Station Management Consultants v. HHS

• Court: Court of Appeals for the Third Circuit
• Decided: May 25, 2021
• Docket: 20-2399
• Status: Unpublished

Opinion

NOT PRECEDENTIAL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. 3 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. 4 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”). 6 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.