East Food & Liquor, Inc. v. U.S., No. 94-1902

• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)
• Writing for the Court: COFFEY
• Citation: 50 F.3d 1405
• Decision Date: 22 June 1995
• Docket Number: No. 94-1902
• Parties: EAST FOOD & LIQUOR, INCORPORATED, Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.

Page 1405

50 F.3d 1405 EAST FOOD & LIQUOR, INCORPORATED, Plaintiff-Appellee,
v.
UNITED STATES of America, Defendant-Appellant. No. 94-1902. United States Court of Appeals,
Seventh Circuit. Argued Oct. 26, 1994.
Decided March 29, 1995.
As Amended on Denial of Rehearing June 22, 1995.

Page 1406

Bernard M. Ellis (argued), Chicago, IL, for plaintiff-appellee.

James J. Kubik, Asst. U.S. Atty., Civil Div., Appellate Section, Chicago, IL, Frank W. Hunger, Office of the U.S. Atty. Gen., Robert S. Greenspan, Edward Himmelfarb (argued), Dept. of Justice, Civil Div., Appellate Section, Washington, DC, James B. Burns, Office of the U.S. Atty., Chicago, IL, for defendant-appellant.

Before COFFEY, GOODWIN ^* and ROVNER, Circuit Judges.

COFFEY, Circuit Judge.

East Food & Liquor, Inc., a Chicago food and liquor store, filed a complaint against the United States under 7 U.S.C. Sec. 2023(a) and 7 C.F.R. Sec. 279.10, seeking de novo judicial review of administrative action taken by the Food and Nutrition Service of the Department of Agriculture (the "Department of Agriculture" or the "FNS") withdrawing East Food's authorization to participate in the federal food stamp program for a period of four years. The FNS disqualified East Food & Liquor under 7 U.S.C. Sec. 2018 and 7 C.F.R. Sec. 278.1(n), on the basis of a determination by the Illinois Department of Public Health ("IDPH") that East Food violated regulations of the state administered Special Supplemental Food Program for Women, Infants, and Children ("WIC"), by charging the WIC program for food items not received by the program participant. The district court denied the government's motion for summary judgment, finding that the de novo judicial review required by 7 U.S.C. Sec. 2023(a) entitled East Food & Liquor to challenge the facts underlying the state's disqualification of the store from the WIC program.

The district court certified its interlocutory order denying the government's motion for summary judgment for appeal, finding that its decision "involv[ed] a controlling question of law as to which there is a substantial ground for difference of opinion" and that

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"[a]n immediate appeal ... may materially advance the ultimate termination of the litigation by eliminating the need for a trial." The court phrased the issue certified for appeal as follows:

Whether a food store is precluded from relitigating the facts underlying its removal by the State of Illinois from the Special Supplemental Food Program for Women, Infants, and Children (WIC) when the store seeks de novo review, under 7 U.S.C. Sec. 2023(a), of the Secretary of Agriculture's subsequent withdrawal of the store from the federal food stamp program on the basis of the state WIC removal.

This court granted the government's petition for permission to appeal from the district court's interlocutory order denying the government's motion for summary judgment, and we reverse.

I. BACKGROUND

A. Statutory Background

Based, in part, on a finding that "the limited food purchasing power of low-income households contributes to hunger and malnutrition among members of such households," Congress enacted the Food Stamp Act of 1964, as amended, 7 U.S.C. Secs. 2011-2033, which provides low-income households with food stamp coupons to be used for the purchase of food from retail and wholesale stores. Id. at Sec. 2011. Pursuant to this Act, Congress directed the Secretary of Agriculture (the "Secretary") to implement and administer the federal food stamp program, and delegated to the Secretary the authority to promulgate any regulations "necessary or appropriate for the effective and efficient administration of the food stamp program." Id. at Sec. 2013(a) and (c). Although the Secretary of Agriculture is responsible for the promulgation of the necessary regulations and establishes national standards for participation in the food stamp program, each participating state bears the responsibility for the actual operation of the program. Id. at Sec. 2020. The Secretary has delegated the authority to administer the food stamp program to the FNS. 7 C.F.R. Sec. 271.3. The FNS of the Department of Agriculture is charged with ensuring that participating food stores comply with the applicable food stamp program regulations. Id. at Secs. 278.1, 278.6.

Notwithstanding the availability of assistance from the food stamp program, Congress determined that "substantial numbers of pregnant, postpartum, and breastfeeding women, infants, and young children" from low-income families were "at special risk with respect to their physical and mental health" because of inadequate nutrition and health care. 42 U.S.C. Sec. 1786(a). To alleviate this public health concern, Congress enacted a separate but related program, the WIC program, which is designed to provide supplemental foods and nutrition education to eligible pregnant, postpartum, and breastfeeding women, as well as infants and young children. Id. at Sec. 1786(a) and (c). Under the WIC program, state and local agencies receive federal cash grants to fund the distribution of food coupons to eligible participants. Id.; 7 C.F.R. Sec. 246.1. WIC program participants receive coupons, which are marked with the specific type and quantity of food items to be purchased, and can be exchanged for those items at those food stores authorized to participate. 7 C.F.R. Sec. 246.12. Under the WIC program, unlike the food stamp program, state agencies are charged with ensuring that participating food stores comply with all applicable program regulations. ¹ The state agencies must monitor stores for WIC program violations, and are required to "establish policies which determine the type and level of sanctions to be applied against food vendors, based upon the severity and nature of the Program violations observed, and such other factors as the State agency determines appropriate." Id. at Sec. 246.12(k)(1).

The Food Stamp Act provides for the disqualification of a food store from the food stamp program, "for a specified period of time ... on a finding [by the Secretary], made as specified in the regulations, that such store ... has violated any of the provisions

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of this chapter or the regulations issued pursuant to this chapter." Id. at Sec. 2021(a). A store may be disqualified from participation in the food stamp program in one of two ways: (1) by violating food stamp program regulations, or (2) by violating WIC program regulations. See id. at Secs. 2018, 2021(a); 7 C.F.R. Secs. 278.1(n), 278.6. The regulations mandate the withdrawal of a food store's authorization to participate in the food stamp program if the store is disqualified from the WIC program for certain enumerated violations. Section 278.1(n)(1) of the food stamp program regulations provides that:

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S shall withdraw the Food Stamp Program authorization of any firm which is disqualified from the WIC Program based in whole or in part on any act which constitutes a violation of that program's regulation and which is shown to constitute a misdemeanor or felony violation of law, or for any of the following specific program violations:

(i) Claiming reimbursement for the sale of an amount of a specific food item which exceeds the store's documented inventory of that food item for a specified period of time.

(ii) Exchanging cash or credit for WIC food instruments;

(iii) Receiving, transacting and/or redeeming WIC food instruments outside of authorized channels;

(iv) Accepting WIC food instruments from unauthorized persons;

(v) Exchanging non-food items for a WIC food instrument;

(vi) Charging WIC customers more for food than non-WIC customers or charging WIC customers more than current shelf price; or

(vii) Charging for food items not received by the WIC customer or for foods provided in excess of those listed on the food instrument.

7 C.F.R. Sec. 278.1(n)(1). This regulation makes disqualification from the food stamp program mandatory, because a store that "has been determined, with due process, to have violated the WIC Program regulations has clearly demonstrated a lack of business reputation and integrity sufficient to warrant its removal from the Food Stamp Program." 52 Fed.Reg. 13220 (April 22, 1987); see 7 U.S.C. Sec. 2018(a)(1)(C) (among the factors to be considered in determining the qualifications of a food stamp program applicant is "the business integrity and reputation of the applicant"). However, withdrawal of a store's authorization to participate in the food stamp program under 7 C.F.R. Sec. 278.1(n) is permitted only if "prior to the time prescribed for securing review of [the] WIC disqualification action, the [store] was provided notice that it could be withdrawn from the Food Stamp Program based on the WIC violation." 7 C.F.R. Sec. 278.1(n)(2).

B. Factual and Procedural Background

On April 1, 1992, the IDPH, the Illinois agency responsible for enforcement of WIC program regulations, cited East Food & Liquor store, a Chicago, Illinois food and liquor store, for a number of Class "A" violations of the WIC program, including exchanging cash or credit for food coupons, exchanging non-food items for food coupons, and charging the WIC program for foods not received by a program participant or for foods provided in excess of those listed on the coupons. The Notice of Class "A" Violations advised East Food of its opportunity for an administrative hearing before a hearing officer. ² Accompanying

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this notice was a Notice of Termination and Opportunity for Hearing, which stated that "[East Food & Liquor] is hereby terminated from participation as a vendor in the State of Illinois WIC program effective April 30, 1992 for a minimum of four (4) years." This notice also advised East Food that "[t]his termination from WIC may result in withdrawal of authorization to participate in the Food Stamp Program per Section 278.1(o)(1) of the Food Stamp Program regulations." ³

East Food &...