Jedatt v. US Dept. of Agriculture

• Decision Date: 19 March 1980
• Docket Number: Civ. No. 79-70514.
• Citation: 488 F. Supp. 261
• Parties: JEDATT, INC. d/b/a Home Town Foods, Plaintiff, v. UNITED STATES DEPARTMENT OF AGRICULTURE, Food and Nutrition Service, Defendant.
• Court: U.S. District Court — Western District of Michigan

488 F. Supp. 261

JEDATT, INC. d/b/a Home Town Foods, Plaintiff, v. UNITED STATES DEPARTMENT OF AGRICULTURE, Food and Nutrition Service, Defendant.

Civ. No. 79-70514.

United States District Court, E. D. Michigan, S. D.

March 19, 1980.

Paul Vincent, Detroit, Mich., for plaintiff.

Hayward Draper, Asst. U. S. Atty., Detroit, Mich., for defendant.

OPINION

COHN, District Judge.

This is a proceeding to review a one year suspension of plaintiff from the food stamp program for violation of the Food Stamp Act of 1977; Pub.L.No.95-113, Title XIII, § 1301; 91 Stat. 961; 7 U.S.C. § 2011 et seq.¹

I.

Plaintiff owns and operates a supermarket in the City of Detroit authorized to accept food stamps in payment for the food items it sells, 7 U.S.C. § 2018. There is no essential dispute about the facts leading to the suspension.²

In July of 1977 by letter and in accordance with administrative practice, the Food and Nutrition Service of the Department of Agriculture cautioned plaintiff as to the importance of observing the requirements of the food stamp program and the possibility of disqualification. Shortly before the letter a representative of the Service personally talked to plaintiff's owner about possible violations and the consequences.³

Following the letter the Detroit office of the Service requested a compliance review based on a concern over excessive redemptions. Compliance review is a procedure by which the Service attempts to determine whether a store in the program is following the law. The procedure involves "shopping" the store over several days under carefully controlled conditions to see whether it sells non-food items for food stamps. In this case on three different days in October, 1977 two different clerks sold to two different persons, six sales in all, in exchange for food stamps, non-food items that are commonly understood to be ineligible for sale for food stamps and are prohibited by 7 U.S.C. § 2013 and 7 C.F.R. § 278.2 (1979)⁴ and also gave cash change for food stamp sales.⁵

The six sales were made to persons known as aides; that is, persons hired on an hourly basis by Service investigators to shop a store. These aides were given a fixed amount of food stamps, went into the store, purchased a number of eligible and ineligible items, paid for them in food stamps and thereafter immediately reported to the investigators with their purchases and change. The merchandise purchased was then carefully checked and recorded.⁶

The results of the compliance review were transmitted to the appropriate Service officials and thereafter an administrative review was conducted first by the regional office and then by the national office culminating in the suspension from the program for one year, 7 U.S.C. § 2021. Plaintiff was notified of the suspension on February 7, 1979 and promptly instituted this proceeding to obtain review, 7 U.S.C. § 2023.⁷ During the pendency of these proceedings suspension has been stayed.

During the course of the administrative review plaintiff was advised in detail of the purchases and given an opportunity to respond, 7 U.S.C. § 2023. Plaintiff's comments were carefully considered. Initial notice of suspension was given plaintiff in August of 1978. Plaintiff was then given a further opportunity to argue against the findings and proposed sanction. The response included affidavits and an informal meeting with the Service review officer, all to no avail. Each of plaintiff's contentions (with an exception noted below) were answered in detail in the letter notifying it of the suspension.

The suspension was based on the Service determination that a store policy to sell non-food items had been established because of the number of clerks involved, the nature of items sold, as well as the number of transactions. Given the prior notice, in accordance with Service guidelines,⁸ a sanction of one year was deemed appropriate.⁹

II.

Plaintiff opposes the one year suspension claiming it is too severe under the circumstances and asks the Court to set it aside or reduce it. As authority for its argument it says:

1. A District Court has authority to review the sanctions imposed by the Service, particularly where the claim is made that the sanction is "unwarranted in law," citing Butz v. Glover Livestock Commission Co., 411 U.S. 182, 93 S.Ct. 1455, 36 L.Ed.2d 142 (1973).

2. The Service relies on guidelines required to be published in the Federal Register. Since they were not published the Service may not rely on them, citing 7 U.S.C. § 2013(c) and 5 U.S.C. § 552(a)(1)D.

The government asserts the Court has no authority to review a sanction imposed by the Service and that there was no obligation to publish the guidelines.

III.

The statutory and regulatory scheme governing the food stamp program is rather complex and may be briefly described as follows:

7 U.S.C. § 2021 provides that a store may be suspended from participation for a period of time, or fined under certain circumstances, for violation of the statute. The period of suspension is to be determined by regulations promulgated by the Secretary of Agriculture.¹⁰

7 U.S.C. § 2023 provides for review de novo in a United States District Court of the administrative proceedings.¹¹

Prior to January 1, 1979, 7 C.F.R. § 272.6 (1977) provided that a store failing to comply could be suspended for a reasonable period of time not to exceed three years. While the regulation provided in detail for the manner of review, 7 C.F.R. § 272.8 (1977) and 7 C.F.R. Part 273 (1977), the way in which the length of the sanction was determined not further elaborated on. The Service, to assure uniformity in the imposition of sanctions, published as part of its manual what it denominated as FNS GUIDELINES (Instruction 744-9 (1970)) which contained detailed criteria to be used in making a determination.¹² A one year suspension was provided for where the evidence clearly indicated that the store as a matter of policy was engaged in the sale of major non-grocery items and Service personnel had taken significant action to prevent violations.

The Midwest Regional Office of the Service, to explain the FNS GUIDELINES and further refine them for use by its personnel, issued what it called a Supplemental Policy Memorandum No. 1 to FNS(FS) Instruction 744-9, in which it elaborated on the terms "store policy" and "major non-grocery items."¹³

Since January 1, 1979 the regulations, 7 C.F.R. § 278.6 (1979) have specifically set forth the criteria to be used in determining the length of a suspension. Likewise, the new regulations, consistent with the 1977 amendments, also provide for a civil money penalty up to $5,000.00 in lieu of suspension under certain circumstances and set forth the basis for making a determination of whether to impose a sanction in lieu of a suspension.¹⁴

IV.

Plaintiff's reliance on Butz v. Glover Livestock Commission Co., 411 U.S. 182, 93 S.Ct. 1455, 36 L.Ed.2d 142 (1973) is misplaced. Butz held that when the Secretary of Agriculture made "`an allowable judgment in his choice of remedy'" 411 U.S. 182, 189, 93 S.Ct. 1455, 1459, 36 L.Ed.2d 142 no review of the sanction was authorized. A decision "unwarranted in law" would be one which exceeds the statutory limitations. Here, 7 U.S.C. § 2021 clearly allows for suspension up to three years.

In Martin v. United States, 459 F.2d 300 (6th Cir. 1972), cert. denied, 409 U.S. 878, 93 S.Ct. 129, 34 L.Ed.2d 131 (1972), the Sixth Circuit definitively interpreted the language of 7 U.S.C. § 2023 to limit this Court's right to review the length of a suspension.

"The statute authorizes a review only on the merits of the case, not on the period of disqualification."

". . . The reviewing court is authorized to `determine the validity of the questioned administrative action in issue'. The Court did make that determination by holding that the stores were disqualified from participation in the Food Stamp Program because of the admitted repeated violations. Upon making that determination the jurisdiction of the Court ended." (emphasis added).

. . . . .

"In the Act, no authority was conferred on the District Court to change the period of suspension ordered by the Secretary, or to impose new sanctions." (footnote omitted).¹⁵

459 F.2d 300, 301-02.

This interpretation was reinforced by the Sixth Circuit's affirmance without opinion, 516 F.2d 901 (6th Cir. 1975), of the decision in American National Foods, Inc. v. United States Dept. of Agriculture, 381 F.Supp. 1021 (M.D.Tenn.1974). Courts in the majority of other Circuits have followed Martin: See, Studt v. United States, 607 F.2d 1216 (8th Cir. 1979); Nowicki v. United States, 536 F.2d 1171 (7th Cir. 1976), cert. denied, 429 U.S. 1092, 97 S.Ct. 1103, 51 L.Ed.2d 537 (1977); Bush v. United States, 473 F.Supp. 715 (E.D.Pa.1979); M. R. Damiani Corp. v. U. S. Dept. of Agriculture, 421 F.Supp. 697 (S.D.N.Y.1976); Berger v. United States, 407 F.Supp. 312 (D.C.R.I.1976); Smith v. United States, 392 F.Supp. 1116 (W.D.La. 1975); Marcus v. U. S. Dept. of Agriculture, 364 F.Supp. 374 (E.D.Pa.1973); Miller v. U.S. Dept. of Agriculture, 345 F.Supp. 1131 (W.D.Pa.1972).

V.

The Court need not answer plaintiff's second contention that the Service is relying on guidelines which the law requires be published in the Federal Register.

As previously mentioned the Service has incorporated in its regulations, 7 C.F.R. § 278.6 (1979), much of the detail of what was formerly in the FNS GUIDELINES and which had not been published in the Federal Register. Included in the new regulations are the criteria for imposing a fine in lieu of disqualification and how such determination is to be arrived at. 7 C.F.R. § 278.6(g) & (h) (1979) and 7 C.F.R. § 279.8(c) (1979).

With the criteria for determination of the sanctions a part of the regulations, the objection based on lack of publication in the Federal Register is now moot. While the government vigorously argues that the Service's determination is to be...