Irobe v. U.S. Dep't of Agric.

• Decision Date: 21 May 2018
• Docket Number: No. 17-1943,17-1943
• Citation: 890 F.3d 371
• Parties: Mahdi IROBE and Suuqa Bakaro Grocery, Plaintiffs, Appellants, v. UNITED STATES DEPARTMENT OF AGRICULTURE, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

890 F.3d 371

Mahdi IROBE and Suuqa Bakaro Grocery, Plaintiffs, Appellants,

v.UNITED STATES DEPARTMENT OF AGRICULTURE, Defendant, Appellee.

No. 17-1943

United States Court of Appeals, First Circuit.

May 21, 2018

Sarah A. Churchill, with whom Nichols & Churchill, P.A. was on brief, for appellants.

John G. Osborn, Assistant United States Attorney, with whom Halsey B. Frank, United States Attorney, and Sheila W. Sawyer, Assistant United States Attorney, were on brief, for appellee.

Before Torruella, Selya and Kayatta, Circuit Judges.

SELYA, Circuit Judge.

This appeal challenges a finding by the United States Department of Agriculture (USDA), echoed on de novo review by the district court, that a grocery store unlawfully trafficked in Supplemental Nutrition Assistance Program (SNAP) benefits. See 7 U.S.C. § 2023(a)(13), (15). Our task requires us to decide, among other things, the allocation of the burden of proof in a civil action brought pursuant to 7 U.S.C. § 2023(a)(13) —a question of first impression in this circuit. After careful consideration, we hold that the district court properly placed the burden of proof on the grocer. See Suuqa Bakaro Grocery v. Dep't of Agric., No. 2:16-cv-254, 2017 WL 3141919, at *5 (D. Me. July 24, 2017). We further hold that the court, acting at the summary judgment stage, supportably determined that the grocer had failed to carry this burden. See id. Consequently, we affirm the judgment below.

I. BACKGROUND

The plaintiffs are Mahdi Irobe and Suuqa Bakaro Grocery (a grocery store in Lewiston, Maine, catering principally to that community's sizeable Somali immigrant population). For ease in exposition, we refer to the plaintiffs, collectively, as the "Store."

Since we are tasked with reviewing the district court's entry of summary judgment, we take the facts in the light most congenial to the nonmovant (the Store). See McKenney v. Mangino, 873 F.3d 75, 78 (1st Cir. 2017), cert. denied, ––– U.S. ––––, 138 S.Ct. 1311, 200 L.Ed.2d 475 (2018). The Store is diminutive: it is only about 800 square feet in size, lacks shopping baskets or carts, and contains a single 2.5-by-1.5-foot-long checkout counter. It carries minimal amounts of fresh produce and frozen foods and does not offer many of the staples commonly found in markets (such as baby food, eggs, and fresh bread). In lieu of such staples, the Store offers Somali delicacies like goat and camel meat, along with certain nonperishables like sugar, flour, rice, pasta, and cooking oil. The Store operates in what might be called a "no frills" fashion: it does not have any optical scanning equipment, and it does not use a cash register in processing SNAP transactions. Instead, Irobe—the Store's owner and lone full-time employee—ordinarily computes each customer's purchases using a calculator. When Irobe cannot be at the Store, his brother-in-law pinch-hits for him.

On June 20, 2015, the USDA authorized the Store to deal in SNAP benefits (commonly known as "food stamps"). Because this authorization proved to be the first step down the road that led to this litigation, we pause to acquaint the reader with the SNAP framework.

Congress established SNAP "to safeguard the health and well-being of the Nation's population by raising levels of nutrition among low-income households." 7 U.S.C. § 2011 ; see 7 C.F.R. § 271.1. Authorized merchants may accept SNAP benefits in payment for certain food items. See 7 U.S.C. § 2013(a). The USDA then redeems those benefits (as described below). See id.

SNAP-qualified households receive electronic benefit transfer cards (EBT cards), which are similar to debit cards and may be used to purchase eligible foodstuffs at authorized stores. In a typical SNAP transaction, a cashier rings up the total food purchases, a household member pays using her EBT card through a point-of-sale device, and the funds in the household's SNAP account are electronically transferred to the store's bank account.

Households may use their monthly SNAP allotments to procure food items that are suitable for "home consumption." 7 U.S.C. § 2012(k). They may not use their allotments to procure cash, hot foods, or non-food items, even though such items may frequently be available at grocery stores. See id. These proscribed items include, for example, lottery tickets, alcoholic beverages, tobacco, vitamins, toothpaste, and cosmetics. See 7 C.F.R. §§ 271.2, 278.2(a).

Trafficking in SNAP benefits is unlawful, see 7 C.F.R. § 278.2(a) ; see also 7 U.S.C. § 2021(a)(1), (b)(3)(B), and a store engages in trafficking by accepting SNAP benefits in exchange for cash or other proscribed items, see 7 C.F.R. § 271.2. For instance, a store trafficks when it "accept[s] food stamps for sales that never took place," allowing its customers to receive "cash rather than merchandise." Idias v. United States, 359 F.3d 695, 698-99 (4th Cir. 2004).

The Food and Nutrition Service (FNS) is the bureau within the USDA charged with administering the SNAP regime. This bureau maintains a searchable database containing the household, store, date, time, and amount involved in each and every SNAP transaction. If the FNS detects a statistically unusual pattern of SNAP transactions at a SNAP-authorized store, it typically refers the matter to a program specialist who arranges for a contractor to visit the store and conduct an on-site investigation. After completing her review of the relevant EBT data and whatever reports emerge from the on-site investigation, the program specialist makes a recommendation to the FNS section chief. If this recommendation is for further action, the section chief sends a charge letter detailing the allegations to the store and affords the store an opportunity to respond. See 7 C.F.R. § 278.6(b). Thereafter, the FNS issues its determination. See id. § 278.6(c).

Once the FNS has issued its determination, an aggrieved store may prosecute an appeal to an administrative review officer. See 7 U.S.C. § 2023(a)(3) ; 7 C.F.R. §§ 279.1(a)(2), 279.5. Upon completion of his work, the review officer issues the final agency decision. See 7 U.S.C. § 2023(a)(5) ; 7 C.F.R. § 279.5. The governing statute empowers the USDA to impose a lifetime program-participation ban on "the first occasion or any subsequent occasion" of trafficking, but such a ban is not an automatic response to a program violation; rather, the USDA has discretion, in lieu of such a ban, to levy civil monetary penalties under certain circumstances. 7 U.S.C. § 2021(b)(3)(B) ; see 7 C.F.R. § 278.6.

With this backdrop in place, we return to the case at hand. As of June 2015 (when the Store was first authorized to participate in SNAP), there were approximately forty-five other shops within a one-mile radius of the Store that accepted SNAP benefits, including several larger ethnic Somali markets, a Walmart Supercenter, and two chain supermarkets. In short order, the FNS detected a suspicious pattern of transactions in the Store's EBT database. This red flag sparked an investigation by a program specialist, which included two on-site visits in the fall of 2015. On December 17, the FNS sent a charge letter detailing hundreds of sets of suspicious transactions that, in its view, evinced trafficking.¹ After receiving the Store's response, the FNS made a determination, dated January 12, 2016, in which it concluded that the Store had engaged in trafficking and permanently disqualified the Store from SNAP participation.

The Store seasonably requested an administrative review of the FNS's determination. On April 22, 2016, an administrative review officer upheld both the FNS's finding that the Store had violated the SNAP guidelines and the order for permanent disqualification.

The matter did not end there. The Store commenced an action in Maine's federal district court, challenging the agency's final decision. Following the close of discovery, the USDA moved for summary judgment. The Store opposed the motion. The district court heard oral argument, took the matter under advisement, and subsequently wrote a thoughtful rescript explaining why it would grant the motion for summary judgment. See Suuqa Bakaro, 2017 WL 3141919, at *5. This timely appeal ensued.

II. ANALYSIS

A party aggrieved by the USDA's final determination may seek judicial review through "a trial de novo ... in which the court shall determine the validity of the questioned administrative action in issue." 7 U.S.C. § 2023(a)(13), (15) ; see 7 C.F.R. § 279.7. This de novo review is wider in scope than that available under the Administrative Procedure Act. See Affum v. United States, 566 F.3d 1150, 1160 (D.C. Cir. 2009) ; Ibrahim v. United States, 834 F.2d 52, 53 (2d Cir. 1987). When a court carries out such a review, it must reexamine "the entire matter" instead of simply determining "whether the administrative findings are supported by substantial evidence." Ibrahim, 834 F.2d at 53 (quoting Saunders v. United States, 507 F.2d 33, 36 (6th Cir. 1974) ). The section 2023 inquiry is not restricted to the record compiled before the agency but, rather, extends to the augmented record compiled before the district court. See Affum, 566 F.3d at 1160 ; McGlory v. United States, 763 F.2d 309, 311 (7th Cir. 1985) (per curiam).

The de novo review standard applies only to the agency's liability determination, not to its choice of a sanction. See Mass. Dep't of Pub. Welfare v. Sec'y of Agric., 984 F.2d 514, 520 (1st Cir. 1993). A reviewing court may disturb the agency's choice of a sanction only if it finds that choice to be "arbitrary, capricious, or contrary to law." Id.; see Estremera v. United States, 442 F.3d 580, 585 (7th Cir. 2006).

When it commenced its civil action, the Store included in its complaint a boilerplate allegation that the USDA's chosen sanction (a lifetime program-participation ban) was arbitrary and capricious. In proceedings before the district court, however, the Store abandoned this allegation and challenged only the agency's liability finding. The...