21871 Hempstead Food Corp. v. United States of America et al, No. 1:2014cv00006 - Document 13 (E.D.N.Y. 2014)

Court Description: ORDER granting 10 Motion for Summary Judgment. Ordered by Judge I. Leo Glasser on 9/4/2014.(Russell, Alexandra)

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21871 Hempstead Food Corp. v. United States of America et al Doc. 13 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK ------------------------------------------------------x 21871 HEMPSTEAD FOOD CORP., MEMORANDUM AND ORDER Plaintiff, 14 Civ. 0 0 0 0 6 (ILG) - against UNITED STATES OF AMERICA, Defendant. ------------------------------------------------------x GLASSER, Senior United States District J udge: The Plaintiff 21871 Hem pstead Food Corp. (“Hem pstead”) brings this action pursuant to 7 U.S.C. § 20 23 to seek de novo review of a determ ination by an agency of the United States to perm anently disqualify the plaintiff from participating in the Supplem ental Nutrition Assistance Program (“SNAP”). The agency is the Food and Nutrition Service (“FNS”) of the United States Departm ent of Agriculture (“USDA”). The defendant is the United States of Am erica.1 The defendant m oves for sum m ary judgm ent. For the reasons that follow, the m otion is GRANTED. LEGAL BACKGROU N D SNAP coupons are distributed to eligible low-incom e households to buy eligible food item s at stores authorized to accept and redeem SNAP coupons. 7 U.S.C. § 20 13. The Governm ent pays the stores the value of the coupons redeem ed. 7 U.S.C. § 20 16(h); 7 C.F.R. § 274.2; 7 U.S.C. § 20 19. The laws governing SNAP prohibit “trafficking,” defined as the exchange of SNAP coupons for cash. 7 C.F.R. § 278.2(a). The Food Stam p Act of 1977, 7 U.S.C. § 20 11 et seq., requires the FNS to perm anently disqualify a store from the SNAP program for 1 Although Hem pstead names both the United States and the USDA as defendants, only the United States is a proper defendant. 7 U.S.C. § 20 23(a)(13); Santana v. U.S. Dept. of Agriculture, No. 11-cv-50 33, 20 12 W.L. 2930 223, at *2 n.5 (E.D.N.Y. J uly 18, 20 12). 1 Dockets.Justia.com trafficking on “the first occasion.” 7 U.S.C. § 20 21(b)(3)(B). In lieu of perm anent disqualification, the FNS m ay im pose a fine if the store provides “substantial evidence” that it had an effective SNAP com pliance policy at the tim e of the violations. Id. Stores are also prohibited from accepting SNAP coupons for ineligible item s such as hot food, cleaning supplies, and other non-food products. 7 C.F.R. § 278.2(a). FNS m ay disqualify or fine a store that accepts SNAP coupons for the purchase of ineligible item s. Id. at § 278.6(e)(5), (f)(1). FACTU AL BACKGROU N D The undisputed facts are as follows.2 Hem pstead, which was incorporated in Novem ber 20 0 8, received authorization to accept SNAP coupons on March 12, 20 0 9. Adm inistrative Record at 1– 8. In May 20 13, the FNS investigated Hem pstead through a confidential inform ant (“CI”) who visited the store four tim es and observed violations of SNAP regulations. Id. at 9– 26. On two of these visits, the store em ployee agreed to exchange $ 30 worth of SNAP coupons for $ 20 cash. Id. at 71– 72. On three of these visits, the em ployee accepted SNAP coupons from the CI for non-eligible item s.3 Id. at 13– 18, 72. The FNS notified Hem pstead of these violations by letter dated J une 28, 20 13, which inform ed Hem pstead that it had 10 days to provide docum entation of an effective com pliance policy warranting the im position of a fine in lieu of perm anent disqualification. Id. at 9– 10 . Hempstead responded through its attorney by letter dated 2 Plaintiffs have not subm itted a statem ent countering the Governm ent’s Local Rule 56.1 statement, as required by subpart (b) of the local rule. This Court accordingly deem s the facts in the Governm ent’s Local Rule 56.1 statem ent supported by the record and adm itted. See Vt. Teddy Bear Co. v. 1-80 0 BEARGRAM Co., 373 F.3d 241, 244 (2d Cir. 20 0 4). 3 Because exchanging SNAP coupons for ineligible items m andates a lesser sanction than trafficking SNAP coupons, the parties focus instead on the trafficking violations. 2 J uly 9, 20 13, which requested a fine in lieu of perm anent disqualification for trafficking. Id. at 28– 30 . Hem pstead stated that it had an effective com pliance policy that had been in effect since 20 0 8, it educated its em ployees on all aspects of SNAP regulations, and it “was not aware of, did not approve, did not benefit from , and was not in any way involved in the conduct or approval of trafficking violations.”4 Id. at 29. Hem pstead did not provide docum entation to support its assertions or dispute the violations. Id. at 77. On August 9, 20 13, Hem pstead subm itted a supplem ental response, which included signed and notarized statem ents from the store owner, Mouteeh Moham ed Mousa, and two store em ployees. Id. at 31– 37. The supplem ental response did not include the required written and dated compliance policy. Mousa’s statem ent described the store’s com pliance policy that he claim ed had been in effect since 20 0 8.5 Under this policy, all newly-hired em ployees view a USDA instructional video about the SNAP program and are instructed “on a regular basis” that SNAP coupons m ay be used to purchase only eligible item s and m ay not be exchanged for cash. Id. at 33. In their statem ents, the two em ployees confirm ed that they viewed the instructional video and were repeatedly instructed not to exchange SNAP coupons for ineligible item s or engage in trafficking. Id. at 36– 37. After reviewing Hem pstead’s subm issions, the FNS determ ined that perm anent disqualification was the appropriate sanction. Id. at 38– 45. It found that Hem pstead “failed to subm it sufficient evidence to dem onstrate that [Hem pstead] had established and im plem ented an effective com pliance policy and program to prevent violations of [SNAP].” Id. at 44. Hem pstead requested an adm inistrative review of this determ ination 4 Hem pstead was not authorized to accept SNAP coupons until 20 0 9, so Hem pstead seem s to be m istaken. 5 Again, the owner of Hempstead seem s to be m istaken about this date. 3 by letter dated October 31, 20 13. Id. at 48– 49. The FNS responded with a request for additional inform ation, to which Hem pstead did not respond. Id. at 63. The FNS issued a final decision on Decem ber 10 , 20 13, confirm ing its previous sanction of perm anent disqualification. Id. at 71– 77. The agency reasoned that Hem pstead did not subm it a written and dated compliance policy or evidence contem poraneous with the policy’s im plem entation—docum entation that would warrant the im position of a fine instead of perm anent disqualification. Id. at 75-77. Hem pstead filed suit on J anuary 2, 20 14. The USDA filed a m otion for sum m ary judgm ent on May 2, 20 14. Hem pstead filed a response on J une 20 , 20 14. The USDA filed a reply on J uly 11, 20 14. D ISCU SSION I. Le gal Stan d ard s Sum m ary judgm ent is appropriate “if the m ovant shows that there is no genuine dispute as to any m aterial fact and the m ovant is entitled to judgm ent as a m atter of law.” Fed. R. Civ. P. 56(a). “An issue of fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonm oving party. A fact is m aterial if it m ight affect the outcom e of the suit under the governing law.” Fincher v. Depository Trust & Clearing Corp., 60 4 F.3d 712, 720 (2d Cir. 20 10 ) (quotation om itted). The m oving party bears the burden of establishing the absence of any genuine issue of m aterial fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A court deciding a m otion for sum m ary judgm ent m ust “construe the facts in the light m ost favorable to the non-m oving party and m ust resolve all am biguities and draw all reasonable inferences against the m ovant.” Brod v. Om ya, Inc., 653 F.3d 156, 164 (2d Cir. 20 11) (quotation om itted). 4 “Where, as here, a plaintiff concedes that violations occurred, the sole issue for the court is whether the penalty was arbitrary or capricious.” Ade v. United States, No. 13 Civ. 2334, 20 14 WL 1333672, at *3 (S.D.N.Y. Mar. 31, 20 14) (citation and quotation om itted); see also Makey Deli Grocery v. United States, 873 F. Supp. 2d 516, 520 (S.D.N.Y. 20 12). The reviewing court m ay not overturn an agency decision if the agency followed its guidelines. Makey Deli Grocery, 873 F. Supp. 2d at 520 . II. An alys is The Food Stam p Act requires perm anent disqualification from SNAP participation for vendors who have trafficked coupons. 7 U.S.C. § 20 21(b)(3)(B). The FNS has discretion to im pose a m onetary penalty in lieu of perm anent disqualification only if “there is substantial evidence that such store or food concern had an effective policy and program in effect to prevent violations.” Id.; accord Traficanti v. United States, 227 F.3d 170 , 175 (4th Cir. 20 0 0 ); Kim v. United States, 121 F.3d 1269, 1276 (9th Cir. 1997). USDA regulations provide four criteria for determ ining eligibility for a m onetary penalty in lieu of perm anent disqualification: (1) the existence of an effective com pliance policy; (2) evidence that the policy was in operation at the location of the violation before the violations occurred; (3) the existence of an effective personnel training program ; and (4) evidence that store ownership was unaware of, did not approve of, did not benefit from , and was in no way involved in the trafficking violations. See 7 C.F.R. § 278.6(i). The regulations further set out the supporting docum entation that the FNS requires and will consider. As to the existence of an effective com pliance policy, “FNS shall consider written and dated statem ents of firm policy.” Id. at § 278.6(i)(1). As to the 5 existence of the policy before the violations occurred, “policy statem ents shall be considered only if docum entation is supplied which establishes that the policy statem ents were provided to the violating em ployee(s) prior to the com m ission of the violation.” Id. And as to the existence of an effective personnel training program , “A firm which seeks a civil m oney penalty in lieu of a perm anent disqualification shall docum ent its training activity by subm itting to FNS its dated training curricula and records of dates training sessions were conducted; a record of dates of em ploym ent of firm personnel; and contem poraneous docum entation of the participation of the violating em ployee(s) in initial and any follow-up training held prior to the violation(s).” Id. at § 278.6(i)(2). There is no m aterial factual dispute in this case and the Governm ent has shown that it is entitled to judgm ent as a m atter of law. FNS followed its guidelines in im posing the sanction of perm anent disqualification, so this court m ay not overturn its decision for being arbitrary and capricious. Hem pstead failed to subm it docum entation warranting the im position of a m onetary penalty. It did not subm it a written and dated copy of its com pliance policy, which the regulations require. Nor did it subm it dated training curricula, dates of training sessions, or contem poraneous docum entation of the participation of violating em ployees in training, which the regulations also require. Hem pstead has not provided the requisite “substantial evidence” of its com pliance policy and training program , and the FNS accordingly did not act arbitrarily or capriciously. The perm anent disqualification sanction m ay be harsh, but it is what the governing regulations required in this case. 6 CON CLU SION For the foregoing reasons, the Governm ent’s m otion for sum m ary judgm ent is GRANTED. SO ORDERED. Dated: Brooklyn, New York Septem ber 4, 20 14 / s/ I. Leo Glasser Senior United States District J udge 7

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