Rosario v. USA et al
ORDER granting 27 Motion for Summary Judgment. Please see attached Ruling and Order. Signed by Judge Robert N. Chatigny on 9/27/2017. (Chenoweth, T.)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
JOSE ALEJANDRO ROSARIO
d/b/a ALEXA GROCERY,
UNITED STATES OF AMERICA,
Case No. 3:14-CV-00907 (RNC)
RULING AND ORDER
Plaintiff Jose Alejandro Rosario challenges a decision of
the United States Department of Agriculture ("USDA") Food and
Nutrition Service ("FNS") permanently disqualifying his grocery
store from accepting food stamps under the Supplemental Nutrition
Assistance Program ("SNAP").
The USDA permanently disqualified
plaintiff for “trafficking,” that is, accepting food stamps in
exchange for ineligible items and cash.
trafficking itself are not in dispute.
The facts of the
Plaintiff contends that
he leased his grocery store to a third party before the
violations occurred and that permanently disqualifying him,
rather than assessing a civil money penalty, was arbitrary and
Plaintiff further alleges that the disqualification
violated his due process rights.
Defendants have moved for
I agree with defendants that the law holds
owners strictly liable for trafficking violations and that a
civil money penalty was not available under the regulations,
making permanent disqualification mandatory.
defendants’ motion is granted.1
Plaintiff owns and operates Alexa Grocery in Norwalk.
Defs.' Local R. 56(a)(1) Statement 1, ECF No. 29; Compl. 1, ECF
Porfirio Rosario (“P. Rosario”) managed the store during
the relevant time period.
Id. at 3.
Grocery was a SNAP participant.
Prior to Spring 2014, Alexa
SNAP, the federal benefits
program known as “food stamps,” offers nutritional assistance to
eligible low-income individuals and families.
7 U.S.C. § 2011
SNAP benefits are delivered to needy households via
electronic benefit transfer ("EBT") cards.
Each month, a SNAP
recipient's EBT card is credited with a dollar amount of benefits
and the card can be used at authorized retail food stores to
purchase eligible food items.
Pursuant to regulations, retail
food store owners who participate in SNAP cannot accept EBT
benefits as payment for ineligible items or in exchange for cash.
These prohibited behaviors are defined as "trafficking."
The complaint names the United States, USDA, and former
Secretary of Agriculture Thomas Vilsack as defendants.
Plaintiff's claims against the USDA and the Secretary must be
dismissed because 7 U.S.C. § 2023(a)(13) permits only judicial
review of complaints filed "against the United States." See
Kassem v. United States, No. 02-CV-0546E(F), 2003 WL 21383906, at
*3 (W.D.N.Y. Apr. 15, 2003) ("Inasmuch as the USDA – as opposed
to the United States – is the only named defendant, this action
fails for lack of subject matter jurisdiction."). The claims
against the defendants other than the United States are therefore
dismissed without further discussion.
C.F.R. § 271.2 (defining "trafficking").
In Summer 2013, an undercover investigator employed by
defendants visited Alexa Grocery three times.
R. at 42, ECF No.
Each time, the investigator either purchased ineligible
non-food items with SNAP benefits, R. at 43-45, 46-49, or
exchanged SNAP benefits for cash, R. at 48, 52.
Soon after these
visits, FNS initiated administrative proceedings against
R. at 39-41.
Plaintiff responded by denying the
trafficking charge and requesting a civil money penalty in lieu
of permanent disqualification stating that he had an effective
R. at 54-55.
On March 6, 2014, plaintiff's
attorney sent FNS an affidavit from the manager of Alexa Grocery,
P. Rosario, averring that in November 2012 he had leased the
store from plaintiff.
R. at 61-62.
A week later, plaintiff's
attorney sent FNS a copy of a management agreement between
plaintiff and P. Rosario, and P. Rosario's IRS form 1099 from
R. at 64-70.
After review of the investigator's reports and plaintiff's
letters and supporting documents, FNS issued a written decision
finding that violations had occurred.
R. at 71-73.
explained that per Regulation 278.6(e)(1), a store shall be
disqualified from participating in SNAP if: "(i) personnel of the
[store] have trafficked as defined in Section 271.2."
R. at 71.
FNS found that plaintiff was the owner of Alexa Grocery at the
relevant time because the management agreement showed only that
P. Rosario would manage the store, not that he would own it.
at 72; see id. ("[The agreement] stated, 'Nothing in this
agreement shall be considered as giving the manager an ownership
interest in the business.'").
Further, plaintiff had submitted
an online reauthorization application on June 10, 2013, naming
himself as owner of the store.
With regard to the nature of
the penalty to be imposed, FNS found that a monetary penalty was
not appropriate because plaintiff had failed to demonstrate that
he had an effective compliance policy and program to prevent
violations, as required to be eligible for a monetary penalty.
R. at 74.
The decision concluded that "a permanent
disqualification is warranted and the disqualification of this
store would not cause hardship to SNAP households."
R. at 73.
Plaintiff requested administrative review of the decision.
R. at 77, 84-87.
FNS issued a final agency decision on May 20,
R. at 91-101.
The final decision concluded that there was
sufficient evidence to support permanent disqualification.
Plaintiff then filed this action pursuant to 7 U.S.C. § 2023.
II. Standard of Review
On a motion for summary judgment, the moving party bears the
burden of showing that there are no material facts in dispute and
the moving party is entitled to judgment as a matter of law.
Fed. R. Civ. P. 56(a); see also Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 247 (1986).
“An issue of fact is ‘genuine’ if ‘the
evidence is such that a reasonable jury could return a verdict
for the nonmoving party.’”
McCarthy v. Dun & Bradstreet Corp.,
482 F.3d 184, 202 (2d Cir. 2007) (quoting Jeffreys v. City of New
York, 426 F.3d 549, 553 (2d Cir. 2005)).
When the nonmovant
“bear[s] the ultimate burden of proof at trial, the movant may
. . . point to an absence of evidence to support an essential
element of the nonmoving party’s claim.”
B.C. v. Mount Vernon
Sch. Dist., 837 F.3d 152, 157–58 (2d Cir. 2013) (second
alteration in original) (quoting Gummo v. Village of Depew, 75
F.3d 98, 107 (2d Cir. 1996)).
A SNAP vendor aggrieved by a final administrative action of
FNS may obtain judicial review of the agency decision.
The district court reviews the facts de novo on
the question of whether the vendor violated the regulations.
Id. § 2023(a)(15); Makey Deli Grocery Inc. v. United States, 873
F. Supp. 2d 516, 520 (S.D.N.Y. 2012).
The SNAP vendor "bear[s]
the burden of proving by a preponderance of the evidence that the
agency's action was 'invalid.'"
Arias v. United States, No. 13
Civ. 8542(HBP), 2014 WL 5004409, at *6 (S.D.N.Y. Sept. 29, 2014)
(quoting 7 U.S.C. § 2023(a)(16)).
If the district court
determines that the violation occurred, it considers whether the
penalty was arbitrary and capricious.
See Yafaie v. United
States, 94 Civ. 7825 (KMW), 1995 WL 422169, at *1 (S.D.N.Y. July
18, 1995) ("Whether the imposition of a penalty by the FNS was
arbitrary or capricious is a matter of law appropriately
determined on a motion for summary judgment.").
action is arbitrary and capricious if it was unwarranted in law
or without justification in fact." Nagi v. USDA, No. 96 CIV.
6034(DC), 1997 WL 252034, at *2 (S.D.N.Y. May 14, 1997) (quoting
Ai Hoa Supermarket, Inc. v. United States, 657 F. Supp. 1207,
1208 (S.D.N.Y. 1987)).
A penalty is not arbitrary or capricious
if it complies with FNS's own policy.
See Nagi, 1997 WL 252034,
at *2 ("If the agency has followed its guidelines, however, the
reviewing court may not overturn the decision as arbitrary and
capricious.") (citing Ai Hoa, 657 F. Supp. at 1208); Young Jin
Choi v. United States, 944 F. Supp. 323, 325 (S.D.N.Y. 1996) ("A
sanction is not arbitrary and capricious when a federal agency
properly adheres to its own regulations and guidelines when
A. The Trafficking Finding Is Supported
Plaintiff does not dispute that trafficking violations
Pl.’s Local R. 56(a)(2) Statement 1, ECF No. 38.
Rather, he argues that "personnel of the firm" who trafficked,
see 7 C.F.R. § 278(e)(1)(i), were not his employees because he
had leased Alexa Grocery to a store manager.
counters that plaintiff is strictly liable for the trafficking
violations because he owned the store and merely outsourced its
daily operation to his agent, P. Rosario.
The Food Stamp Act is a strict liability statute that
penalizes store owners for violations.
See Kassem v. United
States, No. 02-CV-0546E(F), 2003 WL 21382906, at *3 (W.D.N.Y.
Apr. 15, 2003) ("[I]t is well-established that a store owner is
responsible for any violations of the Food Stamp Act and
regulations by the store's employees."); see also Kim v. United
States, 121 F.3d 1269, 1273 (9th Cir. 1997) (rejecting "innocent
store owner" defense); Freedman v. USDA, 926 F.2d 252, 257-58 (3d
The Second Circuit has relied on the legislative
goal of preventing fraud in the food stamp program in holding
owners accountable despite a lack of clarity in the regulations
regarding complex ownership arrangements or “passive investors.”
Abdelaziz v. United States, 837 F.2d 95, 98 (2d Cir. 1988).
The record establishes that plaintiff owned the store at the
The “management agreement” he relies on states in
several parts that he retains full ownership of the business.
As noted above, plaintiff submitted an application for
reauthorization to receive SNAP benefits after the date he
allegedly entered into a “lease” with P. Rosario.
R. at 72.
1099 form submitted by plaintiff shows that the business, Alexa
Grocery, paid P. Rosario.
R. at 70.
On this record, plaintiff
was properly found liable for the violations.
B. The Penalty Is Not Arbitrary and Capricious
Plaintiff challenges the sanction of permanent
disqualification as arbitrary and capricious, asking instead for
a civil money penalty.
The Government responds that the decision
to permanently disqualify plaintiff from SNAP was mandatory under
Again, I agree.
The Food Stamp Act makes permanent disqualification the
default penalty for vendors who have trafficked in SNAP benefits.
7 U.S.C. § 2021(b)(1)(B); see 7 C.F.R. § 278.6(e)(1)(i) ("The FNS
regional office shall [d]isqualify a firm permanently if
[p]ersonnel of the firm have trafficked as defined in § 271.2.")
(emphasis added); see also Ade v. United States, No. 13 Civ.
2334(WHP), 2014 WL 1333672, at *3 (S.D.N.Y. Mar. 31, 2014)
("There is no doubt that the FNS is authorized to disqualify a
store from SNAP permanently for even a single trafficking
Plaintiff argues that the regulations also allow a
monetary penalty if disqualification would cause hardship to
However, that option exists as an
alternative to temporary disqualification, a penalty for
violations other than trafficking.
7 C.F.R. § 278.6(a).
FNS may impose a fine in lieu of permanent disqualification
for trafficking only if the store “establish[es] by substantial
evidence” that it meets four criteria:
(1) the existence of an effective compliance policy;
(2) the policy was in operation at the location before the
(3) the existence of an effective personnel training
(4) store ownership was not aware of, did not approve of,
did not benefit from, and was in no way involved in the
7 C.F.R. § 278.6(i).
The regulations require the store to provide supporting
documentation to comply with the "substantial evidence"
7 C.F.R. § 278.6(i)(1) & (2).
written, dated documents showing training programs and when they
"Store owners cannot simply attest to
having effective antifraud programs; rather, they must prove it."
Traficanti v. United States, 227 F.3d 170, 175 (4th Cir. 2000).
Plaintiff did not provide substantial evidence to FNS
regarding the four criteria of an adequate compliance program.
He merely asserted in an affidavit that he had trained employees
and would fire them for violations.
Because plaintiff failed to
submit substantial evidence in accordance with the regulations,
the sanction of permanent disqualification was mandatory.
21871 Hempstead Food Corp. v. United States, No. 14 Civ.
00006(ILG), 2014 WL 4402069, at *3 (E.D.N.Y. Sept. 4, 2014); see
also Arias v. United States, No. 13 Civ. 8542(HBP), 2014 WL
5004409, at *12 (S.D.N.Y. Sept. 29, 2014) (affirming imposition
of permanent disqualification when vendor did not submit written
documentation of an effective fraud prevention program); Kassem
v. United States, No. 02-CV-0546E(F), 2003 WL 21382906, at *4
(W.D.N.Y. Apr. 15, 2003) (same).
C. Due Process
Plaintiff’s complaint alleges that his permanent
disqualification violates due process.
Compl. 9, ECF No. 1.
Government argues that the statute and regulations on
disqualification for trafficking are rationally related to the
objective of eliminating fraud and plaintiff has received the
process required by the Constitution.
Summ. J. 14–15, ECF No. 28.
Defs.’ Mem. Supp. Mot.
Plaintiff has not responded to this
argument and review of the record discloses no basis for finding
a due process violation.
Accordingly, the motion for summary judgment [ECF No. 27] is
The Clerk may enter judgment for the defendant
and close the case.
So ordered this 27th day of September 2017.
Robert N. Chatigny
United States District Judge
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