orton and documented the same violations for a second time: the sale of tobacco products to a minor and that the minor's purchase took place without Orton checking the minor's identification to verify age. The Center brought an administrative complaint against Orton on October 1, 2015, seeking civil money penalties of $500.
See
Admin. Compl. For Civ. Money Penalties,
Ctr. for Tobacco Prods. v. Orton Motor, Inc. d/b/a Orton's Bagley
, FDA Docket No. FDA-2015-H-3414 (Oct. 1, 2015); J.A. 4-8. This amount derives from the FDA's regulations at
After a prehearing conference and cross-motions for summary decision, ALJ Lewis Booker issued a Decision and Order concluding that Orton "misbranded a tobacco product on May 16, 2015, and will be sanctioned by a civil monetary penalty of $0 and a judicial Warning Letter." FDA Office of Admin. Law Judges, Initial Decision and Order,
Ctr. for Tobacco Prods. v. Orton Motor, Inc. d/b/a Orton's Bagley
, FDA Docket No. FDA-2015-H-3414 (Feb. 8, 2016); J.A. 26-35. In short, ALJ Booker concluded that both the sale to a minor and the failure to check identification resulted in "misbranding" under a single statutory provision, and, as such, constituted a single violation supporting civil money penalties. ALJ Booker held that the July 10, 2013, and May 16, 2015, incidents each constituted misbranding but, because they were 22 months apart, they triggered a $0 penalty.
The Center appealed to the Departmental Appeals Board (the "Board"). In a decision on June 30, 2016, the Board reversed the ALJ's decision and reinstated the $500 penalty.
See
Final Decision on Review of Administrative Law Judge Decision,
Ctr. for Tobacco Prods. v. Orton Motor, Inc. d/b/a Orton's Bagley
, Docket No. A-16-56 (June 30, 2016); J.A. 40-65. The Board reasoned that the agency was interpreting its own regulations, justifying deference unless the agency's interpretation was contrary to the regulations' unambiguous meaning. Other portions of the statute demonstrated that Congress "knew how to limit the number of violations for multiple acts in the course of one transaction" as well as to limit "how penalties may be applied," including by imposing caps where multiple violations are "adjudicated in a single proceeding."
III.
Orton argues that the $500 penalty imposed by the Board should be set aside under the Administrative Procedure Act as "not in accordance with law."
The deference afforded to an agency interpretation of a statute "var[ies] with circumstances."
See
United States v. Mead Corp.
,
Under
Skidmore
, the weight a court affords to an agency interpretation "will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control."
Skidmore
,
A.
Orton posits that the TCA precludes the charging of multiple violations at one time based on certain procedural aspects of the statute as well as the broader legislative context. But the statute and the regulatory scheme support the agency's contrary conclusion, which has consistently informed its enforcement practices.
As an initial matter, the statute provides plainly for the imposition of civil penalties for violations of the tobacco requirements.
See
Orton argues that three procedural provisions combine to curtail the FDA's enforcement authority: the requirement of "timely and effective notice ... to the retailer of each alleged violation at a particular retail outlet prior to conducting a followup compliance check," that the FDA enact regulations establishing a hearing process and an "expedited procedure for the administrative appeal of an alleged violation," and that "a person may not be charged with a violation at a particular retail outlet unless the Secretary has provided notice to the retailer of all previous violations at that outlet."
See
TCA § 103(q). But these provisions hardly demand the interpretation that Orton advocates. Notice before a "followup compliance check" refers to subsequent inspections-by the plain meaning of the words, "compliance check" is an event of inspection, not the incident of a violation. And "notice ... of all previous violations" does not mean that the Center may not charge multiple violations, where the regulations support overlapping as well as discrete-but-concurrent violations and where the statute expressly contemplates the adjudication of multiple violations in a single proceeding, as discussed below. Instead, "all previous violations" must mean all violations previous to those charged. This conclusion preserves the integrity of the statutory scheme and reconciles the provisions within it.
See
James Madison Ltd. v. Ludwig
,
The structure of the regulations promulgated under Section 387f(d), as directed by 21 U.S.C. § 387c(a)(7)(B), also cuts against Orton's proposed interpretation. First, Orton's position would render regulations superfluous with respect to retailer conduct toward underage tobacco purchasers. Generally speaking, a retailer who sells a tobacco product to a minor, in violation of
When examining the varied, potentially overlapping conduct covered by these regulations, it merits note that the regulations themselves have a special history. Ordinarily, reliance on regulations to interpret the authorizing statute would be misplaced.
See
Decker v. Nw. Envtl. Def. Ctr.
,
Structural characteristics of the statute confirm the strength of the FDA's interpretation and provide further reason to find it persuasive. The TCA recognizes the adjudication of multiple violations within a single proceeding where it caps civil money penalty liability for tobacco control "for all such violations adjudicated in a single proceeding."
Orton asserts that the inclusion of this language in the section governing tobacco civil money penalties generally, but not within the provisions setting forth the specific procedures for retailers, indicates Congress's intention that multiple violations be adjudicated in discrete proceedings in the latter. Pet'r's Br. 31-32. However, as Orton concedes in the Reply, § 333(f)(9) by its plain terms applies to retailers as well as to any other entity doing business regulated by the TCA. Pet'r's Reply Br. 10. Moreover, there is no conflict between § 333(f)(9) and the specific procedures for civil money penalties against retailers-as noted above, the statute is otherwise silent as to whether multiple violations may be charged at once. It makes little sense that Congress would provide generally for the adjudication of multiple tobacco control violations in a single proceeding, but carve out retailers from that provision implicitly through a series of other procedures-without ever stating such an intention expressly. Nothing in the retailer provisions demands such a reading of the statute taken as a whole.
*1214
In contrast to the contorted exception that Orton would have us imply with respect to tobacco retailers, Congress clearly precluded the agency from finding multiple violations in a single transaction in other portions of the FDCA. In particular, the FDCA provides that "multiple convictions of one or more persons arising out of the same event or transaction, or a related series of events or transactions, shall be considered as one violation" for the purpose of calculating civil money penalties with respect to violations of certain prescription drug sampling restrictions.
This principle holds true despite the enactment of the FDCA provisions at different times. Courts presume that Congress legislates against the backdrop of existing statutes.
See, e.g.
,
Goodyear Atomic Corp. v. Miller
,
We finally note that the
Skidmore
inquiry "consider[s] whether the agency has applied its position with consistency" as a factor in persuasion.
Fed. Express Corp. v. Holowecki
,
Accordingly, we deny Orton's petition with respect to its first argument that the FDA's methodology of counting violations is improper.
B.
We now turn to Orton's argument that the FDA violated the TCA by not providing a process to challenge an alleged first violation prior to issuance of a warning letter. As described above, the TCA directed the Secretary to issue guidance "providing for a hearing pursuant to the procedures established through regulations of the Food and Drug Administration for assessing civil money penalties." TCA § 103(q)(1)(C). The FDA's regulations detail extensive procedures governing such *1215 hearings. However, the FDA treats first violations as falling outside of these civil money penalty procedures, as the penalty is $0.00 and a warning letter. Orton argues that this omission violates the TCA and Orton's procedural due process rights.
We disagree. The consequences from a first violation alone do not trigger notice and hearing requirements, either under the TCA or principles of procedural due process. The TCA requires such procedures only for the assessment of civil money penalties, and no such penalty attaches to a first violation. TCA § 103(q)(1)(C). While the notice requirement attaches to any alleged violation,
see
Moreover, this Court has rejected the idea that an FDA warning letter itself is a consequence subject to judicial review. In
Holistic Candlers & Consumers Association v. Food & Drug Administration
, we explained that FDA warning letters, while potentially significant as bases for later enforcement, are not subject to review where "no legal consequences flow from the agency's conduct to [that point]."
As for Orton's constitutional claims, due process is required only where government action threatens a deprivation of life, liberty, or property. But Orton has failed to show that the mere issuance of a warning letter, absent further enforcement action, effects any such deprivation. "[R]eputation alone, apart from some more tangible interests such as employment, is [n]either 'liberty' [n]or 'property' by itself sufficient to invoke the procedural protection of the Due Process Clause."
Paul v. Davis
,
Critically, a retailer has an opportunity to challenge the issuance of a first violation upon the later assessment of civil money penalties. During oral argument, counsel for the FDA clarified that a retailer can challenge the facts underlying a first violation during the adjudication of a subsequent violation: if a first violation is disproved, it will not be counted against a retailer. Oral Arg. at 24:17-28; 31:51-32:07. This is important because a first violation becomes legally significant when civil money penalties are assessed for violations identified during a subsequent failed inspection. At that point, the amount of penalty assessed moves up the civil money penalty schedule, based on the foundation of the first violation. As the first violation affects the amount of penalty assessed later, the concrete consequence of the first violation arises at that point. The FDA adjudication of the subsequent violation thus provides a meaningful opportunity for *1216 a retailer to be heard regarding the underlying first violation, at the time that the first violation carries legally significant effects. Due process requires nothing more, and for this reason, we reject Orton's second basis for its petition.
* * *
For the foregoing reasons, we deny Orton's petition.
Reference
- Full Case Name
- ORTON MOTOR, INC., D/B/A Orton's Bagley, Petitioner v. UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, Respondent
- Cited By
- 9 cases
- Status
- Published