Kawran Bazar Inc. et al v. Vilsack

Filing 23

MEMORANDUM & ORDER re 13 Motion for Summary Judgment. Defendants' Motion for Summary Judgment is GRANTED. This order disposes of all claims in the Complaint. Therefore, the Clerk of Court is respectfully directed to close the case. So Ordered by Judge Nicholas G. Garaufis on 12/12/2016. (fwd'd for jgm) (Lee, Tiffeny)

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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
-X
KAWRAN BAZAR INC. and

MEMORANDUM & ORDER

MOHAMMAD ELIAS KHAN,

15-CV-6109(NGG)
(JO)
Plaintiffs,

-against-

UNITED STATES OF AMERICA and

SECRETARY TOM VILSACK,
Defendants.
-X

NICHOLAS G. GARAUFIS,United States District Judge.
Plaintiffs Kawran Bazar Inc. and Mohammad Elias Khan initiated this action against

Defendants the United States of America and Tom Vilsack, Secretary of Agriculture, seeking
judicial review of sanctions imposed on Kawran Bazar under the Supplemental Nutrition
Assistance Program ("SNAP"). (See Compl.(Dkt. 1).) Before the court is Defendants' Motion
for Summary Judgment(the "Motion"). (Defs.' Mot.for Summ. J.(Dkt. 13).) For the reasons
stated below,the Motion is GRANTED.
I.

BACKGROUND

A. The Parties' Statements of Undisputed Facts

The facts in this opinion are drawn, where possible, j&om the parties' statements of
undisputed facts pursuant to Local Rule 56.1, as aggregated in the Consolidated 56.1 Statement

prepared by Defendants. (See Defs.' Local Civ. R. 56.1 Reply Statement("Consol. 56.1")
(Dkt. 21-1): see also Defs.' Local Civ. R. 56.1 Statement(Dkt. 13-2); Pis.' R. 56.1 Statement
(Dkt. 13-1).) See also Holtz v. Rockefeller & Co.. 258 F.3d 62,73(2d Cir. 2001)(intemal
quotation marks and citations omitted)(The court "is not required to consider what the parties

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fail to point out in their Local Rule 56.1 statements."). Citations to the administrative record are
omitted throughout this opinion.

Plaintiffs' 56.1 Statement failed to "include a correspondingly numbered paragraph
responding to each numbered paragraph" in Defendants' statement, as required by Local Civil
Rule 56.1(b). "To the extent the facts in defendants' Rule 56.1 statement are not directly

addressed by [Plaintiff], they are deemed undisputed for the purpose ofthe summary judgment
motion." Petrucelli v. Hasty,605 F. Supp. 2d 410,418(E.D.N.Y. 20091: see also Giannullo v.
Citv ofN.Y..322 F.3d 139,140(2d Cir. 2003); Local Civ. R. 56.1(c). This opinion relies on the
56.1 statements only for such undisputed facts; the court does not cite to the 56.1 statements for

any facts that were contested by the opposing party.
B. The SNAP and WIC Programs

Kawran Bazar is a grocery store that was formerly enrolled in two federal nutrition

assistance programs: SNAP and the Special Supplemental Nutrition Program for Women,
Infants, and Children("WIC"). (Consol. 56.1 at 3

1-2.) SNAP,formerly known as the "food

stamp" program, provides financial assistance to low-income families for purchases at

participating retail food stores. See generally 7 U.S.C. Ch. 51. SNAP falls under the authority
ofthe United States Department of Agriculture("USDA"), and is administered by the Food and
Nutrition Service ("FNS"). 7 C.F.R. § 271.3. WIC is a similar program that provides
"supplemental foods and nutrition education" to infants, children, and "pregnant, postpartum,

and breastfeeding women...from low-income families." 42 U.S.C. § 1786. WIC is funded by
USDA,but operated by a designated agency in each state. Id. § 1786(f). New York's WIC
program is administered by the New York State Department of Health("NYSDOH").
(Consol. 56.1 at 4 T[ 4.)

SNAP regulations provide for mandatory disqualification ofany vendor that has been
disqualified from WIC for violating WIC program rules, such as by "charging WIC customers
more than the current shelf price" for a given item. 7 C.F.R. §§ 278.6(e)(8),(e)(8)(i)(E). A

reciprocal SNAP disqualification "[s]hall be for the same length oftime as the [underlying] WIC
disqualification," and "[sjhall not be subject to administrative or judicial review." Id
§ 278.6(e)(8)(iii); see also 7 U.S.C. § 2021(g)(2). SNAP regulations also establish a
discretionary "hardship" exception, however:

FNS may impose a civil money penalty as a sanction in lieu of
disqualification when the firm subject to a disqualification is selling
a substantial variety of staple food items, and the firm's
disqualification would cause hardship to [SNAP] households
because there is no other authorized retail food store in the area

selling as large a variety of staple food items at comparable prices.
7 C.F.R. § 278.6(f)(1).

C. Factual Allegations and Procedural History
1. Kawran Bazar's Disqualification from WIC
Kawran Bazar was disqualified from WIC in 2012. (Consol. 56.1 at 3 2.) In the years
prior to disqualification, NYSDOH imposed civil monetary penalties on Kawran on two separate
occasions based on "a pattem of violations of WIC requirements." (Id,at 41IK 4-5.) Then,in
2012,NYSDOH sent Kawran Bazar a letter (the "WIC Letter") stating that Kawran Bazar

"would be disqualified from WIC for a period of six years due to a third violation, as required by
the applicable WIC regulations ... based on a pattem ofredeeming WIC checks for amounts
greater than the tme purchase price." (Id

6-7.) The WIC Letter notified Kawran Bazar ofits

right to seek administrative review, and also wamed that WIC disqualification may result in
reciprocal disqualification from SNAP "without the opportunity for a separate administrative or
judicial review." (Id at 5

8-9.) After administrative review proceedings, during which

Kawran Bazar was represented by counsel, NYSDOH sustained Kawran Bazar's disqualification
fromWIC. (Idat51[10to61[15.)
2. Kawran Bazar's Reciprocal Disqualification from SNAP

In July 2015,FNS sent Kawran Bazar a letter (the "Charge Letter") stating that,"based
on the store's WIG disqualification, the agency was considering disqualifying Kawran from

SNAP." (Id at 6f 16.) The Charge Letter notified Kawran Bazar ofits right to reply to the
charges, but Kawran did not submit a reply. (Id

17-18.) On August 13,2015,FNS sent

Kawran B^ar a second letter (the "Determination Letter") stating that Kawran "would be
disqualified jfrom SNAP for a six-year period and that the decision was not subject to
administrative review, in accordance with SNAP regulations." (Id ^ 19.) The Determination

Letter explained "that FNS had considered whether Kawran was eligible for a 'hardship' [civil
monetary penalty] in lieu of disqualification, but had determined it was not 'because there are
other authorized retail stores in the area selling a variety of staple foods at comparable prices.'"
(Id at 7 H 20(quoting the Determination Letter).)
3. Kawran Bazar's Administrative Appeal ofthe SNAP Determination

Kawran Bazar, assisted by counsel, sought administrative review ofFNS's decision to

impose disqualification rather than civil monetary penalties. (Id

22-23.) Kawran Bazar

"conceded that it had violated WIC regulations"(id ^ 24), but argued that the hardship exception
should apply. Kawran alleged that(1)it "sold ethnically assorted food staple items aimed at

serving the Bangladeshi community and the Muslim community,including Halal meat" and
Bangladeshi specialty items;(2)only "two other stores in the area[] offer one or the other of

[those] staple products";(3)both stores are substantially smaller and "have substantially higher
prices than Kawran"; and (4)as a result, disqualifying Kawran would cause "the community [to]

suffer since the other stores in the area will now be able to raise their prices given the decline in
competition." (Id 1123.)

FNS "permitted Kawran the opportunity to submit evidence" to substantiate the
allegations made in its appeal, but Kawran submitted no such evidence. (Id at 8 KH 25-26.) On

September 25,2015,FNS issued a final decision (the "Final Agency Decision")finding that
"Kawran did not qualify" for the hardship exception and sustaining the six-year SNAP
disqualification. (Id K 27.) "The administrative review officer determined that 'there are at least
16 authorized, redeeming stores within a one mile radius of[Kawran]that stock as large [a]

variety of staple foods at comparable prices,'" and "noted that[Kawran's counsel]'provided no
evidence oflower prices at[Kawran]."' (Id

28-29(quoting the Final Agency Decision).)

4. The Present Action

Kawran Bazar and its current owner, Mohammad Elias Khan (see Compl. H 1), brought

this action pursuant to 7 U.S.C. § 2023(a), which establishes a private right of action for a retail
food store that "feels aggrieved" by a financial administrative determination under SNAP. This
action was timely initiated on October 25,2015. S^id § 2023(a)(13)(requiring that a private
suit be initiated "within thirty days after the date of delivery or service ofthe final notice of
determination").

Plaintiffs do not challenge the mandatory reciprocal SNAP disqualification, which is
insulated jfrom judicial review. 7 C.F.R. § 278.6(e)(8)(iii); 7 U.S.C. § 2021(g)(2). Plaintiffs

"only seek to challenge [Defendants'] determination that [Plaintiffs] were not eligible for a civil
monetary penalty []in lieu of disqualification." (Pis.' Mem.in Opp'n(Dkt. 12)at EOF p.5.)
Defendants have moved for summary judgment. (Defs.' Mot. for Summ. J. at 10.)

II.

DISCUSSION

A. Legal Standards
1. Judicial Review ofFNS Administrative Sanctions

Plaintiffs are entitled to "de novo"review of"the validity ofthe questioned

administrative action." 7 U.S.C. § 2023(a)(15). "The standard ofreview for the imposition of a

[SNAP] sanction," including a refusal to apply the hardship exception,"is a determination [of]
whether [FNS's] action was arbitrary or capricious, i.e., whether it was unwarranted in law or
withoutjustiJdcation in fact." El Tenevac Grocery. Inc. v. United States. 515 F. App'x 55, 56
(2d Cir. 2013)
(summary order)(internal alterations omitted)(quoting Willv's Grocery v. United

States. 656 F.2d 24,26(2d Cir. 1981)). "It is well-settled that 'ifthe agency has followed its
guidelines[,] the reviewing court may not overturn the decision as arbitrary and capricious.'"

109 Merrick Deli Corp. v. United States. No. ll-CV-977(SET)
(RER),2014 WL 6891944, at *5

(E.D.N.Y. Sept. 30,2014)(internal alterations omitted)fquoting Gu2man v. U.S. Dep't of Agric.
Food & Nutrition Serv.. 931 F. Supp. 2d 488,494(S.D.N.Y. 2013)).
The SNAP statute is silent as to the burden ofproof on judicial review, and the Second
Circuit has yet to address the issue. However,"other circuits have held consistently that, given
the nature ofthe statutory scheme," the burden of prooffalls on "a store owner who seeks to set
aside an agency action." Saleh v. U.S.. Dep't of Agric. Food & Nutrition Servs..

No. 13-CV-4095(ERK)
(RLM),2014 WL 4905456, at *3(E.D.N.Y. Sept. 30,2014)(quoting
Fells V. United States. 627 F.3d 1250,1253 (7th Cir. 2010), and collecting cases). This court
finds those cases persuasive, and will follow the circuit consensus by placing the burden on
Plaintiffs to show that the agency acted arbitrarily or capriciously.

2. Summary Judgment

Summary judgment must be granted when "there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter oflaw." Fed. R. Civ. P. 56(a). "A

'material' fact is one capable ofinfluencing the case's outcome under governing substantive law,
and a 'genuine' dispute is one as to which the evidence would permit a reasonable juror to find
for the party opposing the motion." Fieueroa v. Mazza. 825 F.3d 89,98(2d Cir. 2016)(citing
Anderson v. Liberty Lobby.Inc.. 477 U.S. 242,248 (1986)).

"In making this determination, the Court'must construe the facts in the light most
favorable to the non-moving party and must resolve all ambiguities and draw all reasonable
inferences against the movant.'" Fireman's Fund Ins. Co. v. Great Am.Ins. Co. ofN.Y..
822 F.3d 620,631 n.l2(2d Cir. 2016)(quoting Beverv. Ctv. ofNassau. 524 F.3d 160,163
(2d Cir. 2008)). "Conclusory allegations, conjecture, and speculation," however,"are
insufficient to create a genuine issue offact." Joseph v. N. Shore Univ. Hosp.. 473 F. App'x 34,

36(2d Cir. 2012)(summary order)(quoting Shannon v. N.Y. City Transit Auth., 332 F.3d 95,99
(2d Cir. 2003)). If"the nonmoving party has failed to make a sufficient showing on an essential
element of her case with respect to which she has the burden ofproof," then the movant is
entitled to summaryjudgment. El-Nahal v. Yasskv. 835 F.3d 248,252(2d Cir. 2016)(quoting
Celotex Corp. v. Catrett. 477 U.S. 317, 323 (1986)).
B. Analysis

Plaintiffs bear the burden ofshowing that FNS acted arbitrarily or capriciously when it

declined to impose civil monetary penalties in lieu ofa six-year disqualification from SNAP.
The court finds that Plaintiffs have failed to satisfy that burden, even with all reasonable

inferences drawn in their favor. As a preliminary matter. Plaintiffs base their claim on an invalid
interpretation of what counts as a "staple food item" under the SNAP regulations. After defining
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the correct governing standard, the court finds that the administrative record amply supports

FNS's determination. Summaryjudgment must therefore be granted in favor of Defendants.^
1. The Definition pf''Staple Food Items"
Plaintiffs' filings before this court echo their arguments in the administrative

proceedings. As before, they argue that only two other stores in their neighborhood offer halal
meat or Bangladeshi staples, and that both stores are substantially smaller and more expensive
than Kawran Bazar. (Pis.' Mem.in Opp'n at ECF pp.11-13.) Plaintiffs contend that FNS erred
in failing to consider these "ethnically specific assorted food staple items aimed at serving the
Bangladeshi community and the Muslim conununity." (Id at ECF p.11.)

Plaintiffs' argument relies on the implicit premise that halal meat and Bangladeshi
specialty items constitute SNAP "staple food items." Plaintiffs offer no supporting legal
authority, however. The relevant regulation defines "staple food" as "those food items intended
for home preparation and consumption in each ofthe following food categories: meat, poultry, or
fish; bread or cereals; vegetables or fruits; and dairy products." 7 C.F.R. § 271.2. On its face,

this language supports Defendants' claim that "the regulations do not require that the staple food
items at the [comparison] stores meet any ethnic or religious specifications." (Defs.' Reply

(Dkt. 21)at 6.) See also King v. Burwell. — U.S. —,135 S. Ct. 2480,2489(2015)("Ifthe
statutory language is plain, we must enforce it according to its terms.").

'
Because the court resolves the case on these grounds, the court need not reach Defendants' additional argument
based on the discretionaiy nature ofthe hardship exception. It appears that, even in cases where FNS finds clear
evidence that disqualifying a particular vendor would cause hardship to the local community,FNS is under no
obligation to impose a civil monetaiy penalty rather than disqualification, ^7 C.F.R. § 278.6(f)(1)(providing that
"FNS may impose" a penalty "in lieu of disqualification"(emphasis added)); see also, e.g.. Makev Deli Grocery Inc.
V. United States. 873 F. Supp.2d 516,523(S.D.N.Y. 2012)("[E]ven where hardship criteria are met, imposition of
the monetary penalty in lieu of disqualification is discretionaiy with FNS."). In this instance, however,ITOS
explicitly stated that the hardship exception did not apply to Kawran Bazar. (Consol. 56.1 at 8 27-29.) The court
therefore begins—^and ends—its analysis by determining that FNS's decision, as articulated by the agency itself, was
neither "unwarranted in law or without justification in fact." El Teoevac Grocery. 515 F. App'x at 56 (citation
omitted).
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Moreover, Defendants' position is consistent with FNS's own interpretations of SNAP

regulations. Notably,the Comparison Store Visit Report form includes multiple subcategories
within each staple group—^the "meat" subcategories, for example, include beefveal,
lamb/mutton/goat, and pork—^but the form does not include data fields for dietary restrictions or
preferences associated with particular ethnic or religious groups. (See, e.g.. Comparison Store
Visit Reps., Admin. R.(Dkts. 15-19) at 7-222.) This omission is conspicuous: FNS apparently
did not expect to compare stores against each other based on whether they offer halal meat or
cuisine-specific specialty items. Also telling is a 1991 notice of proposed rulemaking in which
FNS considered amending "the criteria used in evaluating hardship" to add "special services that
are provided by the store," such as "ethnic foods or language skills not available at other area
stores." Food Stamp Program: Retailer/Wholesaler Changes, 56 Fed. Reg. 12,857, 12,861
(Mar. 28,1991). That proposal was never implemented. Evidently, FNS was aware that

particular demographic groups might be best served ifthe regulations acknowledged additional
dietary classifications beyond the "staple" categories. Nonetheless, FNS declined to formally
codify any such classifications in the "hardship" analysis.

Taken together with the plain regulatory text, these factors support a finding that halal
meats and Bangladeshi specialty items are not considered "staples" under the SNAP program.
See Food & Drug Admin, v. Brown & Williamson Tobacco Corp.. 529 U.S. 120(2000)(holding

that the Food and Drug Administration was not authorized to regulate tobacco products based, in

part, on the agency's own longstanding interpretation of existing statutes, as well as Congress's
rejection of legislation that would have explicitly provided such authority). In addition, a
decision concordant with an agency's longstanding policy weighs against a finding that the

agency's legal interpretation was arbitrary or capricious. See, e.g.. 109 MerrickPeli.2014 WL
6891944, at *5.

2. Evidentiary Support in the Administrative Record

Having determined that halal meats and Bangaldeshi specialty items are not considered
SNAP "staples," the court finds that FNS's decision is amply supported by the evidence in the
administrative record. The court notes that at no stage ofthe proceedings have Plaintiffs

submitted any evidence oftheir own,such as documentary evidence ofthe prices or locations of
comparison stores. The court turns, therefore, to the evidence adduced by Defendants in support
oftheir disqualification decision.

FNS sustained its disqualification decision based on a finding that there are "at least 16
authorized[SNAP vendors] within a one mile radius of[Kawran Bazar] that stock as large [a]

variety ofstaple foods at comparable prices." (Id H 28(quoting the Final Agency Decision).)
Plaintiffs protest that the administrative record only includes full Comparison Store Visit Reports
for eight ofthe 16 local stores, and that some ofthese reports were "stale" because they were

completed long before Kawran's case came up for admiiiistrative review. (Pis.' Mem.in Opp'n
at 11-12.) Defendants respond that five ofthe eight Comparison Store Visit Reports were
collected in July 2013 or later, placing them within approximately two years ofthe Final Agency
Decision. (Defs.' Reply at 4.) All five ofthese stores "offered staple food products comparable
to Plaintiffs' store." (Id.) Those reports alone provide a sufficient basis for FNS's decision
against applying the hardship exception, which requires a finding that "there is no other
authorized retail food store in the area selling as large a variety of staple food items." 7 C.F.R.
§ 278.6(f)(1)(emphasis added).

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In sum,the court finds that Plaintiffs have failed to satisfy their burden ofshowing that
FNS's decision was "unwarranted in law or withoutjustification in fact." El Tepevac Grocery,

515 F. App'x at 56(citation omitted). Therefore, Defendants are entitled to summaryjudgment,
m.

CONCLUSION

For the reasons stated above. Defendants' Motion for Summary Judgment(Dkt. 13)is

GRANTED. This order disposes of all claims in the Complaint. Therefore,the Clerk of Court is
respectfully directed to close the case.
SO ORDERED.

s/Nicholas G. Garaufis

Dated: Brooklyn,New York
December

NICHOLAS G. GARAUFli

2016

United States District Judge

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