Rith v. United States, CASE NO. 2:19-cv-01582-BJR

• Court: U.S. District Court — Western District of Washington
• Writing for the Court: BARBARA J. ROTHSTEIN UNITED STATES DISTRICT JUDGE
• Decision Date: 17 December 2020
• Docket Number: CASE NO. 2:19-cv-01582-BJR
• Citation: Rith v. United States, CASE NO. 2:19-cv-01582-BJR (W.D. Wash. Dec 17, 2020)
• Parties: MON RITH, DALIS SUN, SUPER VIDEO INC., doing business as GROCERY PLUS, Plaintiffs, v. UNITED STATES OF AMERICA, Defendant.

MON RITH, DALIS SUN, SUPER VIDEO INC., doing business as GROCERY PLUS, Plaintiffs, v. UNITED STATES OF AMERICA, Defendant.

CASE NO. 2:19-cv-01582-BJR

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WASHINGTON AT SEATTLE

December 17, 2020

ORDER GRANTING UNITED STATES' MOTION FOR SUMMARY JUDGMENT

I. INTRODUCTION

Plaintiffs Mon Rith, Dalis Sun, and Super Video, Inc., dba Grocery Plus, initiated the present action seeking to overturn the Food and Nutrition Service's ("FNS") permanent disqualification of their specialty grocery store from participating in the Supplemental Nutrition Assistance Program ("SNAP"). See Compl., Dkt. No. 1. Before the Court is the United States' Motion for Summary Judgment seeking dismissal of Plaintiffs' suit, arguing there are no triable facts to contradict the conclusion that Plaintiffs illegally trafficked in SNAP benefits. Mot. for Summ. J., Dkt. No. 18 ("Mot."). Having reviewed the Motion, the opposition thereto, the record of the case, and the relevant legal authorities, the Court will grant the Motion. The reasoning for the Court's decision follows.

II. BACKGROUND

A. Statutory Background

SNAP, the successor to "food stamps," offers food benefits to qualifying individuals and families with financial hardships. See 7 U.S.C. § 2011 et seq.; see also South Hill Mkt. v. United States, No. 19-cv-00073, 2020 WL 4043819, at *1 (E.D. Wash. July 17, 2020). The Program is administered by FNS, which is a division of the Department of Agriculture. SNAP operates similarly to a debit card, in which benefits are transferred to participants through an Electronic Benefits Transfer ("EBT") card. Participants may then spend their SNAP benefits by purchasing eligible items sold by approved SNAP retailers. See 7 U.S.C. § 2018 (Approval of Retail Food Stores and Wholesale Food Concerns); 7 C.F.R. § 278.1.

SNAP regulations prohibit "trafficking" in SNAP benefits, which is defined as "[t]he buying, selling, stealing, or otherwise effecting an exchange of SNAP benefits . . . for cash or consideration other than eligible food . . .." 7 C.F.R. § 271.2. In order to detect trafficking, every purchase made with an EBT card is recorded and stored in a national database. See Am. Decl. of Frederick Conn, Dkt. No. 34 ¶ 10 ("Conn Decl."). FNS utilizes the "Anti-Fraud Locator using Electronic Retailer Transactions," or "ALERT," system to monitor the national database and generate reports of suspicious patterns of transactions that suggest trafficking. Id. ¶¶ 11-12.

The penalty for approved retailers found to have trafficked in benefits is permanent disqualification of the retailer from participation in the Program, assessment of a civil monetarypenalty ("CMP"),¹ or both. 7 U.S.C. § 2021(a); 7 C.F.R. § 278.6(a); 7 C.F.R. § 278.6(e)(1). If, after administrative proceedings, a retailer is found to have trafficked in SNAP benefits and disqualified from participation in the Program, the retailer may file a complaint in federal district court to challenge their administrative disqualification. 7 U.S.C. § 2023(a)(13); 7 C.F.R. § 279.7.

B. Factual Background

Mr. Rith and Ms. Sun are the married proprietors and sole mangers of Grocery Plus. Compl. ¶¶ 2, 7-8; see also Mot. at 4-5, 6-7. They are Cambodian immigrants and their store specializes in Cambodian goods popular among their local Cambodian community as well as the Vietnamese, Thai, Laotian, and Burmese immigrant communities. The store itself is approximately 5,000 square feet, and offers both food and non-food items. Based on its size, FNS classifies Grocery Plus as a "medium" grocery store. Mot. at 4; A.R. 1.²

The store is located in the White Center neighborhood of Seattle. Plaintiffs contend that White Center contains a "high concentration of low-income, immigrant, and refugee households" and, thus, SNAP transactions make up approximately 60-70% of Grocery Plus's total sales. Compl. ¶ 7; Pls.' Opp'n to United States' Mot. for Summ. J., Dkt. No. 21 at 3-5 ("Resp."); Decl. of Mon Rith, Dkt. No. 23 ¶ 12 ("Rith Decl."). Plaintiffs also claim that those in the Cambodiancommunity that do not live in White Center will often travel from across the Seattle area to Grocery Plus for its specialized offerings. Rith Decl. ¶ 6.

The store itself has only one small checkout counter with two cash registers and two EBT Point of Sale devices. See Mot. at 5-6; A.R. 112, 115, 118, 123. That counter does not have an optical scanner, meaning that items must be rung up manually. The store also does not have any large shopping carts, only small, handheld and wheeled baskets customers can use while shopping, although the owners have access to three large hand trucks used to carry bulk items directly to customers' cars. See Rith Decl. ¶ 8; Mot. at 6-7; see also A.R. 96, 122.

According to Plaintiffs, Grocery Plus offers many expensive and bulk SNAP eligible items, such as bulk rice for $42.99, coffee for $55.00, sausage packs for $149.00, fish for $155.00, chicken wings for $97.00, and mangoes for $170.00, that can easily drive up shoppers' grocery bills. Compl. ¶ 8; Rith Decl. ¶ 13.

Grocery Plus was first authorized to participant in SNAP on September 23, 2014. Mot. at 5; A.R. 221.

C. Investigative and Administrative Proceedings

In April 2019, FNS initiated an investigation of Grocery Plus based on patterns of suspicious transactions identified by the ALERT system between December 2018 and March of 2019 ("Review Period"). Mot. at 5; A.R. 220. Specifically, the ALERT system identified four transaction patterns indicative of trafficking, which are at the center of this case:

(1) a large number of transactions ending in $.00 (also called "same-cents transactions");

(2) rapid, repetitive SNAP transactions involving the same SNAP household;

(3) depletion of the majority of a SNAP household's monthly benefits in a shorttime frame; and

(4) a large number of high-dollar SNAP transactions.

A.R. 246, 249-264.

Pursuant to FNS's investigation, an FNS contractor conducted a store visit on April 26, 2019. Mot. at 5-6; A.R. 96-127.³ While the store visit did not produce direct evidence of trafficking, i.e. acquiescence by the proprietor to engage in a benefit trafficking exchange, FNS prepared a Case Analysis Document which compared the four suspicious transaction patterns identified by the ALERT system with the contractor's Store Visit Report. Mot. at 7-9; A.R. 219-45 ("Case Analysis Document"). Based on this analysis, FNS determined that Grocery Plus's physical layout, inventory, amenities, checkout practices, and pricing structure could not account for the identified transaction patterns, leaving only SNAP benefit trafficking to account for the irregularities.

Based on the Case Analysis Document's findings, on May 28, 2019, FNS issued Grocery Plus a Charge Letter pursuant to 7 C.F.R. § 278.6 formally charging Plaintiffs with trafficking. Mot. at 9; A.R. 246-64 ("Charge Letter"). The Charge Letter identified the same four suspicious transaction patterns as recognized by the ALERT system and provided lists identifying the specific suspect transactions. The Charge Letter also invited Plaintiffs to respond to the allegations and explain the anomalies.

On June 5, 2019, Plaintiffs responded through their attorney, including a one-page letter and 14 pages of supporting documentation. Mot. at 9; A.R. 268-82. The Letter attempted to explain each pattern identified by the Charge Letter and contained many of the same explanations made before this Court and discussed infra.

FNS reviewed these explanations and determined that they did not account for the suspicious activities. This determination was memorialized in a Retailer Reply and Case Sanction Recommendation. Mot. at 10; A.R. 285-91 ("Case Sanction Recommendation"). Based on this conclusion, FNS sent a letter on June 17, 2019, informing Plaintiffs that it formally determined that trafficking had occurred and that Grocery Plus would be permanently disqualified from SNAP participation. Mot. at 11; A.R. 292-93. The Letter also informed Plaintiffs that they had a right to request administrative review of FNS's determination.

Plaintiffs, through their counsel, timely applied for administrative review on June 26, 2019. Mot. at 12; A.R. 296. On August 6, 2019, counsel submitted a letter brief in support of Plaintiffs' administrative appeal including numerous exhibits that have also been submitted before this Court. See Decl. of Ashley C. Burns, Ex. D, Dkt. No. 20-4.

Finally, on August 27, 2019, an Administrative Review Officer issued FNS's Final Agency Decision, which considered the evidence submitted by Plaintiffs, but ultimately found sufficient evidence to conclude tracking had occurred at Grocery Plus. Mot. at 12-13; A.R. 331-44. Based on that conclusion, the Final Agency Decision upheld Plaintiff's permanent disqualification.

D. Procedural History

On October 3, 2019, Plaintiffs timely filed their Complaint in this Court seeking to overturn FNS's permanent disqualification pursuant to 7 U.S.C. § 2023 and 7 C.F.R. § 279.7. Compl., Dkt.No. 1. The United States filed the currently-pending Motion for Summary Judgment on September 10, 2020. Mot., Dkt. No. 18.

III. LEGAL STANDARD

A. Summary Judgment

Under Federal Rule of Civil Procedure 56, a District Court shall grant summary judgment if "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). "An issue of material fact is genuine" where there is "sufficient evidence for a reasonable jury to return a verdict for the non-moving party," Karasek v. Regents of Univ. of California, 956 F.3d 1093, 1104 (9th Cir. 2020) (quoting Tauscher v. Phoenix Bd. of Realtors, Inc., 931 F.3d 959, 962 (9th Cir. 2019)), and a fact is "material," where it "might affect the outcome of the suit under the governing law," Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

While reviewing a motion for summary judgement, District...