Capricorn Coffees, Inc. v. Butz, C-75-0295-WWS.

• Decision Date: 19 May 1977
• Docket Number: No. C-75-0295-WWS.,C-75-0295-WWS.
• Citation: 432 F. Supp. 917
• Court: U.S. District Court — Northern District of California
• Parties: CAPRICORN COFFEES, INC., Petitioner, v. Earl BUTZ, as Secretary of the U. S. Department of Agriculture, Food & Nutrition Service, Respondents.

432 F. Supp. 917

CAPRICORN COFFEES, INC., Petitioner, v. Earl BUTZ, as Secretary of the U. S. Department of Agriculture, Food & Nutrition Service, Respondents.

No. C-75-0295-WWS.

United States District Court, N. D. California.

May 19, 1977.

Stephen Arian, San Francisco, Cal., for petitioner.

William T. McGivern, Jr., Asst. U. S. Atty., San Francisco, Cal., for respondents.

MEMORANDUM OPINION, FINDINGS OF FACT AND CONCLUSIONS OF LAW

WILLIAM W SCHWARZER, District Judge.

Petitioner is a wholesale and retail vendor of coffee, tea and spices. It seeks review of a determination by the Secretary of Agriculture withdrawing petitioner's certification to participate in the Food Stamp Program, 7 U.S.C. Secs. 2011 et seq. This Court has jurisdiction under 7 U.S.C. Sec. 2022.

Petitioner was first approved for participation in the Food Stamp Program in 1971. In 1974, respondent notified petitioner that its certification was being withdrawn. The letter of notification stated the following grounds:

"It is our finding that authorization of your store to participate in the Food Stamp Program does not effectuate the purpose of the program. The Food Stamp Act provides that a food coupon recipient household will be given only that amount of coupons which is determined to be the cost of a nutritionally adequate diet. It further requires that the program be administered to ensure that participants use their increased food purchasing power to obtain those staple foods most needed in their diets. In accordance with these provisions of the Food Stamp Act, only those firms which carry a sufficient stock of low-cost basic or necessary foods should be authorized to participate in the program.

"Your store sells individual blends of coffees and teas prepared to customer specifications. The cost to the purchaser for these individualized blends is substantially higher than competitive costs for standard brands of coffees and teas normally considered staple or basic foods. Since you sell primarily luxury-type food items, it is our determination that the nature and extent of your business do not justify authorization of your store to participate in the program."

Following administrative review of this action, petitioner filed its petition for review in this Court in February, 1975, alleging that respondent's action was unlawful as being in excess of his statutory authority and as a denial of petitioner's Fifth Amendment equal protection rights. The action came on for trial before this Court on May 9, 1977. The parties have stipulated, and the Court finds, that the issues presented by the complaint may be decided upon the pleadings, briefs and affidavits on file, and that there are no disputed issues of material fact.

I.

Congress established the Food Stamp Program in 1964 for the dual purpose of utilizing surplus food produced in the United States and raising the level of nutrition among low-income households, 7 U.S.C. Sec. 2011. It vested broad authority in the Secretary of Agriculture to "formulate and administer" the program, 7 U.S.C. Sec. 2013(a). The act directs that

"All practicable efforts shall be made in the administration of the food stamp program to insure that participants use their increased food purchasing power to obtain those staple foods most needed in their diets . . ." (7 U.S.C. Sec. 2019(a)).

The act does not define or describe staple foods.¹ It does, however, direct the Secretary to make two relevant determinations controlling the scope and effect of the program: first, to determine the amount of food stamps to be allotted to any eligible household on the basis of the cost of a nutritionally adequate diet, 7 U.S.C. Sec. 2016(a); and second, to determine which retail food stores and wholesale food concerns shall be authorized to accept and redeem food stamps, 7 U.S.C. Sec. 2017(a). With respect to the second determination, the act provides that the Secretary must consider whether a food store's participation "will effectuate the purposes of the food stamp program." The act further states in this regard:

"In determining the qualifications of applicants food stores there shall be considered among such other factors as may be appropriate, the following: (1) the nature and extent of the retail or wholesale food business conducted by the applicant . . ." (7 U.S.C. Sec. 2017(a)).

The Secretary has delegated his authority to make these determinations to the Food and Nutrition Service of the Department of Agriculture ("FNS"), 7 C.F.R. Part 270 et seq. FNS has issued Instruction 741-2, entitled "Criteria for Authorization, Denial and Withdrawal of Authorization . . . for Participation of Retail and Wholesale Firms." The Instruction contains guidelines on the basis of which FNS determines the eligibility of food stores to participate in the program. Its action in this case, terminating petitioner's participation, was based on paragraph III, A, 14, which states in relevant part:

"Stores Selling Luxury Foods or Foods of Low Nutritional Value. Stores whose primary business is the sale of . . . high-cost luxury items, such as caviar, special blends of coffee and tea, or fancy cheeses, should not be authorized because they do not enable food coupon recipients to obtain a low-cost nutritious diet and, therefore, do not effectuate the purpose of the FS Program . . ."

II.

Petitioner's primary business is the sale, at retail and wholesale, of so-called specialty brands of coffee and tea. Specialty brands are sold at a price per pound which is higher than the price for standard brands of coffee and tea sold at supermarkets and food stores generally.²

Petitioner contends first that respondent's action denies it the equal protection of the laws because it arbitrarily excludes vendors of only coffee and tea from the program, while other single-staple vendors are permitted to participate. Bakeries and meat markets, for example, are evidently authorized to participate even though they may sell only premium priced products. In making the argument, plaintiff relies on U. S. Dept. of Agriculture v. Moreno, 413 U.S. 528, 93 S.Ct. 2821, 37 L.Ed.2d 782 (1973), in which the Supreme Court struck down as violative of the Fifth Amendment a statutory exclusion from eligibility under the food stamp program of households containing an individual who is unrelated to any other member of the household. The Court held the statutory classification of households to be "clearly irrelevant to the stated purposes of the Act", 413 U.S. at 534, 93 S.Ct. at 2824, see pp. 918-919, above.

The same cannot be said of a classification of food stores (which are not intended to be the primary beneficiaries of the program) based on the sale of premium coffees and teas. The Secretary could rationally determine that coffee and tea, although regarded as staples in the American diet, make only an insignificant contribution toward a "nutritionally adequate diet", and that participation of food stores selling only premium-priced coffee and tea will not effectuate the purposes of the food stamp program to dispose of agricultural surpluses and raise the level of nutrition of low-income families.

Petitioner's second argument raises more difficult questions. Petitioner contends that the Secretary exceeded his statutory authority when acting to exclude food stores from participation in the program essentially on the basis of the price charged for the product. It points to Section 2015(b) of the act which states that

"nothing in this chapter shall be construed as authorizing the Secretary to specify the prices of which food may be sold by wholesale food concerns or retail food stores."

It also points to the legislative history which shows that Congress regarded the question whether a particular food item was a luxury food as one which depended on season and location and was not susceptible of objective determination. Congress therefore sought to leave it to the recipient to determine whether any particular item, at the time and place of purchase, was a luxury food. Senate Report No. 1124 contains the following statement on this subject:

"Section 3. Definition of food

"The committee amendment to section 3(b) would simplify the definition of food to make it administratively workable.

"As the bill passed the House `soft drinks, luxury foods,

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