Affum v. U.S.

566 F.3d 1150

Philomena AFFUM, Doing Business as Asafo Market, Appellant v. UNITED STATES of America and Thomas J. Vilsack, Secretary of Agriculture, Appellees.

No. 08-5189.

United States Court of Appeals, District of Columbia Circuit.

Argued February 20, 2009.

Decided May 26, 2009.

Appeal from the United States District Court for the District of Columbia, (No. 1:08-cv-00300).

Charles B. Wayne argued the cause and filed the briefs for appellant.

R. Craig Lawrence, Assistant U.S. Attorney, argued the cause for appellees. With him on the brief were Jeffrey A. Taylor, U.S. Attorney, and Harry B. Roback, Assistant U.S. Attorney.

Before SENTELLE, Chief Judge, KAVANAUGH, Circuit Judge, and EDWARDS, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge EDWARDS.

EDWARDS, Senior Circuit Judge:

The Food Stamp Act ("Act") prohibits retail stores from "trafficking" in food stamp benefits, or exchanging these benefits for cash. See 7 U.S.C. § 2021(b)(3)(B). The penalty for a first-time trafficking offense is permanent disqualification from the food stamp program. However, under the Act, the Secretary of Agriculture ("Secretary") has the discretion to impose a civil money penalty in lieu of disqualification when an offending store produces "substantial evidence" that it had an "effective policy and program" to prevent the trafficking violations. Id. Regulations promulgated by the Secretary set forth criteria for eligibility for a civil money penalty in lieu of permanent disqualification for trafficking. See 7 C.F.R. § 278.6(i).

In early 2007, a part-time employee working alone at appellant Philomena Affum's store exchanged a total of $30 in cash for $30 in electronic food stamp benefits offered by an undercover agent. The Department of Agriculture's Food and Nutrition Service ("FNS") then charged Affum with illegal trafficking. Affum requested that she be assessed a civil money penalty in lieu of permanent disqualification from the program. In November 2007, the FNS determined that Affum did not meet the regulatory criteria for the civil money penalty and permanently disqualified her store from the program. Affum then filed suit in the District Court, challenging the validity of the applicable regulations and seeking a "trial de novo" of the Secretary's penalty determination. See 7 U.S.C. § 2023(a)(15) ("The suit in the United States district court ... shall be a trial de novo by the court in which the court shall determine the validity of the questioned administrative action in issue."). Affum submitted an affidavit affirming that her "store employee had been trained and that the employee knew that it was prohibited to ... exchange cash for food stamp benefits," Affum v. United States, 550 F.Supp.2d 63, 67 (D.D.C.2008), and sought a preliminary injunction to bar the permanent disqualification. In May 2008, the District Court denied Affum's request for injunctive relief on the ground that her "affidavit alone cannot be sufficient under the statute" to require the Secretary to impose a civil money penalty in lieu of disqualification. Id. The District Court further held that Affum lacked Article III standing to challenge the regulations. Id. at 68. At the parties' request, the District Court converted its denial of the injunction to a final judgment in the Secretary's favor. Affum then appealed.

We hold that the District Court was mistaken in its ruling that Affum lacked standing. The Secretary explicitly relied on the regulations to disqualify Affum from the food stamp program and to deny her request for the lesser civil money penalty. Therefore, Affum plainly has standing to challenge the regulations and their application to her case. Accordingly, we vacate the District Court's judgment and remand the case for further proceedings. The District Court must conduct a trial de novo on Affum's claim that the Secretary abused his discretion in denying her request for a civil money penalty in lieu of disqualification.

I. BACKGROUND

A. Statutory and Regulatory Framework

Congress created the food stamp program in 1964 to "permit those households with low incomes to receive a greater share of the Nation's food abundance." The Food Stamp Act of 1964, Pub.L. No. 88-525, § 2, 78 Stat. 703, 703. Retail stores authorized to participate in the program may accept food stamp benefits instead of cash for designated food items. 7 U.S.C. § 2013(a). The stores then redeem these benefits with the government for face value. Id. Today, the government delivers food stamp benefits via electronic benefit transfer cards. Id. § 2016(h). In 2008, Congress amended the Food Stamp Act, renaming it the Food and Nutrition Act and renaming the "food stamp program" the "supplemental nutrition assistance program," but it did not substantively change the statutory provisions at issue in this case. Food, Conservation, and Energy Act of 2008, Pub.L. No. 110-246, § 4001, 122 Stat. 1651, 1853. We use the terms that the parties used in briefing this case.

Congress prohibits participating retail stores from "trafficking" in food stamp benefits, or trading these benefits for cash. Prior to 1988, the Act mandated permanent disqualification even for first-time trafficking offenders. See 7 U.S.C. § 2021(b)(3) (1982). Because of the severity of the sanction, the courts divided over whether "innocent" store owners could be held liable when their employees committed trafficking violations without their knowledge. See Ghattas v. United States, 40 F.3d 281, 283 (8th Cir.1994) (describing circuit split). In 1988, Congress amended the Act to give the Secretary "the discretion to impose a civil money penalty" in lieu of permanent disqualification if the Secretary determined that there was "substantial evidence" that the store had "an effective policy and program in effect to prevent violations of the Act and the regulations." Hunger Prevention Act of 1988, Pub.L. No. 100-435, § 344, 102 Stat. 1645, 1664 (codified as amended at 7 U.S.C. § 2021(b)(3)(B)); see also H.R. REP. NO. 100-828, pt. 1, at 28 (1988) (noting that "[u]nder current law, no discretion is provided to the Secretary of Agriculture to evaluate a store's actions to prevent [trafficking] violations" and the amended Act "provides this discretion"). In 1990, Congress amended the Act again to permit the Secretary to consider evidence that the store's ownership was not in any way involved in the trafficking. Food, Agriculture, Conservation, and Trade Act of 1990, Pub.L. No. 101-624, § 1743, 104 Stat. 3359, 3795 (codified as amended at 7 U.S.C. § 2021(b)(3)(B)).

With these and other amendments, § 2021(b)(3)(B) of the Act now provides for permanent disqualification upon the first instance of trafficking, "except that the Secretary shall have the discretion to impose a civil penalty" in lieu of disqualification in appropriate circumstances. 7 U.S.C. § 2021(b)(3)(B) (the statutory provision is reprinted in a Statutory Appendix at the end of this opinion). The Act further mandates that a store owner who sells a store that was previously disqualified by the Secretary will remain personally disqualified from the program. Id. § 2021(e)(1). Finally, the Act permits a store owner who is aggrieved by the Secretary's decision in a food stamp trafficking case to file suit in district court. Id. § 2023(a)(13). The statute provides that such a suit "shall be a trial de novo by the court in which the court shall determine the validity of the questioned administrative action in issue." Id. § 2023(a)(15); see also id. § 2021(c)(2) ("The action of disqualification or the imposition of a civil penalty shall be subject to review as provided in section 2023 of this title.").

The Act gives the Secretary the authority to "issue such regulations ... as ... deem[ed] necessary or appropriate for the effective and efficient administration" of the food stamp program. 7 U.S.C. § 2013(c); see also id. § 2021(a)(2). Pursuant to this directive, the Secretary has promulgated regulations that amplify the Act's requirements and penalties relating to trafficking violations. See 7 C.F.R. § 278.6. The current regulations contain four criteria that the FNS considers in determining whether to impose a civil money penalty in lieu of permanent disqualification. See id. § 278.6(i). First, the store "shall have developed an effective compliance policy." Id. Second, the store "shall establish that both its compliance policy and program were in operation at the location where the violation(s) occurred prior to the occurrence of violations cited in the charge letter sent to the firm." Id. Third, the store must show that it "had developed and instituted an effective personnel training program." Id. Fourth, the store's ownership must show that it was "not aware of, did not approve, did not benefit from, or was not in any way involved in the conduct or approval of" the trafficking violations. Id. The regulations state that, to qualify for the alternative civil money penalty, a store "shall, at a minimum, establish by substantial evidence its fulfillment of each criterion. Id.

The regulations also specify that, "in determining whether a firm has established an effective policy to prevent violations, FNS shall consider written and dated statements of firm policy which reflect a commitment to ensure that the firm is operated in a manner consistent" with the regulations. Id. § 278.6(i)(1). The regulations further direct that a store "shall document its training activity by submitting to FNS its dated training curricula and records of dates training sessions were conducted." Id. § 278.6(i)(2). "In addition, in evaluating the effectiveness of the firm's policy and program to ensure FSP [Food Stamp Program] compliance and to prevent FSP [Food Stamp Program] violations, FNS may consider ... [a]ny other information the firm may present to FNS for consideration." Id. § 278.6(i)(1)(vi).

B. Facts and Proceedings Below

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