United States District Court, E.D. New York
MEMORANDUM AND ORDER
I. LEO GLASSER, Senior District Judge.
The Plaintiff 21871 Hempstead Food Corp. ("Hempstead") brings this action pursuant to 7 U.S.C. § 2023 to seek de novo review of a determination by an agency of the United States to permanently disqualify the plaintiff from participating in the Supplemental Nutrition Assistance Program ("SNAP"). The agency is the Food and Nutrition Service ("FNS") of the United States Department of Agriculture ("USDA"). The defendant is the United States of America. The defendant moves for summary judgment. For the reasons that follow, the motion is GRANTED.
SNAP coupons are distributed to eligible low-income households to buy eligible food items at stores authorized to accept and redeem SNAP coupons. 7 U.S.C. § 2013. The Government pays the stores the value of the coupons redeemed. 7 U.S.C. § 2016(h); 7 C.F.R. § 274.2; 7 U.S.C. § 2019.
The laws governing SNAP prohibit "trafficking, " defined as the exchange of SNAP coupons for cash. 7 C.F.R. § 278.2(a). The Food Stamp Act of 1977, 7 U.S.C. § 2011 et seq., requires the FNS to permanently disqualify a store from the SNAP program for trafficking on "the first occasion." 7 U.S.C. § 2021(b)(3)(B). In lieu of permanent disqualification, the FNS may impose a fine if the store provides "substantial evidence" that it had an effective SNAP compliance policy at the time of the violations. Id. Stores are also prohibited from accepting SNAP coupons for ineligible items such as hot food, cleaning supplies, and other non-food products. 7 C.F.R. § 278.2(a). FNS may disqualify or fine a store that accepts SNAP coupons for the purchase of ineligible items. Id. at § 278.6(e)(5), (f)(1).
The undisputed facts are as follows. Hempstead, which was incorporated in November 2008, received authorization to accept SNAP coupons on March 12, 2009. Administrative Record at 1-8. In May 2013, the FNS investigated Hempstead through a confidential informant ("CI") who visited the store four times and observed violations of SNAP regulations. Id. at 9-26. On two of these visits, the store employee agreed to exchange $30 worth of SNAP coupons for $20 cash. Id. at 71-72. On three of these visits, the employee accepted SNAP coupons from the CI for non-eligible items. Id. at 13-18, 72.
The FNS notified Hempstead of these violations by letter dated June 28, 2013, which informed Hempstead that it had 10 days to provide documentation of an effective compliance policy warranting the imposition of a fine in lieu of permanent disqualification. Id. at 9-10. Hempstead responded through its attorney by letter dated July 9, 2013, which requested a fine in lieu of permanent disqualification for trafficking. Id. at 28-30. Hempstead stated that it had an effective compliance policy that had been in effect since 2008, it educated its employees 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." Id. at 29. Hempstead did not provide documentation to support its assertions or dispute the violations. Id. at 77.
On August 9, 2013, Hempstead submitted a supplemental response, which included signed and notarized statements from the store owner, Mouteeh Mohamed Mousa, and two store employees. Id. at 31-37. The supplemental response did not include the required written and dated compliance policy.
Mousa's statement described the store's compliance policy that he claimed had been in effect since 2008. Under this policy, all newly-hired employees view a USDA instructional video about the SNAP program and are instructed "on a regular basis" that SNAP coupons may be used to purchase only eligible items and may not be exchanged for cash. Id. at 33. In their statements, the two employees confirmed that they viewed the instructional video and were repeatedly instructed not to exchange SNAP coupons for ineligible items or engage in trafficking. Id. at 36-37.
After reviewing Hempstead's submissions, the FNS determined that permanent disqualification was the appropriate sanction. Id. at 38-45. It found that Hempstead "failed to submit sufficient evidence to demonstrate that [Hempstead] had established and implemented an effective compliance policy and program to prevent violations of [SNAP]." Id. at 44. Hempstead requested an administrative review of this determination by letter dated October 31, 2013. Id. at 48-49. The FNS responded with a request for additional information, to which Hempstead did not respond. Id. at 63. The FNS issued a final decision on December 10, 2013, confirming its previous sanction of permanent disqualification. Id. at 71-77. The agency reasoned that Hempstead did not submit a written and dated compliance policy or evidence contemporaneous with the policy's implementation-documentation that would warrant the imposition of a fine instead of permanent disqualification. Id. at 75-77.
Hempstead filed suit on January 2, 2014. The USDA filed a motion for summary judgment on May 2, 2014. Hempstead filed a response on June 20, 2014. The USDA filed a reply on July 11, 2014.
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