East Village New Deli Corp. v. United States Of America

Background

East Village operates a grocery store and participated in the Supplemental Nutrition Assistance Program (SNAP), which provides eligible households with food benefits used through electronic benefit transfer cards. The Food and Nutrition Service (FNS), a department of the U.S. Department of Agriculture, monitors participating stores.

In May 2020, the USDA accused East Village of “trafficking,” meaning exchanging SNAP benefits for items other than eligible food. The agency identified 174 transactions between October 2019 and March 2020, including repeated transactions by the same household within a period and transactions that were large compared with the store’s characteristics and recorded inventory. East Village denied the allegations, said the transactions were lawful, and submitted affidavits concerning its compliance policies.

The USDA later determined that trafficking had occurred and permanently disqualified East Village from SNAP. It also determined that East Village had not established and implemented an effective compliance policy, so it was not eligible for a civil money penalty instead of permanent disqualification. After an administrative review, the USDA issued its final decision on September 9, 2020.

East Village filed this action seeking de novo judicial review, meaning a fresh court review of the agency’s decision. It also moved to stay, or temporarily pause, the disqualification while the case proceeded.

The court’s analysis

The court first considered whether the Food Stamp Act permits a stay when FNS has permanently disqualified a store. The statute says that agency action generally remains effective during judicial review but permits a court to grant a temporary stay after considering the applicant’s likelihood of success and irreparable injury. Another provision states that permanent disqualification is effective when the store receives notice. Courts have disagreed about how these provisions interact.

The court did not resolve that statutory question. It assumed for purposes of the motion that a stay might be available and concluded that East Village did not qualify for one under the required factors.

Likelihood of success

East Village argued that it was likely to succeed on a procedural due process claim under the Fifth Amendment because it had been permanently disqualified without a hearing before the decision. The court recognized that East Village had a property interest in continued SNAP participation, although it described that interest as less significant than the interests of SNAP recipients. The court also found that the government had strong interests in promptly stopping suspected abuse, protecting program funds, and avoiding the added burdens of a pre-deprivation hearing before the court’s fresh review.

The court found the risk of an erroneous deprivation to be modest because East Village had two opportunities to submit evidence to the USDA. East Village generally denied wrongdoing and said customers had returned to make additional purchases, but it did not provide customer evidence or documentation showing that the disputed purchases were SNAP-compliant. The court also noted that other courts had upheld disqualifications based on similar transaction patterns.

The court distinguished a case involving much older charges and approximately $55 in benefits. Here, the challenged transactions totaled about $22,087.12, many were relatively recent when the agency began its process, and East Village had not faced the same difficulty obtaining records. The court therefore held that East Village had not shown that it was likely to succeed on its due process claim.

Irreparable injury

East Village argued that it would lose approximately $20,000 per month in SNAP sales and that nearby SNAP recipients would have to travel several blocks farther to shop. The court found this showing insufficient. East Village acknowledged that it was not close to bankruptcy, did not place the claimed monthly loss in the context of its total revenue, and appeared to have remained in business after the USDA ended its SNAP participation. The court also noted that at least some nearby stores accepted SNAP benefits.

Disposition

The court denied East Village’s motion for a stay pending the outcome of the litigation. The court stated that East Village would receive de novo review of its challenge to the USDA’s disqualification and directed that the litigation proceed promptly. The opinion did not decide the ultimate challenge to the disqualification or whether a stay is legally available in every permanent-disqualification case.