Chen v. Vilsack

Background

The plaintiffs receive Supplemental Nutrition Assistance Program (SNAP) benefits and alleged that they lost benefits through “skimming,” a form of electronic theft. They sued Brooke L. Rollins and James C. Miller in their official capacities under the Administrative Procedure Act (APA), arguing that USDA’s policy against replacing skimmed SNAP benefits was arbitrary, capricious, and contrary to law.

The plaintiffs challenged two agency actions: 7 C.F.R. § 274.6, referred to as the 2010 Regulation, and an alleged 2022 Policy prohibiting replacement of skimmed SNAP benefits with federal funds. The parties filed cross-motions for summary judgment, asking the court to decide the case without a trial because they claimed no material factual dispute required one.

Extra-record evidence

The court generally limited its review to the administrative record—the materials before the agency when it acted. The plaintiffs offered additional evidence about SNAP administration, electronic-benefit-transfer cards, skimming, agency materials, earlier regulations, and standing.

The court refused to consider the extra-record evidence about the prevalence and incidence of skimming because the administrative record showed that USDA had considered theft, electronic-benefit-card security, card replacement, personal identification numbers, and related security measures. The court concluded that skimming was one form of theft within the general subject matter the agency had considered, rather than an entirely new subject that would justify expanding the record.

The court did consider extra-record evidence only for threshold issues concerning the alleged 2022 Policy. The defendants had not challenged standing, and the complaint adequately alleged it, so the court did not need the extra-record evidence offered on standing.

The 2010 Regulation

The court held that the 2010 Regulation did not violate the APA. Under 7 U.S.C. § 2016(h)(7), Congress required USDA’s electronic-benefit-transfer replacement regulations to be “similar” to the regulations governing the earlier paper-based system. The earlier system generally allowed replacement of coupons that were not received or were stolen from the mail, but did not allow replacement of coupons lost, stolen, or misplaced after receipt.

The court concluded that the 2010 Regulation shared the essential characteristics of the paper-based rules. It allowed replacement of lost or stolen electronic-benefit-transfer cards, even though it did not allow replacement of benefits stolen through skimming. The court recognized that the electronic system differs from the paper system because the card transfers benefits to a vendor at the point of sale. But Congress required similar, not identical, rules, and the earlier system had also accepted that its replacement limits would cause hardship for some people whose benefits were actually stolen.

The court separately rejected the argument that the 2010 Regulation was arbitrary or capricious because USDA failed to consider skimming. An agency action is arbitrary or capricious if the agency entirely fails to consider an important aspect of the problem. The court found that USDA had considered theft and electronic-benefit-transfer security when it adopted the regulation, including card replacement, account holds, personal identification numbers, transaction-data security, and related technical requirements. The court therefore held that USDA had not entirely failed to consider an important aspect of the problem.

The alleged 2022 Policy

The court ruled that the plaintiffs had not timely pleaded their challenge to the alleged 2022 Policy. Although the complaint referred to several 2022 and 2023 agency documents, it did not allege that a separate 2022 Policy existed or describe its basic contours well enough to notify the defendants that the plaintiffs were challenging it. The court explained that plaintiffs may not add a new claim through papers filed in connection with summary judgment.

The court also ruled that, even if the 2022 Policy had been timely pleaded, it was not subject to APA review as a final agency action. Final agency action must mark the completion of the agency’s decision-making process and determine rights or obligations or produce legal consequences. The court found that the alleged policy consisted of documents from state agencies, an October 2022 federal memorandum that did not address reimbursement, and a January 2023 federal memorandum implementing Congress’s temporary reimbursement program. These materials did not constitute a definitive final federal decision establishing the alleged policy.

The court further stated that the plaintiffs identified no single federal action establishing an ongoing program prohibiting reimbursement for benefits stolen before October 2022. Generalized complaints about agency behavior are not reviewable under the APA. The court concluded that the only actionable measure was the 2010 Regulation, which did not violate the APA.

Disposition

The court denied the plaintiffs’ motion for summary judgment and granted the defendants’ motion for summary judgment. It directed the Clerk of Court to enter judgment for the defendants, terminate the open motions, and close the case. The court noted that each plaintiff had lost between a few hundred and a few thousand dollars through skimming and expressed hope that Congress or USDA would develop a better solution, but that observation did not change the judgment.