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Madi v. United States

United States District Court, D. Massachusetts

June 26, 2018

DOAA S. MADI and HMA, INC. Plaintiffs
v.
UNITED STATES OF AMERICA, Defendant

          MEMORANDUM OF DECISION AND ORDER REGARDING DEFENDANT'S MOTION TO AFFIRM THE DECISION OF THE USDA (Dkt. No. 47)

          KATHERINE A. ROBERTSON UNITED STATES MAGISTRATE JUDGE.

         I. Introduction

         Plaintiffs Doaa S. Madi (“Ms. Madi) and HMA, Inc. (“HMA”) (“Plaintiffs”), owned and operated a grocery store conducting business as El Safi at 532 Main Street in West Springfield, Massachusetts. Plaintiffs commenced this action, pursuant to 7 U.S.C. § 2023(a)(13) and the Administrative Procedures Act, 5 U.S.C. § 702, seeking judicial review of the denial of the store's application to participate in the Supplemental Nutrition Program (“SNAP”). The Food and Nutrition Service (“FNS”) of the United States Department of Agriculture (“USDA”) (“Defendant” or “the government”) denied Plaintiffs' application to participate in SNAP based on its determination that Plaintiffs' application was an attempt to circumvent El Safi's permanent disqualification from SNAP participation when it was owned and operated by Ms. Madi's husband, Ashraf M. Galal (“Mr. Galal”). Plaintiffs claim that (1) denial of the application was unsupported by a preponderance of the evidence and should be set aside pursuant to 7 U.S.C. § 2023(a)(13), and (2) the imposition of a three-year bar from applying to participate in SNAP was arbitrary and capricious. The government moves for summary judgment dismissing the complaint in its entirety (Dkt. No. 47). Plaintiffs object (Dkt. No. 52). The parties have consented to this court's jurisdiction. See 28 U.S.C. § 636(c) and Fed.R.Civ.P. 73. For the reasons that follow, the court grants Defendant's motion for summary judgment.

         II. Factual Background

         A. Statutes and Regulations

         An overview of the applicable statutory and regulatory scheme provides a framework for the court's decision. SNAP was established under the Food Stamp Act of 1964, 7 U.S.C. §§ 2011-2036, and is operated by the FNS. See Rockland Convenience Store v. United States, Civil No. 10-260-LM, 2011 WL 5120410, at *1 (D.N.H. Oct. 27, 2011). “Congress established SNAP ‘to safeguard the health and well-being of the Nation's population by raising levels of nutrition among low-income households.'” Irobe v. U.S. Dep't of Agric., 890 F.3d 371, 375 (1st Cir. 2018) (quoting 7 U.S.C. § 2011). “SNAP benefits are provided to eligible households by means of electronic benefit transfer (‘EBT') cards.” Rockland Convenience Store, 2011 WL 5120410, at *1; see also 7 U.S.C. §§ 2012(i), 2016(a). SNAP “utilizes plastic cards which are ‘swiped' at the cash register like a credit [or debit] card.” McClain's Mkt. v. United States, 411 F.Supp.2d 772, 773 n.2 (N.D. Ohio 2005). After a SNAP participant purchases eligible food at an authorized store by using his or her EBT card, funds are electronically transferred from the purchaser's account to the store's bank account. See Irobe, 890 F.3d at 375.

         “Trafficking in SNAP benefits is unlawful.” Id. (citing 7 C.F.R. § 278.2(a)). See 7 U.S.C. § 2021(a)(1), (b)(3)(B). “[A] store engages in trafficking by accepting SNAP benefits in exchange for cash or other proscribed items.” Irobe, 890 F.3d at 375 (citing 7 C.F.R. § 271.2). “For instance, a store traffics when it ‘accept[s] food stamps for sales that never took place,' allowing its customers to receive ‘cash rather than merchandise'” Id. (quoting Idias v. United States, 359 F.3d 695, 698-99 (4th Cir. 2004)).

         If the retailer operations division of the FNS determines that a store has engaged in trafficking, the store is permitted to pursue an appeal to an administrative review officer (“ARO”). See 7 U.S.C. § 2023(a)(3); 7 C.F.R. §§ 279.1(a)(2), 279.5. An ARO's final determination that the store engaged in trafficking permits the USDA to “impose a lifetime program-participation ban on ‘the first occasion or any subsequent occasion' of trafficking.” Irobe, 890 F.3d at 376 (quoting 7 U.S.C. §§ 2021(b)(3)(B), 2023(a)(5); 7 C.F.R. §§ 278.6, 279.5). In certain circumstances, the agency may impose civil monetary penalties instead of a ban. See 7 U.S.C. § 2021(b)(3)(B); 7 C.F.R. § 278.6. The store has the right to appeal the agency's final decision to a federal district court. See 7 U.S.C. § 2023(a)(13), (15).

         In order to participate in SNAP, a store is required to submit an application to the FNS. See 7 C.F.R. § 278.1(a). The FNS has a particular policy for review of applications from retailers designated as being high risk “due to any previous permanent disqualification occurring at [the retailer's] location or in a nearby location” (Dkt. No. 48-1 at 6). A designated high risk store's applicant is required to submit additional information to “ensure there are no ties to the previously disqualified owner's name, home, address, phone number, etc.” (id.). The supplemental information includes personal tax returns for the most recent filing year and “[a] notarized affidavit from the new owner(s) stating that they are not connected with the previously disqualified owner(s)” (id.). If the FNS determines that there is evidence that a store is attempting to “circumvent a period of disqualification, ” it must deny the application on the grounds that the store “lack[s] the necessary business integrity and reputation to further the purposes of the [SNAP].” 7 C.F.R. § 278.1(k)(3)(iii). A retailer whose application is denied for this reason cannot be authorized to participate in SNAP for three years from the effective date of the denial. Id. The store can request review of the denial of its application by an ARO. See 7 C.F.R. §§ 279.1(a)(1), 279.5. The ARO's decision to sustain the denial may be appealed to a federal district court. See 7 U.S.C. § 2023(a)(13), (15).

         B. Facts

         When Plaintiffs applied to participate in SNAP, Ms. Madi was the sole owner of HMA, which operated El Safi at 532 Main Street in West Springfield (Administrative Record “A.R.” at 3). Previously, Mr. Galal, Ms. Madi's husband, owned and operated the El Safi Supermarket at the same location (id. at 818). On April 1, 2014, the FNS determined that El Safi had trafficked in SNAP benefits (id. at 819, 835-36). Consequently, Mr. Galal and El Safi were permanently disqualified from participating in the program (id. at 18). Mr. Galal requested administrative review of the FNS's decision (id. at 818-36). After review, the ARO sustained the disqualification and penalty (id.). Mr. Galal did not appeal the ARO's decision to a federal district court (id. at 72, 836).

         Less than one year later, on April 3, 2015, Ms. Madi incorporated HMA (id. at 1). Plaintiffs continued to operate the store under the same name, “El Safi”, at the same location in West Springfield (id. at 22, 72). They submitted an application to the FNS for authorization for El Safi to participate in SNAP on April 21, 2015 (id. at 1-8). The FNS requested additional information because the store was operating at a location where there had been a SNAP violation (id. at 15-17). Ms. Madi provided an affidavit indicating that “[o]ne or more owners or managers of this firm are related by birth or marriage to an owner or manager of a firm that is or has been disqualified from SNAP or WIC” (id. at 17). She reported that Mr. Galal was her husband (id. at 18). The joint tax return of Mr. Galal and Ms. Madi for the year of 2014 showed that their only income was derived from the operation of El Safi (id. at 51, 53).

         III. Procedural History

         On August 14, 2015, the FNS's operations division notified Plaintiffs that it was denying their application to participate as an authorized retail food store in SNAP because the application constituted an attempt to avoid or circumvent the permanent disqualification of Ms. Madi's husband, Mr. Galal (id. ...


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