Quick Korner Mkt. v. U.S. Dep't of Agric., Case No. 15-cv-1364-BAS-JMA

• Court: United States District Courts. 9th Circuit. United States District Court (Southern District of California)
• Writing for the Court: Hon. Cynthia Bashant, United States District Judge
• Citation: 180 F.Supp.3d 683
• Parties: Quick Korner Market, et al., Plaintiffs, v. U.S. Department of Agriculture, Food and Nutrition Service Defendant.
• Docket Number: Case No. 15-cv-1364-BAS-JMA
• Decision Date: 04 May 2016

180 F.Supp.3d 683

Quick Korner Market, et al., Plaintiffs,
v.
U.S. Department of Agriculture, Food and Nutrition Service Defendant.

Case No. 15-cv-1364-BAS-JMA

United States District Court, S.D. California.

Signed May 4, 2016

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Ivan B. Schwartz, Law Office of Ivan B. Schwartz, San Diego, CA, for Plaintiffs.

Leslie Marie Gardner, United States Attorney, San Diego, CA, for Defendant.

OPINION AND ORDER

Hon. Cynthia Bashant, United States District Judge

Plaintiffs Janan Stephan and Donna Marie Stephan bring this action against the United States Department of Agriculture, Food and Nutrition Service (“FNS” or “Agency”) seeking judicial review of the Agency's decision to withdraw authorization from Plaintiffs' grocery store to participate in the Supplemental Nutrition Assistance Program. (ECF No. 1.) Plaintiffs also bring an action for review under the Administrative Procedures Act, 5 U.S.C. § 701 et seq., and claims under 42 U.S.C. § 1983 for violation of the Fifth Amendment's due process protections. Defendant United States of America (“United States” or “Government”)¹ moves to dismiss

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the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction and pursuant to Rule 12(b)(6) for failure to state a claim. The Government also moves to transfer venue should any claims survive dismissal. (ECF No. 3.) Plaintiffs oppose. (ECF No. 6.)

The Court finds this motion suitable for determination on the papers submitted and without oral argument. See Civ. L.R. 7.1(d)(1). For the reasons that follow, the Court will GRANT IN PART the Government's motion to dismiss. The Government's motion to transfer venue is DENIED AS MOOT .²

I. STATUTORY BACKGROUND

Congress enacted the Food and Nutrition Act of 2008 (the “Act”), 7 U.S.C. §§ 2011 –2036, a successor statute to the Food Stamp Act of 1964, “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. A core component of the Act is the Supplemental Nutrition Assistance Program (“SNAP” or “Program”), which aims to alleviate hunger and malnutrition among low-income households by augmenting their ability to purchase certain food items. 7 U.S.C. §§ 2011, 2013(a). To be eligible for SNAP benefits, a household must meet certain income and resource constraint requirements. 7 U.S.C. § 2014. Beneficiaries receive SNAP benefits in the form of an electronic benefit transfer card, which they may use at retail food stores approved to participate in the Program. See 7 U.S.C. § 2016.

The participation of retail food stores in SNAP is critical to advancing the policy objectives envisioned by the Act. Store owners who wish to accept and redeem SNAP benefits must apply to, and receive authorization from, the FNS. See 7 U.S.C. § 2018. In considering grocery store applications, the FNS considers, among other factors, the nature and extent of the food business conducted by the applicant; whether the applicant is located in an area with significantly limited access to food; and the business integrity and reputation of the applicant. See 7 U.S.C. § 2018(a)(1).

Once a store has been approved to participate in SNAP, the FNS may penalize or disqualify the store from participating in the Program for certain offenses, such as “trafficking” in food stamps. See 7 U.S.C. § 2021. Trafficking includes “[t]he buying, selling, or otherwise effecting an exchange of SNAP benefits ... for cash or consideration other than eligible food.” 7 C.F.R. § 271.2. The penalty for trafficking is severe: the Act provides that a store's first-time trafficking offense results in permanent disqualification from the Program.³ 7 U.S.C. § 2021(b)(3)(B).

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Furthermore, under the Program's implementing regulations, the FNS may withdraw a grocery store's authorization to participate in the Program based on “a lack of business integrity.” 7 C.F.R. §§ 278.1(b)(3), (k)(3).

A store that has been disqualified from SNAP or otherwise sanctioned by the FNS may request administrative review of the decision within ten days of receiving notice of the decision. 7 U.S.C. §§ 2023(a)(1), (a)(3). Once completed, administrative review results in a final agency determination. 7 U.S.C. § 2023(a)(12). A store facing an adverse final agency determination may then seek judicial review under Section 14 of the Act, codified at 7 U.S.C. § 2023(a)(13). That provision provides:

If the store ... feels aggrieved by such final determination, it may obtain judicial review thereof by filing a complaint against the United States in the United States court for the district in which it resides or is engaged in business, or, in the case of a retail food store or wholesale food concern, in any court of record of the State having competent jurisdiction, within thirty days after the date of delivery or service of the final notice of determination upon it, requesting the court to set aside such determination.

7 U.S.C. § 2023(a)(13).

Two additional provisions of the Act discuss the standard of review for district courts reviewing an FNS final agency determination. Section 2023(a)(15) provides that the suit for judicial review “shall be a trial de novo by the court in which the court shall determine the validity of the questioned administrative action in issue[.]” Section 2023(a)(16) states that “If the court determines that such administrative action is invalid, it shall enter such judgment or order as it determines is in accordance with the law and the evidence.” An aggrieved store may also request the district court temporarily stay the challenged administrative action pending judicial review. 7 U.S.C. § 2023(17).

II. FACTUAL BACKGROUND

Plaintiffs are current owners of the retail store Quick Korner Market located in Phoenix, Arizona (“Phoenix store”), and previous owners of the Quick Korner Market & Deli located in El Cajon, California (“El Cajon store).⁴ (Compl.¶¶ 1, 5, 9.) In January 2005, while Plaintiffs owned the El Cajon store, the FNS sent Plaintiffs a charge letter indicating that the FNS had evidence of trafficking violations at the El Cajon store. (Compl.¶ 8.) The FNS indicated that if the evidence was confirmed, the El Cajon store would be permanently disqualified from participating in SNAP. Plaintiffs received the charge letter on January 10, 2005, and responded on January 14, 2005. (ECF No. 3, Mot. to Dismiss (“MTD”) 5:1–2.)

At some point after responding to the January 2005 charge letter, but before the FNS issued a final determination, Plaintiffs sold the El Cajon store and opened the Phoenix store. On October 7, 2005, Plaintiffs received authorization from FNS to participate in SNAP as owners of the Phoenix store. (Compl.¶ 9.)

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Meanwhile, the FNS completed its investigation and adjudication of the El Cajon store's apparent trafficking violations. On June 30, 2006, the FNS issued a determination letter that (1) confirmed the Agency's initial finding that Plaintiffs had committed trafficking violations and (2) permanently disqualified the El Cajon store from participating in SNAP. (ECF No. 3, Attach. 2.) The letter was delivered to the El Cajon store and confirmed by signature. (Compl. ¶ 10; MTD Attach. 3.) Plaintiffs argue that service of the letter was defective because Plaintiffs by that time had already sold the El Cajon store and had advised FNS of both the sale and the change of address.⁵ (Compl.¶ 10.) As a result, Plaintiffs contend, they did not have an opportunity to contest the permanent disqualification decision. Id.

Although Plaintiffs operated the Phoenix store with SNAP authorization for several years, the FNS eventually realized that Plaintiffs and their previous store had been permanently disqualified from the Program. On January 15, 2015, the FNS informed Plaintiffs by letter that the Phoenix store's authorization to participate in SNAP was being permanently withdrawn based on Plaintiffs' previous trafficking violations and permanent disqualification of the El Cajon store. (Compl.¶ 11.) Given Plaintiffs' history, the FNS determined that Plaintiffs “lacked the necessary business integrity and reputation to further the purposes of the program.” Id.; (ECF No. 3, Attach. 3.)

Plaintiffs timely requested administrative review. On May 1, 2015, the FNS issued a Final Agency Decision (“Decision”) upholding the initial decision to permanently withdraw the Phoenix store's SNAP authorization. (ECF No. 3, Attach. 2.) The Decision explained that Plaintiffs could obtain judicial review by filing a complaint within 30 days of receiving the Decision. Id. Plaintiffs received the Decision on May 5, 2015, and filed a Complaint with this Court 48 days later on June 22, 2015—18 days after the statutory filing deadline.⁶ (ECF No. 3, Attach. 2, p. 9.) The Government now moves to dismiss the Complaint pursuant to Rule 12(b)(1) for lack of subject matter jurisdiction and pursuant to Rule 12(b)(6) for failure to state a claim.

III. LEGAL STANDARD

A. Rule 12(b)(1) Motion to Dismiss for Lack of Subject Matter Jurisdiction ...