E. Vill. New Deli Corp. v. United States
| Decision Date | 12 February 2021 |
| Docket Number | 20 Civ. 7356 (PAE) |
| Parties | EAST VILLAGE NEW DELI CORP., Plaintiff, v. UNITED STATES OF AMERICA, et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Before the Court is a motion by plaintiff East Village New Deli Corp. ("East Village") to stay a final decision of the Food Nutrition Service ("FNS"), a department of the U.S. Department of Agriculture ("USDA"), during the pendency of this action. FNS's decision permanently disqualified East Village from participating in the Supplemental Nutrition Assistance Program ("SNAP"). For the reasons that follow, the Court denies the motion to stay.
FNS operates the SNAP program. See Food Stamp Act of 2008, 7 U.S.C. §§ 2011-2036a; see also 7 C.F.R. § 271.3. SNAP's purpose is "to promote the general welfare, to safeguard the health and well-being of the Nation's population by raising levels of nutrition among low-income households." Id. § 2011. "SNAP beneficiaries receive a government-issued Electronic Benefits Transfer ('EBT') card and can purchase designated food items at participating firms by swiping their EBT card through an electronic reader." Makey Deli Grocery Inc. v. United States, 873 F. Supp. 2d 516, 517 (S.D.N.Y. 2012) (citing 7 U.S.C. § 2016(f)(3)(B); 7 C.F.R. §§ 274.2, 274.3). The Government then redeems the benefits and pays the participating firm the value of the purchase. Id. (citing 7 U.S.C. §§ 2013(a), 2019).
FNS is responsible for overseeing SNAP and monitoring firms to ensure compliance with the program. See 7 C.F.R. § 271.3. Trading SNAP benefits for items other than eligible food items constitutes "trafficking." 7 C.F.R. §§ 271.2, 278.2(a). A participating firm found to have engaged in trafficking is permanently disqualified from SNAP. See id. § 278.6(e). However, if the firm "timely submits to FNS substantial evidence which demonstrates that the firm had established and implemented an effective compliance policy and program to prevent violations of the Program," it can request a civil money penalty ("CMP") in lieu of permanent disqualification. Id. § 278.6(i).
East Village is a grocery store located at 115 Avenue A, New York, N.Y., 10009. See Dkt. 1 ("Compl") ¶ 4. On May 7, 2020, USDA sent East Village a letter notifying it that USDA was charging it with trafficking, which carries the penalty of permanent disqualification from SNAP. See id. ¶ 8; see also id., Ex. 1 ("May 7, 2020 Letter"). In the letter, USDA alleged that it had identified "Electronic Benefit Transfer (EBT) transactions that establish[ed] clear and repetitive patterns of unusual, irregular, and inexplicable activity for [East Village's] type of firm." May 7, 2020 Letter at 1. USDA included in the letter a list of the allegedly irregular charges, which were incurred between October 2019 and March 2020. There were two types of unusual transactions that USDA identified: (1) multiple EBT transactions from accounts of individual SNAP households within a set time period; and (2) transactions that were large compared to "observed store characteristics and recorded food stock." Id. USDA gave East Village 10 days to respond to the charges. It described the process by which East Village could request CMP in lieu of permanent disqualification.
On May 14, 2020, East Village responded by letter. Compl., Ex. 2 ("May 14, 2020 Letter"). In general terms, it denied having engaged in trafficking and argued that "theinformation (or lack thereof) presented by [USDA] [did] not support a finding of 'trafficking.'" East Village explained that the transactions "merely illustrate[] a typical six-month period at East Village in which all EBT transactions were legal and conducted in full compliance with SNAP regulations." The letter deemed USDA's accusations "wholly circumstantial" and stated that the "multiple EBT transactions from the same customers occurring typically five-to-six hours apart" were "nothing more than customers returning to make additional purchases after making their original purchase several hours earlier." East Village attached affidavits from the owner, Amran Abdo Nahshal, and three employees to the letter regarding the store's effective compliance policy.
On July 23, 2020, USDA responded by letter. Id., Ex. 3 ("July 23, 2020 Letter"). USDA stated that it had found that the violations outlined in the May 7, 2020 Letter had occurred and that East Village would be permanently disqualified from SNAP. USDA stated that it had also found that East Village had failed to establish and implement an effective compliance policy to prevent SNAP violations, and therefore that East Village was not eligible for a CMP.
On July 27, 2020, East Village sought administrative review of USDA's decision and reprised its arguments that there was "absolutely nothing to support" USDA's determination that East Village had engaged in trafficking. Id., Ex. 4. East Village further argued that it did have an effective compliance policy in place. Id. On September 9, 2020, USDA issued its final agency decision, disqualifying East Village from SNAP. Id., Ex. 5.
On September 9, 2020, East Village filed the Complaint, seeking de novo judicial review of USDA's decision to permanently ban East Village from participation in SNAP. Compl. The same day, East Village filed a motion to stay the agency's decision pending this action. Dkt. 5.On September 29, 2020, defendants moved for an extension of time to oppose the motion to stay until October 5, 2020, Dkt. 10, which the Court granted, Dkt. 11.
At the threshold, the parties dispute whether a stay is available under the Food Stamp Act in cases of permanent disqualification. See Dkt. 6 ("Mem.") at 5; Dkt. 13 ("Opp'n") at 6-10. Section 2023(a)(17) provides that during judicial review of FNS's decision, the decision remains in full force and effect, unless "after hearing thereon and a consideration by the court of the applicant's likelihood of prevailing on the merits and of irreparable injury, the court temporarily stays such administrative action pending disposition of such trial or appeal." However, the next subsection provides that "[n]otwithstanding any other provision of this subsection, any permanent disqualification of a retail food store or wholesale food concern under paragraph (3) or (4) of section 2021(b) of this title shall be effective from the date of receipt of the notice of disqualification." Id. § 2023(a)(18). Further, in cases of permanent disqualification, if the court reverses FNS's decision, the Secretary of Agriculture "shall not be liable for the value of any sales lost during the disqualification period." Id.
Courts have reached conflicting results as to whether stays are available in cases of permanent disqualification. Some have read the text of § 2023(a)(18) to "reflect[] that a stay is not available in cases of permanent disqualification." Ilaian v. U.S. Dep't of Agric., Food & Nutrition, 87 F. Supp. 2d 1047, 1048 (S.D. Cal. 2000); cf. Skyson USA, LLC v. United States, 651 F. Supp. 2d 1202, 1208 (D. Haw. 2009) (). Ilaian noted that the USDA's regulations interpreting and implementing§ 2203 provide that "permanent disqualification actions taken in accordance with § 278.6(e)(1) of this chapter shall not be subject to such a stay of administrative action," thereby implicitly indicating that, were the statute held ambiguous, deference to the USDA's interpretation of it would be due under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). 87 F. Supp. 2d at 1048 (quoting 7. C.F.R. § 279.10(d)).
Other courts have found that § 2023 unambiguously allows stays, making the agency's regulation to the contrary ineffective. See Tony's Pantry Mart Inc. v. U.S. of Am. Dep't of Agric. Food & Nutrition Serv., 175 F. Supp. 3d 987, 993 (N.D. Ill. 2016); Lazaro v. U.S. Dep't of Agric., 186 F. Supp. 2d 1203, 1211 (M.D. Fla. 2001). Section 2023(a), they reason, does not "limit the circumstances under which a store may seek a stay," and § 2023(a)(18) "does not contain any language that limits the federal courts' authority to grant a stay under § 2023(a)(17)." Tony's Pantry Mart Inc., 175 F. Supp. 3d at 994 (citing Lazaro, 186 F. Supp. 2d at 1210).
Two courts in this Circuit have resolved applications for such stays. See Al Amin Halal Meat & Fish Mkt. Inc. v. United States, No. 15 Civ. 276A, 2015 WL 12552019, at *15 (W.D.N.Y. Oct. 21, 2015) (), report and recommendation adopted, 2015 WL 12552031 (W.D.N.Y. Dec. 7, 2015); Ahmed v. United States, 47 F. Supp. 2d 389, 393-401 (W.D.N.Y. 1999) ().
The Court here does not have occasion to determine whether, as a matter of statutory interpretation, a stay is available pending completion of judicial review of a final administrative decision by FNS permanently disqualifying a business from participating in SNAP. That isbecause, as in Al Amin, the Court finds that, even if the statute allowed for such a stay, East Village would not qualify for one on the merits.
The standards for a stay under § 2023(a)(17) are that the applicant (1) is likely to prevail on the merits to its challenge to permanent disqualification, and (2) would suffer irreparable injury absent the stay.1
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