Orton Motor, Inc. v. U.S. Dep't of Health & Human Servs.

• Decision Date: 20 March 2018
• Docket Number: No. 16-1299,16-1299
• Citation: 884 F.3d 1205
• Parties: ORTON MOTOR, INC., d/b/a Orton's Bagley, Petitioner v. UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, Respondent
• Court: U.S. Court of Appeals — District of Columbia Circuit

884 F.3d 1205

ORTON MOTOR, INC., d/b/a Orton's Bagley, Petitioner

v.UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, Respondent

No. 16-1299

United States Court of Appeals, District of Columbia Circuit.

Argued December 7, 2017

Decided March 20, 2018

Johanna Dennehy, Washington, DC, argued the cause for petitioner. With her on the briefs were Michael J. Baratz and Molly Bruder Fox, Washington, DC.

Megan Barbero, Attorney, U.S. Department of Justice, argued the cause for respondent. With her on the brief were Mark B. Stern and Alisa B. Klein, Attorneys, Washington, DC, and AnnaMarie Kempic, Deputy Chief Counsel for Litigation, United States Food & Drug Administration.

Before: Tatel, Griffith and Wilkins, Circuit Judges.

Wilkins, Circuit Judge:

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. , 627 F.3d 891, 898 (D.C. Cir. 2010) (citations omitted). The FDA previously attempted to regulate tobacco products under the Food, Drug, and Cosmetic Act ("FDCA") in 1996, but the Supreme Court concluded in Food & Drug Administration v. Brown & Williamson Tobacco Corp. that it lacked the authority to do so based on "the FDCA's overall regulatory scheme and [ ] the tobacco-specific legislation that [Congress] ha[d] enacted subsequent to the FDCA." 529 U.S. 120, 125–26, 120 S.Ct. 1291, 146 L.Ed.2d 121 (2000). Congress passed the TCA to fill this gap, finding that "Federal and State governments have lacked the legal and regulatory authority and resources they need to address comprehensively the public health and societal problems caused by the use of tobacco products" and determining that "[i]t is in the public interest for Congress to enact legislation that provides the Food and Drug Administration with the authority to regulate tobacco products and the advertising and promotion of such products." 21 U.S.C. § 387 Note, Findings (7) & (12); Pub. L. No. 111-31, 123 Stat. 1776 (June 22, 2009). The TCA incorporated this authority to regulate tobacco into the existing regulatory structure of the FDCA. Sottera , 627 F.3d at 894–95.

Relevant to this case, the TCA prohibits the "misbranding of any ... tobacco product ... in interstate commerce," 21 U.S.C. § 331(b), as well as "the doing of any [ ] act ... [that] results in [a tobacco product] being ... misbranded." Id . § 331(k). A tobacco product is "deemed to be misbranded" if "it is sold or distributed in violation of regulations prescribed under section 387f(d)," id . § 387c(a)(7)(B), which in turn authorizes the Secretary of Health and Human Services to "require restrictions on the sale and distribution of a tobacco product" by regulation, as "appropriate for the protection of the public health." Id. § 387f(d). The regulations promulgated pursuant to this section provide that:

(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.

21 C.F.R. § 1140.14(a). Neither the statute nor the regulations explicitly states how violations are to be counted.

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. 21 U.S.C. § 333(f)(9). Other provisions specify the penalty schedule applicable to violations of the retailer-specific regulations. For a retailer with an approved training program, the maximum penalties are:

(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.

21 U.S.C. § 333 Note; Pub. L. No. 111-31, 123 Stat. 1776, 1839 (June 22, 2009).

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 21 U.S.C. § 333, these provisions direct that the Secretary issue guidance:

(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, 123 Stat. 1776, 1838–39 (June 22, 2009).

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...