Perales v. United States, 83 Civ. 5850-CLB.

• Decision Date: 14 May 1984
• Docket Number: No. 83 Civ. 5850-CLB.,83 Civ. 5850-CLB.
• Citation: 598 F. Supp. 19
• Parties: Cesar A. PERALES, Commissioner of Social Services of the State of New York, Plaintiff, v. The UNITED STATES of America and John R. Block, Secretary, United States Department of Agriculture, Defendants.
• Court: U.S. District Court — Southern District of New York

598 F. Supp. 19

Cesar A. PERALES, Commissioner of Social Services of the State of New York, Plaintiff, v. The UNITED STATES of America and John R. Block, Secretary, United States Department of Agriculture, Defendants.

No. 83 Civ. 5850-CLB.

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

May 14, 1984.

Daniel D. Kaplan, Asst. Atty. Gen., for the State of N.Y., New York City, for plaintiff.

Rudolph W. Giuliani, U.S. Atty., for the Southern Dist. of New York by Richard A. Simpson, Asst. U.S. Atty., New York City, for defendants.

MEMORANDUM AND ORDER

BRIEANT, District Judge.

The Food Stamp Act of 1977, as amended, 7 U.S.C. § 2011, et seq., provides assistance to eligible low income households to enable them "to obtain a more nutritious diet through normal channels of trade by increasing their food purchasing power ...." 7 U.S.C. § 2011. The Act's purposes are to combat hunger and malnutrition among those of limited means, as well as to strengthen the nation's agricultural economy through the enhancement of food marketing and distribution. Id.

The assistance provided under the Food Stamp Act is in the form of food stamp coupons that recipients use to purchase food from approved retail stores. These coupons are redeemable at face value by the Secretary of Agriculture through the facilities of the United States Treasury. 7 U.S.C. § 2013(a).

The Food Stamp Program is administered nationally by the Food and Nutrition Service of the Department of Agriculture ("FNS"). 7 C.F.R. § 271.3. It is administered locally by state agencies pursuant to plans of operation approved by the Secretary of Agriculture, which incorporate uniform standards of eligibility for assistance and specify the manner in which assistance will be processed. 7 U.S.C. § 2020. The state agencies are eligible to receive up to 50% or more of the costs of administering the program from the federal government. 7 U.S.C. § 2025.

Among the responsibilities of these state agencies are the certification of eligible households; the procurement, acceptance, storage, protection, control, accounting for and issuance of coupons; and the conduct of fair hearings for the determination of eligibility and entitlement to assistance. See generally 7 C.F.R. § 273. The Department of Social Services ("DSS") is the state agency responsible for the administration of the program in New York, and the program is implemented by social services districts throughout the State.

Under New York's plan of operation, as administered by DSS, an eligible individual is issued an Authorization to Participate ("ATP") card which can be redeemed for food coupons at authorized coupon redemption centers. The ATP bears an expiration date beyond which it cannot be used. Generally, an ATP is valid for the entire month of issuance. However, if it is issued after the 25th day of the month, it will be valid for at least twenty days thereafter, or until the end of the following month. See 7 C.F.R. § 274.2(e)(3).

In New York City, where the program is administered by the Human Resources Administration, special procedures have been implemented under the FNS's Rapid Access System, in an effort to reduce fraud. Pursuant to these procedures, an ATP card must be transacted initially within eight days of issuance. If a household reports that an ATP card has been lost or stolen, those eligible must wait until the expiration of the eight-day period before obtaining a duplicate. If during this time the original ATP has been redeemed fraudulently by a thief or finder, or if it has not been redeemed at all, the household will receive a duplicate. However, the household will be denied this duplicate if it is determined that its member actually redeemed the original card during the first eight days of issuance.

If an eligible household fails to redeem its ATP within the eight-day period, it can obtain an immediate replacement within the month of issuance of the original. The replacement ATP is valid until the end of the month or for twenty days thereafter if issued after the 25th day of the month. It entitles the household to the same monthly coupon allotment that could have been obtained with the original card, but it will not be issued unless the household's entitlement is confirmed and the original is surrendered.

The City and the State provide FNS with periodic reconciliation reports on forms provided by FNS that account for all redeemed ATP cards. The reports list the value of coupons issued upon acceptance of lost, stolen and expired ATP's and this information provides the basis by FNS to compute the losses of the program.

Federal regulations make state agencies strictly liable for any shortages or losses of coupons or cash that are caused by, inter alia, theft, embezzlement, cashier errors and natural disasters. 7 C.F.R. §§ 276.1(a), 276.2(a), (b). State agencies are also made liable for financial losses caused by the acceptance of expired ATP cards. 7 C.F.R. § 276.2(b)(3)(i). FNS is authorized to bill state agencies for the exact amount of such losses. 7 C.F.R. § 276.2(d). In the absence of payment, FNS may recover these losses through offsets against the federal share of administrative funds to which the state agency is otherwise entitled. 7 C.F.R. §§ 276.2(d), 277.16(c)(iii).

A state agency may seek administrative review of FNS claims by filing an appeal with the State Food Stamp Appeals Board. It may also seek judicial review of an Appeals Board determination, within thirty days of the receipt thereof, by a trial de novo in a District Court. 7 U.S.C. § 2023(a); 7 C.F.R. § 276.7(j). The filing of a timely appeal for administrative review automatically stays the action of FNS to collect any claim until a final determination has been issued by the Appeals Board. 7 C.F.R. § 276.7(e). The automatic stay applies to all claims except those based on a state agency's failure to comply with an order to reduce, suspend or cancel benefits. Id.

By letter of August 23, 1982, FNS notified DSS of the implementation of a policy of charging interest "on all debts over 30 days old which are owed to FNS by any party outside the Federal Government," including state agencies which administer the Food Stamp Program. Interest is to accrue on all claims, including those under administrative review, from the 31st day following the date of the initial billing of the claims. The rate of interest to be assessed is established quarterly in accordance with the prevailing value of funds to the Treasury, and remains constant over the life of a particular debt.

According to FNS, this policy was adopted under the authority of the Federal Claims Collection Standards, the Treasury Fiscal Requirements Manual, and a Treasury Department directive issued pursuant to these authorities.

FNS billed DSS on three occasions based on determinations that food stamps had been issued in New York to persons holding expired eight-day ATP cards. These billings were as follows:

                Claim No.    Date     Period Covered      Amount
                  1-83     1/18/83      10/80—3/81     $ 15,559.00
                  6-83     2/11/83       4/81—9/81       46,843.80
                  9-83     3/08/83      10/81—3/82      108,210.00
                                                       ___________
                                             TOTAL     $170,612.82
                

(The latter two amounts were subsequently revised, decreasing them to $43,428.80 and $102,844.00, respectively.)

DSS filed administrative appeals to the State Food Stamp Appeals Board pursuant to 7 C.F.R. § 276.7 with respect to each billing. The Appeals Board upheld each of the claims.

DSS has paid all claims. In addition, it has been assessed and has paid interest in the amount of $842.80 on the first claim, $4,234.31 on the second claim, and $8,913.14 on the third claim. Pursuant to the recently implemented FNS policy, interest was assessed retroactively to the 31st day following the initial billing of all the claims, even though the Appeals Board had not yet issued a final decision on DSS' appeals by that date.

Plaintiff's initial complaint in this action challenged only the first billing, No. 1-83, and was timely filed on August 8, 1983, pursuant to 7 U.S.C. § 2023(a). On September 26, 1983, DSS received notice of the Appeals Board's determination on claims Nos. 6-83 and 9-83. On November 4, 1983, over thirty days later, DSS filed an amended complaint challenging the second and third billings as well.

Defendants argue that this Court lacks subject matter jurisdiction to review the second and third billings because no complaint with respect to them was filed within the statutory period, and asks that the amended complaint be dismissed pursuant to Rules 12(b)(2) and 12(b)(6), F.R.Civ.P. Plaintiff contends that the action for judicial review of claims Nos. 6-83 and 9-83 was timely, since leave to amend was granted at this court's scheduling conference held on October 25, 1983. At that time, plaintiff alleges leave to amend the complaint to include the two new claims was granted with consent of defendants' counsel. There is no transcript of that conference. Usually this Court does not require attendance of a court reporter at such conferences, since most arrangements are both consensual and procedural, and to do otherwise would waste scarce resources. Plaintiff also contends that, as the amended complaint arises out of the conduct set forth in the original complaint, it relates back to the date of that pleading. Under these theories, plaintiff alleges that this Court does have proper subject matter jurisdiction.

In determining this threshold matter, we need not address the contested issue as to whether leave to file the amended complaint was granted in timely fashion with the consent of defendants' counsel at the court conference on October 25, 1983, since, in any event, the amended complaint relates back to the date of the original complaint.

Rule 15(c), F.R.Civ.P. provides that:

"Whenever the claim or defense asserted in the amended pleading arose out of the

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