Maflahi v. United States

Background

Ghamdan Abdullah Maflahi and 875 E Tremont Grocery Deli Corp. challenged a March 2, 2023 final decision by the Food and Nutrition Service (FNS), a division of the United States Department of Agriculture. The FNS permanently disqualified E Tremont Grocery from the Supplemental Nutrition Assistance Program (SNAP) after finding that the store trafficked SNAP benefits. Trafficking includes exchanging SNAP benefits for cash or something other than eligible food.

The store had been approved as a SNAP retailer in 2015 and was classified as a convenience store. During a review period from July through October 2019, the FNS identified 428 transactions it considered suspicious. The transactions included 86 sets of multiple purchases by the same SNAP households within short periods, totaling $4,151.30, and 342 large transactions ranging from $32.00 to $115.49, totaling $17,126.00.

FNS contractors reported that the store had approximately 1,250 square feet of retail space, one cash register, no shopping carts or baskets, empty shelves, and no telephone or online ordering or delivery service. The FNS also compared the store’s transactions with those of nearby and similarly classified stores. During the review period, the store had $84,045.66 in SNAP redemptions, compared with an average of $25,022.56 for similar stores in Bronx County.

Plaintiffs’ Arguments and Administrative Proceedings

The plaintiffs did not deny that the flagged transactions occurred. They argued that the purchases were legitimate and could be explained by customers forgetting items, shopping together, returning to the store, or following ordinary shopping habits. They also argued that the store’s location, customers, inventory, and alleged sales of particular foods explained the transactions. They submitted invoices, bank statements, photographs, studies, customer affidavits, and other materials during the administrative process.

The FNS nevertheless determined that trafficking was more likely than not and permanently disqualified the store. The FNS found, among other things, that the store’s inventory did not explain the volume of large transactions, that the submitted invoices showed a substantial gap between SNAP-eligible inventory purchases and SNAP redemptions, and that some customer affidavits were inconsistent with transaction records. The FNS administrative review officer upheld the permanent disqualification on March 2, 2023.

The plaintiffs then filed this action under 7 U.S.C. § 2023(13) and 7 C.F.R. § 279.7. They sought to vacate the agency decision and alleged that the FNS’s decision was arbitrary and capricious and violated procedural due process. In opposing summary judgment, the plaintiffs submitted only a memorandum of law, without affidavits, declarations, documentary evidence, or the required response to the defendants’ statement of material facts.

Summary-Judgment Standard and Review

The court explained that summary judgment is appropriate when the evidence shows no genuine dispute about a material fact and the moving party is entitled to judgment as a matter of law. In reviewing an FNS trafficking determination, the court conducts a de novo review, meaning it independently examines the entire matter rather than merely asking whether the agency had substantial evidence. The plaintiffs bore the burden of proving by a preponderance of the evidence that the cited trafficking instances were invalid.

The court also explained that, after finding trafficking, it had to determine whether the sanction was arbitrary or capricious. A sanction is generally not arbitrary or capricious when the agency imposed it in accordance with its regulations and procedures. The court further stated that de novo judicial review satisfies procedural due process for an FNS disqualification challenge.

Court’s Analysis

The court found ample admissible evidence that E Tremont Grocery engaged in trafficking. It rejected the plaintiffs’ argument that the FNS relied only on an unreliable computerized transaction-screening system. The court found that the system did not itself determine that trafficking occurred and that the FNS also considered store visits, comparable-store data, nearby retailers, individual household data, invoices, customer affidavits, photographs, and other materials.

The court also rejected the plaintiffs’ explanations for the transactions. It found that the plaintiffs had not supplied evidence supporting their assertions about the store’s location, inventory, food offerings, delivery practices, or customer shopping patterns. The court noted that 37 of the 86 multiple-transaction sets occurred between 11:00 p.m. and 5:00 a.m., and that the plaintiffs had not addressed each cited instance of trafficking. The court therefore found, by a preponderance of the evidence, that E Tremont Grocery engaged in trafficking violations.

The court then upheld the permanent disqualification. Under the governing law and regulations, permanent disqualification is the default sanction for SNAP trafficking, including a first offense. A store may instead receive a civil money penalty if it timely requests that alternative and submits substantial evidence of an effective compliance policy and employee-training program, along with evidence satisfying other regulatory requirements. The court found that the plaintiffs did not request a civil money penalty or provide the required supporting documentation within the required period. It therefore ruled that the FNS followed its regulations and that the sanction was not arbitrary or capricious. The court added that even if the plaintiffs had been eligible for a civil money penalty, the FNS’s choice of sanction would not automatically have been arbitrary or capricious because the agency had discretion.

Finally, the court rejected the due process claims. It held that the opportunity for de novo review in federal court satisfied procedural due process. To the extent the plaintiffs asserted substantive due process, the court applied rational-basis review and found that preventing illegal activity in SNAP is a legitimate government purpose and that the disqualification was rationally related to that purpose.

Disposition

Judge Victor Marrero granted the defendants’ motion for summary judgment. The court entered summary judgment in favor of the United States of America, the United States Department of Agriculture, and the Food and Nutrition Service on the plaintiffs’ claims. The court dismissed all of the plaintiffs’ claims with prejudice and directed the Clerk to close the case.