MI Express Inc v. United States

• Court: Court of Appeals for the Sixth Circuit
• Decided: June 29, 2004
• Docket: 03-1595
• Status: Published

Opinion

RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206 2 Mich. Express Inc., et al. No. 03-1595 ELECTRONIC CITATION: 2004 FED App. 0198P (6th Cir.) v. United States File Name: 04a0198p.06 _________________ UNITED STATES COURT OF APPEALS COUNSEL FOR THE SIXTH CIRCUIT ARGUED: Lawrence W. Rattner, RATTNER MEDINA _________________ PROFESSIONAL CORPORATION, Detroit, Michigan, for Appellants. Peter A. Caplan, ASSISTANT UNITED MICHIGAN EXPRESS , INC.; X STATES ATTORNEY, Detroit, Michigan, for Appellee. MAHMOUD ABDALLAH ; - ON BRIEF: Lawrence W. Rattner, RATTNER MEDINA NABIL AJAMI, - PROFESSIONAL CORPORATION, Detroit, Michigan, for - No. 03-1595 Appellants. Peter A. Caplan, ASSISTANT UNITED Plaintiffs-Appellants, - STATES ATTORNEY, Detroit, Michigan, for Appellee. > , v. _________________ - - OPINION UNITED STATES OF AMERICA , - _________________ Defendant-Appellee. - - BOYCE F. MARTIN, JR., Circuit Judge. Michigan N Express Inc., Mahmoud Abdallah, and Nabil Ajami appeal Appeal from the United States District Court from the district court's grant of summary judgment for the for the Eastern District of Michigan at Detroit. United States. The district court held that the fining of Mr. No. 02-71772—George E. Woods, District Judge. Abdallah and Mr. Ajami by the Food and Nutrition Services, a division of the Department of Agriculture, was proper. We Argued: June 10, 2004 AFFIRM.

Decided and Filed: June 29, 2004 I.

Before: MARTIN and SUTTON, Circuit Judges; Mr. Abdallah and Mr. Ajami owned shares in Michigan WILLIAMS, Senior District Judge.* Express, Inc., a retail grocery store located in Detroit, Michigan. The Department of Agriculture authorized Michigan Express to accept food stamps. Between May 3, 2000, and September 8, 2000, the Department of Agriculture's Food and Nutrition Service conducted an undercover investigation of Michigan Express to ensure it was complying with food-stamp laws and * The Honorable Glen M. Williams, Senior United States District regulations. On four occasions, Michigan Express personnel Judge for the Western District of Virginia, sitting by designation.

1 No. 03-1595 Mich. Express Inc., et al. 3 4 Mich. Express Inc., et al. No. 03-1595 v. United States v. United States

accepted food stamps in payment for ineligible, non-food Express, Mr. Abdallah, and Mr. Ajami requested an items. On three occasions, Michigan Express personnel administrative review, arguing that the letter from the accepted cash in exchange for food stamps. Assistant United States Attorney estopped the government from pursuing other penalties against them. The Department On November 13, 2000, the Food and Nutrition Service of Agriculture's Administrative Review Board sustained the informed Mr. Abdallah that Michigan Express was fine. Michigan Express, Mr. Abdallah and Mr. Ajami then disqualified from participating in the food-stamp program, the filed suit in the United States District Court for the Eastern disqualification of the business did not preclude further action District of Michigan seeking an order rescinding the fine. On being taken by the Department of Agriculture or any other cross-summary-judgment motions, the district court affirmed federal agency, and he and Mr. Ajami faced civil penalty if the decision of the Review Board. This appeal followed. Michigan Express was sold or otherwise transferred. An Assistant United States Attorney sent Mr. Abdallah and Mr. II. Ajami a letter, dated April 24, 2001, which, in pertinent part, reads: We review de novo a district court's order granting summary judgment, Markva v. Haveman, 317 F.3d 547, 552 I am writing to inform you that, upon further review and (6th Cir. 2003), and in our review, we view the evidence in consideration, this office has determined that it will not the light most favorable to the non-moving party. Williams pursue a False Claims Act action or other federal action v. Int'l Paper Co., 227 F.3d 706, 710 (6th Cir. 2000). We will against you for alleged food stamp trafficking at affirm if a party fails to make a showing sufficient to establish Michigan Express, Inc. the existence of an essential element on which it would bear the burden at trial. Celotex Corp. v. Catrett, 477 U.S. 317, On September 7, 2001, Mr. Abdallah and Mr. Ajami, 322 (1986). If a party claims the government is estopped relying on the letter, sold Michigan Express. After learning from making an argument, summary judgment is appropriate of the sale, the Food and Nutrition Service informed Mr. in favor of the government if there is an insufficient showing Abdallah and Mr. Ajami that they would be required to pay for any of the estoppel elements. Kennedy v. United States, a $23,918 fine for selling the store after it had been 965 F.2d 413, 417 (7th Cir. 1992). disqualified from the food-stamp program.1 Michigan

1 The Food and Nutrition Service imposed the fine pu rsuant to 7 C.F.R . § 278 .6(f)(2), which read s:

In the event any retail food store or wholesale food concern which has been disqualified is sold or the ownership thereof is otherwise transferred to a purchaser or transferee, the person or other legal concern has been permanently disqualified, the civil money penalty entity who sells or otherwise transfers o wnership of the retail food shall be double the penalty for a ten year disqualification period. The store or wholesale food concern shall be subjected to and liable for disqualification shall continue in effect at the disqualified location for a civil money pe nalty in an amou nt to reflec t that portion of the the person or other legal entity who tra nsfers ownership of the retail disqualification period that has not expired, to be calculated using the food store or wholesale food conce rn notwithstanding the imposition method found at § 278.6(g). If the retail food store or wholesale food of a civil money penalty under this paragraph. No. 03-1595 Mich. Express Inc., et al. 5 6 Mich. Express Inc., et al. No. 03-1595 v. United States v. United States

III. The Ninth Circuit defines "affirmative misconduct" as a deliberate lie or a pattern of false promises. Socop-Gonzalez Although separated into two parts in their brief, Michigan v. I.N.S., 272 F.3d 1176, 1184 (9th Cir. 2001) (en banc). In Express, Mr. Abdallah, and Mr. Ajami make one basic an earlier case it gave a more developed definition, explaining argument. They contend that the government, by the that "[n]either the failure to inform an individual of his or her language of the Assistant United States Attorney's letter, was legal rights nor the negligent provision of misinformation estopped from fining or pursuing any punitive action against constitute affirmative misconduct." Sulit v. Schiltgen, 213 them in regards to their sale of the business. They do not F.3d 449, 454 (9th Cir. 2000). The Seventh Circuit defines argue that the fine was illegally imposed; they argue only that "affirmative misconduct" as "more than mere negligence . . . . the government should have been estopped from pursuing it. It requires an affirmative act to misrepresent or mislead." LaBonte, 233 F.3d at 1053. The Fifth Circuit, in almost A. identical language, defines "affirmative misconduct" as "something more than merely negligent conduct." United "Estoppel is an equitable doctrine which a court may States v. Marine Shale Processors, 81 F.3d 1329, 1350 n. 12 invoke to avoid injustice in particular cases." Fisher v. (5th Cir. 1996). Instead, "the [government] official must Peters, 249 F.3d 433, 444 (6th Cir. 2001). "[T]he traditional intentionally or recklessly mislead the estoppel claimant." Id. elements of equitable estoppel are: (1) misrepresentation by at 1350. Lastly, the Fourth Circuit defines "affirmative the party against whom estoppel is asserted; (2) reasonable misconduct" as lying rather than misleading and as malicious, reliance on the misrepresentation by the party asserting not negligent, conduct. Keener v. E. Associated Coal Corp., estoppel; and (3) detriment to the party asserting estoppel." 954 F.2d 209, 214 n.6 (4th Cir. 1992). LaBonte v. United States, 233 F.3d 1049, 1053 (7th Cir. 2000). The government, however, "may not be estopped on Finding the common approach of sister circuits prudential, the same terms as any other litigant." Heckler v. Cmty. we hold that "affirmative misconduct" is more than mere Health Servs. of Crawford Cty., Inc., 467 U.S. 51, 60 (1984). negligence. It is an act by the government that either Instead, "[a] party attempting to estop the government bears intentionally or recklessly misleads the claimant. The party a very heavy burden" in sustaining its argument. Fisher, 249 asserting estoppel against the government bears the burden of F.3d at 444. At a minimum, the party must demonstrate some proving an intentional act by an agent of the government and "affirmative misconduct" by the government in addition to the the agent's requisite intent. other estoppel elements. Ibid. B. Our Court has never announced the definition of "affirmative misconduct." Although we have cases applying The government's conduct in this case does not rise to the the rule, see, e.g., In re Gardner, 360 F.3d 551, 559 (6th Cir. requisite level of malfeasance to qualify as "affirmative 2004), we have not set the bounds of the concept. A review misconduct." It is true that the government could have of our sister circuits, however, reflects a general consensus on worded the letter better, explaining in clearer terms that its the definition. waiver of claims was limited to punishing past conduct and expressly retaining the right to pursue punishment if No. 03-1595 Mich. Express Inc., et al. 7 v. United States

Michigan Express were sold. But, the failure to explain is at best a negligent error, not a reckless one. The government was not attempting to trick Mr. Abdallah or Mr. Ajami. Instead, the government was attempting, in good-faith, to advise Mr. Abdallah and Mr. Ajami as to its intended course of action based on the facts that it knew. Mr. Abdallah or Mr. Ajami seem to admit as much in describing the Assistant United States Attorney as "culpably negligent." They admit that they do not believe that the attorney's loose language was deceptively drafted with malicious intent, and that admission defeats their argument. As the Supreme Court has pointed out, punishing the good- faith and conscientious efforts of the government by an easy rule of estoppel "might create not more reliable advice, but less advice. . .." Office of Personnel Mgmt. v. Richmond, 496 U.S. 414, 433 (1990). We wish to avoid that consequence. We AFFIRM the judgment of the district court.