Jerusalem Halal Meats, Inc. v. United States

JERUSALEM HALAL MEATS, INCORPORATED, Plaintiff - Appellant v. UNITED STATES OF AMERICA, Defendant - Appellee

No. 19-20170

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

July 22, 2020

Appeal from the United States District Court for the Southern District of Texas

USDC No. 4:17-CV-1423

Before SMITH, HIGGINSON, and ENGELHARDT, Circuit Judges.

PER CURIAM:^*

Jerusalem Halal Meats, Inc. (JHM) filed suit in district court seeking judicial review of an administrative decision by the Food and Nutrition Service (FNS) of the United States Department of Agriculture to disqualify JHM from participating in the Supplemental Nutrition Assistance Program (SNAP) for one year. The district court granted the Government's motion for summary judgment, upholding the disqualification. We AFFIRM.

JHM is a grocery store in Houston, Texas, that specializes in selling various types of halal meat, vegetables, and dairy products. JHM was an authorized participant in the SNAP program. In connection with an FNS investigation, a confidential informant visited JHM seven times from October 2016 to December 2016. During the first compliance visit, the informant used SNAP benefits to purchase only eligible food items. But during the next six visits, the informant was permitted by JHM employees to use SNAP benefits to purchase ineligible, major non-food items, including a board-game set, blankets, and kitchen appliances.¹ FNS notified JHM of the alleged SNAP violations and provided multiple opportunities for JHM to respond.² FNS ultimately determined that the violative transactions occurred as charged. Based on JHM's violations in 2016 and because JHM had previously been sanctioned,³ FNS disqualified JHM from participating in SNAP for one year pursuant to 7 U.S.C. § 2021 and 7 C.F.R. §§ 278.6(a),(e)(5)-(6).

JHM sought review of the FNS' decision by trial de novo in the United States District Court for the Southern District of Texas. See 7 U.S.C. § 2023(a)(15). The Government filed a motion for summary judgment, attachingas an exhibit the complete record of the FNS' administrative proceedings. In accordance with the magistrate judge's memorandum and recommendation, the district court granted summary judgment upholding the FNS' one-year disqualification of JHM.⁴ JHM appealed.

We review summary judgment de novo, applying the same standard as the district court. Smith v. Reg'l Transit Auth., 827 F.3d 412, 417 (5th Cir. 2016). In an action brought under 7 U.S.C. § 2023, the district court's review is a trial de novo, in which the court "shall determine the validity of the questioned administrative action in issue." 7 U.S.C. § 2023(a)(15); Ramirez v. Sec'y of Agric., 712 F.2d 150, 151 (5th Cir. 1983). The agency action stands unless JHM proves the invalidity of the administrative action by a preponderance of the evidence. Redmond v. United States, 507 F.2d 1007, 1011-1012 (5th Cir. 1975); see also Modica v. United States, 518 F.2d 374, 376 (5th Cir. 1975). "The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A genuine dispute of material fact exists if a reasonable trier of fact could find for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

JHM argues that summary judgment was inappropriate because there are genuine disputes of material facts regarding whether a violation occurred.⁵JHM points to an affidavit from a JHM director and an affidavit from the store clerk allegedly responsible for the 2016 violative transactions. The director's affidavit states that JHM employees are trained to accept SNAP benefits for only eligible food items, that JHM monitors employees with video surveillance, and that JHM informs its employees that they are being monitored. The clerk's affidavit discusses her SNAP training, states that she never knowingly sold ineligible items for SNAP benefits, and that she knew she was being monitored by video. The clerk believed that if she did "accept SNAP benefits for [an ineligible] item, it [would] be seen by [her] manager or other employees, and the transaction would be recorded by the cameras and [she] would be fired." According to JHM, however, it was unable to obtain its video surveillance of the alleged violations because the videotapes were "written over."⁶

None of the statements in the affidavits create a genuine dispute that the SNAP violations alleged by FNS occurred. The director's affidavit details efforts to avoid violating SNAP regulations, but does not definitively state that no violation occurred. Nor does the director allege that he was at the store during the compliance visits.

Although the clerk denies knowingly making improper transactions, proof of knowledge is not a requirement for sanctions. Rather, JHM was disqualified for committing violations that involved the "sale of common nonfood items due to carelessness or poor supervision by the firm's ownershipor management."⁷ 7 C.F.R. § 278.6(e)(5). And even though the clerk professes to "believe that if the videotapes were available, they would show that [she] did not do the transactions that are being claimed," this speculation is not a direct denial and does not rebut the Government's evidence that the prohibited transactions occurred.⁸ Redmond, 507 F.2d at 1012 ("[T]he burden of proof . . . is upon the aggrieved food store to establish the invalidity of the administrative action in issue by the preponderance of the evidence."); see also Irobe v. U.S. Dep't of Agric., 890 F.3d 371, 378-79 (1st Cir. 2018) (Because the burden ofproof is on the store challenging the USDA's determination and the agency produced evidence of SNAP violations, the store "must point to some significantly probative evidence to rebut it (and, thus, fend off summary judgment).").

Having reviewed the record, we conclude that there are no genuine disputes as to any material facts and the Government is entitled to judgment as a matter of law. The district court's judgment is AFFIRMED.STEPHEN A. HIGGINSON, Circuit Judge, dissenting:

Jerusalem Halal Meats, Inc. (JHM) is alleged to have violated Food Stamp Program regulations by selling ineligible items to a government confidential informant ("CI"). The Food and Nutrition Service (FNS) of the United States Department of Agriculture (USDA) issued a report containing the CI's description of his/her ineligible purchases from JHM and disqualified JHM from participating in the Food Stamp Program for one year.

The government alleged violations in an investigative report, and the proof supporting the sales described in that report is from the undisclosed CI. On each occasion, the CI is alleged to have exited the store and told the FNS investigator that he/she purchased ineligible items using an EBT card with SNAP benefits. Notably, the report does not (1) include purchases made by investigating officer himself; (2) indicate the retention or even existence of the ineligible purchased items; or (3) indicate the retention or even existence of contemporaneous receipts for any purchased item.⁹ Instead, the alleged violative sales appear to be described only by the CI upon exiting the store, as recorded in the USDA investigative report.

Throughout the administrative process, JHM denied making unlawful sales, and it contested the evidence attributed to the CI. At each stage of the administrative process, the USDA's adverse determinations recognized that JHM made these denials and challenged the statements attributed to the CI. Indeed, in federal court, the magistrate judge acknowledged that the clerk denied the alleged sales, although she later faulted the clerk's denial for not being specific enough. While seeking an administrative appeal challenging disqualification, JHM submitted sworn affidavits from Ms. Mekiya Ali, theclerk at cash register #3, and from Mr. Khaled Hamash, a member of the store's management team, in which, on pain of perjury, both denied that Ali sold any ineligible items.¹⁰

In upholding the disqualification decision of the FNS, the USDA reviewing officer acknowledged two points: (1) the FNS violations were upheld because JHM did not show by a preponderance of the evidence that the violation did not occur; and (2) on administrative appeal, her review authority did not extend to consideration of JHM's contention that the government relied on inadmissible proof in the form of untested CI hearsay statements.

Thereafter, JHM brought suit in federal district court under 7 U.S.C. § 2023. JHM's complaint is lengthy and explicit, both in its contention that the government's CI allegations are unreliable, and also in emphasizing its own firsthand, contradictory and sworn proof that the ineligible sales did not occur. The district court's review of the administrative action is de novo. Modica v. United States, 518 F.2d 374, 376 (5th Cir. 1975). Under this standard, the court may not merely rely on the administrative finding in evaluating JHM's evidence, but instead must "reach its own factual and legal conclusions based on the preponderance of the evidence, and should not limit its consideration to matters previously appraised in the administrative proceedings." Id.

I would hold that this record defeats the government's entitlement to summary judgment.¹¹ At this stage, the only question before the court iswhether there is a disputed issue of material fact. See Betesfa, Inc. v. United States, 410 F. Supp. 3d 132, 141 (D.D.C. 2019) (acknowledging that despite the store's ultimate burden of proof to show the invalidity of the administrative determination, "[a]t this stage of the proceeding, . . . the Court's role is limited to determining whether Plaintiffs have marshalled sufficient evidence to give rise to a genuine dispute of material fact"); McGlory v. United States, 763 F.2d 309, 311 (7th Cir. 1985) (holding that where there was a "flat denial" of the agency's...