Capellan v. United States of America

Background

Yaniris Capellan is the sole owner of LF Food Market Corp., which operates LF Food Market. The store was authorized to participate in the Supplemental Nutrition Assistance Program (SNAP) in March 2016.

In July 2017, the Food and Nutrition Service (FNS), the Department of Agriculture agency responsible for policing SNAP violations, charged the store with trafficking SNAP benefits. The charge was based on electronic-benefit-transfer transaction patterns from December 2016 through May 2017, including transactions ending in the same cents value, repeated transactions by households within unusually short periods, and unusually large purchases.

FNS identified 1,006 transactions ending in zero or 50 cents, 14 households that made multiple transactions totaling more than $100 within 24 hours, and 123 transactions of at least $35. Plaintiffs did not respond to the charge letter within the required period. FNS permanently disqualified Plaintiffs from SNAP. Plaintiffs later sought agency review, but FNS affirmed the disqualification in its final decision.

Plaintiffs filed this action under 7 U.S.C. § 2023, which allows judicial review of SNAP disqualification decisions. Defendants moved for summary judgment on all claims.

Sovereign immunity and proper defendants

The court held that the United States had waived sovereign immunity for this type of statutory challenge, but that Congress had not waived sovereign immunity for claims against Sonny Perdue, the Secretary of Agriculture, or the Department of Agriculture. The court therefore held that the United States was the only proper defendant and granted summary judgment on the claims against Secretary Perdue and the Department of Agriculture.

Legal standard for reviewing the disqualification

The court explained that review of an FNS trafficking determination has two stages. First, the court independently determines whether a trafficking violation occurred, rather than merely asking whether the agency had substantial evidence. Plaintiffs bore the burden of proving by a preponderance of the evidence that the disqualification was invalid. Second, if a violation occurred, the court considers whether the sanction was arbitrary or capricious, meaning unauthorized by law or unsupported by the facts.

Trafficking determination

The court held that transaction patterns alone can support an FNS trafficking determination. Plaintiffs did not need to explain every transaction, but they had to provide evidence showing that the cited patterns could not establish that any transaction involved trafficking.

For the same-cent transactions, Plaintiffs argued that customers rounded purchases or avoided paying sales tax. The court found that Plaintiffs provided no supporting evidence and that the store manager’s testimony did not explain the large number of transactions ending in zero or 50 cents.

For the repeated purchases, Plaintiffs argued that family members made separate purchases or that customers were settling credit accounts. The court found that those explanations could not plausibly account for some of the closely timed, large transactions, including one household’s two $75 purchases one minute apart. The court also found that Plaintiffs had not supported their credit explanation with evidence sufficient to explain the identified transactions.

For the large purchases, the court found that purchases over $35, standing alone, were not especially persuasive because customers could make legitimate bulk purchases. But it found that some of the larger purchases also had other suspicious characteristics, including amounts over $100 that ended in zero cents. Plaintiffs did not provide an explanation for those transactions.

Because Plaintiffs failed to produce evidence capable of showing that the identified same-cent, repeated, and large transactions were not trafficking, the court granted Defendants’ motion for summary judgment on Plaintiffs’ challenge to the trafficking determination.

Permanent disqualification

The court also granted summary judgment on Plaintiffs’ challenge to permanent disqualification. Under the applicable regulation, a monetary penalty could replace disqualification only if the store timely submitted substantial evidence that it had established and implemented an effective compliance policy and program. The record showed that Plaintiffs did not submit such evidence, and Plaintiffs admitted that they had no written food-stamp policy or written materials for employees about SNAP rules.

The court concluded that FNS’s decision not to impose a monetary penalty instead of disqualification followed its regulations and settled policy. It therefore was not arbitrary or capricious.

Other claims

Plaintiffs also alleged that FNS violated the Administrative Procedure Act and that the rules governing monetary penalties conflicted with congressional intent and violated the Fifth Amendment’s Due Process Clause. Plaintiffs’ opposition did not respond to Defendants’ arguments on those claims. Because Plaintiffs were represented by counsel, the court treated their failure to defend those claims as abandonment and granted summary judgment on them as well.

Disposition

Judge Analisa Torres granted Defendants’ motion for summary judgment on all claims. The order terminated the motion and directed the Clerk of Court to close the case.