Potts-Lolley v. Magarik

• Court: Superior Court of Delaware
• Decided: May 21, 2024
• Docket: N22A-09-006 PAW
• Status: Published

Opinion

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

ZETA POTTS-LOLLEY, ) ) Appellant, ) ) v. ) C.A. No. N22A-09-006 PAW ) ) MOLLY MAGARIK, ) in her official capacity as ) Secretary of the Delaware ) Department of Health and ) Social Services ) ) Appellee. )

Submitted: January 19, 2024 Decided: May 21, 2024

Upon Appeal from the Delaware Department of Health and Social Services; REVERSED AND REMANDED.

MEMORANDUM OPINION AND ORDER

Gilberte Pierre, Esq. and John S. Whitelaw, Esq., of Community Legal Aid Society, Inc., Attorneys for Appellant.

Renee L. Hrivnak, Esq., of the Delaware Department of Justice, Attorney for Appellee.

WINSTON, J. I. INTRODUCTION

Zeta Potts-Lolley appeals a decision of the Delaware Department of Health

and Social Services (“DHSS”). Prior to issuing its decision, DHSS held an

administrative hearing. At the hearing, over Potts-Lolly’s objection, the

Administrative Hearing Officer (the “Hearing Officer”) admitted and considered

evidence submitted after the hearing. The Hearing Officer found Potts-Lolley

committed an intentional program violation by misusing and trafficking her

Electronic Benefit Transfer (“EBT”) card. The violation disqualified Potts-Lolley

from receiving Supplemental Nutrition Assistance Program (“SNAP”) benefits for

twelve months. Because the Hearing Officer erred in admitting and considering

evidence submitted after the hearing, the decision of the Hearing Officer must be

REVERSED and this matter REMANDED for a fair hearing as required by law.

II. FACTUAL AND PROCEDURAL HISTORY

The Audit & Recovery Management Services (“ARMS”) division of DHSS,

first suspected Potts-Lolley of EBT card trafficking while investigating two stores –

Mama’s Convenience (“Mama’s”) and Stop Shop N Go (“Stop Shop”).1 Upon

reviewing Potts-Lolley’s EBT account, an ARMS investigator identified suspected

1 R. at 184:1-4 and 186:4-6. The investigator does not recall when his investigation of Potts-Lolley began, but testified it was well before late 2021. R. at 198:5-13. 2 trafficking activity.2 Thereafter, ARMS sent Potts-Lolley a letter informing her of

the investigation, requesting an interview and advising her of her rights regarding an

Administrative Disqualification Hearing (the “Hearing”) waiver.3

As Potts-Lolley did not waive her Hearing rights, a disqualification Hearing

was held.4 Potts-Lolley was represented by counsel but did not testify. The ARMS

investigator testified, on behalf of DHSS, that Potts-Lolley engaged in benefits

trafficking at Mama’s and Stop Shop between January 2015 and August 2017.5

ARMS presented evidence that included a report of all of Potts-Lolley’s EBT activity

from 2014 to 20206 and a condensed list of the alleged trafficking violation

transactions at Mama’s and Stop Shop.7 In addition, Potts-Lolley’s January 3, 2020

signed benefit application was also submitted (“Exhibit 2”).8 Exhibit 2 indicates

Potts-Lolley understood the proper use of EBT benefits and penalties for misuse.9

The ARMS investigator further testified that Mama’s and Stop Shop were

permanently disqualified from the United States Department of Agriculture Food

and Nutrition Service (“FNS”) program due to repeated violations of the FNS

2 R. at 184:16-186:17. 3 R. at 96-99. 4 R. at 241-243. 5 R. at 93 and 185:6-186:8. 6 R. at 67-92. 7 R. at 93-94. 8 R. at 61-66. 9 Id. 3 regulations.10 Potts-Lolley objected on hearsay grounds.11 In response, DHSS

indicated it possessed disqualification documents related to Stop Shop.12 The

disqualification documents contain a list of transactions meeting food benefits

trafficking patterns.13 These trafficking patterns include: repetition, size, and back-

to-back purchases.14 Upon confirming disqualification documents existed, the

Hearing Officer permitted DHSS to submit the disqualification evidence after the

Hearing.15 Thus, prior to the end of the Hearing, the Hearing Officer left the record

open and directed DHSS to submit evidence of Stop Shop’s FNS disqualification by

the end of the day.16 Then, Potts-Lolley was permitted to submit any objections

within two days.17 Directly after the hearing, ARMS submitted the requested Stop

Shop disqualification documents (“Exhibit 8”).18 The next day, Potts-Lolley timely

renewed her objection to Exhibit 8 as inadmissible hearsay evidence and requested

a supplemental hearing, if the Hearing Officer decided to admit Exhibit 8.19

10 R. at 174:17-175-17. 11 R. at 176:7-18. 12 R. at 183:1-4. Disqualification documents related to Mama’s either did not exist or DHSS was not in possession of the documents. R. at 180:19-23. 13 R. at 174:17-175:6. 14 Id. 15 R. at 183:2-8. 16 R. at 206:23-207:15. 17 R. at 207:16-24. 18 R. at 5-6 and 101-137. 19 Id. at 5-6. 4 The Hearing Officer’s written decision concluded that, “[b]ased upon the

testimony and evidence, it is highly probable, reasonably certain, and free from

serious doubt” that Potts-Lolley committed an intentional program violation.20

Accordingly, Potts-Lolley was disqualified from SNAP benefits for twelve months.21

In reaching this decision, the Hearing Officer admitted and considered Exhibit 8

under Delaware Rule of Evidence 803(6) and denied Potts-Lolley’s request for a

supplemental hearing because she had failed to demonstrate cause.22

Potts-Lolley filed the instant action with the Court challenging the Hearing

Officer’s decision.23 After an initial delay,24 the record was filed and briefing

commenced.25 During oral argument, DHSS argued that hearsay is permissible at

an administrative hearing, even if objected to, so long as it is not the sole basis for

the evidence being admitted. In consideration of this new contention, the Court

requested supplemental submissions. In its submission, DHSS reversed its position

and stated that 16 Del. Admin. C. § 5600 regulates hearsay admission in DHSS

20 R. at 53. 21 Id. 22 R. at 46 and 232. 23 D.I. 1. 24 D.I. 17, 18, 21, and 22. 25 D.I. 26, 27, 28, 34, 40, 42, 45, and 46. 5 administrative hearings.26 Potts-Lolley acknowledged the receipt of the filing but

did not respond.27

III. STANDARD OF REVIEW

DHSS decisions are subject to judicial review under 31 Del. C. § 520.28 The

standard of review is limited to whether the Hearing Officer’s decision is free from

legal error and supported by substantial evidence.29 However, only if the procedure

of disqualification determination is legally sound does the Court proceed to the

question of sufficiency of evidence to support the decision.30

On appeal, Potts-Lolley makes four arguments: (1) the Hearing Officer erred

in admitting Exhibit 8; (2) the denial of her request for a supplemental evidentiary

hearing violated her due process rights; (3) the decision that Potts-Lolley intended

to commit an intentional program violation is not supported by substantial evidence;

26 D.I. 51. 27 D.I. 52. 28 Section 520 provides in pertinent part: Any…recipient of public assistance benefits…against whom an administrative hearing decision has been decided may appeal such decision to the Superior Court…. The appeal shall be on the record without a trial de novo. The Court shall decide all relevant questions and all other matters involved, and shall sustain any factual findings of the administrative hearing decision that are supported by substantial evidence on the record as a whole. 29 Prunckun v. Delaware Dep’t of Health and Soc. Serv., 201 A.3d 525, 539 (Del. 2019). 30 Lawson v. Dep’t of Health and Soc. Serv., 2004 WL 440405, at *2 (Del. Super. Feb. 25, 2004) (citing Bowden v. Del. Dep’t of Health and Soc. Serv. Division of Soc. Serv., 1993 WL 390480, at *2 (Del. Super. 1993)). 6 and (4) the finding that any transaction over $40.05 is excessive and evidence of

benefits trafficking is not supported by substantial evidence.31

IV. ANALYSIS

The Hearing Officer Committed Legal Error Over Potts-Lolley’s objection, the Hearing Officer admitted Exhibit 8, post-

hearing. The Hearing Officer found Exhibit 8 an exception to the rule against

hearsay under D.R.E. 803(6). In addition, the Hearing Officer denied Potts-Lolley’s

request for a supplemental hearing to address, confront, or otherwise refute Exhibit

8. The Hearing Officer committed legal error by admitting Exhibit 8 and failing to

afford Potts-Lolley due process.

DHSS’s Fair Hearing Process and Procedures are set forth in Title 16 of the

Delaware Administrative Code. Before the hearing, the appellant has the right to

examine all documents and records to be used by DHSS at the hearing.32 At the

hearing, hearsay evidence is inadmissible if there is an objection unless it meets one

of the hearsay exceptions.33 D.R.E. 803(6),34 commonly referred to as the business

31 D.I. 28. 32 § 5403(1). 33 16 Del. Admin. C. § 5600(2). 34 Under D.R.E. 803(6), business records are admissible if: (A) the record was made at or near the time by, or from information transmitted by—someone with knowledge; (B) the record was kept in the course of a regularly conducted activity of a business, organization, occupation, or calling, whether or not for profit; (C) making the… record…was a regular practice of 7 records exception, is an exception to the rule against hearsay. Admission subject to

D.R.E. 803(6) also requires compliance with D.R.E. 902(11). D.R.E. 902(11)

provides that before “the hearing, the proponent must give an adverse party

reasonable written notice of the intent to offer the record and – must make the record

and certification available for inspection – so that the party has a fair opportunity to

challenge them.” After the hearing, in reaching a decision, hearing officers may only

consider evidence presented at the hearing.35

Here, contrary to DHSS’s Fair Practices and Procedures, Potts-Lolley was not

provided with Exhibit 8 before (or even during) the hearing. In addition, the Hearing

Officer considered Exhibit 8 in determining whether to disqualify Potts-Lolley’s

SNAP benefits. First, post-hearing, the Hearing Officer found Exhibit 8 qualified as

a business record under D.R.E. 803(6). Exhibit 8 is a record of a regularly conducted

activity and practice of the United States Department of Agriculture (“USDA”), and

its accuracy was attested to by the USDA reviewer who visited Stop Shop. 36 The

Court need not address whether the certification complied with the Delaware Rules

that activity; (D) all the conditions are shown by the testimony of the custodian or another qualified witness, or by a certification that complies with Rule 902(11) …; and (E) the opponent does not show that the source of information or the method or circumstances of preparation indicate a lack of untrustworthiness. 35 16 Del. Admin. C. § 5400(1)(G). 36 R. at 46. 8 of Evidence because Exhibit 8 was not provided to Potts-Lolley before the hearing

as required under D.R.E. 902(11) and Section 5403(1). Therefore, even if the

certification complied, Exhibit 8 was improperly admitted.

Second, by admitting Exhibit 8, post-hearing, and denying Potts-Lolley’s

request for a supplemental hearing, the Hearing Officer considered evidence

presented outside of the hearing. Delaware recognizes that SNAP benefits are

property rights of which a recipient may not be deprived without due process of

law.37 Because Potts-Lolley’s benefits were terminated, her due process rights were

triggered. The requirements of due process includes a decision resting “solely on

the legal rules and evidence adduced at the hearing.”38 Federal regulations require

state agencies to provide fair hearings that meet this requirement.39 DHSS’s Fair

Hearing Practices and Procedures includes the right to examine all documents and

records to be used before and at the hearing, and question or refute any evidence.40

As required by federal regulations, “[o]nly evidence presented at the hearing shall

be considered by the hearing officer in reaching his decision.”41

37 16 Del. Admin. C. §§ 5000-5606. 38 Lawson, 2004 WL 440405, at *4 (quoting Goldberg v. Kelly, 397 U.S. 254, 266- 67 (1970)). 39 Id. at *4 (citation omitted). 40 16 Del. Admin. C. §§ 5403 and 5404; 7 C.F.R. § 273.15(p)(5). 41 16 Del. Admin. C. § 5400(1)(G). 9 Contrary to federal and state regulations, Exhibit 8 was not presented at the

hearing and the Hearing Officer denied Potts-Lolley a fair opportunity to refute the

evidence.42 In consequence, the Hearing Officer considered evidence submitted

post-hearing in reaching her decision. Accordingly, the Court finds Potts-Lolley’s

due process rights were violated. Therefore, an error of law was committed, and the

decision of the Hearing Officer must be REVERSED. The matter is REMANDED

for a new hearing.43

IT IS SO ORDERED.

/s/Patricia A. Winston Patricia A. Winston, Judge

42 Providing Potts-Lolley an opportunity, post-hearing, to submit written objections did not alter this due process violation. 43 As Potts-Lolley’s due process rights were violated, the Court does not reach her arguments that the decision is not supported by substantial evidence. Lawson, 2004 WL 440405, at *2. 10