La Reyna De Westchester Deli Grocery Corp. v. United States Department of…

Background

The U.S. Department of Agriculture’s Food and Nutrition Service (FNS) permanently disqualified La Reyna De Westchester Deli Grocery Corp. from participating in the Supplemental Nutrition Assistance Program (SNAP). La Reyna sought judicial review of that decision under 7 U.S.C. § 2023. The United States, the Department of Agriculture, and FNS moved for summary judgment, asking the court to uphold the agency’s decision and dismiss the action.

FNS investigated La Reyna after its electronic-benefit-transfer transaction data showed patterns it considered consistent with SNAP-benefit trafficking. The review covered transactions from July through December 2020. The store had a small checkout area, no optical scanners, no handbaskets or shopping carts, and only four items priced above $10. FNS identified 31 sets of transactions involving 71 purchases made close together, 239 transactions above $40, and transaction patterns involving five households that differed from their purchases at nearby stores.

FNS concluded that trafficking was more likely than not and permanently disqualified La Reyna. La Reyna requested a civil money penalty instead of permanent disqualification, but it submitted only a statement from the owner saying that employees had been trained and that SNAP rules were reviewed annually. After administrative review, an Administrative Review Officer upheld the disqualification.

Legal standard

The court reviewed the trafficking issue independently and considered whether La Reyna proved, by a preponderance of the evidence, that the agency’s action was invalid. The court explained that a store may be permanently disqualified after even one trafficking violation, so La Reyna had to show that each cited transaction or set of transactions was invalid. If a violation occurred, the court then considered whether the permanent disqualification was arbitrary or capricious, meaning unsupported by law or factual justification. The court gave substantial deference to the agency’s sanction decision.

Trafficking determination

The court held that the transaction evidence supported FNS’s finding. It emphasized that some households made multiple purchases within minutes, including purchases of $71.50 followed two minutes later by $64.00, and purchases of $57.70 followed three minutes later by $22.00. The court found these transactions particularly suspicious given the store’s size, equipment, limited inventory, and lack of a pricing or rounding practice that would explain the repeated round-dollar or quarter-dollar amounts.

The court also found the large transactions suspicious. La Reyna had 239 transactions above $40, including six of at least $100, while the average convenience-store transaction during the review period was $8.71. The court noted that La Reyna was near larger and better-stocked stores that also accepted electronic benefit transfers, yet some households spent unusually large portions of their benefits at La Reyna, sometimes shortly after making purchases at those other stores.

The court rejected La Reyna’s explanations. It found that the customer letters about shopping together did not address most of the specific flagged transactions. The letters also did not explain most of the large purchases or establish that customers bought in bulk. The store photographs, invoices, and receipts did not demonstrate that the store could support the transactions; some invoices were from after the relevant period, and some receipts covered products that SNAP benefits could not purchase. The owner’s statement that the transactions were legitimate was also insufficient by itself to create a genuine factual dispute.

Permanent disqualification

The court held that the permanent disqualification was not arbitrary or capricious. FNS regulations require disqualification when trafficking is found unless the store qualifies for a civil money penalty instead. To qualify for that alternative, the store had to provide documentation of an effective compliance policy, a preexisting training program, employee training records, and lack of owner involvement in the trafficking.

La Reyna did not submit written and dated policies, dated training materials, employment records, or contemporaneous records showing that employees had received the required training. The court therefore concluded that FNS followed its regulations and properly imposed permanent disqualification.

Disposition

Judge Katharine H. Parker granted the defendants’ motion for summary judgment, upheld the FNS decision, directed the Clerk of Court to terminate the motion, and closed the case.