Prunty v. US DEPT. OF AGR., FOOD & NUTRITION SER.

• Decision Date: 31 October 1983
• Docket Number: No. C-3-81-251.,C-3-81-251.
• Citation: 573 F. Supp. 1015
• Parties: Saint H. PRUNTY, dba Saint's Carry Out, Plaintiff, v. U.S. DEPT. OF AGRICULTURE, FOOD & NUTRITION SERVICE, Defendant.
• Court: U.S. District Court — Southern District of Ohio

573 F. Supp. 1015

Saint H. PRUNTY, dba Saint's Carry Out, Plaintiff, v. U.S. DEPT. OF AGRICULTURE, FOOD & NUTRITION SERVICE, Defendant.

No. C-3-81-251.

United States District Court, S.D. Ohio, W.D.

October 31, 1983.

John M. Cloud, Dayton, Ohio, for plaintiff.

James A. Wilson, Asst. U.S. Atty., Dayton, Ohio, for defendant.

DECISION AND ENTRY OVERRULING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT; JUDGMENT TO BE ENTERED FOR DEFENDANT; TERMINATION ENTRY

RICE, District Judge.

Plaintiff, Saint H. Prunty, dba Saint's Carry Out (Saint's), challenges a one year disqualification from participation in the government's Food Stamp Program pursuant to 7 U.S.C. § 2021. Plaintiff's disqualification resulted from the sale of ineligible items on five separate occasions. (Parties' Stipulations ¶ 9). Having received notification of disqualification by way of a letter dated November 5, 1980, Plaintiff sought and obtained review of this determination by the Administrative Review Staff of the Food & Nutrition Service which affirmed the original penalty imposed. (Joint Exhibit I, pp. 44-60).

Plaintiff subsequently filed this action pursuant to 7 U.S.C. § 2023 which provides for review de novo in a United States District Court of the "validity of the administrative action in issue."

Before the Court for determination are cross motions for summary judgment wherein the following issues are raised:

1. Whether, and to what extent, this Court has jurisdiction to make a determination on the issues raised in this proceeding;

2. Whether, as a matter of law, the one year disqualification is invalid and excessive;

3. Whether the Food Stamp Review Officer failed to give sufficient consideration to Plaintiff's request for imposition of a fine as opposed to a one year disqualification.

I. JURISDICTION

Defendant, the U.S. Department of Agriculture, Food & Nutrition Service (FNS or Agency), argues that it is entitled to a grant of summary judgment in its favor on the ground that this Court does not have jurisdiction to consider the contentions raised by the Plaintiff in his complaint.

There does not appear to be total concurrence among the circuits on the extent to which the district courts may properly engage in judicial review pursuant to 7 U.S.C. § 2023. The majority of the courts have held that the statutory language permits judicial review of the validity of the administrative action taken, i.e. whether the agency was acting within the bounds established by the applicable statutory and regulatory provisions. These courts have also held that the statute permits judicial review of the exercise of administrative judgment in imposing a particular penalty. Kulkin v. Bergland, 626 F.2d 181, 184 (1st Cir.1980); Studt v. United States, 607 F.2d 1216, 1218 (8th Cir.1978); Nowicki v. United States, 536 F.2d 1171, 1177-78 (7th Cir. 1976); cert. denied, 429 U.S. 1092, 97 S.Ct. 1103, 51 L.Ed.2d 537 (1977); Goodman v. United States, 518 F.2d 505, 511-12 (5th Cir.1975); Cross v. United States, 512 F.2d 1212, 1217-18 (4th Cir.1975) (en banc).

The Sixth Circuit, however, appears to have taken the position that a court may only review the validity of the agency's action, but may not modify the sanction deemed appropriate by the agency, once it has been determined that the administrative record supports a finding that the violation occurred and the sanction is within the agency's discretion as defined in the statute and corresponding regulations. Martin v. United States, 459 F.2d 300, 302 (6th Cir.1972); cert. denied, 409 U.S. 878, 93 S.Ct. 129, 34 L.Ed.2d 131 (1972); see also, American National Foods, Inc. v. United States Department of Agriculture, 381 F.Supp. 1021 (M.D.Tenn.1974), affirmed without opinion, 516 F.2d 901 (6th Cir.1975); Cass Corridor Food Coop. v. United States, 512 F.Supp. 925 (E.D.Mich. 1981).

Defendant, the United States Department of Agriculture, Food & Nutrition Service (FNS) argues that the Sixth Circuit's holding in Martin precludes this Court from reviewing the actions of the agency as the parties have stipulated the only matter properly reviewable by this Court, i.e., whether the violations prompting the sanctions in fact occurred.

However, Plaintiff's first argument is not that the agency, although acting within its discretionary authority, abused that discretion by imposing too severe of a penalty. Rather, the Plaintiff's argument is that, in this instance, FNS was not authorized by its governing regulations to impose a one-year disqualification as a sanction. Thus, the question before the Court is not whether the agency properly exercised its discretion, but rather, whether the agency was acting outside the scope of its authority, thus rendering its action invalid. The Sixth Circuit's holding in Martin does not preclude the Court from examining this question.

Moreover, Plaintiff's second argument does not seek to have the Court alter the sanction imposed by FNS, which action the Martin decision places outside the scope of the Court's authority. Instead, Plaintiff in its second contention, urges the Court to remand this matter to FNS for further consideration of whether the facts warrant imposition of a fine as opposed to a one-year disqualification. Should the Court agree with Plaintiff that the administrative record does not reflect adequate consideration of the alternative sanction of a civil penalty, remanding the matter to the agency for reconsideration would not be precluded by the holding in Martin. Jedatt v. U.S. Department of Agriculture, 488 F.Supp. 261 (E.D.Mich. 1980).

The Court concludes, therefore, that it has jurisdiction to consider the merits of the contentions raised by Plaintiff in its complaint and the parties' cross motions for summary judgment.

II. THE VALIDITY OF THE AGENCY'S ACTION

The basic thrust of Plaintiff's arguments focuses on the language of the regulations found in 7 C.F.R. § 278.6(e)(2), as those regulations read when they became effective on January 1, 1979.¹ These regulations provide the criteria that must be met in imposing various penalties on stores that have violated the Food Stamp Program provisions found in 7 U.S.C. §§ 2011, et seq. With respect to the imposition of a one-year penalty these regulations provide:

(2) Disqualify the firm for 1 year if:

(i) the evidence shows that: (A) It is the firm's policy to sell expensive or conspicuous non-food items, cartons of cigarettes, or alcoholic beverages, in exchange for food coupons, and the firm has engaged in such practices, or

(B) The firm bought coupons at discount, and

(ii) The firm was warned about the possibility that violations were occurring and of the possible consequences of violating the regulations. The regional office may disqualify a firm for 1 year, even though the firm was not warned about the possibility that violations were occurring, if the regional office finds that the firm has committed unusually serious violations of the kind described in (i)(A) or (B) of this subparagraph.

(iii) The evidence shows that the firm's coupon redemptions for a specified period of time exceed its food sales for the same period of time.

Plaintiff contends that regulation clearly calls for the agency to make the following three determinations before imposing a one-year disqualification: 1. the store has a policy of selling the items in (i) (or the store bought coupons at discount); 2. the store has been warned in accordance with (ii); and 3. the store's coupon redemptions exceed food sales during a specified time as described in (iii). Any other reading of the regulation's plain language, according to Plaintiff, would be tortured. Thus, because the administrative record is devoid of any finding that Saint's redemptions have ever exceeded its food sales, FNS was not authorized to even consider imposition of a one-year penalty.

Though the disputed regulation is rather inartfully drafted, the Court does not agree that there is but one logical interpretation to be given its language. To the contrary, the Court neither feels that Plaintiff's reading is compelled, nor that it is accurate. A reading of the prior internal guidelines,² and explanatory memoranda³ generated by FNS prior to the publishing of its regulation in 1979, demonstrates that the agency had previously always grouped store violation cases into two categories. One category of violations, referred to as Investigative Cases, encompassed infractions that came to light as a result of on-site investigating and monitoring by the agency of a store's sale practices to identify specified impermissible sales or types of transactions involving food stamps. The agency guidelines provided the agency staff with various criteria based upon the seriousness of the store's violations, which were designed to both limit and inform the exercise of the staff's discretion in meting out penalties which ranged from 30 days to 3 years.

The second category of violations addressed by the agency were unmasked by reviewing the regular statistical reporting requirements placed on stores participating in the Food Stamp Program. If it was determined that a store's rate of redeeming food stamps exceeded its sale of eligible food items and no acceptable reason or explanation for this disparity was forthcoming from the store, then the agency would impose a one or possibly three year disqualification on the store. Excessive redemptions were treated by FNS as evidence of widespread violations of the Food Stamp Program requirements. FNS (FS) Instruction 744-18, p. 12, ¶ A. Once the unexplained imbalance in statistics was identified, there was no need to determine the specific type or frequency of impermissible sales and transactions, as the disproportionate redemption rate served as conclusive proof that the store had been engaging in substantial Food Stamp Program violations. Thus, FNS considered such a statistical discrepancy to warrant at least a...