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Duchimaza v. United States

United States District Court, D. Connecticut

September 30, 2016



          MICHAEL P. SHEA, U.S.D.J.

         This action arises from an administrative determination by the United States Department of Agriculture that Cecilia's Market, LLC, owned and operated by Justo Duchimaza, was engaged in the “trafficking” of benefits provided by the Supplemental Nutrition Assistance Program (“SNAP”), which in this context means exchanging SNAP benefits for cash. On the basis of that determination, Cecilia's Market, LLC, and Duchimaza (“Plaintiffs”) were permanently disqualified from participating in SNAP. Plaintiffs bring this action under 7 U.S.C. § 2023(a)(13) to set aside the determination and reverse the permanent disqualification penalty. Defendants have moved for summary judgment and have filed a separate motion in limine to preclude Plaintiffs' expert. For the reasons set forth below, Defendants' motion for summary judgment is GRANTED in all respects, and because I conclude that the opinions of Plaintiffs' expert would not raise a genuine issue of material fact if they were considered, I DENY the motion in limine as moot.[1]

         I. Background

         A. SNAP and Trafficking

         The Supplemental Nutrition Assistance Program (“SNAP”), established pursuant to the Food Stamp Act, allows “low-income households to obtain a more nutritious diet through normal channels of trade by increasing food purchasing power for all eligible households who apply for participation.” 7 U.S.C. § 2011. The Secretary of Agriculture is directed to “issue such regulations consistent with this chapter as the Secretary deems necessary or appropriate for the effective and efficient administration of the supplemental nutrition assistance program.” 7 U.S.C. § 2013(c). The Food and Nutrition Services (“FNS”) division of the United States Department of Agriculture administers SNAP. 7 C.F.R. § 271.3.

         Households participating in SNAP are provided with Electronic Benefit Transfer (“EBT”) Cards, which store benefits that can be used to purchase food at eligible retail stores. 7 C.F.R. § 274.1. These cards work much like debit cards. (Affidavit of Vicky Robinson, ECF No. 32-3 at ¶ 8.) Each month, the cards are credited with a dollar amount of SNAP benefits for the month. (Id. at ¶ 9.) When a SNAP benefit recipient makes a purchase at an authorized store, the amount of the purchase is electronically credited to the store owner's bank account. (Id. at ¶ 10.) Store owners must be approved by FNS to participate in SNAP. 7 C.F.R. § 278.1.

         The SNAP regulations prohibit “trafficking, ” which is defined to include, among other things, the “buying, selling, stealing, or otherwise effecting an exchange of SNAP benefits . . . for cash or consideration other than eligible food.” 7 C.F.R. § 271.2; 7 U.S.C. § 2021. Stores that engage in trafficking of SNAP benefits are subject to permanent disqualification from the program or a civil monetary penalty (“CMP”). 7 U.S.C. § 2021(b)(3)(B). FNS is authorized to disqualify any authorized retail store from participation in the program “if the firm fails to comply with the Food Stamp Act of 1977.” 7 C.F.R. § 278.6. “Such disqualification shall result from a finding of a violation on the basis of evidence that may include facts established through on-site investigations, inconsistent redemption data, evidence obtained through a transaction report under an electronic benefit transfer system, or the disqualification of a firm from the Special Supplemental Nutrition Program for Women, Infants and Children (WIC).” Id.

         The FNS, through statistical analysis of EBT redemption data “of stores caught in trafficking violations during on-site investigations, [has] found that transactions involving trafficking consistently display particular characteristics or patterns.” (ECF No. 32-4 at 190.) The FNS is able to use these data to draw a conclusion by “a preponderance of the evidence” that a store is engaged in trafficking when it notices “unusual, irregular, and inexplicable transactions and patterns” in a store's EBT redemptions. (Id.)

         If the FNS suspects a store is trafficking, the regulations provide that it will send a charge letter advising “a firm being considered for permanent disqualification based on evidence of trafficking as defined in § 271.2” that it “must notify FNS if the firm desires FNS to consider the sanction of a civil money penalty in lieu of permanent disqualification.” 7 C.F.R. § 278.6(b)(2)(i). The FNS may impose a civil money penalty in lieu of disqualification if it determines that “a disqualification would cause hardship to participating households.” 7 C.F.R. § 278.6(a). However, “[i]f a firm fails to request consideration for a civil money penalty in lieu of a permanent disqualification for trafficking and submit documentation and evidence of its eligibility within the 10 days [of receipt of the charge letter], the firm shall not be eligible for such a penalty.” 7 C.F.R. § 278.6(b)(2)(iii). In addition, to qualify for a civil money penalty instead of permanent disqualification, the store owner must timely submit “substantial evidence” showing that the store meets the following four criteria:

Criterion 1. The firm shall have developed an effective compliance policy as specified in § 278.6(i)(1); and
Criterion 2. The firm shall establish that both its compliance policy and program were in operation at the location where the violation(s) occurred prior to the occurrence of violations cited in the charge letter sent to the firm; and
Criterion 3. The firm had developed and instituted an effective personnel training program as specified in § 278.6(i)(2); and
Criterion 4. Firm ownership was not aware of, did not approve, did not benefit from, or was not in any way involved in the conduct or approval of trafficking violations . . . .

7 C.F.R. § 278.6(i).

         The “appropriate FNS regional office” will then review the “letter of charges, the response, and any other information available to FNS” and issue a determination as to whether the store was trafficking and the appropriate penalty. 7 C.F.R. § 278.6(c). Stores can then appeal this determination to the Administrative Review Branch within ten days of the delivery of the decision from FNS. 7 C.F.R. § 279.2. Stores may file “written information in support of [their] position” along with the request for review. 7 C.F.R. § 279.4(b). The designated reviewer “shall make a determination based upon:

(1) The information submitted by the appropriate FNS office;
(2) Information submitted by the firm in support of its position; and
(3) Any additional information, in writing, obtained by the designated reviewer from any other person having relevant information.”

7 C.F.R. § 279.5.

         The statute allows for judicial review of a final agency decision within thirty days of service of the final notice. 7 U.S.C. § 2023(a)(13). The suit in federal district court “shall be a trial de novo by the court in which the court shall determine the validity of the questioned administrative action in issue.” 7 U.S.C. § 2023(a)(15).

         B. Factual Background

         1. Investigation of Plaintiffs

         Plaintiff Justo Duchimaza owns and operates a small grocery store called Cecilia's Market located in New Haven, Connecticut. (Compl., ECF No. 1 at ¶ 1; Declaration of Vicky T. Robinson, ECF No. 32-3 at ¶ 19; ECF No. 32-4 at 8.) Cecilia's Market was approved as an authorized retail food store on September 10, 2010. (Def.'s MSJ Ex. A, ECF No. 32-4, at 4.) On September 24, 2013, a Food and Nutrition Services (“FNS”) contractor conducted a store visit to Cecilia's Market to observe the nature and scope of the store's operation, stock, and facilities. (See Id. at 12-48.) The contractor documented the visit with a report and took photographs of the store. (Id.) The report also included information about the store, including an evaluation of the store's inventory, a hand-drawn map of the store's layout, and limited pricing data. (Id.)

         After the EBT Alert system identified a number of suspicious transactions that suggested possible trafficking violations, the matter was referred to Program Specialist Richard O'Toole for investigation. (Id. at 49-61.) O'Toole conducted an EBT Case Analysis, which analyzed EBT Transaction Data for the months of October, November, and December 2013. (Id.) Based on the EBT analysis, the FNS contractor's visit to the store, and a comparison to competing stores in the area, O'Toole concluded that there were “clear and repetitive patterns of unusual, irregular, and inexplicable SNAP activity, which would warrant issuance of a trafficking charge letter.” (Id. at 59.) He recommended to FNS Section Chief Gilda Torres that FNS charge Cecilia's Market with trafficking. (Id.)

         2. FNS Charge Letter to Plaintiffs

         On January 13, 2014, the FNS sent a letter to the Plaintiffs accusing them of trafficking as defined in Section 271.2 of the SNAP regulations, i.e., the “exchange of SNAP benefits . . . for cash.” (Id. at 60.) Specifically, the letter accused Cecilia's Market of 388 violations of SNAP regulations, separated into three categories, and included three attachments that identified the EBT transactions in each category. (Id. at 63-73.) The three categories of EBT patterns that FNS considered suggestive of trafficking were: (1) an “unusual number of transactions ending in same cents values” (“Attachment 1”); (2) “multiple transactions . . . made from individual benefit accounts in unusually short time frames” (“Attachment 2”); and (3) “excessively large purchase transactions . . . made from recipient accounts” (“Attachment 3”). (Id. at 60.)

         The letter informed Plaintiffs that they would be permanently disqualified from SNAP if FNS determined that they committed the violations detailed in the letter and invited them to respond to the charges with additional information. (Id. at 61.) The letter also informed Plaintiffs that if they met certain conditions, “FNS may impose a civil money penalty (CMP) . . . in lieu of permanent disqualification.” (Id. at 60.) The letter detailed what the Plaintiffs would need to show to qualify for a CMP. (Id.) Finally, the letter advised Plaintiffs that they had ten days to respond to the charges, ask for a CMP instead of a permanent disqualification, and submit any documentation. (Id. at 60-61.)

         3. Plaintiff's Response to Charge Letter

         On January 17, 2014, Plaintiffs, through their accountant, Sylvia Greenfield, responded to the charge letter denying all accusations and addressing the three categories of EBT Data included in the FNS's charge letter. (Id. at 75.) The response included a price list of “most commonly purchased items” (id. at 110), worksheets of five households and their EBT purchases at Cecilia's Market (id. at 111-144), records of credit given to customers (id.), receipts highlighting unusual food items available at Cecilia's Market (id. at 76, 145), and photos of the store's inventory.[2] (Id. at 169.) The response argued that all three categories of transactions could be explained by “customer behavior, sales quantities, and products sold which are not normally found in this type of store.” (Id. at 77.) The response did not request a CMP or provide any evidence showing that Plaintiffs were entitled to one. (Id. at 75.)

         4. Disqualification Determination

         Upon reviewing the materials and explanations submitted by Greenfield, O'Toole recommended that Cecilia's Market be permanently disqualified from SNAP. (Id. at 94.) He determined that the explanations provided by Greenfield lacked merit and that Cecilia's Market did not qualify for a CMP instead of permanent disqualification because the response provided no evidence that Cecilia's Market met the four criteria set forth in 7 C.F.R. § 278.6(i). (Id. at 93.)

         In a letter dated February 12, 2014, FNS informed Plaintiffs that they had been permanently disqualified from the SNAP program. (Id. at 95.) The letter informed Plaintiffs of their right to appeal the decision to the Chief of the ...

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