Guzman v. U.S. Dep't of Agric. Food & Nutrition Serv.

• Decision Date: 18 March 2013
• Docket Number: No. 12 Civ. 3275 (PGG).,12 Civ. 3275 (PGG).
• Citation: 931 F.Supp.2d 488
• Parties: Juan F. GUZMAN, Francisco G. Guzman, Owners 3607 Broadway Food Center, Inc., Plaintiffs, v. UNITED STATES DEPARTMENT OF AGRICULTURE FOOD AND NUTRITION SERVICE, Defendant.
• Court: U.S. District Court — Southern District of New York

931 F.Supp.2d 488

Juan F. GUZMAN, Francisco G. Guzman, Owners 3607 Broadway Food Center, Inc., Plaintiffs,

v.UNITED STATES DEPARTMENT OF AGRICULTURE FOOD AND NUTRITION SERVICE, Defendant.

No. 12 Civ. 3275 (PGG).

United States District Court, S.D. New York.

March 18, 2013.

Juan F. Guzman, New York, NY, pro se.

Jeffrey Kenneth Powell, U.S. Attorney's Office, New York, NY, for Defendant.

MEMORANDUM OPINION & ORDER

PAUL G. GARDEPHE, District Judge.

In this action, pro se Plaintiffs 3607 Broadway Food Center, Inc. (“3607 Broadway”) and its owners Juan F. Guzman and Francisco G. Guzman challenge an administrative decision of the United States Department of Agriculture (“USDA”) disqualifying 3607 Broadway from participating in the Supplemental Nutrition Assistance Program (“SNAP”) for six years. ( See Am. Cmplt. ¶ IV) ¹ The USDA Food and Nutrition Service (“FNS”) imposed the six-year disqualification sanction after 3607 Broadway had been disqualified from participating in the Special Supplemental Nutrition Program for Women, Infants, and Children (“WIC”).

The Government has moved for summary judgment. (Dkt. Nos. 7, 11) Plaintiffs do not dispute or challenge the validity of the WIC disqualification but contend that they should not have been disqualified from participation in the SNAP program. The Government argues that the USDA's decision to suspend 3607 Broadway from the SNAP program was mandated by the relevant regulations and, in any event, was not arbitrary and capricious. For the reasons stated below, the Government's motion for summary judgment will be granted.

BACKGROUND

I. STATUTORY AND REGULATORY BACKGROUND

WIC provides “supplemental foods and nutrition education” to pregnant, post-partum, and breast-feeding women, as well as to children from low-income families. 42 U.S.C. § 1786(a) WIC is funded by the USDA and is subject to federal regulations, but is state-administered. In New York, WIC is administered by the New York State Department of Health (“DOH”). DOH authorizes vendors to participate in WIC and sanctions vendors who violate the regulations that govern the program. See42 U.S.C. § 1786(f); 7 C.F.R. §§ 246.3, 246.4, 246.12(j); Kim v. United States, 822 F.Supp. 107, 108 (E.D.N.Y.1993).

SNAP provides benefits designed to increase the food purchasing power of eligible beneficiaries. These benefits are distributed through Electronic Benefits Transfer (“EBT”) cards, and are used to purchase eligible food items at participating retail food stores. The Government then pays those food stores the full face value of the purchased items. 7 U.S.C. § 2013.

Pursuant to its authority under the Food and Nutrition Act of 2008 (“FNA”), the USDA has promulgated regulations that govern the WIC and SNAP programs. While the DOH sanctions those vendors that violate WIC regulations, FNS is responsible for imposing sanctions on vendors that violate SNAP regulations. 7 C.F.R. § 278.6(a). Violations of the SNAP regulations may result in temporary or permanent suspension from the SNAP program. ( Id.) FNS may impose a civil monetary penalty in lieu of disqualification, however, where it “determines that a disqualification would cause hardship” to households receiving SNAP benefits. ( Id.) Such a hardship exists where “the firm subject to a disqualification is selling a substantial variety of staple food items[ ] and ... there is no other authorized retail food store in the area selling as large a variety of staple food items at comparable prices.” 7 C.F.R. § 278.6(f)(1).

Under certain circumstances, FNS is required to disqualify a food store from participating in the SNAP program where that store has been disqualified from participating in the WIC program. For example, reciprocal disqualification from the SNAP program is required where a food store has been disqualified from WIC based on a “pattern of 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.” 7 C.F.R. § 278.6(e)(8)(i)(A); see also7 U.S.C. § 2021(g)(1) (authorizing USDA to issue regulations setting forth criteria for when WIC disqualification triggers reciprocal SNAP disqualification).

II. FACTUAL BACKGROUND

3607 Broadway is a grocery store located in the Hamilton Heights section of Manhattan. (Def. Rule 56.1 Stmt. ¶ 1; Administrative Record (“AR”) 1–3) ² 3607 Broadway was previously an authorized vendor in the WIC and SNAP programs. (Def. Rule 56.1 Smt. ¶¶ 2–3)

On September 8, 2003, the DOH sanctioned 3607 Broadway for violations of the WIC program.³ (AR 7) Pursuant to 7 C.F.R. § 246.12( l )(1)(ix), the DOH imposed a monetary penalty in lieu of disqualification after determining that 3607 Broadway's continued participation in the WIC program was necessary at that time in order to adequately serve the needs of the community. (AR 7) On September 25, 2005, the DOH imposed a second monetary penalty on 3607 Broadway based on a pattern of overcharge violations that occurred between February 2005 and May 2005. (AR 7–8)

In a June 10, 2011 letter, the DOH informed 3607 Broadway that the store's sales invoices for the period between October 2010 and February 2011 showed that 3607 Broadway had engaged in “a pattern of claiming reimbursement for sale of an amount of a specific supplemental food item which exceeds the store's documented inventory of that supplemental food item for a specific period of time.” ⁴ (AR 11) In this letter, the DOH further stated that because this conduct constituted 3607 Broadway's third violation of WIC regulations,it would be disqualified from participating in the WIC program for six years, as required by applicable regulations. (AR 11); see7 C.F.R. § 246.12( l )(1)(iii)(B) (requiring three-year WIC disqualification for pattern of claiming reimbursement for sales that exceed documented inventory); 7 C.F.R. § 246.12( l )(1)(vi) (requiring state agency “to double” sanction after three or more violations of the regulations governing the WIC program).

The June 10, 2011 letter also warned Plaintiffs that the “WIC disqualification may result in a Food Stamp Program reciprocal disqualification without the opportunity for a separate administrative or judicial review under the Food Stamp Program.” (AR 11) The DOH letter informed Plaintiffs that they had “the right to a hearing before an Administrative Law Judge” if they wished to challenge the disqualification. (AR 11) 3607 Broadway did not request administrative review and the store was disqualified from participating in the WIC program for six years, effective June 30, 2011. (AR 11, 22)

In a January 5, 2012 letter (the “Charge Letter”), FNS informed Plaintiffs that it was considering whether 3607 Broadway should be suspended from participating in the SNAP program based on its disqualification from the WIC program. FNS noted that “[o]ne of the [store's] violations [of the WIC regulations] is also a violation of the SNAP regulations.” (AR 15) FNS reiterated that if 3607 Broadway was suspended from the SNAP program based on the WIC disqualification, the disqualification from the SNAP program would not be subject to administrative review. ( Id.)

Through counsel, Plaintiffs requested a meeting with FNS officials to discuss the Charge Letter. (AR 18) At a January 24, 2012 meeting with FNS officials, Plaintiffs did not dispute the validity of the WIC disqualification, but simply stated that they had chosen not to appeal that sanction after being told by the DOH that “they had no chance of winning the appeal” and that the WIC disqualification “may or may not” result in reciprocal SNAP disqualification. (AR 22–23)

In a February 21, 2012 letter (the “Determination Letter”), FNS informed Plaintiffs that 3607 Broadway would be disqualified from participating in the SNAP program for six years, and that this decision “was final and ... not subject to administrative review.” (AR 27) The Determination Letter stated that FNS had considered whether to impose a monetary penalty instead of disqualification, but had decided that such a “hardship” exception would not be appropriate given that “there are other authorized retail stores in the area selling a variety of staple foods at comparable prices.” (AR 27) Three other grocery stores within 0.3 miles of 3607 Broadway accept SNAP benefits. Within the zip code for 3607 Broadway, four large grocery stores, three supermarkets, and two “super stores” accept SNAP benefits. (Def. Rule 56.1 Stmt. ¶ 4; AR 23–24, 26) The letter advised Plaintiffs, however, that they could appeal the denial of a “hardship” exception. (AR 27)

Plaintiffs requested administrative review of the disqualification determination in a February 28, 2012 letter to FNS. (AR 30–31) Plaintiffs argued that the disqualification determination should be overturned because they were not aware of the “potential of reciprocal disqualification from the [SNAP] program as a result of the WIC Disqualification,” given that their accountant had told them it was “more likely than not” that FNS would not exercise its discretion to impose reciprocal disqualification. (AR 30) Plaintiffs also argued that they “qualified for a [civil monetary penalty]in lieu of disqualification” because (1) the store had an effective compliance policy and program in place at the time the WIC violation occurred; (2) the store had developed and implemented an effective personnel training program covering SNAP rules and regulations; (3) the store was not aware that reciprocal disqualification could result from “poor record keeping”; and (4) the store was located in a low-income area and disqualification “would adversely impact the community.” (AR 30–31)

On March 28, 2012, FNS issued a Final Agency Decision sustaining the six-year disqualification imposed by its New York City Field Office. (AR 43–48) In upholding the six-year disqualification, FNS found that because there were “at least three other authorized retail stores...