TRM, Inc. v. U.S., 94-6684

• Decision Date: 19 May 1995
• Docket Number: No. 94-6684,94-6684
• Citation: 52 F.3d 941
• Parties: TRM, INC. d/b/a Food Circle, Plaintiff-Appellee, v. UNITED STATES of America, Department of Agriculture, Food and Nutrition Service Food Stamp Program, Defendants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 941

52 F.3d 941

TRM, INC. d/b/a Food Circle, Plaintiff-Appellee, v. UNITED STATES of America, Department of Agriculture, Food and Nutrition Service Food Stamp Program Defendants-Appellants.

No. 94-6684.

United States Court of Appeals Eleventh Circuit.

May 19, 1995.

Richard E. O'Neal, Asst. U.S. Atty., Walter E. Braswell, Acting U.S. Atty., Birmingham, AL, Barbara C. Biddle, Christine N. Kohl, U.S. Dept. of Justice, Appellate Staff, Civil Div., Washington, DC, Steven J. Youngpeter, U.S. Dept. of Agriculture, Office of the Gen. Counsel, Montgomery, AL, for appellants.

Jim L. DeBardelaben, Montgomery, AL, for appellee.

Appeal from the United States District Court for the Northern District of Alabama.

Before KRAVITCH, ANDERSON and EDMONDSON, Circuit Judges.

KRAVITCH, Circuit Judge:

This case arises out of the permanent disqualification of a grocery store from participation in the federal food stamp program because two of the store's employees allegedly accepted food stamps in exchange for cash. In a suit challenging the action, the district court granted summary judgment in favor of TRM, Inc., d/b/a Food Circle ("TRM"), and set aside the U.S. Department of Agriculture, Food and Nutrition Service's disqualification of the store, holding that TRM's due process rights had been violated. We REVERSE and REMAND.

I. Facts

By letter dated July 14, 1993, the U.S. Department of Agriculture, Food and Nutrition Service ("the FNS"), notified TRM, which operated a grocery store in Birmingham, Alabama, that its employees had violated 7 C.F.R. Sec. 278.2(a) by exchanging food stamps for cash. ¹ This is known as "trafficking." See 7 C.F.R. Sec. 271.2. The letter advised TRM that it was subject to either permanent disqualification from the food stamp program, or if certain criteria were met, the imposition of a civil monetary penalty ("CMP"). ² The letter explained that to qualify for a CMP, TRM had to send a request and supporting documentation to the FNS within 10 days. Further, TRM was informed that it could reply to the charges and present any relevant information to the FNS.

TRM responded, through counsel, and neither disputed that the trafficking incidents took place, nor requested a CMP. Instead, TRM explained that it had not properly supervised its employees because one of the store's owners was recovering from gunshot wounds, stated that the two employees involved had been terminated, and detailed actions taken by the store to prevent future abuses, such as the installation of surveillance cameras.

After considering TRM's submissions, the Officer-in-Charge of the FNS Montgomery Field Office notified TRM, by letter dated August 13, 1993, that it was upholding the charges, and that TRM would be permanently disqualified from the food stamp program; the letter also stated that TRM had the right to further administrative review. ³ TRM availed itself of such review and met with an FNS Administrative Review Officer ("ARO"). The ARO upheld TRM's permanent disqualification. ⁴

TRM filed suit in federal district court, seeking reversal of the permanent disqualification penalty. Following an evidentiary hearing, the district court stayed TRM's disqualification, pending resolution on the merits, relying on language from the stay order in Holmes v. United States, 815 F.Supp. 429, 432 (M.D.Ala.1993), judgment entered and stay dissolved, 868 F.Supp. 1348 (M.D.Ala.1994), ⁵ to the effect that the permanent disqualification penalty might violate a store owner's due process rights. In the stay order, the district court also stated that if TRM moved for summary judgment, the district court intended to grant the motion. TRM made such a motion, which the district court granted on May 26, 1994. This appeal followed.

II. The District Court Decision

In its order granting summary judgment, the court quoted Holmes I:

It is elemental in constitutional law that:

Due process of law implies the right of the person affected thereby to be present before the tribunal which pronounces judgment upon the question of life, liberty, or property, in its most comprehensive sense; to be heard, by testimony or otherwise, and to have the right of controverting, by proof, every material fact which bears on the question of right in the matter involved. If any question of fact or liability be conclusively presumed against him, this is not due process of law. Black's Law Dictionary 500 (6th ed. 1990); accord, U.S. Department of Agriculture v. Murry, 413 U.S. 508 [93 S.Ct. 2832, 37 L.Ed.2d 767] (1973); Stanley v. Illinois, 405 U.S. 645 [92 S.Ct. 1208, 31 L.Ed.2d 551] (1972).

Because the court has serious concern as to whether a statute which imposes strict liability on a store owner with no recourse to him or her to prove his or her innocence violates the due process clause of the Fifth Amendment of the Constitution, the court grants the stay pending resolution of this constitutional issue.

Mem.Op. at 2 (quoting Holmes I, 815 F.Supp. at 432). The district court then stated: "This court also believes that disqualifying the plaintiff from participating in the food stamp program is a deprivation of its property rights. Furthermore, the court believes that withholding the means by which the plaintiff store owners earn a livelihood is a violation of due process of law." Id.

The district court did not elaborate further on the rationale for its decision. The government contends that the district court erred because: (1) the administrative process and the district court's de novo review satisfy the minimum requirements of procedural due process; and (2) the imposition of the permanent disqualification penalty upon an "innocent" store owner does not violate the owner's substantive due process rights. ⁶ We address each contention in turn. ⁷

III. Standard of Review

"We review the district court's grant of summary judgment de novo, applying the same legal standards used by the district court." Parks v. City of Warner Robins, 43 F.3d 609, 612 (11th Cir.1995). Summary judgment shall be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c).

IV. Procedural Due Process

"Procedural due process requires notice and an opportunity to be heard before any governmental deprivation of a property interest." Zipperer v. City of Fort Myers, 41 F.3d 619, 623 (11th Cir.1995). ⁸

FNS regulations provide for multiple levels of informal agency review of alleged trafficking violations. First, the appropriate FNS office sends a charge letter to the firm specifying the violations or actions which the FNS believes constitute a basis for sanctions. See 7 C.F.R. Sec. 278.6(b)(1). ⁹ The charge letter informs the firm that it has ten days to respond, either orally or in writing, to the charge, id., ¹⁰ and in the case of a trafficking violation, the letter explains that a request for a CMP must be made within 10 days, or else it is deemed waived. See 7 C.F.R. Sec. 278.6(b)(2). The appropriate FNS office then reviews the relevant information, including the store's submissions, if any, and determines the appropriate penalty. See 7 C.F.R. Sec. 278.6(c)-(e). If the store is dissatisfied with the decision, it may appeal the determination to an ARO. See 7 C.F.R. Secs. 278.8, 279.5, 279.6, 279.7. Such review may include an appearance in front of the ARO, as well as the submission of any information in support of the store's position. See 7 C.F.R. Secs. 279.6(b), 279.7(b)-(d), 279.8(a). The ARO renders the final agency decision on the matter, notifying the firm by certified mail. 7 C.F.R. Sec. 279.8(e).

As noted above, TRM fully availed itself of this administrative review process. Nevertheless, we need not decide whether the administrative review process alone sufficiently safeguarded TRM's right to be heard, because the statute provides TRM with a full hearing de novo in the district court. See 7 U.S.C. Sec. 2023(a) ("The suit in the United States district court ... shall be a trial de novo by the court in which the court shall determine the validity of the questioned administrative action in issue...."). ¹¹

This court's predecessor and other courts have held that the provision of a de novo hearing in the district court adequately protects an aggrieved store owner's procedural due process rights. See Redmond v. United States, 507 F.2d 1007, 1012 (5th Cir.1975) ¹² ("By providing the aggrieved food store with a new trial where the store may introduce evidence outside the administrative record, the statute also protects the rights and interests of the store against final adverse action without the opportunity for an adversary hearing."); see also Haskell v. United States Dep't of Agriculture, 930 F.2d 816, 820 (10th Cir.1991) (when opportunity for de novo judicial review exists, lack of evidentiary hearing at the administrative level is not a denial of due process); Ibrahim v. United States, 834 F.2d 52, 54 (2d Cir.1987) ("trial de novo provision clearly afforded full procedural due process"); McGlory v. United States, 763 F.2d 309, 312 (7th Cir.1985) (per curiam) ("The due process argument fails because, once a participant seeks review de novo, the adequacy of the administrative process as an abstract matter is no longer important."). ¹³ Accordingly, we hold that TRM's procedural due process rights were not violated in this case.

V. Substantive Due Process

The next issue is the whether the disqualification penalty can properly be imposed upon an "innocent" store owner, who neither knows of nor benefits from a store employee's trafficking.

A.

In 1982, Congress amended the Food Stamp Act to provide for permanent disqualification upon the first trafficking offense. ¹⁴ See Omnibus Budget Reconciliation Act of 1982, Pub.L. No. 97-253, Sec. 175, 1982 U.S.C.C.A.N. (96...