Goldstein v. U.S.

• Decision Date: 12 November 1993
• Docket Number: No. 92-6342,92-6342
• Citation: 9 F.3d 521
• Parties: Charles GOLDSTEIN, d/b/a Chucky's Drive In Grocery, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 521

9 F.3d 521

Charles GOLDSTEIN, d/b/a Chucky's Drive In Grocery Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.

No. 92-6342.

United States Court of Appeals, Sixth Circuit.

Submitted Oct. 8, 1993.

Nov. 12, 1993.

S. Denise McCrary (briefed), Wagerman & Seligstein, Memphis, TN, for plaintiff-appellant.

Daniel A. Clancy, U.S. Atty., Robert M. Williams, Jr., Asst. U.S. Atty., David A. Craig, Asst. U.S. Atty. (briefed), Memphis, TN, for defendant-appellee.

Before: MARTIN and BOGGS, Circuit Judges; and JOINER, Senior District Judge. ^*

BOGGS, Circuit Judge.

Plaintiff Charles Goldstein, d/b/a Chucky's Drive In Grocery in Memphis, Tennessee, appeals a district court order affirming a decision of the Food and Nutrition Service ("FNS") of the United States Department of Agriculture permanently disqualifying his business from participating in the food stamp program. For the reasons discussed herein, we affirm the district court's order.

I

Goldstein owns and operates a grocery and deli store in a low-income neighborhood. He began participating in the food stamp program in April 1985. By signing the certification on his application to participate in the program, he acknowledged that he understood that his authorization to accept food stamps could be revoked if any of his employees committed violations. Food stamp purchases constituted a significant portion of the income of Goldstein's store. He claims that hardship would be created for the area if his store were not allowed to accept food stamps.

In 1989, the FNS conducted a routine compliance investigation of Goldstein's store, in which an undercover agent on a number of occasions purchased ineligible items (e.g., soap) with food stamps and traded stamps for cash, in violation of food stamp statutes and regulations. Goldstein claimed to have been unaware of the illegal transactions and fired the two employees involved upon learning of their participation in the transactions. He further claimed that he had training sessions with his employees, instructing them on the applicable regulations.

With no prior warnings, the FNS charged Goldstein with violating the regulations by sending him a "charge letter" on August 7, 1989. The letter outlined the factual findings of the investigation and advised Goldstein of his right to respond before a final decision would be made. The FNS contends that it received no response from Goldstein until after the expiration of the ten-day period in which he could preserve his right to seek a civil fine in lieu of the sanction of permanent disqualification. However, Goldstein has produced a letter dated August 15, 1989, explaining his preventative actions and requesting a hearing.

On September 1, 1989, the FNS permanently disqualified Goldstein from participating in the food stamp program. After administrative review, the sanction was affirmed. Goldstein subsequently sought judicial review in federal court. The district court, after a de novo bench trial, sustained the sanction in August 1992. Goldstein appeals to this court.

II

An approved retail food store, such as Goldstein's, may be temporarily disqualified from participation or be fined for violating the food stamp statutes and regulations. 7 U.S.C. Sec. 2021(a); 7 C.F.R. Sec. 278.6(a). If the disqualification is based upon "trafficking" in coupons (i.e., trading food stamps for cash), disqualification is to be permanent. 7 U.S.C. Sec. 2021(b)(3)(B); 7 C.F.R. Sec. 278.6(a), (e)(1). However, the FNS, in its discretion, may impose a civil money penalty in lieu of disqualification for trafficking if it finds substantial evidence that the store had an effective policy and training program in effect to prevent violations of the statutes and regulations. 7 U.S.C. Sec. 2021(b)(3)(B); 7 C.F.R. Sec. 278.6(a), (i), (j).

When a store is disqualified, notice must be given to the store of the administrative action. The store then may file, within ten days, a written request for an opportunity to submit to the FNS information supporting its position. If no request is made or information submitted, the administrative determination is final. If the request is made, the FNS is to review the information submitted, as well as any other available information. A determination is then made, which is, subject to review provisions, final and takes effect in thirty days. The store may obtain judicial review of this final determination in a United States district court. The suit in the district court is a trial de novo by the court in which the court is to determine the validity of the questioned administrative action. 7 U.S.C. Sec. 2023(a); 7 C.F.R. Sec. 278.6(b), (c).

Goldstein does not contest the finding that his store had engaged in trafficking. Rather, he argues that the district court erred in upholding the sanction of permanent disqualification. He contends that a civil money penalty was warranted because he received no prior warnings, lacked any intent to violate the anti-trafficking regulations, did not benefit from the trafficking, and had a training program for his employees.

We recently examined the scope of judicial review under 7 U.S.C. Sec. 2023 in Abboud Market, Inc. v. Madigan, 1991 WL 165656 No. 90-3695 (6th Cir. Aug. 29, 1991) (unpublished), and take this opportunity to reiterate that scope. "Determination of a sanction to be applied by an administrative agency, if within bounds of its lawful authority, is subject to very limited judicial review." Woodard v. United States, 725 F.2d 1072, 1077 (6th Cir.1984) (citing Kulkin v. Bergland, 626 F.2d 181, 184 (1st Cir.1980)); Martin v. United States, 459 F.2d 300, 301-02 (6th Cir.), cert. denied, 409 U.S. 878, 93 S.Ct. 129, 34 L.Ed.2d 131 (1972). Once the trial court has confirmed that the store has violated the statutes and regulations, the court's only task is to examine the sanction imposed in light of the administrative record in order to judge whether the agency properly applied the regulations, i.e., whether the sanction is "unwarranted in law" or "without justification in fact." Woodard, 725 F.2d at 1077 (quoting Butz v. Glover Livestock Comm'n Co., Inc., 411 U.S. 182, 185-89, 93 S.Ct. 1455, 1458-59, 36 L.Ed.2d 142 (1973)). If the agency properly applied the regulations, then the court's job is done and the sanction must be enforced. The trial de novo is limited to determining the validity of the administrative action; the severity of the sanction is not open to review. Woodard, 725 F.2d at 1078 (quoting H.R.Rep. No. 464, 95th Cong., 1st Sess. 397-98, reprinted in 1977 U.S.C.C.A.N. 1978, 2326-27).

Thus, the question before us is whether the FNS acted within its authority in permanently disqualifying Goldstein from the food stamp program. Because Goldstein was found to have violated the regulations by trafficking in food stamps, the penalty of permanent disqualification from participation in the program was imposed. 7 C.F.R. Sec. 278.6(a) states that the FNS may impose the sanction of disqualification for a violation of the statutes or regulations; such disqualification shall be permanent if the disqualification is based...