Ganesh et al v. USA
Filing
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MEMORANDUM OPINION AND ORDER: (1) The government's motion for summary judgment, R. 14 , is GRANTED. (2) A separate judgment will follow. Signed by Judge Amul R. Thapar on 11/6/2015. (RCB)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
SOUTHERN DIVISION
PIKEVILLE
JAY SHRI GANESH, et al.,
Plaintiffs,
v.
UNITED STATES OF AMERICA,
Defendant.
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Civil No. 15-12-ART
MEMORANDUM OPINION
AND ORDER
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The United States determined that the plaintiffs—convenience store operators—
violated the guidelines for participating in the Food Stamp Program. So it barred the
plaintiffs from participating. The plaintiffs sued. The United States now moves for
summary judgment. For the reasons that follow, the United States’ motion is granted.
BACKGROUND
Jay Shri Ganesh and Hiteshkumar Patel own and operate a small convenience
store in Inez, Kentucky. R. 1 at 1. On October 28, 2014, they received a letter from
the United States Department of Agriculture’s Food and Nutrition Service (“FNS”)
stating that the FNS believed that they had violated the terms and provisions of the
Food Stamp Program. Id. at 2; R 14-1 at 3. After investigating further, the FNS
determined that the plaintiffs had trafficked in Supplemental Nutrition Assistance
Program (“SNAP”) benefits, so the FNS permanently disqualified the plaintiffs from
participating in the SNAP program. R. 1 at 2. This disqualification means that the
plaintiffs cannot accept SNAP benefits as payment for goods, thus eliminating some of
the store’s customer base.
The FNS’s decision to disqualify the plaintiffs from the SNAP program was
largely based on an analysis of electronic benefit transfers (“EBT”) at the store. R. 1-1
at 5–12.
The FNS identified several types of suspicious transfers that regularly
occurred at the plaintiffs’ store. First, the FNS found 118 transfers in which the same
EBT card was used at the store within a 24-hour period. Id. at 7. Many of these
charges were for the same amount. Id. Second, the FNS identified many transactions
where a customer would spend nearly all of his or her monthly SNAP allotment within
a very short timeframe, a pattern that is inconsistent with typical SNAP recipient
behavior. Id. at 9–10. Third, the FNS identified 275 transactions that it described as
“excessively large”—while the average SNAP purchase at a Kentucky convenience
store is $7.09, the plaintiffs’ store handled transactions of amounts up to $253.98. Id.
at 10–11. Finally, after visiting the plaintiffs’ store, the FNS determined that nothing
about the store could account for these suspicious transactions. Id. at 6–7. Instead, the
store offered a limited amount of food that a customer could purchase with SNAP
benefits, the counter space was small and not conducive to large transactions, and the
store did not offer grocery carts or shopping baskets. Id. Based on the electronic data
and the in-store visit, the FNS determined that SNAP-benefit trafficking provided the
best explanation for the unusual transactions.
See id. at 13.
permanently disqualified the plaintiffs from the SNAP program. Id.
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Thus, the FNS
The plaintiffs appealed the FNS’s decision. R. 1 at 2. The Administrative
Review Branch of the FNS reviewed the decision and determined that the FNS had
established a prima facie case for SNAP trafficking by a preponderance of the
evidence. Id.; R. 1-1 at 12–13. The Review Branch also determined that the defendant
had failed to offer any “reasonable explanations” for the suspicious transaction data.
R. 1-1 at 13. Because SNAP regulations mandate permanent disqualification as the
punishment for SNAP trafficking, the Review Branch held that the imposed sanction
was appropriate. Id.
On February 11, 2015, Jay Shri Ganesh and Hiteshkumar Patel filed the instant
complaint and appeal of the Administrative Review Branch’s decision. R. 1. The
plaintiffs asked this Court to determine the validity of the FNS’s administrative orders
and to void any order disqualifying them from participating in the SNAP program. Id.
at 3–4. The government filed a motion for summary judgment.1 R. 14. For reasons
that will be explained below, the motion for summary judgment will be granted.
DISCUSSION
Under the SNAP statute, upon the filing of a complaint, the district court shall
conduct a “trial de novo” to “determine the validity of the questioned administrative
action.” 7 U.S.C. § 2023(a)(15). But a party is not entitled to a de novo trial if
summary judgment is appropriate. See McClain’s Mkt. v. United States, 214 F. App’x
502, 504 (6th Cir. 2006) (affirming district court’s grant of summary judgment in
1
The government also moved, in the alternative, to dismiss the complaint pursuant to Federal Rule of Civil
Procedure 12(b)(6). Because summary judgment is appropriate, the Court need not consider this alternative
motion.
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SNAP trafficking case); see also J.C.B. Super Markets Inc. v. United States, 57 F.R.D.
500, 503 (W.D.N.Y. 1972) (stating that “[t]he use of the term ‘trial de novo’ in [the
Act] does not . . . signify an intention to provide a party the right to have its case tried if
summary judgment is appropriate”). When reviewing the agency’s determination, a
court may only inquire as to validity of the agency’s action—it may not review the
imposed sanctions. Woodard v. United States, 725 F.2d 1072, 1077–78 (6th Cir.
1984). Furthermore, the plaintiff bears the burden of proof to “establish the invalidity
of the administrative action by a preponderance of the evidence.” Warren v. United
States, 932 F.2d 582, 586 (6th Cir. 1991).
Summary judgment is appropriate when there is “no genuine dispute as to any
material fact.” Fed. R. Civ. P. 56(a). The party that moves for summary judgment
must identify the portion of the record which demonstrates the absence of a genuine
issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Once
the moving party has made this showing, the non-moving party bears the burden of
“showing that there is a genuine issue for trial.” Gregg v. Allen-Bradley Co., 801 F.2d
859, 861 (6th Cir. 1986). The non-moving party can survive summary judgment only
if it puts forward “significant probative evidence in support of the complaint to defeat
the motion for summary judgment.” Copeland v. Machulis, 57 F.3d 476, 479 (6th Cir.
1995) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248–49 (1986)). Thus, to
survive summary judgment, the plaintiffs must show that there is a genuine issue as to
whether the government met its burden of proof below.
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Here, the plaintiffs have not established that the administrative action was
invalid.
The record contains an abundance of evidence to support the SNAP-
trafficking determination. As discussed above, the government has offered three types
of electronic data showing suspicious transactions at the plaintiffs’ store: 1) multiple
transactions made by individual beneficiaries within short periods of time, 2)
transactions that exhausted a beneficiary’s account abnormally quickly, and 3)
excessively large purchases from beneficiary accounts. R. 14-1 at 10–12. These
transaction patterns are indicative of SNAP trafficking, and the FNS determined that
trafficking was the most logical explanation for this pattern. See R. 1-1. Additionally,
the FNS visited the plaintiffs’ store and determined that nothing about the store could
explain the suspicious transactions. Id. at 6-7. The plaintiffs now attempt to explain
each of these categories of suspicious transactions. None of their explanations are
persuasive.
A.
Multiple transactions from a single beneficiary within a short period of
time
The plaintiffs first argue that the government has not produced sufficient
evidence to support summary judgment.
Specifically, they allege that redacted,
unsubstantiated, circumstantial evidence—such as the electronic transaction records—
is insufficient to support the SNAP-trafficking charges. R. 17 at 6. But, as explained
above, it is the plaintiffs’ burden to establish by a preponderance of the evidence that
the administrative action was invalid. Moreover, the FNS may base its analysis on
electronic data—indeed, the applicable statute explicitly recognizes that violations
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maybe established through electronic benefit transfer reports. 7 U.S.C. § 2021(a)(2)
(stating violations may be established through electronic-benefit-transfer reports); see
also McClain’s Mkt. 214 F. App’x at 502 (upholding district court’s decision to
disqualify store based on electronic data).
Next, the plaintiffs attempt to explain the multiple transactions by arguing that it
is “impossible for [the store] to identify a SNAP card that had been used at another
time by a different individual to make purchases fraudulently, or to be expected to be
aware of the prior purchases that are associated with a particular SNAP account.” R.
17 at 6. The plaintiffs seem to argue that it would be possible for someone to come
into the store, make a purchase, then give his card to someone else to make a purchase.
This theory could, according to the plaintiffs, explain some of the multiple transactions.
Fair enough.
Perhaps this explanation could account for some of the suspicious
transactions. But this explanation fails to account for all of the suspicious transactions.
For example, the government points to a transaction on July 20, 2014, where an
account spent $63.49 and then spent $107.94 less than two minutes later. R. 20 at 3.
It would be physically impossible for a second person to make such a large purchase in
only two minutes. See R. 20 at 4 (elaborating on why such a situation is physically
impossible). Indeed, even ringing up $107.94 worth of items would presumably take
longer than two minutes. So plaintiffs’ proffered explanation fails to account for at
least one of the allegedly fraudulent transactions. And 7 U.S.C. § 2021(b)(3)(B)
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mandates that a violator be permanently disqualified upon the “first occasion” of
trafficking. So the FNS’s sanction was justified.2
B.
Transactions that exhaust a beneficiary’s account abnormally quickly
The plaintiffs do not provide a direct explanation for this category of suspicious
charges. Instead, the plaintiffs argue that they cannot verify the allegations about this
category because the government has redacted the names of the accounts. Yet the
plaintiffs do not explain why the names on the accounts are important.
Plaintiffs do
not argue that the transaction report misrepresents the transactions that occurred or
offer any other theory that might make the names on the accounts useful to their case.
Nor do they explain why they need the account names in order to provide an
explanation for the fraudulent charges. Although plaintiffs say they would like to
depose the beneficiaries, R. 17 at 7, plaintiffs do not explain how the information they
would gain from these depositions would help them explain the electronic charges in
question. Thus, plaintiffs’ rebuttal is inadequate.
The plaintiffs also argue that the government has failed to meet its burden of
proof because it only points to four example transactions that fall into this category.
R. 17 at 7–8. This argument is misguided. First, as explained above, the plaintiffs—
not the government—bear the burden of proof at this stage. Second, the law is clear
that even one instance of trafficking is sufficient to support permanent disqualification
from the SNAP program. 7 U.S.C. § 2021(b)(3)(B) (stating that a store shall be
2
The government also notes correctly that the plaintiffs are ineligible for a civil monetary penalty in lieu of
disqualification. In order to qualify for a civil monetary penalty, plaintiffs must submit “substantial evidence
which demonstrates that the firm ha[s] established and implemented an effective compliance policy.” 7
C.F.R. § 278.6(i). Plaintiffs have offered no proof of any such compliance program.
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permanently disqualified on “the first occasion” of trafficking); see also Kahin v.
United States, 101 F. Supp. 2d 1299, 1303 (S.D. Cal. 2000) (“[P]ermanent
disqualification is warranted on ‘the first occasion’ of coupon trafficking.”). Even if
the plaintiffs could explain the four example transactions, many other allegedly
fraudulent transactions exist to support the FNS’s allegations. See R 1-1 at 7–12. So
the plaintiffs have, yet again, failed to show that there is a genuine dispute of a material
fact.
C.
Excessively large purchases
The plaintiffs respond to this category of charges with only one new argument:
that the large transactions can be explained by the store’s low prices for soft drinks.
Specifically, the plaintiffs explain that they have a good deal with the local Coca-Cola
bottler, which allows them to: 1) offer Coca-Cola products at a lower price, and 2) sell
24-pack sodas instead of 20-pack sodas. R. 17 at 2, 3, 10. The plaintiffs suggest that
the large purchases at their store stem from this market advantage. But the plaintiffs
acknowledge that they adhere to a five-case-per-customer limit on soft drink sales.
R. 1-1 at 11. And photos taken at the store indicate that a 24-pack sells for $6.49.
R. 17-2 at 1. Together, this evidence suggests that Coca-Cola products could account
for only $32.45 of a sale. The 275 transactions identified by the FNS as excessively
large include amounts as large as $253.98. R. 1-1 at 11. The plaintiffs have failed to
offer an explanation for these larger transactions. Because the plaintiffs have failed to
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show that there remains any genuine dispute of a material fact, the government is
entitled to summary judgment.3
CONCLUSION
Ample evidence exists supporting the FNS’s determination. The plaintiffs have
failed to show that there is any genuine dispute as to whether the government met its
burden of proof in the administrative action below. For that reason, summary judgment
must be granted in favor of the government.
Accordingly, it is ORDERED that:
(1)
The government’s motion for summary judgment, R. 14, is GRANTED.
(2)
A separate judgment will follow.
This the 6th day of November, 2015.
3
In the complaint and appeal, the plaintiffs also allege that the USDA failed to properly consider the three
factors from 7 C.F.R. § 278.6(d) before determining sanctions. R. 1 at 3. But plaintiffs’ complaint offers no
evidence to support this claim, nor do the plaintiffs address this claim when responding to the government’s
motion for summary judgment. See id.; see also R. 17. Because the plaintiffs offer no evidence to support
this claim, this claim cannot survive summary judgment.
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