16‐364‐cv Nadia Intʹl Mkt. v. United States
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 26th day of April, two thousand seventeen.
PRESENT: GUIDO CALABRESI, DENNY CHIN, RAYMOND J. LOHIER, JR., Circuit Judges. ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x
NADIA INTERNATIONAL MARKET, Plaintiff‐Appellant, 16‐364‐cv v.
UNITED STATES OF AMERICA, Defendant‐Appellee.
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x
FOR PLAINTIFF‐APPELLANT: JASDEEP PANNU, Stowe, Vermont.
FOR DEFENDANT‐APPELLEE: MELISSA A.D. RANALDO, Assistant United States Attorney (Nikolas P. Kerest, Gregory L. Waples, Assistant United States Attorneys, on the brief), for Eugenia A.P. Cowles, Acting United States Attorney for the District of Vermont, Burlington, Vermont.
Appeal from the United States District Court for the District of Vermont
(Reiss, C.J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.
Plaintiff‐appellant Nadia International Market (ʺNadia Marketʺ) appeals
from a judgment of the district court entered December 7, 2015, granting summary
judgment in favor of defendant‐appellee United States and dismissing Nadia Marketʹs
complaint, which sought judicial review of its permanent disqualification from the
Supplemental Nutrition Assistance Program (ʺSNAPʺ). The district court explained its
reasoning in an opinion and order filed December 2, 2015. We assume the partiesʹ
familiarity with the underlying facts, procedural history, and issues on appeal.
Nadia Market, a small grocery store in Winooski, Vermont, began
participating in SNAP in November 2010. In 2012, the Food and Nutrition Service
(ʺFNSʺ), the agency of the United States Department of Agriculture that administers
SNAP, began an investigation into unusual patterns of Electronic Benefit Transfer
(ʺEBTʺ) transactions at Nadia Market. Transaction reports for August through October
2012 identified several types of statistically unusual EBT transactions, including (1)
transactions ending in the same cents value (e.g., ʺ.00ʺ), (2) rapid successive purchases
2 by different households, (3) rapid successive purchases involving the same household,
(4) groups of transactions that largely depleted a householdʹs benefits over a period of
minutes or hours, and (5) relatively high dollar‐value transactions given Nadia Marketʹs
size and inventory. As part of the investigation, FNS compared Nadia Marketʹs EBT
activity from the three‐month period with that of other similarly sized, SNAP‐
authorized stores within one to two miles of Nadia Market. Following this analysis, a
FNS field officer visited Nadia Market to inspect its inventory, stock, layout, and
pricing, and spoke with a store clerk.
On November 28, 2012, FNS notified Nadia Marketʹs owner, Yahya
Ikhmayyis, that it had identified ʺclear and repetitive patterns of unusual, irregular, and
inexplicable activity,ʺ and was considering permanently disqualifying Nadia Market
from SNAP. App. 46. In subsequent communications, Ikhmayyis explained that the
identified transactions resulted from allowing customers to purchase items on credit
and rounding totals to the nearest dollar, in accordance with Iraqi custom. Ikhmayyis
also submitted a ledger of credit transactions.
On December 19, 2012, FNS sent a determination letter advising
Ikhmayyis that it was charging Nadia Market with ʺtrafficking,ʺ or exchanging SNAP
benefits for cash. A.R. 177. In the letter, FNS invited Ikhmayyis to provide additional
documentation before a final decision was issued, as well as to request imposition of a
civil money penalty instead of permanent disqualification. After Ikhmayyis requested
3 review of his case, the Administrative Review Branch (the ʺReview Branchʺ) provided
Nadia Market with another opportunity to submit additional information. Nadia
Market submitted an affidavit from Ikhmayyis and an accountantʹs analysis of its EBT
data and credit ledger. The Review Branch nevertheless sustained the recommendation
to permanently disqualify Nadia Market from SNAP. FNS also determined that Nadia
Market was not eligible for a civil money penalty in lieu of disqualification.
Nadia Market sought review of the agencyʹs decision in the district court
pursuant to 7 U.S.C. § 2023(a). After the close of discovery, the district court granted
the governmentʹs motion for summary judgment. Acknowledging that Nadia Market
did not dispute the validity of any of the evidence on which FNS relied, the district
court concluded that the government was entitled to judgment as a matter of law
because Nadia Market had not established by a preponderance of the evidence that it
did not engage in trafficking. The district court further determined that FNSʹs decision
to permanently disqualify Nadia Market from SNAP, rather than impose a civil
monetary penalty, was not arbitrary and capricious. This timely appeal followed.
On appeal, Nadia Market argues that (1) the government was not entitled
to summary judgment because the EBT transaction data was insufficient to establish
trafficking and support disqualification, and (2) FNSʹs decision to permanently
disqualify Nadia Market from participating in SNAP rather than issue a civil monetary
penalty was arbitrary and capricious. We review a grant of summary judgment de novo,
4 ʺconstru[ing] the evidence and draw[ing] all reasonable inferences in the light most
favorable to the non‐moving party.ʺ Proctor v. LeClaire, 846 F.3d 597, 607 (2d Cir. 2017).
We affirm when ʺthere is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.ʺ Id. (citations and internal quotation marks
omitted).
The Secretary of Agriculture may permanently disqualify any approved
retail food store from participation in SNAP upon ʺthe first occasion or any subsequent
occasion of a disqualification based on the purchase of coupons or trafficking in
coupons or authorization cards by a retail food store.ʺ 7 U.S.C. § 2021(b)(3)(B). Section
2021(b)(3)(B) grants the Secretary discretion to impose a civil monetary penalty in lieu
of permanent disqualification for trafficking ʺif the Secretary determines that there is
substantial evidence that such store or food concern had an effective policy and
program in effect to prevent violations of the chapter and the regulations.ʺ Id.
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16‐364‐cv Nadia Intʹl Mkt. v. United States
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 26th day of April, two thousand seventeen.
PRESENT: GUIDO CALABRESI, DENNY CHIN, RAYMOND J. LOHIER, JR., Circuit Judges. ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x
NADIA INTERNATIONAL MARKET, Plaintiff‐Appellant, 16‐364‐cv v.
UNITED STATES OF AMERICA, Defendant‐Appellee.
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x
FOR PLAINTIFF‐APPELLANT: JASDEEP PANNU, Stowe, Vermont.
FOR DEFENDANT‐APPELLEE: MELISSA A.D. RANALDO, Assistant United States Attorney (Nikolas P. Kerest, Gregory L. Waples, Assistant United States Attorneys, on the brief), for Eugenia A.P. Cowles, Acting United States Attorney for the District of Vermont, Burlington, Vermont.
Appeal from the United States District Court for the District of Vermont
(Reiss, C.J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.
Plaintiff‐appellant Nadia International Market (ʺNadia Marketʺ) appeals
from a judgment of the district court entered December 7, 2015, granting summary
judgment in favor of defendant‐appellee United States and dismissing Nadia Marketʹs
complaint, which sought judicial review of its permanent disqualification from the
Supplemental Nutrition Assistance Program (ʺSNAPʺ). The district court explained its
reasoning in an opinion and order filed December 2, 2015. We assume the partiesʹ
familiarity with the underlying facts, procedural history, and issues on appeal.
Nadia Market, a small grocery store in Winooski, Vermont, began
participating in SNAP in November 2010. In 2012, the Food and Nutrition Service
(ʺFNSʺ), the agency of the United States Department of Agriculture that administers
SNAP, began an investigation into unusual patterns of Electronic Benefit Transfer
(ʺEBTʺ) transactions at Nadia Market. Transaction reports for August through October
2012 identified several types of statistically unusual EBT transactions, including (1)
transactions ending in the same cents value (e.g., ʺ.00ʺ), (2) rapid successive purchases
2 by different households, (3) rapid successive purchases involving the same household,
(4) groups of transactions that largely depleted a householdʹs benefits over a period of
minutes or hours, and (5) relatively high dollar‐value transactions given Nadia Marketʹs
size and inventory. As part of the investigation, FNS compared Nadia Marketʹs EBT
activity from the three‐month period with that of other similarly sized, SNAP‐
authorized stores within one to two miles of Nadia Market. Following this analysis, a
FNS field officer visited Nadia Market to inspect its inventory, stock, layout, and
pricing, and spoke with a store clerk.
On November 28, 2012, FNS notified Nadia Marketʹs owner, Yahya
Ikhmayyis, that it had identified ʺclear and repetitive patterns of unusual, irregular, and
inexplicable activity,ʺ and was considering permanently disqualifying Nadia Market
from SNAP. App. 46. In subsequent communications, Ikhmayyis explained that the
identified transactions resulted from allowing customers to purchase items on credit
and rounding totals to the nearest dollar, in accordance with Iraqi custom. Ikhmayyis
also submitted a ledger of credit transactions.
On December 19, 2012, FNS sent a determination letter advising
Ikhmayyis that it was charging Nadia Market with ʺtrafficking,ʺ or exchanging SNAP
benefits for cash. A.R. 177. In the letter, FNS invited Ikhmayyis to provide additional
documentation before a final decision was issued, as well as to request imposition of a
civil money penalty instead of permanent disqualification. After Ikhmayyis requested
3 review of his case, the Administrative Review Branch (the ʺReview Branchʺ) provided
Nadia Market with another opportunity to submit additional information. Nadia
Market submitted an affidavit from Ikhmayyis and an accountantʹs analysis of its EBT
data and credit ledger. The Review Branch nevertheless sustained the recommendation
to permanently disqualify Nadia Market from SNAP. FNS also determined that Nadia
Market was not eligible for a civil money penalty in lieu of disqualification.
Nadia Market sought review of the agencyʹs decision in the district court
pursuant to 7 U.S.C. § 2023(a). After the close of discovery, the district court granted
the governmentʹs motion for summary judgment. Acknowledging that Nadia Market
did not dispute the validity of any of the evidence on which FNS relied, the district
court concluded that the government was entitled to judgment as a matter of law
because Nadia Market had not established by a preponderance of the evidence that it
did not engage in trafficking. The district court further determined that FNSʹs decision
to permanently disqualify Nadia Market from SNAP, rather than impose a civil
monetary penalty, was not arbitrary and capricious. This timely appeal followed.
On appeal, Nadia Market argues that (1) the government was not entitled
to summary judgment because the EBT transaction data was insufficient to establish
trafficking and support disqualification, and (2) FNSʹs decision to permanently
disqualify Nadia Market from participating in SNAP rather than issue a civil monetary
penalty was arbitrary and capricious. We review a grant of summary judgment de novo,
4 ʺconstru[ing] the evidence and draw[ing] all reasonable inferences in the light most
favorable to the non‐moving party.ʺ Proctor v. LeClaire, 846 F.3d 597, 607 (2d Cir. 2017).
We affirm when ʺthere is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.ʺ Id. (citations and internal quotation marks
omitted).
The Secretary of Agriculture may permanently disqualify any approved
retail food store from participation in SNAP upon ʺthe first occasion or any subsequent
occasion of a disqualification based on the purchase of coupons or trafficking in
coupons or authorization cards by a retail food store.ʺ 7 U.S.C. § 2021(b)(3)(B). Section
2021(b)(3)(B) grants the Secretary discretion to impose a civil monetary penalty in lieu
of permanent disqualification for trafficking ʺif the Secretary determines that there is
substantial evidence that such store or food concern had an effective policy and
program in effect to prevent violations of the chapter and the regulations.ʺ Id.
Upon disqualification, a retail food store operator may obtain judicial
review by way of ʺa trial de novo . . . in which the court shall determine the validity of
the questioned administrative action in issue.ʺ 7 U.S.C. § 2023(a)(13), (15).1 In
1 The district court held that Nadia Market bore the burden of proving the invalidity of the agency action, a determination Nadia Market disputes on appeal. Section 2023 does not clearly specify which party bears the burden of proof in the review of a disqualification action. Although we have not yet addressed the issue, other circuits have ruled that the party challenging the agency action bears the burden of proof. See Fells v. United States, 627 F.3d 1250, 1253 (7th Cir. 2010) (collecting cases). We need not reach the issue here because, even assuming
5 conducting its review, ʺthe district court ʹmust reach its own factual and legal
conclusions based on the preponderance of the evidence, and should not limit its
consideration to matters previously appraised in the administrative proceedings.ʹʺ
Ibrahim v. United States, 834 F.2d 52, 53‐54 (2d Cir. 1987) (quoting Modica v. United States,
518 F.2d 374, 376 (5th Cir. 1975)). When reviewing the sanction imposed by FNS, we
assess ʺwhether the Secretaryʹs action was arbitrary or capricious, i.e., whether it was
ʹunwarranted in law or without justification in fact.ʹʺ Willyʹs Grocery v. United States, 656
F.2d 24, 26 (2d Cir. 1981) (quoting Cross v. United States, 512 F.2d 1212, 1218 (4th Cir.
1975) (en banc)).
Here, the evidence in the record was sufficient to establish as a matter of
law that Nadia Market engaged in trafficking of SNAP benefits and that, as a result, its
disqualification from SNAP was appropriate. FNS identified over two hundred
statistically unusual EBT transactions, the timing and amount of which demonstrated
that SNAP benefits were not being redeemed for items sold at Nadia Market. The
record indicates that Nadia Market lacked the high‐priced inventory or checkout
mechanisms needed to process sales at the speed and total dollar value indicated on the
transaction reports. In addition, a comparison of Nadia Marketʹs inventory and
redemption activity with that of similarly situated SNAP‐authorized retailers in
the Secretary bears the burden of proof, a reasonable factfinder could conclude only that Nadia Market had engaged in the trafficking of SNAP benefits.
6 Winooski showed that Nadia Marketʹs average transaction and monthly redemption
amounts dwarfed that of nearby stores selling comparable items at similar prices.
Nadia Market does not dispute the accuracy of the transaction reports, nor
does it provide plausible alternative explanations for the suspect transactions.
Although Nadia Market claimed that the suspect transactions were the result of
customers buying goods on credit, its accountant was able to identify only three
possible matches to the storeʹs credit ledger and suggested that timing of the
transactions appeared problematic. Nadia Marketʹs claim that FNS ignored certain
probative evidence is misplaced, as the district court engaged in a de novo review of the
evidence. Moreover, the argument is belied by the final decision of the Review Board,
which expressly referenced the credit ledger and the investigating officerʹs observations
and interactions from his visit. Furthermore, it was entirely proper for FNS to rely on
transaction data alone in making its trafficking determination. See 7 U.S.C. § 2021(a)(2)
(allowing FNS to disqualify a participating store based on ʺon‐site investigations,
inconsistent redemption data, or evidence obtained through a transaction report under
an electronic benefit transfer systemʺ). Accordingly, drawing all inferences in Nadia
Marketʹs favor, a reasonable factfinder could conclude only that the agencyʹs trafficking
determination was valid.
We also hold that FNSʹs decision to permanently disqualify Nadia Market
rather than issue a civil monetary penalty was neither arbitrary nor capricious.
7 Although FNS advised Nadia Market of its option to request a monetary penalty and
establish its eligibility for one, Nadia Market never made such a request to the agency.
Furthermore, there is no evidence in the record to suggest that Nadia Market was
eligible for a civil monetary penalty. See 7 C.F.R. § 278.6(i) (giving FNS discretion to
impose a penalty in lieu of permanent disqualification for trafficking if store ʺtimely
submits to FNS substantial evidence which demonstrates that [it] had established an
effective compliance policy and program to prevent violations of [SNAP]ʺ).
Finally, based on our independent, de novo review of the record, we find
no merit in Nadia Marketʹs arguments that the administrative process violated its due
process rights.
We have considered Nadia Marketʹs remaining arguments and conclude
they are without merit. Accordingly, we AFFIRM the judgment of the district court.
FOR THE COURT: Catherine OʹHagan Wolfe, Clerk