Cross v. U.S.

• Citation: 512 F.2d 1212
• Decision Date: 07 February 1975
• Docket Number: No. 74-1367,74-1367
• Parties: James T. CROSS, Appellant, v. UNITED STATES, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1212

512 F.2d 1212

James T. CROSS, Appellant, v. UNITED STATES, Appellee.

No. 74-1367.

United States Court of Appeals Fourth Circuit.

Argued Oct. 1, 1974.

Decided Feb. 7, 1975.

Martin S. Driggers, Sr., Hartsville, S. C. (Saleeby, Saleeby & Cox, Hartsville, S. C., on brief), for appellant.

Eloise E. Davies, Atty., U. S. Dept. of Justice (Carla A. Hills, Asst. Atty. Gen. of the United States, John K. Grisso, U. S. Atty., and Stephen F. Eilperin, Atty., U. S. Dept. of Justice, on brief), for appellee.

Before HAYNSWORTH, Chief Judge, and WINTER, CRAVEN, BUTZNER, RUSSELL, FIELD and WIDENER, Circuit Judges, sitting in banc.

WINTER, Circuit Judge:

We heard this appeal in banc to resolve the difference in views expressed by the panel in Welch v. United States, 464 F.2d 682 (4 Cir.1972). The question in Welch, which plaintiff asks us to reconsider here, is whether under the Food Stamp Act of 1964, 7 U.S.C. § 2011 et seq., a district court, in affording a "trial de novo" to determine "the validity of the questioned administrative action in issue," 7 U.S.C. § 2022(c), may, in a proper case, reduce an administratively imposed sanction, even though it concludes that the Secretary of Agriculture, or his designate, properly found that the Act has been violated and imposed a sanction permitted by the statute and implementing regulations. In Welch, a majority of the court concluded that the district court lacked the power to go beyond the issue of the validity of the disqualification action and to modify the administrative sanction. Although Judge Butzner joined in the judgment because he thought that the administrative sanction was neither arbitrary nor capricious, he expressed the view that the scope of review by the district court extended to modification of the length of time a merchant is disqualified to participate in the food stamp program. In a subsequent unreported case, Shurkin v, United States, 473 F.2d 907 (4 Cir.1973), the panel agreed that the administrative penalty which was imposed should be sustained, but again, diverged as to the rationale of the result. Judges Craven and Butzner were of the view that the Secretary should be sustained because his action in fixing the penalty was neither arbitrary nor capricious; but Judge Russell, while agreeing that the Secretary had not abused his discretion, adhered to the majority view in Welch that the district court was powerless to change the penalty period.

We conclude to adopt the minority view in Welch ¹ and hold that the scope of judicial review extends to the period of administrative sanction, notwithstanding that the Secretary did not impose a penalty exceeding that permitted by the statute or the regulations. What was said to the contrary in the majority opinion in Welch is no longer to be deemed to be the law of this circuit, although, of course, the judgment in Welch is unaffected. In the instant case, the judgment of the district court that it lacked authority to review the penalty is vacated and the case is remanded for further consideration in the light of the views expressed herein.

I.

Plaintiff, James T. Cross, together with his son, operates a rural South Carolina grocery store. Since 1968, he has been authorized to participate in the federal food stamp program. Two of the requirements of the program are that food stamps be accepted only for eligible food items, 7 C.F.R. § 272.2(b), and that no money be given in exchange for stamps in excess of 49 cents change in a food stamp transaction, 7 C.F.R. § 272.2(e). On four occasions between 1968 and 1969 plaintiff was visited by program field officers, and twice he was warned that violations of either or both of these requirements could result in his disqualification from participation in the program.

Because of two admitted violations in 1969 and an apparently abnormally high volume of food stamp redemptions, Department of Agriculture agents made five investigatory shoppings of plaintiff's store in 1971. On each occasion a clerk accepted food stamps for ineligible items ² and, on several, the clerk gave change in cash in excess of 49 cents in food stamp transactions. Plaintiff was advised of these violations and told that he could make an oral or written explanation to the Food and Nutrition Service ^S, Florence, South Carolina. Plaintiff and his son responded promptly by writing to FNS, stating that the offending clerk had a problem of excessive drinking, which rendered him incapable of carrying out his instructions with regard to food stamp transactions, and that the clerk had been discharged since his drinking problem became apparent. Plaintiff added, "I do not think that we have violated any of the terms or provisions of the Food Stamp Program."

After receipt of plaintiff's response, the FNS officer in charge of the Florence office recommended that plaintiff be disqualified from participation in the stamp program for ninety days in order to make plaintiff and his son "aware of Program regulations and their obligation to assure that all persons employed in this store were aware of and adhering to the regulations." The Regional Office concurred in the proposed ninety-day disqualification, but the Acting Director of the Food Stamp Division in Washington increased the disqualification to a period of one year. He explained that the increase resulted from two factors: (1) that "the large number of major nongrocery items sold confirms that it is store policy ... to sell major nongrocery items," and (2) that "sufficient compliance action had been taken before the investigation" and warnings given so that the case fell within the guidelines for a one-year disqualification which the Department of Agriculture set forth in written instructions for recommending and making final determinations.

Plaintiff's counsel sought and obtained review by the Food Stamp Review Officer, but he affirmed the propriety of a one-year disqualification. Cross then sought judicial review of the validity of the administrative action. Both in the district court and here, Cross did not dispute that his former clerk had violated the federal food stamp regulations, but plaintiff sought a de novo review of the period of disqualification. The district court characterized the sanction as "harsh," but, relying on the majority opinion in Welch, it declined to review the severity of the sanction and gave summary judgment enforcing it. The judgment has been stayed pending our review.

II.

The scope of review in an action of this nature is governed by 7 U.S.C. § 2022, and this section grants "a trial de novo well beyond the scope of review available under the general provisions of the Administrative Procedure Act (5 U.S.C. § 706(2)(F))." Peoples v. United States Dept. of Agriculture, 138 U.S.App.D.C. 291, 427 F.2d 561, 565 (1970). As the several opinions in Welch and Martin v. United States, 459 F.2d 300 (6 Cir.1972), demonstrate, § 2022 on its face, may be read either to limit the trial de novo to the fact of violation of the Food Stamp Act and its concomitant regulations, or to extend it to review also of the sanction imposed for violation. Other considerations, such as legislative history ³ and application of the ordinary canons of statutory construction, ⁴ aside, we think that because of the method by which the fact of violation and the penalty are determined, due process requires that § 2022 be construed to give the district court a measure of revisory power over the sanction if it determines that the fact of violation has been proved.

The Act vests in the Secretary the rule-making authority to devise a scheme of enforcement, 7 U.S.C. § 2013(c). The scheme provided for enforcement by the regulations permits an authorized retail food store to be disqualified from participation in the program for not more than three years if FNS finds that the retailer has failed to comply with the Act or the regulations. 7 C.F.R. § 272.6(a). Disqualification is decided on the basis of information gathered by FNS, except that the retailer is given notice of the charges against him and afforded the opportunity "to submit to FNS information, explanation, or evidence concerning any instances of noncompliance before a final determination is made." 7 C.F.R. § 272.6(b). Any such explanation "shall be review and considered by the Director, Food Stamp Division, who shall then issue his determination," 7 C.F.R. § 272.6(c), but this consideration falls for short of the usual concept of a "hearing." There is no confrontation with accusers, no opportunity to cross-examine and to test credibility, and no determination by an impartial fact-finder.

Once the Director, Food Stamp Division, makes his determination-and that determination may include a recommendation of disqualification for a certain period-the retailer may have the determination reviewed by a Food Stamp Officer. 7 C.F.R. §§ 273.3-273.5. If review is sought, the retailer has the right to file "written information in support of its position" and to appear in person, 7 C.F.R. § 273.7. The Food Stamp Review Officer may sustain the action under review, reverse it or modify it; he decides upon information submitted by the Director, Food Stamp Division, FNS, information submitted by the retailer in support of its position, and any additional relevant written information obtained by the Review Officer "from any other person." 7 C.F.R. § 273.8. Again, it will be seen that the usual attributes of a full "hearing" are not present. In short, as Judge Butzner, concurring in Welch, correctly stated: "The only hearing allowed by the Act is in the district court." 464 F.2d at 685.

We recognize that disqualification from participation in the food stamp program is not a criminal sanction. At the same time, that disqualification may have grave economic consequences to a retailer engaged in business in a depressed economic area where there is widespread use of food stamps. In such an area one who holds...