The opinion of the court was delivered by: ROBERTSON
If the Secretary of Agriculture finds that a retail food store has violated provisions of the statute or the regulations establishing and governing the federal food stamp program, the Secretary may (but is not required to) disqualify the food store for a specified period of time from further participation in the food stamp program. If the Secretary determines that disqualification would cause hardship to food stamp households, the Secretary may subject the store to a civil money penalty in lieu of disqualification. 7 U.S.C. § 2021(a). Judicial review is available to a retail food store that has been sanctioned under this provision; the statute provides for a trial de novo
"in which the Court shall determine the validity of the questioned administrative action in issue. If the Court determines that such administrative action is invalid, it shall enter such judgment or order as it determines is in accordance with the law and the evidence."
USDA investigators paid six visits to the Shipley Market in Southeast Washington, D.C. between March 16 and July 27, 1994. They were able to purchase non-food items using food stamps on the first four of those six visits, but not on the last two. On February 2, 1995, more than eight months after the last date on which its investigator had exchanged food stamps for ineligible items, USDA notified the Shipley Market that it would be disqualified from the food stamp program for six months. Plaintiffs, the owners of the Shipley Market, sought and received an administrative review. On May 22, 1995, they were told by the USDA's Administrative Review Branch in Dallas, Texas that the disqualification would be sustained. Plaintiffs sought judicial review timely thereafter. On June 27, 1995, I issued an order staying the administrative action and setting the matter down for the de novo hearing contemplated by the statute.
At the de novo hearing, held on July 24, 1995 the government introduced in evidence the "transaction reports" constituting the investigator's record of her purchases at the Shipley Market, a form report supporting the identification of the plaintiffs and one other as the persons who sold her the ineligible items, and the May 22 letter of the Administrative Review Branch in Texas sustaining the disqualification. Pressed for a statement whether the government's evidence constituted the record on which its administrative determination was based, counsel responded that she was satisfied that the exhibits established the government's case of violation and for disqualification. The government proffered the testimony of the USDA investigator and her superior. Because the substance of the proffer concerned only the identification of persons who made the sales in question, I declined to hear that testimony.
Plaintiff Chang Kim, with the assistance of a Korean language interpreter, testified without contradiction to the effect that about 25 percent of his business is derived from food stamps, that a number of elderly food stamp customers live next door to the Shipley Market, that the closest other market to which such people could go to make food stamp purchases of the variety of food he sells is about half a mile away, that many elderly people wait at his door for him to open his store in the morning, and that in his view those persons would suffer hardship if the disqualification were sustained.
It is undisputed that the Kims have never been charged or sanctioned for food stamp violations before now; that none of the violations in question involve "trafficking" or selling products containing alcohol or tobacco; and that no warning of any kind was given to the Kims before the imposition of the six month disqualification they challenge here.
I find on the basis of the evidence presented that violations of the food stamp statute and regulations occurred as charged: On March 16, 1994, the investigator was able to buy a can of brass polish (an item that is ineligible for purchase with food stamps) together with franks, corn-on-the-cob, applesauce, noodle mix and syrup (items that are eligible for food stamp purchase). On March 23, 1994, the investigator was able to buy hot/cold cups, a mop refill and bowl cleaner (ineligible) along with potatoes, instant potatoes, sausage, chili, fruit cups and greens (eligible) On May 13, 1994, the investigator was able to buy bathroom tissue, coffee pot cleaner and bowl cleaner (ineligible) along with Crisco, pancake mix, rice and broccoli, Spam and seasoning (eligible). On May 24, 1994, the investigator was able to buy rug deodorizer, clothes pins, liquid wax and detergent (ineligible) along with eggs, rolls, spaghetti, Hamburger Helper, sausage, spaghetti sauce and sweet potatoes (eligible).
The USDA's regulations require the regional office making a disqualification or penalty determination to consider
"(1) the nature and scope of the violations committed by personnel of the firm, (2) any prior action taken by FNS [Food and Nutrition Service] to warn the firm about the possibility that violations are occurring, and (3) any other evidence that shows the firm's intent to violate the regulations."
7 C.F.R. § 278.6(d). The government's record covers only the first of those three elements. No prior warnings were given, so obviously there was no consideration given to any such warnings. No evidence was offered or apparently considered on the subject of intent.
The regulations further provide certain "criteria for civil money penalties for hardship," 7 C.F.R. § 278.6(f), and specifically permit the ...