United States District Court, E.D. Michigan, Southern Division
J & L LIQUOR, INC. Plaintiff,
UNITED STATES OF AMERICA, Defendant.
OPINION AND ORDER RE: DEFENDANT'S MOTION FOR
SUMMARY JUDGMENT (DKT. 15)
STEPHANIE DAWKINS DAVIS, UNITED STATES MAGISTRATE JUDGE
Proceedings in this Court
February 29, 2016, plaintiff filed the instant suit seeking
judicial review of the USDA's Food and Nutrition Service
(FNS) determination that plaintiff trafficked in Supplemental
Nutrition Assistance Program (SNAP, known colloquially as the
food stamp program), and to review the decision to
permanently disqualify plaintiff from participation in the
program. (Dkt. 1). With consent of the parties, this case was
referred to the undersigned for final judgment in accordance
with 28 U.S.C. § 636(c) and Federal Rule of Civil
Procedure 73. (Dkt. 12). This matter is before the Court on
defendant's motion for summary judgment. (Dkt. 15).
Plaintiff also filed a response brief in opposition to
defendant's motion. (Dkt. 18). Defendant filed a reply
brief in further support of its motion. (Dkt. 19). The Court
has reviewed the pleadings, and has heard oral argument from
the parties at a hearing held on May 2, 2017.
9, 2015, the FNS issued a letter to plaintiff charging it
with trafficking in SNAP benefits. (Dkt. 14, PgID 180-182). The
letter was the culmination of an investigation triggered by
the FNS's computerized ALERT system identifying
suspicious benefit redemption patterns at the retail
convenience store operated by plaintiff in 2014, which
included a visit to the store and a manual analysis of
redemption data. (Dkt. 14, PgID 148-179, 223-232). The charge
letter advised plaintiff that the penalty for SNAP
trafficking is permanent disqualification from SNAP, but that
plaintiff could request a civil monetary penalty in lieu of
permanent disqualification by submitting certain
documentation as set forth in 7 C.F.R. §278.6 within ten
days of its receipt of the charge letter. (Dkt. 14, PgID
180-182). Plaintiff disputed the trafficking charge, and did
not request a civil monetary penalty in lieu of permanent
disqualification. (Dkt. 14, PgID 197-208).
23, 2015, FNS permanently disqualified plaintiff from
participating in SNAP and sent a letter to plaintiff advising
it of that determination. (Dkt. 14, PgID 237-238). The July
23, 2015 FNS letter also advised plaintiff of its right to
review by the Administrative Review Branch, and plaintiff
submitted its request for such a review on July 29, 2015.
(Dkt. 14, PgID 237-243). FNS granted plaintiffs timely
request for Administrative Review of the adverse action taken
against plaintiff. (Dkt. 14, PgID 310-311). On or about
February 2, 2016, the administrative review officer issued a
Final Agency Decision upholding the permanent
disqualification of plaintiff from SNAP participation. (Dkt.
14, PgID 391-418). The Final Agency Decision advised
plaintiff of its right to judicial review pursuant to 7
U.S.C. §2023 and 7 C.F.R. §279.7. (Dkt. 14, PgID
417). Plaintiff timely commenced the present action for
judicial review. (Dkt. 1). The defendant filed a motion for
summary judgment, which is now ripe for determination by the
Court. (Dkt. 15, 18, 19).
FACTUAL BACKGROUND AND PARTIES ARGUMENTS
J & L Liquor, Inc. owns and operates a retail market in
Highland Park, Michigan known as J & L Market. (Dkt. 1,
¶2-3, 8). In March 2013, FNS authorized plaintiff to
accept SNAP benefits as payment for eligible food items.
(Dkt. 14, PgID 223). Plaintiff market carries an assortment
of food products, including, but not limited to, a deli
counter offering meats and cheeses, eggs, baby food and
formula, bread, milk, juices, soft drinks and snack foods, as
well as nonfood items such as tobacco products, liquor and
lottery tickets. (Dkt. 14, PgID 148-167). FNS's
computerized fraud detection system identified suspicious
benefit redemption patterns at plaintiffs store, which
triggered a manual analysis of redemption data for plaintiffs
store for the months of September through December 2014.
(Dkt. 14, PgID 168- 179). FNS also conducted an on-site visit
in order to observe the store, complete a survey and take
photographs of the premises in November 2014. (Dkt. 14, PgID
146-167). FNS's manual analysis of benefit redemption
data revealed average transaction dollar amount, average
transaction dollar volume and total purchase count
significantly higher than comparable retail outlets, as well
as multiple transactions from the same benefit accounts
within an unusually short period of time. FNS deemed 22
groups of 2 to 4 rapid transactions suspicious as they are
unusual and suggestive of trafficking. (Dkt. 14, PgID
183-232). The FNS investigator concluded that the data from
September through December 2014 established clear and
repetitive patterns of unusual, irregular and inexplicable
SNAP activity warranting the issuance of a trafficking charge
letter. (Dkt. 14, PgID 232).
responded to the charge letter by arguing that the suspect
repetitive transactions were sometimes separated by more than
24 hours, and thus did not lead to a reasonable inference
that plaintiff violated SNAP regulations. Plaintiff argued
that the demographics of its customer population provided
legitimate explanations for the irregular redemption data.
(Dkt. 14, PgID 197-200). Specifically, plaintiff suggests
that Highland Park is a poor community, under-served by large
chain supermarkets which leads its residents to rely on small
markets like plaintiff for grocery staples. Additionally,
plaintiff asserted that the citizens in the community lack
access to transportation, thereby requiring customers to make
repeated trips on foot to satisfy their shopping needs.
Plaintiff reasons that these circumstances explain the
frequent, repeated transactions on the same benefit account
and also supports the legitimacy of the larger than average
transactions. (Id.) Plaintiff maintains that it is
not uncommon for its customers to do all of their grocery
shopping at a store like J & L. (Dkt. 14, PgID 411).
also disputed the characterization of the 491 identified
transactions as excessively large because nearly 40% of them
were for $40 or less, and only 14 of them exceeded $100.
(Dkt. 14, PgID 197-200). Plaintiff repeatedly argued to FNS
that its own "analysis of the transactions demonstrates
that the store did not engage in any violations." (Dkt.
14, PgID 242). Plaintiff also asserts that it conducted its
own investigation into the transactions and found no SNAP
violations, and that FNS's speculative findings were
specious. (Dkt. 14, PgID 411). Plaintiff supplied photographs
of the store's interior, including shelves of a variety
of grocery and other food items. (Id.). One
photograph shows a sign advertising large packages of frozen
chicken wings for $37.99, packages of frozen fish for $22.99,
as well as for spare ribs, baby back ribs and frozen potato
wedges. (Dkt. 14, PgID219).
Final Agency Decision addressed plaintiffs responses by
noting that its on-site investigation revealed a substantial
inventory of prepared, ready-to-eat foods and accessory food
items, as well as beer, wine and liquor, household items,
paper products, cleaning supplies, laundry detergent, health
and beauty products, and lottery tickets. "Store visit
photos reflected that canned/packaged items were dusty, and
staple food shelves were sparsely stocked, indicating a low
turnover." (Dkt. 14, PgID 412). The store offered no
fresh meat, fish or poultry, other than cold cuts; and no
fresh vegetables or fruit was in inventory aside from two
bags of onions, three tomatoes and one bunch of bananas.
at the time of the on-site investigation, there was one
shopping cart present, and it contained merchandise for sale.
There was one hand-held shopping basket available. There were
two cash registers situated behind a Plexiglass barrier.
There was no check-out counter or conveyor belt; purchased
items had to be handed through 8"xl8" openings in
the Plexiglass. (Id.). "The majority of
SNAP-eligible food items on hand consisted of snack foods and
soft drinks. There was no indication of advertised
specials/promotions or bulk/expensive food items."
(Id.) The FNS administrative review officer
questioned how, without any available shopping carts, only
one shopping basket and little to no checkout space,
customers were able to gather and transport large orders of
inexpensive snack food to the cash registers and waiting
also refuted plaintiffs assertion that its customers had no
access to better-stocked outlets in the area by noting that
plaintiffs customers who were documented to have conducted
implausible transactions with plaintiff were shopping at
super stores, supermarkets and grocery stores - stores which
likely offered better stock with more competitive prices than
plaintiff, at or near the same time of the suspicious
transactions. (Dkt. 14, PgID413). Specifically, FNS notes
that at the time of the charge letter, there were 89
SNAP-authorized stores within a two-mile radius of plaintiff,
including four super stores, three supermarkets, four medium
grocery stores, four small grocery stores ...