Tony's Pantry Mart Inc. #1 v. U.S. Dep't of Agric. Food & Nutrition Serv.

• Decision Date: 30 March 2016
• Docket Number: Case No. 15 C 2967
• Citation: 175 F.Supp.3d 987
• Parties: Tony's Pantry Mart Inc. #1, Plaintiff, v. United States of America Department of Agriculture Food and Nutrition Service, Defendant.
• Court: U.S. District Court — Northern District of Illinois

175 F.Supp.3d 987

Tony's Pantry Mart Inc. #1, Plaintiff,

v.United States of America Department of Agriculture Food and Nutrition Service, Defendant.

Case No. 15 C 2967

United States District Court, N.D. Illinois, Eastern Division.

Signed March 30, 2016

Joseph R. Lopez, Lisa M. Lopez, Joseph R. Lopez, Ltd., Adam Michael Altman, Adam M. Altman, Ltd., Chicago, IL, for Plaintiff.

AUSA—Chicago, Virginia Ovitz Hancock, Prashant Kolluri, Susan Willoughby Anderson, Office of the United States Attorney, Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

AMY J. ST. EVE, District Court Judge

On April 3, 2015, Plaintiff Tony's Pantry Mart Inc. #1 (“Tony's Pantry”) filed a Complaint and Petition for Review of the Food and Nutrition Service's (“FNS”) Final Agency Decision permanently disqualifying Tony's Pantry from participating in the Supplemental Nutrition Assistance Program (“SNAP”).¹ See 7 U.S.C. §§ 2021(b)(3)(B), 2023(a)(13). Before the Court is Plaintiff's November 18, 2015 motion to stay the FNS's Final Agency Decision pending the outcome of this matter pursuant to 7 U.S.C. § 2023(a)(17). On March 1 and 17, 2016, the Court conducted an evidentiary hearing on Plaintiff's motion to stay. After carefully considering the evidence and the parties' arguments, the Court denies Plaintiff's motion.

LEGAL BACKGROUND

“In 1964, Congress permanently established what was then called the Food Stamp Program” that “aims both to feed low-income individuals and to strengthen the nation's agricultural economy.” Fells v. United States, 627 F.3d 1250, 1252 (7th Cir.2010) (internal citation and citations omitted); see also 7 U.S.C. § 2011. “In 1996, Congress set a deadline for states to replace the [original paper] coupons with electronic benefit transfer ('EBT') systems, which use debit-type cards to deduct benefits from a central location.” Fells , 627 F.3d at 1252 (citing 7 U.S.C. § 2016(h) ); see also Brothers Food & Liquor, Inc. v. United States, 626 F.Supp.2d 875, 877 (N.D.Ill.2009) (“Food stamp benefits are delivered to recipients on encoded Electronic Benefits Transaction (EBT) cards which recipients swipe through a reader in order to pay for eligible items, such as bread, dairy products, meat, and vegetables.”). “Upon the completion of this change in 2008, Congress renamed the program the Supplemental Nutrition Assistance Program” or SNAP. Fells , 627 F.3d at 1252 ; see also Mehrab No. 1 Corp. v. United States, 837 F.Supp.2d 943, 944 (N.D.Ill.2011) (SNAP was “formerly known as the Food Stamp Program”). Individuals may only redeem SNAP benefits for eligible food items at retail stores that are approved for program participation. See 7 U.S.C. § 2013(a). “Just as individuals must satisfy certain eligibility requirements in order to participate in SNAP, retail food store owners also must comply with applicable provisions and regulations.” Fells , 627 F.3d at 1252 (citing 7 U.S.C. § 2018 ). The FNS may disqualify participating stores for the improper use of benefits, including “trafficking,” which is defined as “the buying, selling, stealing, or otherwise effecting an exchange of SNAP benefits...for cash or consideration other than eligible food.” Dinner Bell Mkts., Inc. v. United States, 116 F.Supp.3d 905, 907 (S.D.Ind.2015) (quoting 7 C.F.R. § 271.2 ).

FACTUAL BACKGROUND

According to the administrative record in this matter, Tony's Pantry is a convenience store owned by Mohammad Yahya. (Ex. A, EBT Case Analysis, A.R. 47.) Tony's Pantry, an authorized SNAP retailer since April 2012, is located at 745 S. Kedzie Avenue in Chicago, Illinois. (Id .) After detecting unusual SNAP transaction activity at Tony's Pantry, the FNS, via a store visit contractor, conducted an in-person visit of the store on November 30, 2013. (A.R. 47-60.) The resulting EBT case analysis related to the November 2013 store visit stated that the store's eligible food inventory consisted of a mixture of staple and snack foods, but that the volume of snack foods was much greater than staple foods. (A.R. 48-49.) The analysis also stated that the store did not carry fresh meats, fish, or poultry and had minimal selections of fresh fruits and vegetables. (Id .) Moreover, the store did not advertise specials or offer items in bulk, had only one cash register, and the store's shopping cart and basket were in the storeroom at the time of the visit. (Id .) In addition to the store visit, the FNS monitored Tony Pantry's SNAP-EBT transactions from October 2013 through March 2014. (A.R. 47-48, 51-60.)

On September 2, 2014, the FNS sent Tony's Pantry a charge letter based on its analysis of the store's SNAP-EBT transactions that showed patterns indicative of trafficking. (Ex. B, 9/2/14 Charge Letter, A.R. 61-63.) Specifically, the charge letter notified Tony's Pantry that: (1) a series of SNAP-EBT transactions revealed an unusual number of transactions ending in the same cents value; (2) a series of SNAP-EBT transactions revealed multiple transactions made by individual benefit accounts in unusually short time-frames; and (3) a series of SNAP-EBT transactions showed excessively large purchase transactions made from recipient accounts. (A.R. 61-63.) The charge letter attached the lists of the transactions upon which the FNS relied in making its determination. (A.R. 64-103.) Further, the charge letter advised Tony's Pantry that it could request the imposition of a civil money penalty in lieu of the sanction of permanent disqualification, but to do so, Tony's Pantry had to satisfy the four criteria set forth in 7 C.F.R. § 278.6(i). (A.R. 61-62.)

On September 11, 2014, Tony's Pantry, by counsel, filed a response to the September 2, 2014 charge letter. (Ex. C, 9/11/14, Response Letter, A.R. 105-08.) In the response, Tony's Pantry did not request the imposition of a civil penalty under 7 C.F.R. § 278.6(i) in lieu of permanent disqualification. (Id .) In addition, although the response asserted that the store had not engaged in any trafficking, counsel failed to attach any supporting documentation—such as receipts, invoices, or affidavits—supporting its argument that the transactions identified in the charge letter were legitimate SNAP purchases. (Id .) Thereafter, the FNS considered the response and lack of documentation, along with the SNAP-EBT transactions outlined in the charge letter, and concluded that the sanction of permanent disqualification was appropriate under the circumstances. (Ex. E, 10/1/14 Case Sanction Rec. A.R. 119-27.)

On October 2, 2014, the FNS issued a final determination letter to Tony's Pantry permanently disqualifying the store from SNAP. (Ex. F, 10/02/14, Final Determination Letter, A.R. 128-29.) The final determination letter specifically notified Tony's Pantry that the permanent disqualification was effective upon receipt of the letter and that the determination was final unless the store submitted a written request for administrative review of the decision within ten days. (A.R. 128.) On October 10, 2014, Tony's Pantry requested administrative review of the final determination letter with the USDA's Administrative Review Branch. (Ex. G, 10/10/14 Letter, A.R. 131-32.) To that end, counsel for Tony's Pantry provided documents to justify the irregular transactions identified in the charge letter. (Ex. I, 10/23/14 Letter, A.R. 146-293.)

On March 10, 2015, an administrative review officer issued the Final Agency Decision upholding the FNS's finding of trafficking and the penalty of permanent disqualification. (Ex. K, Final Agency Decision, A.R. 312-28.) Based on the factual record, including the SNAP-EBT benefit transaction data, the Final Agency Decision concluded that there were three patterns of EBT transaction characteristics that indicated trafficking, including: (1) an unusual number of transactions ending in the same cents value; (2) multiple transactions from individual household accounts in short time-frames; and (3) excessively large SNAP transactions. (A.R. 322-26.) The Final Agency Decision also noted that Tony's Pantry did not offer sufficient evidence or reasonable explanations for these unusual, irregular, and inexplicable transactions. (Id .) Pursuant to the Final Agency Decision, the FNS permanently disqualifying Tony's Pantry from participating in SNAP. See 7 U.S.C. §§ 2021(b)(3)(B), 2023(a)(13).

On April 3, 2015, Tony's Pantry filed this lawsuit seeking judicial review of the March 10, 2015 Final Agency Decision. Over seven months later, on November 18, 2015, Tony's Pantry filed the present motion to stay the FNS's Final Agency Decision pending the outcome of this matter pursuant to 7 U.S.C. § 2023(a)(17).

On March 1, 2016, the Court held an evidentiary hearing regarding the store's motion to stay, at which time Jeffrey Sparman, a FNS program specialist, testified. The Court continued the evidentiary hearing on March 17, 2016 and Mr. Sparman concluded his testimony. At the hearing, Mr. Sparman testified about the SNAP program in general; how the EBT cards function; the FNS's systems, including ALERT (“Anti-Fraud Locator using EBT Retailer Transactions”) and STARS (“Store Tracking and Redemption System”), that monitor EBT transactions to target suspicious SNAP activity; contractor store visits and reports; the procedures involved in compiling an EBT Case Report; and how the agency generates charge letters, case sanction recommendations, and determination letters. In addition, he testified about the November 30, 2013 store visit of Tony's Pantry; the specific transaction scans in the store's EBT Case Analysis, including the same cents ending transactions, high dollar transactions, and household shopping patterns; and why he recommended the sanction of permanent disqualification. Mr. Sparman further explained the FNS's administrative review process.

Also at the March 17, 2016 evidentiary hearing, Tony's Pantry called the following witnesses in support of the store's motion to stay: (1) Abdalrahim Asfor, an employee of Tony's Pantry; (2) Mohammad...