United States District Court, D. Connecticut
RULING AND ORDER
N. Chatigny, United States District Judge
Plaintiff Jose Alejandro Rosario challenges a decision of the
United States Department of Agriculture ("USDA")
Food and Nutrition Service ("FNS") permanently
disqualifying his grocery store from accepting food stamps
under the Supplemental Nutrition Assistance Program
("SNAP"). The USDA permanently disqualified
plaintiff for “trafficking, ” that is, accepting
food stamps in exchange for ineligible items and cash. The
facts of the trafficking itself are not in dispute. Plaintiff
contends that he leased his grocery store to a third party
before the violations occurred and that permanently
disqualifying him, rather than assessing a civil money
penalty, was arbitrary and capricious. Plaintiff further
alleges that the disqualification violated his due process
rights. Defendants have moved for summary judgment. I agree
with defendants that the law holds owners strictly liable for
trafficking violations and that a civil money penalty was not
available under the regulations, making permanent
disqualification mandatory. Accordingly, the defendants'
motion is granted.
owns and operates Alexa Grocery in Norwalk. Defs.' Local
R. 56(a)(1) Statement 1, ECF No. 29; Compl. 1, ECF No. 1.
Porfirio Rosario (“P. Rosario”) managed the store
during the relevant time period. Id. at 3. Prior to
Spring 2014, Alexa Grocery was a SNAP participant. SNAP, the
federal benefits program known as “food stamps, ”
offers nutritional assistance to eligible low-income
individuals and families. 7 U.S.C. § 2011 (2012). SNAP
benefits are delivered to needy households via electronic
benefit transfer ("EBT") cards. Each month, a SNAP
recipient's EBT card is credited with a dollar amount of
benefits and the card can be used at authorized retail food
stores to purchase eligible food items. Pursuant to
regulations, retail food store owners who participate in SNAP
cannot accept EBT benefits as payment for ineligible items or
in exchange for cash. These prohibited behaviors are defined
as "trafficking." See 7 C.F.R. §
271.2 (defining "trafficking").
Summer 2013, an undercover investigator employed by
defendants visited Alexa Grocery three times. R. at 42, ECF
No. 28-1. Each time, the investigator either purchased
ineligible non-food items with SNAP benefits, R. at 43-45,
46-49, or exchanged SNAP benefits for cash, R. at 48, 52.
Soon after these visits, FNS initiated administrative
proceedings against plaintiff. R. at 39-41. Plaintiff
responded by denying the trafficking charge and requesting a
civil money penalty in lieu of permanent disqualification
stating that he had an effective compliance program. R. at
54-55. On March 6, 2014, plaintiff's attorney sent FNS an
affidavit from the manager of Alexa Grocery, P. Rosario,
averring that in November 2012 he had leased the store from
plaintiff. R. at 61-62. A week later, plaintiff's
attorney sent FNS a copy of a management agreement between
plaintiff and P. Rosario, and P. Rosario's IRS form 1099
from 2013. R. at 64-70.
review of the investigator's reports and plaintiff's
letters and supporting documents, FNS issued a written
decision finding that violations had occurred. R. at 71-73.
The decision explained that per Regulation 278.6(e)(1), a
store shall be disqualified from participating in SNAP if:
"(i) personnel of the [store] have trafficked as defined
in Section 271.2." R. at 71. FNS found that plaintiff
was the owner of Alexa Grocery at the relevant time because
the management agreement showed only that P. Rosario would
manage the store, not that he would own it. R. at 72; see
id. ("[The agreement] stated, 'Nothing in this
agreement shall be considered as giving the manager an
ownership interest in the business.'"). Further,
plaintiff had submitted an online reauthorization application
on June 10, 2013, naming himself as owner of the store.
Id. With regard to the nature of the penalty to be
imposed, FNS found that a monetary penalty was not
appropriate because plaintiff had failed to demonstrate that
he had an effective compliance policy and program to prevent
violations, as required to be eligible for a monetary
penalty. R. at 74. The decision concluded that "a
permanent disqualification is warranted and the
disqualification of this store would not cause hardship to
SNAP households." R. at 73.
requested administrative review of the decision. R. at 77,
84-87. FNS issued a final agency decision on May 20, 2014. R.
at 91-101. The final decision concluded that there was
sufficient evidence to support permanent disqualification.
Id. Plaintiff then filed this action pursuant to 7
U.S.C. § 2023.
Standard of Review
motion for summary judgment, the moving party bears the
burden of showing that there are no material facts in dispute
and the moving party is entitled to judgment as a matter of
law. Fed.R.Civ.P. 56(a); see also Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 247 (1986). “An issue
of fact is ‘genuine' if ‘the evidence is such
that a reasonable jury could return a verdict for the
nonmoving party.'” McCarthy v. Dun &
Bradstreet Corp., 482 F.3d 184, 202 (2d Cir. 2007)
(quoting Jeffreys v. City of New York, 426 F.3d 549,
553 (2d Cir. 2005)). When the nonmovant “bear[s] the
ultimate burden of proof at trial, the movant may . . .
point to an absence of evidence to support an essential
element of the nonmoving party's claim.” B.C.
v. Mount Vernon Sch. Dist., 837 F.3d 152, 157-58 (2d
Cir. 2013) (second alteration in original) (quoting Gummo
v. Village of Depew, 75 F.3d 98, 107 (2d Cir. 1996)).
vendor aggrieved by a final administrative action of FNS may
obtain judicial review of the agency decision. 7 U.S.C.
§ 2023(a)(13). The district court reviews the facts
de novo on the question of whether the vendor
violated the regulations. Id. § 2023(a)(15);
Makey Deli Grocery Inc. v. United States, 873
F.Supp.2d 516, 520 (S.D.N.Y. 2012). The SNAP vendor
"bear[s] the burden of proving by a preponderance of the
evidence that the agency's action was
'invalid.'" Arias v. United States, No.
13 Civ. 8542(HBP), 2014 WL 5004409, at *6 (S.D.N.Y. Sept. 29,
2014) (quoting 7 U.S.C. § 2023(a)(16)). If the district
court determines that the violation occurred, it considers
whether the penalty was arbitrary and capricious. See
Yafaie v. United States, 94 Civ. 7825 (KMW), 1995 WL
422169, at *1 (S.D.N.Y. July 18, 1995) ("Whether the
imposition of a penalty by the FNS was arbitrary or
capricious is a matter of law appropriately determined on a
motion for summary judgment."). "An agency's
action is arbitrary and capricious if it was unwarranted in
law or without justification in fact." Nagi v.
USDA, No. 96 CIV. 6034(DC), 1997 WL 252034, at *2
(S.D.N.Y. May 14, 1997) (quoting Ai Hoa Supermarket, Inc.
v. United States, 657 F.Supp. 1207, 1208 (S.D.N.Y.
1987)). A penalty is not arbitrary or capricious if it
complies with FNS's own policy. See Nagi, 1997
WL 252034, at *2 ("If the agency has followed its
guidelines, however, the reviewing court may not overturn the
decision as arbitrary and capricious.") (citing Ai
Hoa, 657 F.Supp. at 1208); Young Jin Choi v. United
States, 944 F.Supp. 323, 325 (S.D.N.Y. 1996) ("A
sanction is not arbitrary and capricious when a federal
agency properly adheres to its own regulations and guidelines
when imposing it.").
The Trafficking Finding Is Supported
does not dispute that trafficking violations occurred.
Pl.'s Local R. 56(a)(2) Statement 1, ECF No. 38. Rather,
he argues that "personnel of the firm" who
trafficked, see 7 C.F.R. § 278(e)(1)(i), were
not his employees because he had leased Alexa Grocery to a
store manager. The Government counters that plaintiff is
strictly liable for the trafficking violations because he
owned the store and merely outsourced its daily operation to
his agent, P. Rosario. I agree.
Food Stamp Act is a strict liability statute that penalizes
store owners for violations. See Kassem v. United
States, No. 02-CV-0546E(F), 2003 WL 21382906, at *3
(W.D.N.Y. Apr. 15, 2003) ("[I]t is well-established that
a store owner is responsible for any violations of
the Food Stamp Act and regulations by the store's
employees."); see also Kim v. United States,
121 F.3d 1269, 1273 (9th Cir. 1997) (rejecting "innocent
store owner" defense); Freedman v. USDA, 926
F.2d 252, 257-58 (3d Cir. 1991). The Second Circuit has
relied on the legislative goal of preventing fraud in the
food stamp program in holding owners accountable despite a
lack of ...