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United States District Court, Western District of New York

April 15, 2003


The opinion of the court was delivered by: John T. Elfvin, Senior District Judge.


Plaintiffs*fn2 commenced this action pursuant to 7 U.S.C. § 2023(a)(13) (1999 Supp. 2003) on July 30, 2002 in order to challenge their disqualification by the U.S. Department of Agriculture ("USDA") from continued participation in the Federal Food Stamp Program ("FFSP").*fn3 The USDA filed a motion for summary judgment October 28, 2002, to which plaintiffs made no reply.*fn4 The USDA's motion was submitted on the papers January 31, 2003.*fn5 For the reasons set forth below, defendant's motion for summary judgment will be granted.

Plaintiffs have not filed any papers in opposition to the USDA's motion for summary judgment. This Court must nonetheless determine whether the USDA has satisfied its burden under Rule 56 of the Federal Rules of Civil Procedure ("FRCvP") by "demonstrating that no material issue of fact remains for trial." Amaker v. Foley, 274 F.3d 677, 680-681 (2d Cir. 2001); Bon Supermarket & Deli v. U.S., 87 F. Supp.2d 593, 600 (E.D.Va. 2000) (same). Inasmuch as plaintiffs have not refuted the USDA's LRCvP 56 Statement, the facts contained therein are deemed admitted. See Bon, at 600 n. 12; note 4 supra. Indeed, the facts of this case — which are primarily taken from the administrative record — are straightforward and undisputed.*fn6

Kassem is the President of Seneca Street Mini Mart, a convenience store that participated in the FFSP until plaintiffs' disqualification in March 2002. By letter dated February 11, 2002, the USDA sent Kassem a letter outlining numerous violations stemming from thirteen transactions and informing plaintiffs that the USDA was considering disqualifying them from further participation in the FFSP and/or the imposition of a civil monetary penalty ("Violation Notice").*fn7 The Violation Notice indicated that employees of the store had accepted food stamps for ineligible items (i.e., beer and non-food items) and had trafficked food stamps (i.e., bought food stamps at discounted prices) on six occasions.*fn8 The Violation Notice informed plaintiffs, inter alia, that they must submit a request for such penalty within ten days of their receipt of the Violation Notice in order to be eligible for consideration for the civil monetary penalty — as opposed to permanent disqualification.*fn9

Plaintiffs' responded via counsel in a letter dated February 22, 2002.*fn10 Plaintiffs' response indicated that Kassem was out of the country and that Kassem's daughter, Kathy Hussein, was plaintiffs' agent. Hussein submitted an affidavit to the USDA that stated, inter alia, that "[w]hile I am not in a position to deny the allegations, I can assure the Department that any such lapses were not in accordance with store policy and training; that the employees involved have been trained and instructed in proper procedures for handling Food Stamps transaction [sic], and that they have been cautioned on pain of termination, not to repeat their behavior." Admin. Rec. at 58; Hussein Aff., at ¶ 4. Hussein also requested a civil monetary penalty.

By letter dated March 15, 2002, the USDA informed plaintiffs, inter alia, that they were permanently disqualified from the FFSP and that they were deemed ineligible for a civil monetary penalty because plaintiffs failed to submit the requisite documentation. By letter dated March 28, 2002, Kassem requested an administrative review of plaintiffs' disqualification. Beverly King, an Administrative Review Officer at the USDA, reviewed plaintiffs' disqualification and in a letter dated June 20, 2002 sustained such disqualification. King's letter also informed plaintiffs of their right to file suit in federal court, which they did July 30, 2002.

Rule 56(c) of the Federal Rules of Civil Procedure ("FRCvP") states that summary judgment may be granted only if the record shows "that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." In other words, after discovery and upon a motion, summary judgment is mandated "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Summary judgment is thus appropriate where there is "no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).*fn11

With respect to the first prong of Anderson, a genuine issue of material fact exists if the evidence in the record "is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, at 248.*fn12 Stated another way, there is "no genuine issue as to any material fact" where there is a "complete failure of proof concerning an essential element of the nonmoving party's case." Celotex, at 323. Under the second prong of Anderson, the disputed fact must be material, which is to say that it "might affect the outcome of the suit under the governing law ***." Anderson, at 248.

Furthermore, "[i]n assessing the record to determine whether there is a genuine issue as to any material fact, the district court is required to resolve all ambiguities and draw all factual inferences in favor of the party against whom summary judgment is sought." St. Pierre v. Dyer, 208 F.3d 394, 404 (2d Cir. 2000) (citing Anderson, at 255). Nonetheless, mere conclusions, conjecture, unsubstantiated allegations or surmise on the part of the non-moving party are insufficient to defeat a well-grounded motion for summary judgment. Goenaga, at 18.*fn13 Indeed, "[s]ummary judgment has been held to be appropriate on de novo judicial review of a disqualification of a retail food store from participating in the food stamp program if no genuine issue of material fact exists." Haskell v. United States Dep't of Agriculture, 743 F. Supp. 765, 767 (D.Kan. 1990), aff'd, 930 F.2d 816 (10th Cir. 1991); Nagi v. U.S. Dep't of Agriculture, 1997 WL 252034, at *2 (S.D.N.Y. 1997) (granting summary judgment in favor of USDA and sustaining permanent disqualification).*fn14

Turning to the merits, section 2023(a)(13) provides:

"If the store, concern, or State agency feels aggrieved by such final determination, it may obtain judicial review thereof by filing a complaint against the United States in the United States court for the district in which it resides or is engaged in business, or, in the case of a retail food store or wholesale food concern, in any court of record of the State having competent jurisdiction, within thirty days after the date of delivery or service of the final notice of determination upon it, requesting the court to set aside such determination." 7 U.S.C. § 2023(a)(13) (2003) (emphasis added).
Inasmuch as the USDA — as opposed to the United States — is the only named defendant, this action fails for lack of subject matter jurisdiction. See De La Nueces v. U.S., 1992 WL 58851, at *1 (S.D.N.Y. 1992) (dismissing suit against defendant USDA for lack of subject matter jurisdiction because complaint improperly named the USDA as a defendant).*fn15 Accordingly, this action will be dismissed.

In any event, this action also fails on the merits. As noted above, this Court must review de novo whether plaintiffs violated the FFSP. 7 U.S.C. § 2023(a)(15); Ibrahim v. U.S., 834 F.2d 52, 53 (2d Cir. 1987).*fn16 Plaintiffs do not deny that the alleged violations occurred. See Admin. Rec. at 58; Hussein Aff., at ¶ 4; Compl. at ¶¶ 7-9. This fact coupled with a de novo review of the Administrative Record leads this Court to conclude that the violations did occur as alleged.

Plaintiffs do, however, challenge the sanction of permanent disqualification. The sole issue to be determined is whether the sanction imposed by the USDA was arbitrary and capricious. See Lawrence v. United States, 693 F.2d 274, 276 (2d Cir. 1982); Willy's Grocery v. United States, 656 F.2d 24 (2d Cir. 1981), cert. denied, 454 U.S. 1148 (1982); Nagi, at *2. An agency's decision is arbitrary and capricious if it was "unwarranted in law or without justification in fact." Willy's Grocery, at 26. Where, however, the USDA has followed the applicable laws and regulations, its decision may not be overturned as arbitrary and capricious. Ibid.*fn17

The USDA's decision to permanently disqualify plaintiffs was not arbitrary and capricious. Indeed, it 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 7 C.F.R. § 278.6(e)(1)(i); J.C.B. Super Markets Inc. v. United States, 530 F.2d 1119, 1122 (2d Cir. 1976) ("The abuse of [the FFSP] by employees authorized to act by [the corporation] suffices to inculpate the corporation.").*fn18 It is undisputed that plaintiffs' employees committed the alleged violations and that plaintiffs are responsible for such violations. Accordingly, in order to determine whether the sanction of permanent disqualification was arbitrary and capricious, this Court must examine 7 U.S.C. § 2021(b)(3)(B); 7 C.F.R. § 278.6(f).

The USDA's sanction was not arbitrary and capricious because the USDA was simply following the applicable regulations in imposing permanent disqualification. See Willy's Grocery, at 26 (finding that USDA sanction was not arbitrary and capricious because the USDA properly applied its regulations); Lawrence, at 277 (holding that a disqualification policy was not arbitrary and capricious because the USDA "(1) wrote it down and (2) uses it all the time and against everyone")). Under 7 U.S.C. § 2021(b)(3)(B), the USDA may impose permanent disqualification upon

"the first occasion or any subsequent occasion of a disqualification based on the purchase of coupons or trafficking in coupons or authorization cards by a retail food store or wholesale food concern, except that the Secretary shall have the discretion to impose a civil money penalty of up to $20,000 for each violation (except that the amount of civil money penalties imposed for violations occurring during a single investigation may not exceed $40,000) in lieu of disqualification under this subparagraph, for such purchase of coupons or trafficking in coupons or cards that constitutes a violation of the provisions of this chapter or the regulations issued pursuant to this chapter, if the Secretary determines that there is substantial evidence that such store or food concern had an effective policy and program in effect to prevent violations of the chapter and the regulations ***. (emphasis added).
See also Nagi, at *3 (applying 7 U.S.C. § 2021(b)(3)(B) and sustaining the USDA's sanction of permanent disqualification because plaintiffs "failed to allege, much less demonstrate, that [the store] had such a policy or program"). Likewise, plaintiffs have neither alleged nor demonstrated that they had "an effective policy and program in effect to prevent violations" of the FFSP and the applicable regulations. Indeed, the Complaint merely alleges that the violations "were not in accordance with store policy and training; that the employees involved have been trained and instructed in proper procedures for handling Food Stamps transaction [sic] ***."*fn19 The Complaint and Hussein's Affidavit,*fn20 however, are patently deficient under 7 C.F.R. § 278.6(i) because they fail to demonstrate, inter alia, that a compliance policy and program were in effect prior to the trafficking violations. See 7 C.F.R. § 278.6(i); Traficanti v. U.S., 227 F.3d 170, 174-176 (4th Cir. 2000) (affirming imposition of permanent disqualification because store owner failed to submit written documentation of an effective fraud prevention program).*fn21 Consequently, the USDA lacked the discretion to impose a civil monetary penalty on plaintiffs in lieu of permanent disqualification. See 7 U.S.C. § 2021(b)(3)(B); Bon, at 602-603 (holding that the USDA lacked the discretion to impose civil monetary penalty because plaintiff had not submitted supporting documentation as required under 7 C.F.R. § 278.6(i)). Accordingly, the USDA's sanction was not arbitrary and capricious and will be sustained.*fn22

Accordingly, it is hereby ORDERED that defendant's motion for summary judgment is granted, that the Complaint is dismissed, that plaintiffs shall reimburse the USDA for $1,320 in trafficked food coupons within thirty days of this Order and that the Clerk of the Court shall close this case.

*fn2 Plaintiffs are Seneca Street Mini Mart and its President, Daifah Kassem. Plaintiffs will be collectively referred to as either "plaintiffs" or "Kassem."

*fn3 The USDA and its sub-unit responsible for the FFSP — the Food and Nutrition Service ("FNS") — will be collectively referred to as the "USDA." Although its role has remained relatively unchanged, the FNS has been known by different names since the advent of the FFSP. See Ahmed v. U.S., 47 F. Supp.2d 389, 390 n. 1 (W.D.N.Y. 1999) (noting that the "agency that administers the Food Stamp Program has undergone several changes in nomenclature" and discussing such changes).

*fn4 Plaintiff's counsel did, however, send this Court a letter dated January 31, 2003, which stated that

"[w]ith respect to the defendant's motion for summary judgment, I have not been able to receive any assistance from my clients in preparing a response. Thus, I take no position on the motion and have submitted no papers."
Accordingly, plaintiffs violated Rule 56 of the Local Rules of Civil Procedure ("LRCvP") by failing to submit an opposing statement of material facts; they also violated LRCvP 7.1(e) by failing to submit a memorandum of law or any affidavit in opposition to the USDA's motion for summary judgment. See Chase v. Kaufmann's, 2003 WL 251949 at *1 n. 5 (W.D.N.Y. 2003); see also Brainard v. Freightliner Corp., 2002 WL 31207467, at *2 n. 7 (W.D.N.Y. 2002) (discussing LRCvP 56 and LRCvP 7.1(e) and citing cases). Accordingly, the facts set forth in the USDA's Statement of Material Facts As To Which There Is No Genuine Issue To Be Tried ("LRCvP 56 Statement") are deemed admitted where not controverted by the record. Ibid.

*fn5 Plaintiff's counsel did not attend the oral argument scheduled for January 31, 2003 and defense counsel submitted its motion for summary judgment on the papers.

*fn6 Plaintiffs have produced no evidence whatsoever.

*fn7 The thirteen violations resulted from the USDA's investigation, which included undercover transactions by shoppers who were either agents of the USDA or cooperating witnesses. See Admin. Rec., at 9-45, 51-56.

*fn8 The Violation Notice charged plaintiffs with violation of 7 C.F.R. § 278.2(a), which prohibits stores from, inter alia, accepting food stamps in exchange for ineligible items or exchanging food stamps for cash (i.e., trafficking). See generally Bon, at 601 (discussing trafficking); 7 C.F.R. § 271.2 (defining "trafficking" as "buying or selling [of benefits coupons] for cash or consideration other than eligible food"); ibid (defining "eligible food" as "any food or food product intended for human consumption except alcoholic beverages, tobacco, ***."). Plaintiffs accepted food stamps for ineligible items including laundry products, cleaning agents, beer and hard lemonade.

*fn9 See 7 U.S.C. § 2021(b)(3)(B); 7 C.F.R. § 278.6(i).

*fn10 Plaintiffs' response appears to have been timely inasmuch as it was sent within ten days of receipt — which occurred on February 19, 2003. In any event, the USDA does not claim otherwise and this Court deems plaintiffs' response to have been timely submitted.

*fn11 Of course, the moving party bears the burden of showing that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. Goenaga v. March of Dimes Birth Defects Found., 51 F.3d 14, 18 (2d Cir. 1995) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970)). If the moving party makes such a showing, the non-moving party must then come forward with evidence of specific facts sufficient to support a jury verdict in order to survive the summary judgment motion. Ibid.; FRCvP 56(e).

*fn12 See also Anderson, at 252 ("The mere existence of a scintilla of evidence in support of the [movant's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [movant].")

*fn13 See footnote 11.

*fn14 See also Ruszczyk v. Secretary of U.S. Dept. of Agriculture, 662 F. Supp. 295, 295 (W.D.N.Y. 1986) (granting summary judgment in favor of USDA).

*fn15 See also Junel Food Ctr. Corp. v. U.S. Dep't of Agriculture, 1997 WL 150998, at *2 (S.D.N.Y. 1997) ("the USDA is not a suable entity under section 2023, as the statute provides that the complaint is to be filed against the United States"); J.C.C. Food & Liquor v. United States et al., 1997 WL 55960 (N.D.Ill. 1997) (dismissing case against USDA with prejudice for lack of subject matter jurisdiction).

*fn16 See also Nagi, at *2; Bon, at 599 n. 9 (noting that the FFSP had been amended, although the requirement of de novo review has remained substantively unchanged).

*fn17 See also Nagi, at *2; Hernandez v. U.S. Dep't of Agriculture, 961 F. Supp. 483, 488 (W.D.N.Y. 1997); Ai Hoa Supermarket, Inc. v. United States, 657 F. Supp. 1207, 1208 (S.D.N.Y. 1987).

*fn18 See also Kim v. U.S., 121 F.3d 1269, 1273 (9th Cir. 1997) (holding that "innocent store owners whose stores lack [an effective policy to prevent trafficking] remain subject to permanent disqualification" and noting that this holding has been unanimously adopted by every circuit court of appeals to have addressed the issue); Freedman v. U.S. Dep't of Agriculture, 926 F.2d 252, 257-258 (3d Cir. 1991) (holding that owners are strictly liable for trafficking violations by store personnel); Bon, at 601 (same); Hernandez, at 485-486 (noting that there is no "innocent owner" defense with respect to permanent disqualifications); Four Star Grocery v. United States, 607 F. Supp. 1375, 1376 (S.D.N.Y. 1985) (holding store owner liable for employee's trafficking of food stamps).

*fn19 Such allegations simply parrot the inadequate boilerplate contained in the Hussein Affidavit.

*fn20 Hussein's Affidavit is deficient because, inter alia, it is not based on personal knowledge. See Kim, at 1276-1277 (finding that affidavit failed to raise a genuine issue of material fact where it was not based upon personal knowledge).

*fn21 The Complaint and Hussein's Affidavit also fail to satisfy other requirements set forth by 7 C.F.R. § 278.6(i). Indeed, under 7 C.F.R. § 278.6(i) plaintiffs must demonstrate by substantial evidence the following four criteria: (1) the store "shall have developed an effective compliance policy as specified in § 278.6(i)(1) [which requires "written and dated statements of firm policy which reflect a commitment to ensure that the firm is operated in a manner consistent with this Part 278 of current FSP regulations and current FSP policy on the proper acceptance and handling of food coupons"]"; (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 that "such policy statements shall be considered only if documentation is supplied which establishes that the policy statements were provided to the violating employee(s) prior to the commission of the violation"; (3) the "firm had developed and instituted an effective personnel training program as specified in § 278.6(i)(2) [which requires the store to, inter alia, "document its training activity by submitting to FNS its dated training curricula and records of dates training sessions were conducted"]"; and (4) "Firm ownership was not aware of, did not approve, did not benefit from, or was not in any way involved in the conduct of or approval of trafficking violations ***". See 7 C.F.R. § 278.6(i) (emphasis added); Traficanti, at 174-176 (holding that 7 C.F.R. § 278.6(i) requires owners to provide "written documentation proving that it had [an effective compliance policy] and program before the violations"); Bon, at 602 n. 14.

*fn22 See Bon, at 600-603 (holding that the USDA was "required to impose permanent disqualification" because of plaintiff's failure to submit supporting documentation); Haskell, at 771-772; Nagi, at *3. Moreover, Ahmed — supra note 3 — is distinguishable because the Hussein affidavit did not describe plaintiffs' compliance program; it merely stated that one existed. Accordingly, there is no evidence whatsoever of whether plaintiff's compliance program — even assuming one existed — was effective or that it existed prior to the violations.

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