United States District Court, E.D. Michigan, Southern Division
WEST TOWN MARKET, INC. and HAYTHAM BESHI, Plaintiffs,
UNITED STATES OF AMERICA, et al., Defendants.
ORDER DENYING PLAINTIFFS' MOTION FOR SUMMARY
JUDGMENT [ECF No. 19], GRANTING IN PART AND DENYING IN PART
DEFENDANTS' MOTION FOR SUMMARY JUDGMENT [ECF No. 20], AND
GRANTING IN PART PLAINTIFFS' MOTION FOR LEAVE TO AMEND
WITNESS LIST [ECF No. 25]
GEORGE CARAM STEEH JUDGE
Beshi is the owner of the West Town Market convenience store
(Beshi and West Town Market will be referred to collectively
as “plaintiff”). West Town Market was permanently
disqualified from participating in the federal Supplemental
Nutrition Assistance Program (“SNAP”) due to a
finding by the United States Department of Agriculture Food
and Nutrition Services that plaintiff trafficked in SNAP
benefits.Plaintiff filed a complaint in this court
seeking to reverse the disqualification. The matter is before
the court on cross motions for summary judgment.
28, 2017, the United States Department of Agriculture
(“USDA”) issued a “charge letter”
that permanently disqualified West Town Market from accepting
SNAP Benefits. The USDA alleged that plaintiff trafficked
SNAP benefits in two ways: (1) by conducting numerous
transactions within a short time frame within the same
household; and (2) by conducting transactions too excessive
in value to be actual purchases in West Town Market.
Plaintiff responded to the charge letter by providing a
legitimate explanation for the types of purchases made by its
customers and attaching receipts for its food purchases to
demonstrate that it had the inventory to support the SNAP
purchases made in its store. On October 5, 2017, the USDA
denied plaintiff's request to reverse the USDA action.
Plaintiff appeals the denial to this court.
USDA operates SNAP under the Food Stamp Act, 7 U.S.C.
§§ 2011, et seq. SNAP is administered by
the USDA's Food and Nutrition Services
(“FNS”), with a mission to “promote the
general welfare and safeguard the health and well-being of
the Nation's population by raising the levels of
nutrition among low-income households.” 7 U.S.C. §
2011. Electronic benefit transfer (“EBT”) cards
are distributed to households qualified to participate in
SNAP. The EBT cards function like a debit card. The
household's account is credited monthly with the amount
of benefits allocated and members of the household access the
benefits by swiping the card at a specially programmed
point-of-sale device issued to stores authorized to
participate in SNAP. The benefits are debited from the
household's account and credited to the store's
designated bank account. Benefits may only be used to
purchase eligible items.
employs the Anti-Fraud Locator using EBT Retailer
Transactions (“ALERT”) system to monitor SNAP
transactions and flag those with unusual patterns that may be
consistent with trafficking. The ALERT system records EBT
transactions at every retail store participating in SNAP. One
manner of trafficking occurs when SNAP recipients sell their
benefits for cash to food retailers, usually at a discount.
FNS looks for patterns indicative of trafficking, like
multiple transactions by the same household in a short
period, to avoid a single high dollar transaction, or
unusually high dollar transactions at stores that otherwise
have small transactions. If FNS identifies a retailer with
unusual patterns it will conduct further investigation.
Town Market, located in Wayne, Michigan, is a 2, 000 square
foot store that is described as a grocery store by plaintiff
and as a convenience store by defendants. (Beshi Aff. ¶
4; Denise Thomas Decl. ¶14). In 1995, West Town Market
was authorized to participate in SNAP. Significantly,
plaintiff had no compliance issues in he 22 years preceeding
Town Market showed up on the ALERT system and FSN researched
its EBT data from February 1, 2017 through May 31, 2017. The
average SNAP transaction at a convenience store in all of
Wayne County during the relevant four month period was $5.67,
while West Town Market's average ranged from $10.88 a
month to $15.06 a month. West Town Market had total SNAP
sales of $25, 906.10, which was nearly double the average
SNAP sales ($13, 936.64) for convenience stores in Wayne
County during the same period.
contractor, Kelli Chambliss, visited West Town Market to
conduct an on-site review. She noted the market did not have
scanners at the checkout, did not have shopping baskets or
carts, and that it operated through a plastic barrier.
Chambliss's report contained several errors, such as the
size of the store (she said the store was 1500 square feet,
but it is 2000 square feet), the size of the counter (she
said it is 1 x 1, but it is 3 x 3), whether it has baskets
for shopping (she said it does not, but it does) and how many
entrances it has (she said it had only one entrance, but it
time relevant to the facts of this case, Beshi had only one
employee, Stiven Toma, who worked as a cashier. (Beshi Dep.
p. 9). Chambliss spoke to Toma who said that the most
expensive SNAP eligible item sold at West Town Market was a
12.5 oz. can of baby formula that sold for $20.99. The next
most expensive items ranged from $5.69 to $6.99.
Specialist Anthony Pesini reviewed the ALERT data and results
of the on-site review. Pesini found 29 sets of violations in
which a household conducted multiple higher-than-average SNAP
transactions in fewer than 24 hours. (EFC No. 11, AR 92). One
such household spent $20.96, $35.21, $26.50 and $32.92 in a
24 hour period, with two of the transactions occurring in
less than one hour. Id. Pesini also identified 219
SNAP transactions exceeding $24, and 23 SNAP transactions
exceeding $100. Id. at 93. A comparison of larger
convenience stores located less than 2 miles away with
similar inventory showed no transactions unusually close in
time from the same household during the same period, 87 SNAP
transactions over $24, and 5 transactions over $100.
Id. at 94.
Pesini analyzed data for three of the specific households
involved in the suspicious transactions and found that within
days of the households making an unusually large SNAP
transaction at West Town Market, they also made a SNAP
purchase at a superstore. Id. at 100-107. One
household spent $1, 797.63 in SNAP benefits at a superstore
and during the same period spent $3, 026.76 at West Town
Market. Id. at 107. Pesini noted that this was
indicative of trafficking because there were not many
products a household could purchase at West Town that they
could not get at better-stocked and lower-priced superstores.
Town Market did not carry fresh meat, specialty or ethnic
foods that would provide a reason for it to have uniquely
high transactions compared to its lower-priced competitors.
Pesini described West Town Market as a “place to pick
up a few items forgotten at the grocery store or to get a few
items to make dinner with.” Id. at 93. Based
on his analysis of the transaction data, he concluded there
were “clear and repetitive patterns of unusual,
irregular, and inexplicable SNAP activity” which
warranted issuance of a trafficking charge letter.
Id. at 107.
sent Beshi a charge letter on July 28, 2017. Id. at
128-30. The transactions FNS considered to be violations of
SNAP regulations were attached to the charge letter.
Id. at 131-38. The letter informed Beshi he could
submit any information, explanation or evidence for FNS to
consider in making a final determination.
through counsel, responded by submitting numerous receipts
and invoices he believed showed that he purchased enough food
inventory to support the amount of claimed SNAP sales. ECF
No. 11-1, AR 184-280. Beshi explained that the large and
multiple transactions occurred because there were no other
grocery stores in the immediate neighborhood. Id. at
144; ECF No. 11-2, AR 333. He claimed that the data on large
transactions was not indicative of trafficking because he
sold baby formula for $20.99 and $74.99 and cases of soda or
energy drinks for $9.99 to $49.99. Id. at 147. Beshi
emphasized that large purchases were due to the sale of baby
formula not reimbursed by the Special Supplemental Nutrition
Program for Women, Infants and Children (WIC”), as well
as the sale of soda and energy drinks. Id. at 334.
reviewed the documentation submitted by Beshi and determined
that 78% of West Town Market's SNAP-eligible inventory
consisted of soda, snacks and candy and noted that it seemed
unlikely a household would spend a large proportion of their
monthly benefits on these items. ECF No. 11-3, AR 462. Pesini
determined that within one mile of West Town Market there
were 12 other convenience stores, a supermarket, a meat
market, a medium grocery store and a farmer's market.
Id. at 462-63.
Town's WIC redemptions for March - May were $15, 722.62.
Id. at 466. Beshi provided invoices for $5, 339.70
of baby formula inventory purchased during the period at
issue. Even considering a 100% markup on formula, Pesini
concluded there would be a large excess in WIC redemptions,
making it reasonably likely that most formula sales were made
with WIC rather than SNAP benefits. Pesini also determined it
was highly unlikely a household would spend over $100 on
cases of energy drinks and soda in a convenience store when
the same could be obtained more cheaply at a superstore.
the households had 18 SNAP transactions totaling $1, 459.63
at West Town in a 6-day timeframe in March and had no other
transactions at West Town before or after that date.
Id. at 466-67. The particular household shopped at
Kroger and other markets during the same period, causing FNS
to conclude it was unlikely the household would legitimately
spend such a large amount on food at a convenience store.
on Pesini's analysis and Beshi's evidence,
Pesini's supervisor, Denise Thomas, found by a
preponderance of the evidence that the transactions
identified in the charge letter were more likely than not the
result of trafficking. Id. at 468-69. FNS informed
Beshi that West Town Market would be permanently disqualified
from the SNAP program. Beshi requested administrative review
of the decision. Id. at 474. On June 28, 2018, FNS
issued a ...