United States District Court, W.D. New York
WAFIK NAWAF ALTAWEL, d/b/a LITTLE BROOKLYN MINI MARKET, Plaintiffs,
UNITED STATES OF AMERICA, UNITED STATES DEPARTMENT OF AGRICULTURE FOOD AND NUTRITION SERVICE, BENEFIT REDEMPTION DIVISION. Defendants,
DECISION AND ORDER
MICHAEL A. TELESCA, District Judge.
In this action, plaintiff Little Brooklyn Mini Market ("Brooklyn Mini Market") and its owner Wafik Nawaf Altawel ("Altawel") challenges an administrative decision of the United States Department of Agriculture ("USDA"), Field and Nutrition Services ("FNS"), which permanently disqualifies Brooklyn Mini Market from participating in the Supplemental Nutrition Assistance Program ("SNAP").
The Government has moved for summary judgment, contending that the FNS's decision to disqualify Brooklyn Mini Market from the SNAP program was mandated by, and consistent with, the relevant regulations and, in any event, was not arbitrary and capricious. For the reasons stated below, the Government's motion for summary judgment is denied.
Brooklyn Mini Market is a small grocery store located at 848 Joseph Avenue in Rochester, New York. The FNS is an administrative agency of the United States that administers SNAP under the Food and Nutrition Act of 2008 (the "Act"). 7 U.S.C. § 2011 et seq.; see also 7 C.F.R. § 271.3. Brooklyn Mini Market applied to be a SNAP retailer in 2006, but was permanently disqualified from participation in the program on October 3, 2012.
The USDA monitors every SNAP electronic benefit card ("EBT") transaction in a national database. The date, time, and amount of each transaction is recorded. FNS uses a "computerized fraud detection tool" called ALERT to identify statistically unusual EBT transaction patterns that may indicate SNAP violations. Statistical anomalies that may be identified by Alert reports include high frequencies of sale totals in whole-dollar and half-dollar amounts.
In May 2012, Brooklyn Mini Market's SNAP redemptions totaled 14, 589.00, a five-percent increase from its prior monthly average. Brooklyn Mini Market's June 2012 SNAP redemptions increased to $17, 344.00, an 18 percent increase from May. In July 2012, the SNAP redemptions dropped down to $15, 164.00.
Robert Hughes ("Hughes"), an FNS program specialist in charge of the Northeast Compliance Center South, reviewed the national database records for food stamp transactions conducted by Brooklyn Mini Market in May, June, and July of 2012. He discovered three patterns of unusual activity within three months. As examples, 479 food stamps sales greater than $9.00 ended in whole-dollar amounts, and 170 food stamp sales greater than $9.00 ended in half-dollar amounts. These 649 transactions "occurred 46% of the time[, ] well beyond the typical frequency found in the national database, " according to Hughes. The other patterns of suspect activity in May, June, and July included an unusually high number of SNAP transactions within short time frames, frequently by the same SNAP beneficiary household, and frequent high-dollar SNAP transactions relative to the type and price of items stocked by Brooklyn Mini Market.
Hughes also reviewed a "site-visit report, " dated August 6, 2012, which stated that Brooklyn Mini Market was a 4000-square-foot convenience store with two aisles devoted to candy, tobacco products, and hot foods. The store had one cash register, one EBT processing device, no shopping carts or hand baskets, and minimal counter space. Located within a mile of Brooklyn Mini Market are two supermarkets, two medium-sized grocery stores, and 15 small stores. On August 29, 2012, Hughes issued an FNS charge letter to Altawel, advising him that Brooklyn Mini Market was being charged with trafficking food stamps. Thereafter, the SNAP redemptions at Brooklyn Mini Market dropped by 30 percent from August 2012 to September 2012.
In response to Hughes's August 29 letter, Altawel, owner of Brooklyn Mini Market for 14 years, denied the Government's allegations. He countered that Brooklyn Mini Market's products are priced with "even" or "whole" numbers because the amounts are easier to calculate and avoid the necessity to give change. The store sells a variety of products, including meat, baby formula, and household goods, among other things. Customers commonly return to the store later the same day because they have family members or children who have forgotten something or desire an additional item. Brooklyn Mini Market is operated in an economically-distressed Rochester neighborhood; most of the customers live nearby and do not own motor vehicles. Large transactions frequently occur in the first two weeks of the month because food stamp beneficiaries receive their SNAP distributions during that period. Families wait until the benefits are received, and they tend to purchase large quantities of groceries. A month's supply of infant formula alone can cost up to $150.00.
Altawel submitted two customer affidavits and an employee affidavit that support the contentions contained his response letter. Altawel also submitted a letter signed by a number of Brooklyn Mini Market customers (names redacted in the record) in which they stated that food stamps are received in the first two weeks of the month and that families will make their major monthly grocery purchases at that time.
In its Final Agency Decision, USDA found that there was sufficient evidence to support Brooklyn Mini Market's permanent disqualification from participating in SNAP. USDA noted that there were "three patterns of EBT transaction characteristics indicative of trafficking: (1) "an unusual number of transactions ending in same cents value"; (2) multiple withdrawals made from individual benefit accounts in an unusually short time; and (3) excessively large purchase transactions made from SNAP recipient accounts. Agency decision, p. 3. USDA further found that Altawel's explanations for the transactions did not "provide the ...