Missouri ex rel. Freeman v. Block

690 F.2d 139
CourtCourt of Appeals for the Eighth Circuit
DecidedOctober 12, 1982
DocketNo. 82-1653
StatusPublished
Cited by3 cases

This text of 690 F.2d 139 (Missouri ex rel. Freeman v. Block) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Missouri ex rel. Freeman v. Block, 690 F.2d 139 (8th Cir. 1982).

Opinion

HEANEY, Circuit Judge.

The State of Missouri [State] appeals a district court1 order granting summary judgment for the United States Department of Agriculture [USDA]. The State filed this action requesting declaratory, injunctive, and other appropriate relief from [141]*141past and potential USDA offsets of federal funds otherwise available to the State under the Food Stamp Act of 1964, 7 U.S.C. §§ 2011-2029. The district court held the State strictly liable for lost funds it owed to the Food and Nutrition Service [FNS] of the USDA under the food stamp program. It found that regulations imposing strict liability were within the USDA’s authority, that they were properly promulgated, that the defense of assumption of risk was unavailable to shield the State’s liability herein, and that the offset procedure threatened and used by the FNS was lawful. We affirm the district court’s order, but remand for it to retain jurisdiction for further proceedings as to appropriate relief.

I.

BACKGROUND

This case is not new to the Court. We have fully detailed its background in a connected criminal appeal previously decided. United States v. Lanier, 578 F.2d 1246, 1248-1249 (8th Cir.), cert. denied, 439 U.S. 856, 99 S.Ct. 169, 58 L.Ed.2d 163 (1978). Accordingly, we briefly summarize the relevant facts.

The federal food stamp program is administered by the USDA in conjunction with the states. Individual states agree with the USDA concerning plans for state distribution of food stamp coupons provided by the federal government. The federal government shares the administrative cost of such distribution plans. Missouri’s plan provided for distribution through private vendors which contracted with the Missouri Division of Family Services. In 1975, Moneytown, Inc., was one of those private vendors.

Moneytown’s contract with the State, as well as FNS instructions, required Money-town to deposit receipts from its sale of food stamp coupons in a FNS account in the Federal Reserve Bank of St. Louis. From May to September, 1975, Moneytown failed to make various deposits and falsified records to cover those failures. The receipts which were not deposited totaled $1,012,-925.75. To date, these funds remain missing.

From March 11, 1976, through February 10, 1978, FNS made three demands for reimbursement of these funds from the State. Its demands were based on regulations in effect in 1975 which required the State to pay for lost coupons and lost receipts from the sale of coupons. 7 C.F.R. § 271.7(b) (1975). In the third and final demand, it warned that it would take further steps to effect collection if the State did not pay within thirty days. After several fruitless communications in 1979, FNS notified the State that it would collect by administrative offset of funds otherwise payable to the State under the food stamp program. FNS recovered $84,434.00 by offset, and continues to threaten future offsets.

The State filed the present action for relief from these offsets. The district court granted summary judgment for the USDA. The State filed a timely notice of appeal and sought an injunction barring future offsets pending appeal. We granted such an injunction on June 30, 1982.

II.

MERITS OF THE CASE

The State contests all four of the conclusions of law reached by the district court. We affirm each of those conclusions.

A. Authorization for USDA Strict Liability Regulations.

USDA regulations in effect in 1975 clearly placed the risk of loss of food stamp coupons and the receipts therefrom on the states.2 The district court, relying on Het[142]*142tleman v. Bergland, 642 F.2d 63 (4th Cir. 1981), held that the USDA had authority to promulgate such “strict liability” regulations. We also agree with the basic reasoning in Hettleman on this issue.

The USDA promulgated the regulations in issue pursuant to a section of the 1964 Food Stamp Act which read: “The Secretary shall issue such regulations, not inconsistent with this chapter, as he deems necessary or appropriate for the effective and efficient administration of the food stamp program.” 7 U.S.C. § 2013(c) (1976) (current version substantially similar, at id. (Supp.III 1979)). This provision delegated broad regulatory authority to the USDA. Knebel v. Hein, 429 U.S. 288, 293, 97 S.Ct. 549, 553, 50 L.Ed.2d 485 (1977). The strict liability regulations promulgated pursuant to this broad authorization are at the very least “appropriate” to the “effective and efficient administration” of the program. They provide a strong incentive for the states to take serious precautions in supervising the handling of food stamp coupons and receipts. Moreover, they place “responsibility for loss with the custodian of the coupons” and receipts, Hettleman v. Bergland, supra, 642 F.2d at 66, instead of more distant supervisory entities such as the USDA.

The State argues that language in the Emergency Food Stamp Vendor Accountability Act of 1976, enacted subsequent to the regulations being considered, indicates that Congress did not authorize a strict liability standard. In particular, the State relies on 7 U.S.C. § 2015(c)(1) (1976) (amended 1977), which instructed the USDA to prescribe procedures for the “custody, care, control, and storage of coupons in the hands of coupon vendors in order to secure such coupons against theft, embezzlement, misuse, loss, or destruction.” Coupon vendors convicted of violating such procedures could be fined and/or imprisoned. Id. at § 2015(c)(2). Even if later action by Congress may be helpful in interpreting an earlier statute, this argument is still unavailing. The Court in Hettleman responded to this same argument by noting that the statutory language at issue provided for “procedures” to guide coupon vendors in caring for coupons; it did not create a standard of care inconsistent with strict liability on the states for coupon or receipt loss. Hettleman v. Bergland, supra, 642 F.2d at 66-67. Although the Hettleman response does not fully examine the fact that the “procedures” authorized by this 1976 legislation were enforceable by criminal penalties and, thus, were more than mere “guidance,” we need not make this examination either since we find independent support for the result reached.

First, the 1976 legislation authorized regulatory procedures enforceable against coupon vendors that contracted with state agencies to distribute food stamps, not against the state agencies themselves. Based on the language and purpose of this statute, strict liability on the states, through their agencies, is consistent with such authorization as an additional measure of protection against mishandling of coupons.

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