Station Management Consultants v. HHS ( 2021 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 20-2399
STATION MANAGEMENT CONSULTANTS, INC., d/b/a Sunoco,
Petitioner
v.
UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES;
UNITED STATES FOOD AND DRUG ADMINISTRATION
On Petition for Review of an Order of the Department of Health and Human Services
Departmental Appeals Board, Appellate Division
(FDA-1 : DAB No. 20-2996)
Administrative Law Judge: Catherine Ravinski
Submitted under Third Circuit L.A.R. 34.1(a)
on April 19, 2021
Before: AMBRO, RESTREPO and RENDELL, Circuit Judges
(Opinion filed: May 25, 2021)
OPINION *
*
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
AMBRO, Circuit Judge
In 2019, an Administrative Law Judge imposed a 30-day No-Tobacco-Sale Order
(NTSO) against Station Management, the operator of a gas station and store, for repeatedly
selling tobacco products to minors and failing to check photo identifications. The
Department of Health and Human Services Departmental Appeals Board (the “Board”)
affirmed and Station Management now petitions to us. Discerning no reason to disturb the
Board’s decision, we deny the petition for review.
I.
We have jurisdiction to review the Board’s decision imposing an NTSO on Station
Management, which operates in Darby, Pennsylvania and requested a hearing in its answer
to the agency’s complaint. See 21 U.S.C. § 333(f)(6) (permitting those who requested a
hearing and were aggrieved by an NTSO to “file a petition for judicial review” in the circuit
where they reside or transact business); see also id. at § 333(f)(8) (providing that “[p]rior
to the entry of a no-sale order . . . a person shall be entitled to a hearing pursuant to the
procedures established through regulations of the Food and Drug Administration for
assessing civil money penalties”); 21 C.F.R. § 17.47(a) (providing for an appeal to the
Board); id. at § 17.51(a) (providing that “[t]he final decision of the Commissioner of Food
and Drugs or other entity deciding the appeal (currently the [Board]) constitutes final
agency action from which a respondent may petition for judicial review under the statutes
governing the matter involved”); id. at § 17.51(c) (providing that “[e]xhaustion of an
appeal to the entity deciding the appeal (currently the [Board]) is a jurisdictional
prerequisite to judicial review”).
2
While § 333 does not explicitly provide a scope or standard of review, we conclude
that our review is analogous to other cases involving penalties imposed by the Department
of Health and Human Services and review of agency actions more generally. We will
overturn the action if it is “arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law,” Jewish Home of E. Pa. v. Ctrs. for Medicare & Medicaid Servs.,
693 F.3d 359, 361 (3d Cir. 2012) (quoting 5 U.S.C. § 706(2)), and we will uphold factual
findings as long as they are supported by substantial evidence in the record, see id.;
Arkansas v. Oklahoma, 503 U.S. 91, 112–13 (1992) (criticizing an appellate court for
“disregard[ing] well-established standards for reviewing the factual findings of agencies
and instead ma[king] its own factual findings,” . . . as “we have long recognized the
‘substantial evidence’ standard in administrative law”); Dia v. Ashcroft, 353 F.3d 228, 248
(3d Cir. 2003) (en banc) (noting that “[t]he substantial evidence standard has historically
been, and continues to be, the standard governing the relationship between administrative
agencies and courts of review”); accord TMJ Implants, Inc. v. U.S. Dep’t of Health & Hum.
Servs., 584 F.3d 1290, 1299 (10th Cir. 2009) (applying the same standard in a petition for
review of monetary penalties brought under § 333(f)(6)).
II.
Acting under authority from Congress, the agency 1 promulgated regulations
prohibiting retailers from selling cigarettes and smokeless tobacco products to minors and
1
In general, statutory requirements are directed to the Secretary of Health and Human
Services. In practice, the regulations and actions relevant here are often more specifically
linked to the Food and Drug Administration (within the Department of Health and Human
Services) or the Center for Tobacco Products within the Food and Drug Administration.
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requiring retailers to verify the age of every purchaser with photo identification unless the
purchaser is over the age of 26. See 21 U.S.C. § 387f(d)(1) (providing that the Secretary
may “by regulation require restrictions on the sale and distribution of a tobacco product”);
21 C.F.R. §§ 1140.14(a)(1)–(2) (providing that “[n]o retailer may sell cigarettes or
smokeless tobacco to any person younger than 18 years of age” and that “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,” except for mail-order sales
or sales to “any person over the age of 26”). 2
In addition to monetary penalties, the agency is empowered to impose an NTSO for
five or more “repeated violations” of these regulations over a 36-month period. 21 U.S.C.
§ 333(f)(8); Pub. L. No. 111-31, 123 Stat. 1838 (2009) (requiring the Secretary to “issue
guidance . . . defining the term ‘repeated violation’ . . . as including at least 5 violations of
particular requirements over a 36-month period at a particular retail outlet that constitute a
repeated violation”). In imposing an NTSO, the agency “shall 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
See generally 21 U.S.C. § 387a(e) (directing the Secretary to establish the Center for
Tobacco Products within the Food and Drug Administration). We generally refer to the
“Secretary” or the “agency” for convenience when referring to any of these parties where
the particular actor is not critical to our analysis.
2
Congress recently raised the minimum age for tobacco purchases from 18 to 21. See Pub.
L. No. 116-94, § 603(a)(2), 133 Stat. 3123 (2019). At the time of Station Management’s
violations, the minimum age was still 18.
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violations, the degree of culpability, and such other matters as justice may require.” 21
U.S.C. § 333(f)(5)(B).
The agency also considers whether the retailer has taken “effective steps” to prevent
violations, including written policies, employee training and sanctions, and ID verification.
Pub. L. No. 111-31, 123 Stat. at 1839 (requiring the Secretary to issue guidance providing
for the Secretary to consider these factors in determining whether to impose an NTSO);
see also Food and Drug Administration, Civil Money Penalties and No-Tobacco-Sale
Orders for Tobacco Retailers (Revised) 11 (Dec. 2016),
https://www.fda.gov/media/80888/download. The agency has in the past announced its
intention to seek a 30-day period for a retailer’s first NTSO, though acknowledging it may
sometimes vary downward based on the statutory factors described above. See Food and
Drug Administration, Determination of the Period Covered by a No-Tobacco-Sale Order
and Compliance with an Order: Guidance for Tobacco Retailers 3–4 (Aug. 2015),
https://www.fda.gov/media/93328/download.
III.
The facts underlying Station Management’s violations are not meaningfully in
dispute, so we do not recount them in detail here. On appeal, Station Management
essentially contends the Board erred in imposing the NTSO and failed fully to consider
evidence in the record, particularly: (1) evidence of policies and remedial procedures
Station Management has in place to prevent violations, including termination of one
offending “errant” employee; (2) the fact that several of the violations occurred as part of
the same “episodes” (i.e., that selling tobacco to one minor customer and also failing to
5
check her ID counted as two violations); and (3) Station Management’s financial hardship.
We are not persuaded that any of Station Management’s arguments support disturbing the
Board’s decision.
First, the Board considered Station Management’s policies and procedures,
specifically listing and summarizing several exhibits in the record. A.R. at 16. It
nonetheless declined to disturb the Administrative Law Judge’s finding that these policies
and procedures were not effective and further concluded Station Management “has not
shown how the additional measures it took were effective at ensuring its staff complies
with the Act and regulations.” Id. at 17–18. Similarly, it expressly considered Station
Management’s termination of the offending “errant” employee but concluded that the
company was nonetheless responsible for the actions of those it employs. Id.
Second, the Board clearly understood that some of the violations occurred as part of
the same “episodes.” Nonetheless, it concluded that the statute did not explicitly compel
consideration of this fact and that Station Management “did not address how committing
multiple violations in a single inspection somehow reduces its culpability or mitigates the
penalty under any of the other [statutory] factors.” Id. at 19. 3
3
Station Management does not directly challenge the Board’s counting of the sale and ID
failures in one transaction as separate violations, and instead it argues simply that the
number of transactions, in addition to the number of violations, should have affected the
decision to impose a 30-day NTSO. We therefore presume without deciding that the
Board’s method of counting these violations is appropriate. Cf. Orton Motor, Inc. v. U.S.
Dep’t Health & Hum. Servs., 884 F.3d 1205, 1210–11, 1214 (D.C. Cir. 2018) (rejecting a
challenge that the relevant Act “does not permit the Center’s practice of charging multiple
violations arising from a single inspection or transaction” under analogous circumstances
where a retailer was charged with multiple violations for “the sale to a minor and the failure
to check identification”).
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Third, the Board expressly considered Station Management’s argument that the
NTSO would impose undue financial hardship because it is operating at a net loss. Id. at
15–16. Relying on record evidence (including the “profit and loss statements from 2017
and 2018”) analyzed by the Administrative Law Judge, the Board concluded that Station
Management did not support its assertion that the 30-day NTSO would jeopardize its ability
to continue to operate. Id.* * * * *
In sum, we conclude that the Board’s decision was reasonable and the findings it
relied on were supported by substantial evidence in the record. We thus deny the petition
for review.
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