MEMORANDUM OPINION AND ORDER
Randolph D. Moss United States District Judge
This is
an action seeking to set aside a decision by U.S. Department
of Agriculture's (“USDA”) Food and Nutrition
Service (“FNS”) permanently disqualifying ABG
Mart, a convenience store located in Washington, D.C., from
participating as an authorized retailer in the Supplemental
Nutrition Assistance Program “(SNAP”). Under 7
U.S.C. § 2021, the FNS is required permanently to
disqualify a retail food store from participating in the SNAP
if the store has engaged in “trafficking in [SNAP]
coupons or authorization cards” and if the store does
not qualify for the discretionary imposition of a civil
monetary penalty “in lieu of disqualification.” 7
U.S.C. § 2021(b)(3)(B). An aggrieved store may seek
judicial review of a final determination of disqualification,
and review is by “a trial de novo” to
“determine the validity of the questioned
administrative action in issue.” 7 U.S.C. §
2023(a)(15).
After
the FNS issued a final agency decision permanently
disqualifying ABG Mart from participating in the SNAP, the
store and its owner (collectively “Plaintiffs”)
brought this action, alleging that they did not traffic in
SNAP benefits and seeking to set aside the agency's
action. Dkt. 1. In response, the government moves to dismiss
for failure to state a claim, Fed.R.Civ.P. 12(b)(6), or, in
the alternative, moves for summary judgment. Dkt. 10 at 1.
For the reasons set forth below, the Court will deny the
government's motion.
I.
BACKGROUND
A.Statutory
Background
SNAP is
a government program operated by the FNS pursuant to 7 U.S.C.
§§ 2011-2036. See 7 C.F.R. § 271.3.
The program's mission is “in order to promote the
general welfare, to 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. To achieve this mission, SNAP supplements low-income
families' food-purchasing funds in the form of an
electronic benefit transfer (“EBT”) card, which
operates like a debit card and can be used only for the
purchase of food at approved SNAP retailers. Id.
§§ 2013(a), 2016(j).
Approved
SNAP retailers have one or more EBT terminals, which the
retailer uses to swipe the SNAP beneficiary's EBT card
when that beneficiary is making a SNAP-eligible purchase. The
beneficiary enters a personal identification code on the
terminal's keypad, and the amount spent on the
corresponding purchase is deducted from the beneficiary's
EBT card balance. The EBT terminal generates a receipt for
each transaction, and the purchase amount is credited to the
retailer's bank account within two business days. The FNS
can monitor SNAP retailers' EBT transactions
electronically. See 7 C.F.R. § 278.6.
SNAP
retailers are subject to a range of regulatory requirements.
See Id. Of particular relevance here, the FNS may
permanently disqualify a SNAP retailer that it finds is
“trafficking” in SNAP benefits. Id.
“Trafficking” is defined in relevant part as
“buying, selling, stealing or otherwise effecting an
exchange of SNAP benefits issued and accessed via [EBT] cards
. . . for cash or consideration other than eligible food,
either directly, indirectly, in complicity or collusion with
others, or acting alone.” Id. § 271.2. A
finding of trafficking must be based on evidence, which
“may include facts established through on-site
investigations, inconsistent redemption data, evidence
obtained through a transaction report under an [EBT] system,
or the disqualification of a firm from the Special
Supplemental Nutrition Program for Women, Infants and
Children.” Id. § 278.6(a). If a retailer
is found to have trafficked in SNAP benefits, that retailer
is permanently disqualified from future participation.
Id. The FNS may, in its discretion, impose “a
civil money penalty in lieu of a permanent disqualification,
” but only if the retailer requests consideration of
this alternative penalty within ten days, id. §
278.6(b)(2)(iii), and if the retailer meets various criteria,
see Id. § 278.6(i).
The
statute and regulations also provide for administrative and
judicial review of an FNS decision to disqualify a SNAP
retailer. 7 U.S.C. § 2023(a). First, the FNS must send
the retailer written notice of its initial decision, upon the
receipt of which the retailer may ask the FNS to review that
initial decision. Id.; 7 C.F.R. § 279. Upon
completion of the review, FNS renders a “final
determination” and notifies the retailer, at which
point the retailer may seek judicial review in state or
federal court. See 7 U.S.C. § 2023(a)(13); 7
C.F.R. § 279.
B.
Factual and Procedural Background
The
present dispute began when the FNS's electronic alert
system identified “patterns” of EBT transactions
at ABG Mart that were “consistent with possible EBT
trafficking violations.” AR 72. Based on this finding,
the FNS Retailer Operations Division began an investigation.
Id. An FNS contractor visited the store on April 15
and June 17, 2017. AR 30-70. The contractor found one EBT
terminal at the store, AR 31, 50, minimal counter space at
the check-out area, AR 44, 46, 60, 63, no carts or baskets
available to carry items around while shopping, AR 30, 49,
and no high-priced food items for sale, AR 31, 33, 50,
52.[1]
The FNS also compared the store's transactions to those
of other stores in the area, including five other convenience
stores within a 1.64-mile radius of the store, and found that
ABG Mart had “the highest total transactions and
highest dollar volume [and] highest amount of scan flag
hits” among the five local convenience stores. AR
86-89. The FNS then analyzed all the information gathered
during its investigation and determined that the transaction
data “established clear and repetitive patterns of
unusual, irregular, and inexplicable SNAP activity, which
would warrant issuance of a trafficking charge letter.”
AR 99.
ABG
Mart's suspicious transactions fell into two categories:
(1) “[r]apid [a]nd [r]epetitive [t]ransactions [i]n [a]
[s]hort [p]eriod [o]f [t]ime” from the “[s]ame
[h]ousehold/[a]ccount, ” and (2) “[h]igh [d]ollar
[t]ransactions. AR 84-85, 104-11. The FNS considered these
transactions to be inconsistent with the transactions at
other similarly situated SNAP retailers, which had similar
average dollar transaction sizes but fewer high dollar
transactions and, at most, around half the total SNAP
transaction volume. AR 89-91. In reviewing the shopping
patterns of four households that were involved in suspicious
transactions at the store, the FNS found that their average
transaction sizes at the store were over $50.00- well above
the $7.76 average transaction size for convenience stores in
the District of Columbia. AR 93-99. Furthermore, the FNS
found that those same households were also shopping at larger
stores, often within a day or two of shopping at ABG Mart,
demonstrating that the store's customers had access to
stores with larger inventories.[2] Id.
On July
17, 2017, the FNS sent a letter to ABG Mart indicating that
the store was being charged with trafficking in EBT benefits.
AR 101-03. The letter explained that ABG Mart had a right to
explain the suspicious charges and a right-within ten days-to
request a civil money penalty in lieu of permanent
disqualification. Id. at 101. Betelhem Gesesse, the
owner of ABG Mart, requested and received additional time to
respond, although he was cautioned that the extension did not
apply to the time to request a civil money penalty in lieu of
disqualification. AR 114. On August 10, 2017, Gesesse
responded to the charge letter, offering 24 pages of cashier
receipts but asserting only that the charges were often
multiples of the same item and that, going forward, he would
scan each item individually. AR 117-42. The FNS analyzed the
receipts that Gesesse provided and concluded that they did
not explain the suspicious transactions. AR 143-49. On
September 6, 2017, the FNS issued a determination letter
informing Gesesse and ABG Mart that it found that the store
had engaged in trafficking and that the store was therefore
permanently disqualified from participation in the SNAP. AR
150.
Gesesse
and ABG Mart sought administrative review of the agency's
decision, and, through counsel, submitted a brief on January
2, 2018. AR 162-78. The only additional evidence that Gesesse
and ABG Mart submitted was several pages of 2016 D.C. and
federal tax returns, AR 179-91, which they included to show
their significant inventory and sales numbers.[3]
The
brief argued that the store's inventory and customer
shopping patterns explained the repetitive and high-dollar
transactions. AR 163-64. In doing so, it made a number of
assertions: The brief asserted that the store was open 24
hours a day, A.R. 163; that it sold frozen meat and soda in
bulk for whole dollar amounts, AR 164; and that the
highest-priced items it sold were a box of frozen burgers for
$25 and a bag of chicken tenders for $30, AR 164, 168. The
brief also asserted that the store sold cold, pre-made
sandwiches, at least four of which appear to be viewable in a
store visit photo. AR 41, ...