Nationwide Trade Inc. v. United States

• Decision Date: 31 May 2022
• Docket Number: 21-cv-10275
• Parties: NATIONWIDE TRADE INC. Plaintiff, v. UNITED STATES OF AMERICA, U.S. DEPARTMENT OF AGRICULTURE FOOD AND NUTRITION SERVICE, RETAILER OPERATIONS DIVISIONS, Defendant.
• Court: U.S. District Court — Eastern District of Michigan

NATIONWIDE TRADE INC. Plaintiff,
v.
UNITED STATES OF AMERICA, U.S. DEPARTMENT OF AGRICULTURE FOOD AND NUTRITION SERVICE, RETAILER OPERATIONS DIVISIONS, Defendant.

No. 21-cv-10275

United States District Court, E.D. Michigan, Southern Division

May 31, 2022

Anthony P. Patti Magistrate Judge

OPINION AND ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT (ECF NO. 20)

SHALINA D. KUMAR UNITED STATES DISTRICT JUDGE

I. PROCEDURAL HISTORY

A.

Plaintiff Nationwide Trade Inc., which operates Complete Dollar Store, a retail convenience store in Detroit, Michigan, filed the instant action seeking judicial review of the U.S. Department of Agriculture's Food and Nutrition Service (FNS) determination that plaintiff trafficked in Supplemental Nutrition Assistance Program (SNAP)^[1] benefits and the

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decision to permanently disqualify plaintiff from participation in the program. ECF No. 1. Plaintiff also asserted that the FNS actions under SNAP regulations violated its due process and Eighth Amendment rights. Id. The matter comes before the Court on defendant's motion for summary judgment. ECF No. 20. Plaintiff filed a response brief opposing defendant's motion and defendant filed a reply brief in further support of its motion. ECF Nos. 28, 29. The Court has reviewed the pleadings and heard oral argument from the parties at a hearing held on May 25, 2022.

B.

In February 2018, the FNS issued a letter to plaintiff charging it with trafficking in SNAP benefits.^[2] ECF No. 20-4. The charge letter resulted from an investigation triggered by the FNS's computerized fraud detection system, known as ALERT, identifying suspicious benefit redemption patterns at Complete Dollar Store in 2017. ECF No. 20-2. The investigation included a visit to the store, photographs, an interview of Hussein Fawaz, plaintiff's president, and a manual analysis of data. Id.; ECF No. 20-11, PageID.2540-2547. The charge letter advised plaintiff that the penalty for

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SNAP trafficking is permanent disqualification from SNAP participation, but that plaintiff could pay a civil monetary penalty in lieu of permanent disqualification if it met certain regulatory criteria and requested it within ten days of receipt of the charge letter. ECF No. 20-4, PageID.1399; see 7 C.F.R. § 278.6(i). Plaintiff requested and was granted an extension of time to dispute the trafficking charge but was notified that the time to request a civil monetary penalty could not be extended. ECF No. 20-5, PageID.1410. Plaintiff did not request a civil monetary penalty within the ten days. ECF No. 20-11, PageID.2547.

In November 2020, FNS permanently disqualified plaintiff from participating in SNAP. ECF No. 20-8. Plaintiff requested an administrative review its disqualification and submitted a brief to support its request for review. ECF No. 20-10. On January 4, 2021, the Administrative Review Branch of the FNS upheld permanent disqualification in its Final Agency Decision. ECF No. 20-11. Plaintiff timely commenced this action for judicial review. ECF No. 1. Defendant's motion for summary judgment is now ripe for determination by the Court. ECF Nos. 20, 28, 29.

II. FACTUAL BACKGROUND

Complete Dollar Store began operating in August 2016 and was authorized to accept SNAP benefits as payment for eligible food items

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beginning in October 2016. ECF Nos. 20-2, PageID.1366-67; 20-6, PageID.1414; 28, PageID.2604. Complete Dollar Store stocked a variety of food items, including milk, juices, water, cereals, canned goods, chips, and nuts. ECF No. 20-7, PageID.1965; ECF No. 20-10, PageID.1984. The store did not stock fresh meat, poultry, or seafood, fresh produce, infant formula or infant cereal, or dairy products such as sour cream, yogurt, cottage cheese, or ice cream. ECF No. 20-7, PageID.1965-66. Complete Dollar Store also sold non-food items including tobacco products, lottery tickets, automobile products, health and beauty items, paper goods, and cleaning products. ECF No. 20-2, PageID.1370.

As noted above, FNS's ALERT system identified suspicious redemption patterns at Complete Dollar Store, which triggered a manual analysis of redemption data for the store for the months of August through December 2017. ECF No. 20-2. FNS also conducted an on-site visit to survey and photograph the store and interview the owner in December 2017. Id. The store inspection and photographs revealed that Complete Dollar Store had a single check-out area, enclosed entirely in a plexiglass barrier. Id., PageID.1368. Merchandise on top and underneath the checkout counter further limited checkout space. Id. The store had two registers, and one or two EBT/Credit Card scanners, no optical scanner,

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and no adding machine. Id. The inspector noted and photographed the most expensive SNAP eligible food items in the store, namely a 42.5 oz. cannister of ground coffee marked $11.99, a 50 oz. cannister of non-dairy instant coffee creamer marked $9.99, a 3 lb. box of Ritz crackers marked $9.99, and a gallon jug of vegetable oil marked $7.99. Id., PageID.1367-70. The inspector also noted and photographed dusty cans and packages and sparsely stocked shelves. Id. The inspector noted that the store sold no hot food, did not have a deli or prepared food section, and did not sell meat bundles, seafood specials, or fruit and vegetable boxes. Id, PageID.1370. The inspection noted that there were seventeen other SNAP authorized outlets within a one-mile radius of Complete Dollar Store: one supermarket, one seafood specialty store, four combination grocery/other stores, and eleven convenience stores. Id., PageID.1376.

The manual analysis of data from Complete Dollar Store revealed at least nineteen sets of rapid and repetitive transactions in a short period of time from the same SNAP account. Id., PageID.1373-74. Rapid, repetitive transactions are multiple purchases from a single account within a few seconds, minutes, or hours in the same twenty-four-hour period. Id. The case analysis included a review of three randomly selected SNAP households (accounts). Id., PageID.1389-1397. The reviewed households

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each redeemed benefits at convenience stores, combination stores, small grocery stores, supermarkets, and superstores during the August to December 2017 review period. Id. The three sampled accounts all spent large dollar amounts at Complete Dollar Store even though it does not carry expensive food items and the households had used their benefits at larger superstores or supermarkets the same day or a day before or after the visit to Complete Dollar Store. Id., PageID.1389. The case analysis concluded that the sampled SNAP account data strongly suggested trafficking occurred at Complete Dollar Store. Id., PageID.1397.

The case analysis also identified 231 excessively large transactions. Id., PageID.1374-75. These were transactions in the amount of $24.00 to $301.50, which were considerably higher than the average $5.43 convenience store transaction in Wayne County, Michigan during the review period. Id. The analysis compared plaintiff with three nearby convenience store competitors, finding that plaintiff had more than double the number of individual transactions totaling sixty to ninety dollars, and that plaintiff, with over forty such transactions, was the only authorized convenience store in the group to have any transactions over ninety dollars. Id., PageID.1380-84; ECF No. 20-11, PageID.2544-45.

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The case analysis surmised that the dusty cans and sparsely stocked shelves, the inventory of mostly inexpensive snack items, canned goods and beverages, and limited check-out space made the high-dollar purchase amounts flagged by ALERT highly suspicious for trafficking. ECF No. 20-2, PageID.1380. The case analysis concluded that the transaction data and on-site investigation, as analyzed and compared, were evidence that possible trafficking occurred at Complete Dollar Store, and thus warranted a charge letter. Id., PageID.1397.

In response to the charge letter, plaintiff argued that the repetitive transactions noted in the FNS case analysis had legitimate explanations: the SNAP participant forgot an item in the earlier transaction; members of the same household were co-shopping, purchasing items separately during the same visit; or the participant returned for a second purchase. ECF No. 20-6, PageID.1418-19. Plaintiff argued that its clientele has inconsistent transportation and relies on the variety of its inventory to fully satisfy their shopping needs. Id., PageID.1420. It argued that the store was sufficiently provisioned to satisfy the purchase amounts flagged in the case analysis report. Id., PageID.1416. Plaintiff posited that its higher dollar transactions were the result of its larger size and inventory than the convenience stores

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with which it was compared. Id., PageID.1422. Finally, plaintiff asserted that analysis of ALERT data is inherently unreliable. Id., PageID.1416-17.

The Final Agency Decision addressed plaintiff's denial of violations by highlighting information from the investigative visit to Complete Dollar Store. The plaintiff's observed operation and facilities revealed no scanners or conveyor belts, five shopping carts and six hand baskets, a small, cluttered checkout counter space, surrounded by barriers with very little surface area to place large purchases and little ability to process more than once customer at a time. ECF No. 20-11, PageID.2540. Plaintiff's observed inventory consisted of SNAP-eligible...