Food stamp trafficking: Why small groceries need judicial protection from the Department of Agriculture (and from their own employees)

Michigan Law Review

Volumn 96, Issue 7, 1998, Pages 2156-2184

  Regenstein, Elliot ^a  

^a NONE

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EID: 0039061090     PISSN: 00262234     EISSN: None     Source Type: Journal    
DOI: 10.2307/1290065     Document Type: Article

References (174)

1. The author visited the store September 1, 1997 and May 17, 1998. Seven Mile Road is flanked by a long low line of buildings and is one of the primary commercial thoroughfares in northern Detroit. While a number of the buildings on Seven Mile Road are now abandoned, 7-Van Drugs currently shares a relatively modern plaza and a small parking lot with a manicurist, an independent insurance agent, and a fashion accessories store.
2. The facts in this paragraph come from Bakal Bros. v. United States, 105 F.3d 1085, 1087 (6th Cir. 1997).
3. The Food and Consumer Service was formerly known as the Food and Nutrition Service. See Lopez v. United States, 962 F. Supp. 1225, 1227 (N.D. Cal. 1997).
4. See Bakal Bros., 105 F.3d at 1087.
5. See Bakal Bros., 105 F.3d at 1090 (citing 7 C.F.R. § 278.6(b)(2) (1994)).
6. See Bakal Bros., 105 F.3d at 1090.
7. See 7 U.S.C. § 2021(b) (1982); see also Kim v. United States, 121 F.3d 1269, 1272 (9th Cir. 1997).
8. See Ghattas v. United States, 40 F.3d 281, 283 (8th Cir. 1994) (describing the state of the law prior to 1988). The FCS did not have complete freedom to apply this sanction, as the Ninth Circuit refused to allow the FCS to punish store owners who did not know about their employees' actions. See Kim, 121 F.3d at 1272; Ghattas, 40 F.3d at 283.
9. This Note uses the term "innocent owner" to describe the proprietor of a small grocery store whose employees have trafficked in food stamps illegally, and who did not know about or benefit from the transaction. See 7 U.S.C. § 2021(b)(3)(B); see also Kim, 121 F.3d at 1274 ("Congress believed that punishing innocent employers for the misdeeds of their employees would create a powerful incentive for employers to guard against illegal . . . conduct."); Bakal Bros., 105 F.3d at 1090 ("Congress has made clear that innocent store owners should be held responsible for the independent, unauthorized acts of store personnel."). To qualify as an innocent owner, the proprietor must also have in place an "effective policy and program to prevent violations." See 7 U.S.C. § 2021(b)(3)(B) (1988).
10. See 7 U.S.C. § 2021(b)(3)(B). The amended statute allows "the Secretary . . . discretion to impose a civil monetary penalty of up to $20,000 in lieu of disqualification . . . ." The circuits have unanimously found that the change in the statute eliminates the innocent-owner defense as a complete bar to liability. See Kim, 121 F.3d at 1273 (collecting cases).
11. See Ghattas, 40 F.3d at 284 ("[The FCS's] regulations in many respects reflect a reluctant or hostile attitude toward the alternative monetary sanction."). The Ghattas court's concern about the FCS's actions was based in part on the fact that Congress had expressed some displeasure with the FCS's administration of the program. See H.R. CONF. REP. NO. 101-916, at 1098 (1990), reprinted in 1990 U.S.C.C.A.N. 5286, 5623 ("The Managers are concerned with the manner in which the Secretary has implemented the retailer disqualification provi-sions of the Food Stamp Act."); see also Castillo v. United States, 989 F. Supp. 413, 419 (D. Conn. 1997) (ruling on plaintiffs motion for preliminary injunction) ("[T]he [Administrative Review Officer] cites to 'internal USDA policy guidelines' for the proposition that trafficking 'shall warrant permanent disqualification, regardless of whether or not the firm benefited from the violation, or the owner or management of the firm had knowledge of the violation.' . . . This 'internal policy guideline' is in direct contravention of the Food Stamp Act . . . .").
12. See 7 C.F.R. § 278.6(b)(2)(i), (iii) (1994).
13. See 7 C.F.R. § 278.6(f)(1). The regulations make a "hardship-to-households" defense available only for offenses that would otherwise lead to a nonpermanent disqualification, but not for offenses that would otherwise lead to a permanent disqualification. See 7 C.F.R. § 278.6(f)(1). When it allows a hardship-to-households defense, the FCS considers whether "the firm's disqualification would cause hardship to food stamp households because there is no other authorized retail food store in the area selling as large a variety of staple food items at comparable prices." 7 C.F.R. § 278.6(f)(1).
14. The formula bases the penalty on the dollar amount of food stamps redeemed by the violating store and dictates that the maximum penalty must be imposed if the trafficking violation exceeds ninety-nine dollars and if the store redeems $40,000 or more in food stamps annually. See 7 C.F.R. § 278.6(j). This formula effectively applies the maximum fine to almost every store with a meaningful food stamp redemption program. See discussion infra section III.B.
15. Parties aggrieved by FCS decisions are entitled to de novo review in United States district courts or state courts, and the law directs judges to "determine the validity of the questioned administrative action." 7 U.S.C. § 2023(a)(15) (Supp. II 1996).
16. See Ghattas, 40 F.3d at 285-86.
17. See Ghattas, 40 F.3d at 284-85.
18. See Corder v. United States, 107 F.3d 595, 598 (8th Cir. 1997).
19. See Goldstein v. United States, 9 F.3d 521, 524 (6th Cir. 1993); see also Bakal Bros. v. United States, 105 F.3d 1085, 1090 (6th Cir. 1997).
20. See Lopez v. United States, 962 F. Supp. 1225, 1231 (N.D. Cal. 1997).
21. See Bakal Bros., 105 F.3d at 1090; Goldstein, 9 F.3d at 523. Several circuits have refused to review the agency's sanctions since well before the 1988 amendments to the statute. See, e.g., Kulkin v. Bergland, 626 F.2d 181 (1st Cir. 1980). One district court recently found that the formula is not arbitrary and capricious. See Vasudeva v. United States, No. C96-1252Z, 1998 WL 279223, at *4-7 (W.D. Wash. May 27, 1998).
22. See Kim v. United States, 121 F.3d 1269, 1275-76 (9th Cir. 1997).
23. See Bakal Bros., 105 F.3d at 1087.
24. See 7 C.F.R. § 278.6(b)(2)(iii) (1994).
25. See Bakal Bros., 105 F.3d at 1090.
26. See 7 U.S.C. § 2023(a)(15) (Supp. II 1996) ("[T]he court shall determine the validity of the questioned administrative action in issue . . . .").
27. See Ghattas v. United States 40 F.3d 281, 285-87 (8th Cir. 1994) (discussing whether regulations are consistent with Congress's intent).
28. See K-Mart Corp. v. Cartier, Inc., 486 U.S. 281, 291 (1988) ("In determining whether a challenged regulation is valid a reviewing court must first determine if the regulation is consistent with the language of the statute. . . . In ascertaining the plain meaning of the statute, the court must look to the particular statutory language at issue, as well as the language and design of the statute as a whole." (citations omitted)).
29. See K-Mart, 486 U.S. at 291 (discussing Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984)).
30. See RLC Indus. Co. v. Commissioner, 58 F.3d 413, 417 (9th Cir. 1995) ("The question, then, is whether (d)(5) is a valid regulation. . . . The inquiry thus becomes whether subsection (d)(5) . . . is consistent with Congress' mandate . . . ."); Illinois Envtl. Protection Agency v. United States Envtl. Protection Agency, 947 F.2d 283, 289 (7th Cir. 1991); Boettger v. Bowen, 923 F.2d 1183, 1186 (6th Cir. 1991) ("For the federal regulation and the state policy to be valid, they must be consistent with the statutory purpose. To the extent they are inconsistent with the controlling statute, they are invalid."); Clinton Meml. Hosp. v. Sullivan, 783 F. Supp. 1429, 1437 (D.D.C. 1992), affd., 10 F.3d 854 (D.C. Cir. 1993).
31. See Goldstein v. United States, 9 F.3d 521, 523-24 (6th Cir. 1993).
32. See Goldstein, 9 F.3d at 523-24 ("[T]he question before us is whether the [FCS] acted within its authority in permanently disqualifying Goldstein from the food stamp program. . . . 7 CFR § 278.6(a) states that the [FCS] may impose the sanction of disqualification for a violation of the statutes or regulations; such disqualification shall be permanent if the disqualification is based on trafficking. . . . The regulations thus authorize the [FCS] to prescribe the sanction imposed in this case.").
33. See Bakal Bros. v. United States, 105 F.3d 1085, 1088 (6th Cir. 1997); Goldstein, 9 F.3d at 523-24. The Sixth Circuit drew its reasoning from an Eighth Circuit Administrative Procedure Act case. See Glover Livestock Commn. v. Hardin, 454 F.2d 109, 114 (8th Cir. 1972) ("The shaping of remedies is peculiarly within the special competence of the regulatory agency vested by Congress with authority to deal with these matters . . . ."), revd. on other grounds sub nom. Butz v. Glover Livestock Commn., 411 U.S. 182 (1973). See generally American Power & Light Co. v. SEC, 329 U.S. 90, 112 (1946); Phelps Dodge Corp. v. NLRB, 313 U.S. 177, 194 (1941). The term "remedy" is used essentially as an analogous term to "sanction"; see infra note 35. While this section assumes that the Sixth Circuit is correct that courts should not review the FCS's sanctions, section III.A argues that courts should evaluate those sanctions under the Food Stamp Act's de novo review provision.
34. See Goldstein, 9 F.3d at 524 ("The regulations confer on the [FCS] discretion to mitigate . . . the sanction . . . . As the decision to mitigate relates to the severity of the sanction, the [FCS's] denial of Goldstein's request for a civil money penalty in lieu of permanent disqualification [based on his missing the ten-day deadline] is precluded from our review . . . .").
35. See BLACK'S LAW DICTIONARY 1341 (6th ed. 1990) (defining a sanction as a "[p]enalty or other mechanism of enforcement used to provide incentives for obedience with the law or with rules and regulations[; t]hat part of a law . . . designed to secure enforcement by imposing a penalty for its violation"); see also id. at 1294 (defining a remedy as "[t]he means by which a right is enforced or the violation of a right is prevented, redressed, or compensated").
36. Cf. Walters v. National Assn. of Radiation Survivors, 473 U.S. 305, 329 (1985) ("The [agency] procedures cited by the court do permit a claimant to prejudice his rights by failing to respond in a timely manner to an agency notice . . . . [T]hese procedural requirements have [not] led to an unintended forfeiture . . . ." (emphasis added)).
37. 7 C.F.R. § 278.6(b) (1994).
38. 7 C.F.R. § 278.6(e).
39. See 7 U.S.C. § 2023(a)(15) (Supp. II 1996); K-Mart Corp. v. Cartier, Inc., 486 U.S. 281, 291 (1988).
40. See Motor Vehicle Mfrs. Assn. of the United States, v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).
41. H.R. REP. NO. 100-828, at 27-28 (1988). Even without the explanation in the legislative history, Congress's adding the secretarial discretion provisions to the statute is enough to infer that Congress intended the Secretary to exercise discretion. See 7 U.S.C. § 2021(b)(3)(B) (1988).
42. When a technical correction to the amendment was made in October 1988, both of the bill's primary advocates specifically noted the Secretary's newfound discretion. See 134 CONG. REC. 32,269 (1988) (remarks of Rep. Panetta) ("The permanent disqualification . . . without any evaluation of preventive measures . . . was excessively harsh. It is for this reason that [the amendment] gives the Secretary of Agriculture the discretion to impose a fine . . . ."); id. at 32,269 (remarks of Rep. Emerson) ("The bill provides the Secretary of Agriculture . . . discretion . . . .").
43. See K-Mart, 486 U.S. at 291.
44. See discussion infra Part I.B.2.
45. See K-Mart, 486 U.S. at 291 ("In determining whether a challenged regulation is valid, a reviewing court must . . . determine if the regulation is consistent with the language of the statute.").
46. See, e.g., Arkansas v. Oklahoma, 503 U.S. 91, 113 (1992) ("As we have often recognized, an agency ruling is 'arbitrary and capricious if the agency has . . . entirely failed to consider an important aspect of the problem.'" (citation omitted)).
47. See Motor Vehicles Mfrs. Assn. of the United States v. State Farm Mut. Auto. Ins. Co, 463 U.S. 29, 43 (1983).
48. See State Farm, 463 U.S. at 43 ("[W]e may not supply a reasoned basis for the agency's action that the agency itself has not given." (citation omitted)).
49. When the FCS made the ten-day requirement part of an interim rule, it did not explicitly say whether it had or had not considered the impact on small businesses in doing so. See Food Stamp Program; Civil Money Penalties in Lieu of Permanent Disqualification for Trafficking, 54 Fed. Reg. 18,641 (1989) (to be codified at 7 C.F.R. pt. 278). The interim rule was put in place in order to bring the regulations in line with the revised statute, which became effective October 1, 1988. The FCS invited public comment before the final rulemaking. See id. at 18,642. The FCS has not only failed to give a clear explanation of its actions in the Federal Register, but also apparently has failed to give a clear explanation when the regulation has been challenged in court. One district court, in upholding the regulation as not arbitrary and capricious, did not discuss in any detail what the agency actually considered when formulating the regulation; instead, it discussed what inferences can be made from the FCS's regulatory scheme. See Lopez v. United States, 962 F. Supp. 1225, 1231 (N.D. Cal. 1997).
50. See Ghattas v. United States, 40 F.3d 281, 285-86 (8th Cir. 1994), quoted infra in text accompanying note 59. The Lopez court vigorously disagreed with Ghattas's attack on the ten-day requirement, saying: While it might be convenient for an owner busy running a store to have more than ten days, there is nothing in the nature of drafting or copying such documents that makes a ten day limit inherently unreasonable, nor therefore the imposition of that limit "a clear error of judgment." If the regulation allowed only one day, presuming that all the required documentation would be extant and available for immediate mailing, then one could conclude that the agency had "entirely failed to consider an important aspect of the problem." Lopez, 962 F. Supp. at 1231 (citation omitted). By admitting that one day is not enough, the Lopez court engages in the same exercise as the Ghattas court: considering how many days in which a store could reasonably be expected to respond to an FCS notice. Careful consideration would require evidence of the business circumstances of small grocery stores, to see if they could reasonably be expected to meet a ten-day deadline. While the Lopez opinion cites portions of the Ghattas opinion explaining the hardship the requirement causes to owners of small groceries, the Lopez court apparently was not convinced that a small grocery store would need more than ten days to find an attorney who could then organize the extensive documentation required by the FCS.
51. See 7 C.F.R. § 278.6(b)(2)(iii) (1994) ("If a firm fails to request consideration for a civil money penalty in lieu of a permanent disqualification for trafficking and submit documentation and evidence of its eligibility within the 10 days specified in § 278.6(b)(1), the firm shall not be eligible for such a penalty."); see also Lopez, 962 F. Supp. at 1228 ("[I]n order to be considered for the money penalty, [the store's owner] had to enclose copies of all documentation demonstrating the violation prevention policy in use at [the] store.").
52. See Lopez, 962 F. Supp. at 1227-28. In Lopez, clerk Alonzo Lopez, the son of the owners of the Chavez Meat Market in Newark, California, sold an investigator ineligible items, and another clerk purchased food stamps for cash. See Lopez, 962 F. Supp. at 1227. In response to the allegations, Guadalupe Lopez, Alonzo's mother, wrote to the FCS admitting the store's guilt eight days after receiving the charge. She admitted that their son had not been properly trained before working at the store while on a break from school. (Any store that requests a civil monetary penalty must have an adequate training program for its employees to be considered, see 7 U.S.C. § 2021(b)(3)(B) (Supp. II 1996), but the FCS apparently did not reach the issue of the store's training program). The owners said that they had explained the rules to their employees again, and were translating them into Spanish to ensure that all of them understood; they did not, however, provide any documentary evidence of these programs. The letter closed with Ms. Lopez begging for forgiveness, and asking if the case could be re-evaluated. See Lopez, 962 F. Supp. at 1227-28. The FCS did not consider Ms. Lopez's letter a timely request for a civil monetary penalty. See Lopez, 962 F. Supp. at 1228.
53. After sending the documentation, Lopez brought the FCS to court. The court granted the FCS summary judgment against her on the procedural ground, without ever reaching the merits of the case. See Lopez, 962 F. Supp. at 1231-32.
54. Some agencies, when imposing response requirements on themselves, allow themselves waivers in "unusual" circumstances, and the FCS could allow waivers for stores in certain circumstances. See, e.g., 15 C.F.R. § 4b.5 (1997) ("If a response [to a request for information] cannot be made within ten days due to unusual circumstances . . . the [Commerce Department officer] shall send an acknowledgment . . . providing information on the status of the request . . . .").
55. Cf. Ghattas, 40 F.3d at 286 ("[The FCS's] unreasonable ten-day time limit would not be of great concern if the innocent store owner retained a later opportunity to urge the agency's ultimate decision-maker to impose a lesser monetary sanction."). If a store cannot produce the necessary material even after an extension, then a permanent disqualification would be appropriate. See Ibay, Inc. v. United States. No. 97-1558, 1997 WL 741365, at *1 (4th Cir. Dec. 2, 1997) (per curiam) (unpublished) ("Although given a lengthy extension, Ibay failed to provide any documentation at the administrative level . . . .").
56. See Ghattas, 40 F.3d at 285-86.
57. Many agencies that require responses to charge letters allow longer than ten days. See, e.g., Procedures for Implementation of the Fastener Quality Act, 15 C.F.R. §§ 280.1, .605, .608 (1997) ("The Fastener Quality Act . . . protects] the public safety [by requiring] that certain fasteners . . . conform to the specifications to which they are represented to be manufactured . . . . The Director . . . may begin administrative enforcement proceedings . . . by issuing a charging letter. . . . The respondent must answer the charging letter within 30 days . . . ."). The Eighth Circuit also noted that the ten-day requirement is "far shorter than the time for filing a one-paragraph notice of appeal to this court." See Ghattas, 40 F.3d at 285.
58. In fiscal year 1994, 1452 food stamp cases were processed through the Department of Agriculture's administrative review process. See FOOD & CONSUMER SERV., U.S. DEFT. OF AGRIC., RETAILER ACTIVITY REPORT: FISCAL YEAR 1994 19, 61 (1996) [hereinafter RETAILER ACTIVITY REPORT]. Of those, 168 (12%) were reversed, 54 (4%) were reduced, and 1230 (85%) were sustained. See id. Courts reviewing the results of these administrative determinations generally have been more sympathetic than the FCS. For comparison, in fiscal year 1994, 83.5% of administrative review cases led to disqualification, including 53% that led to permanent disqualification, while 8.2% led to a civil monetary penalty in lieu of disqualification. See id. at 20. Of the cases that reached judicial review, 50% led to a disqualification, including 28.6% that led to permanent disqualification, while 24.5% led to a civil monetary penalty in lieu of disqualification. See id. The FCS's administrative review officers dismissed only 2.3% of the prosecutions before them, while courts dismissed 16.3%. See id.
59. Ghattas, 40 F.3d at 285-86. Oddly enough, the Eighth Circuit's next major food stamp case did involve a pro se litigant, but one who had managed to make a timely request for a civil monetary penalty. See Corder v. United States, 107 F.3d 595, 596 (8th Cir. 1996).
60. See Brooks v. United States, 64 F.3d 251 (7th Cir. 1995) (per curiam) (finding against the owner of a small store who made a pro se challenge of FCS disqualification); Haskell v. United States Dept. of Agric., 930 F.2d 816 (10th Cir. 1991) (same); Woodard v. United States, 725 F.2d 1072 (6th Cir. 1984) (same); Hernandez v. United States Dept. of Agric. Food & Consumer Serv., 961 F. Supp. 483 (W.D.N.Y. 1997) (finding against the owner of a small store who made a pro se challenge of FCS withdrawal of authorization); Calderon v. United States Dept. of Agric. Food & Nutrition Serv., 756 F. Supp. 181 (D.N.J. 1990) (dismissing case because of inadequacy of pleadings filed pro se, and plaintiff later retained counsel to no avail); Reason v. Heslin, 723 F. Supp. 1309 (S.D. Ind. 1989) (same); Wilson v. United States, 651 F. Supp. 701 (E.D. Wis. 1986) (finding against the owner of a small store who made a pro se challenge of FCS disqualification); cf. Moon v. United States, Nos. 95-1797, 95-2364, 1996 WL 342005, at *4 (4th Cir. June 21, 1996) (per curiam) (unpublished) (finding against plaintiffs because of attorney error); Mused v. United States Dept. of Agric., Food & Nutrition Serv., 169 F.R.D. 28 (W.D.N.Y. 1996) (dismissing a case brought by a small store that hired a sole practitioner who missed a court deadline). But see Corder, 107 F.3d at 596 (finding for pro se challenger of FCS sanction); Harrison v. United States Dept. of Agric., 915 F. Supp. 115 (E.D. Mo. 1995) (finding for the owner of a small store who challenged FCS's refusal to allow the store to participate in program).
61. See Food Stamp Program; Civil Money Penalties in Lieu of Permanent Disqualification for Trafficking, 55 Fed. Reg. 31,809, 31,812 (1990) (to be codified at 7 C.F.R. pt. 278) ("[T]his 10-day timeframe is consistent with other regulatory requirements . . . .").
62. See, e.g., New Drug and Antibiotic Regulations, 50 Fed. Reg. 7452, 7485 (1985) ("[T]he primary purpose in [imposing a ten-day response requirement] was to provide for agency action within the 180-day time frame specified by the act.").
63. See Civil Money Penalties in Lieu of Permanent Disqualification for Trafficking, 55 Fed. Reg. at 31,812. The Department also justifies its narrow window by saying that it is "simply requesting copies of policies and documentation of compliance program activities already in existence." See id. The fact that the FCS requires small stores to keep extensive written records has also come under criticism, and the FCS has responded that the standards are the same for both small and large stores. See id. at 31,810. While stores are required to keep these records on an ongoing basis, they may not understand how to use the information in a response to an FCS charge letter. See Kim v. United States, 121 F.3d 1269, 1271 (9th Cir. 1997); Ghattas, 40 F.3d at 285-86; Lopez v. United States, 962 F. Supp. 1225, 1227-28 (N.D. Cal. 1997). See also discussion supra Section I.B.
64. See Ghattas, 40 F.3d at 286 ("[T]he [FCS] regulations dramatically skew the administrative process to the disadvantage of small business."); see also discussion supra Part I.B.1.
65. See supra text accompanying note 41.
66. See FOOD & CONSUMER SERV., U.S. DEPT. OF AGRIC., THE EXTENT OF TRAFFICKING IN THE FOOD STAMP PROGRAM 4 (1995) [hereinafter THE EXTENT OF TRAFFICKING] (noting that only 4.2% of supermarkets are involved in trafficking, while 12.8% of small grocery stores are involved in trafficking);
67. see also Changes in Food Stamps: U.S. Officials Consider Limitations on Stores, ST. Louis POST-DISPATCH, Jan. 6, 1995, at 12A ("Agriculture Department officials believe the USDA can curb black-market trafficking in food stamps by dropping from the program some of the small, independently owned groceries where fraud tends to occur.");
68. Jennifer Dixon, Fraud in Food Stamps Thrives, Inquiry Finds, ST. LOUIS POSTDISPATCH, Sept. 2, 1995, at 13B ("The black market for food stamps is thriving largely because federal regulators have authorized scores of questionable businesses to accept food stamps . . . .");
69. John R. Emshwiller, Hot Special at Small Stores: Food-Stamp Fraud, WALL ST. J., June 1, 1995, at B1 ("[S]mall businesses play a surprisingly big role in food-stamp fraud.").
70. See THE EXTENT OF TRAFFICKING, supra note 66, at 7 (showing that in areas where 0 to 10% of households are in poverty, 4.6% of stores are involved in trafficking, while in areas where over 30% of households are in poverty, 19.2% of stores are involved in trafficking).
71. H.R. REP. NO. 104-77, at 48 (1995); RETAILER ACTIVITY REPORT, supra note 58, at 9.
72. See Emshwiller, supra note 66, at Bl ("'Most retailer trafficking occurs in smaller stores,' Roger C. Viadero, the Agriculture Department's inspector general, recently testified before Congress."); see also H.R. REP. NO. 104-77, at 48 ("USDA has found that most retail trafficking occurs in smaller food stores . . . .").
73. Electronic transfer systems make food stamp fraud easier to detect than the paper stamps that had been used exclusively until recently. See Merrell Foote, Texas Saying Goodbye to Paper Food Stamps; Debit Card System Designed to Reduce Fraud, WASH. POST, Sept. 10, 1995, at A20.
74. Smaller stores may be reluctant, however, to spend the money necessary to install these systems. See Mark Hornbeck, Food Stamps: State Plans Test From Coupons to Debit Card System, DETROIT NEWS, Apr. 4, 1997, at C1.
75. The Secret Service has found that food stamps are frequently sold to small stores for cash that then is used to buy drugs, often right in the store in which the food stamps were illegally sold. See Probe of Food Stamp Fraud Targets Grocers, L.A. TIMES, Sept. 10, 1994, at 9; see also H.R. REP. NO. 104-77, at 47 ("In many communities, food stamps have become a second currency. . . . [F]ood stamps [are] traded for cash, drugs, [and] guns . . . .").
76. See H.R. REP. NO. 100-828, at 27 ("Sale of food stamps at a discount price or trading food stamps for non-food items is a serious offense. It violates the purpose of the food stamp program and harms needy food stamp families. . . . [Nevertheless t]he permanent disqualification of retail food stores upon the first trafficking offense -without any evaluation of preventive measures or complicity in the trafficking - seems excessively harsh.").
77. See H.R. REP. NO. 100-828, at 27-28 ("[T]here are instances in which trafficking in food stamps will take place - despite the best efforts of all people committed to a well-run food stamp program. . . . Under current law no discretion is provided to the Secretary of Agriculture to evaluate a store's actions to prevent . . . violations. This provision provides this discretion.").
78. See 7 U.S.C. § 2021 (b)(3)(B) (Supp. II 1996) (explaining that the penalty for innocent-owner trafficking violations is permanent disqualification unless the Secretary finds sufficient evidence to reduce the penalty).
79. The FCS sometimes mitigates penalties because "the firm subject to a disqualification is selling a substantial variety of staple food items, and the firm's disqualification would cause hardship to food stamp households because there is no other authorized retail food store in the area selling as large a variety of staple food items at comparable prices." See 7 C.F.R. § 278.6(f)(1) (1994). Such evidence is not allowed, however, in cases in which the firm is facing a permanent disqualification, such as in innocent-owner cases. See 7 C.F.R. § 278.6(i). This section criticizes that distinction as contrary to Congress's intent and as arbitrary and capricious. In the particular case of 7-Van Drugs, it is possible the store's hardship-to-households evidence might not have been compelling because of the presence of competitors within walking distance.
80. All innocent-owner cases fall under the FCS's exception, because permanent disqualification is a potential penalty. See 7 U.S.C. § 2021(b)(3)(B).
81. Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The two courts that have addressed this particular issue have both done so within a Chevron framework. See Kim v. United States 121 F.3d 1269, 1275 (9th Cir. 1997) (citing Chevron); Ghattas v. United States, 40 F.3d 281, 284-85 (8th Cir. 1994) (citing Smithville R-II Sch. Dist. v. Riley, 28 F.3d 55, 57-58 (8th Cir. 1994), which relied on Chevron).
82. See Chevron, 467 U.S. at 843.
83. See Chevron, 467 U.S. at 842-43 & n.9.
84. See Chevron, 467 U.S. at 843.
85. 7 U.S.C. § 2021(a).
86. 7 U.S.C. § 2021(b).
87. See 7 U.S.C. § 2021(b), (b)(3), (b)(3)(B).
88. The legislative history does not speak directly to why Congress did not include the provision in the innocent-owner penalty clause, so it is impossible to know definitively why it was not put in. See H.R. REP. NO. 100-828.
89. Compare 7 U.S.C. § 2021(a) (the introduction) (setting a maximum civil monetary penalty of $10,000 for any violations of the Food Stamp Act) with 7 U.S.C. § 2021(b)(3)(B) (the specific penalty clause) (setting a maximum civil monetary penalty of $20,000 for any trafficking violations).
90. See Kim v. United States, 121 F.3d 1269, 1275-76 (9th Cir. 1997).
91. See INS v. Cardoza-Fonseca, 480 U.S. 421, 432 (1987); see also Kim, 121 F.3d at 1276 ("'[W]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.'" (quoting Tang v. Reno, 77 F.3d 1194, 1197 (9th Cir. 1996), which quotes Cardoza-Fonseca, 480 U.S. at 432)).
92. See 7 U.S.C. § 2021(b); supra text accompanying note 82.
93. Compare 7 U.S.C. § 2021(a) ("[Firms may be] subjected to a civil monetary penalty of up to $10,000 for each violation . . . [of] . . . any of the provisions of this chapter or the regulations issued pursuant to this chapter.") with 7 U.S.C. § 2021(b)(3)(B) ("a civil monetary penalty of up to $20,000 for each violation . . . for such purchase of coupons or trafficking in coupons or cards that constitutes a violation of the provisions of this chapter or the regulations issued pursuant to this chapter" (emphasis added)).
94. See, e.g., Gozlon-Peretz v. United States, 498 U.S. 395, 407 (1991); Bulova Watch Co. v. United States, 365 U.S. 753,758 (1961) ("[I]t is familiar law that a specific statute controls over a general one . . . .").
95. See Kim, 121 F.3d at 1275 (citing Security Pac. Natl. Bank v. RTC, 63 F.3d 900, 904 (9th Cir. 1995)). While the Ninth Circuit cites one of its own cases to support this proposition, the idea that a specific statute controls over a general statute is well settled in American law. See Bulova Watch Co., 365 U.S. at 758.
96. The Ninth Circuit made this leap, but made it without the support of any other court. See Kim, 121 F.3d at 1275 ("Moreover, the difference in the monetary limits suggests the provisions are mutually exclusive." (no citation provided in text)).
97. See 7 U.S.C. § 2021(a) ("Any approved retail food store . . . may be disqualified for a specified period of time from further participation in the food stamp program, or subjected to a civil money penalty of up to $10,000 for each violation if the Secretary determines that its disqualification would cause hardship to food stamp households . . . ."). The term "specified period of time" includes permanently. Outside the trafficking context, where permanent disqualification can be imposed for a firm's first violation, the FCS has used its authority under this paragraph to disqualify repeat offenders permanently. See 7 C.F.R. § 278.6(a) (1994) ("[FCS] may disqualify any authorized retail food store . . . if the firm fails to comply with the Food Stamp Act . . . . [Disqualification shall be permanent for a firm's third sanction . . . ."); see also Castillo v. United States, 989 F. Supp. 413, 419 (D. Conn. 1997) (ruling on plaintiffs motion for preliminary injunction) ("[T]he statute does not limit the 'hardship to households' exception to non-permanent disqualification, but rather provides generally that any disqualification may be replaced by a money penalty.").
98. See 7 C.F.R. § 278.6(f)(1) ("A civil money penalty for hardship to food stamp households may not be imposed in lieu of a permanent disqualification." (emphasis added)).
99. See Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843 (1984).
100. Ghattas v. United States, 40 F.3d 281, 285 (8th Cir. 1994); Castillo, 989 F. Supp. at 419 (quoting Ghattas). The Ninth Circuit has found that Congress did not speak directly to the issue of this distinction. See Kim, 121 F.3d at 1275.
101. See Food Stamp Act of 1964, Pub. L. No. 88-525, § 2, 78 Stat. 703 (codified as amended at 7 U.S.C. § 2011) ("It is hereby declared to be the policy of Congress, in order to promote the general welfare, that the Nation's abundance of food should be utilized cooperatively . . . to the maximum extent practicable to safeguard the health and well-being of the Nation's population and raise levels of nutrition among low-income households.").
102. 413 U.S. 528, 533-34 (1973). In Moreno the Court was evaluating the constitutionality of an amendment to the Food Stamp Act requiring all members of a food stamp household to be blood relatives. The Court reiterated its holding 15 years later in Lyng v. International Union, 485 U.S. 360, 371 (1988) ("[T]he Act was passed to alleviate hunger and malnutrition and to strengthen the agricultural economy.").
103. See Dan Glickman, Letter to the Editor, Food Stamp Fraud: No Joke, WASH. POST, Dec. 9, 1995, at A23 ("[W]e . . . ensure that the food stamp program will accomplish its health mission: getting food to people who need it.");
104. John L. Mitchell, 683 Stores Barred From U.S. Food Stamp Program, L.A. TIMES, Nov. 17, 1995, at B1 ("'[W]holesome, nutritious, affordable food [is what] the food stamp program is meant to provide,' [Agriculture Secretary Dan Glickman] said [in 1995].").
105. Cf. Rodway v. United States Dept. of Agric., 514 F.2d 809, 823 (D.C. Cir. 1975) ("The purposes of the Food Stamp Act - the health and well-being of our populace -are too important, and the legislative intent that those purposes be achieved for substantially all recipients too clear, for us to allow their administrative evisceration."). For an explanation of the hardship caused to food stamp households, see discussion infra Part II.B.2.
106. See H.R. REP. NO. 100-828, at 27-28. It does emphasize that the antitrafficking provisions must serve the statute's purpose of assisting families in need. See H.R. REP. NO. 100-828, supra.
107. See id. (discussing the kinds of policies and programs that would allow the Department of Agriculture to conclude that a store's management had trained employees to know which food stamp transactions were legal and which were illegal, and to further conclude that management had actively discouraged employees from participating in illegal transactions).
108. Compare 7 U.S.C. § 2021 (1988) with 7 U.S.C. § 2021 (1982) (incorporation by reference remains identical); see H.R. REP. NO. 100-828 (no discussion of that fact).
109. See Pierce v. Underwood, 487 U.S. 552, 567 (1988) ("Quite obviously, reenacting precisely the same language is a strange way to make a change.").
110. Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843 (1984). If the court finds that Congress's clear intent was to exclude hardship-to-households evidence, it must uphold the FCS's regulation without reaching step two of Chevron. 467 U.S. at 842-43.
111. As noted above, both circuits to consider this issue have found Congress's intent to be unambiguous, and did not reach the issue of whether the FCS's action was arbitrary and capricious. See Kim v. United States, 121 F.3d 1269, 1276 (9th Cir. 1997); Ghattas v. United States, 40 F.3d 281, 285 (8th Cir. 1994). Because these courts disagreed about what Congress's "unambiguous" mandate was, it is possible that future courts will find Congress's mandate ambiguous, and reach the second step of the Chevron test.
112. See Motor Vehicle Mfrs. Assn. of the United States v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) ("[T]he agency must examine the relevant data and articulate a satisfactory explanation for its action . . . .").
113. See Food Stamp Program; Civil Money Penalties in Lieu of Permanent Disqualification for Trafficking, 55 Fed. Reg. 31,809 (1990) (to be codified at 7 C.F.R. pt. 278) (including no discussion of hardship-to-households evidence). This is analogous to the agency's failure to provide an explanation of its ten-day response requirement. See discussion supra Part I.B.
114. See State Farm, 463 U.S. at 43.
115. See State Farm, 463 U.S. at 43 (explaining that an agency rule would be arbitrary and capricious if the agency based its decision on the wrong factors, or offered an explanation that was counter to the evidence).
116. See supra text accompanying note 108.
117. See supra notes 97-100 and accompanying text.
118. See, e.g., Mitchell, supra note 99, at B1 ("Most of the stores eliminated from the program were in the county's poor urban areas where the need is greatest . . . ."). The hardship may extend beyond food stamp households; a permanent disqualification from the food stamp program could drive some stores out of business, forcing all consumers to travel farther to purchase groceries. See Cross v. United States, 512 F.2d 1212, 1217 (4th Cir. 1975) (en bane) ("[D]isqualification may have grave economic consequences to a retailer engaged in business in a depressed economic area where there is widespread use of food stamps. In such an area one who holds himself out as a retailer of food would be cut off from a substantial segment of the buying public if he is disqualified from engaging in food stamp transactions.").
119. In high-poverty urban areas, 35.2% of the stores participating in the food stamp program are small groceries, while only 7.8% are supermarkets. See OFFICE OF ANALYSIS & EVALUATION, U.S. DEPT. OF AGRIC., FOOD RETAILERS IN THE FOOD STAMP PROGRAM: CHARACTERISTICS AND SERVICE TO PARTICIPANTS 15 tbl.6 (1997) [hereinafter CHARACTERISTICS]. In low-poverty urban areas, 39.8% of the participating stores are supermarkets, while 5.1% are small groceries. See id. The same degree of imbalance between poverty bands also exists in mixed and rural areas, although to a lesser extent. See id. at 16-17 & tbls.7-8. These small groceries are less likely to have the kind of selection available in supermarkets. See id. at 24 & tbl.11 (showing that supermarkets have an average of 95% of the FCS's standard "market basket," while stores that are not supermarkets or large groceries have an average of 44% of the market basket);
120. see also Charles Boisseau, Few Choices for Shoppers: Survey Reveals Dearth of Inner-city Markets, HOUSTON CHRON., May 17, 1995, at 2C ("Residents of low-income neighborhoods in Houston and other U.S. cities have fewer and smaller supermarkets at which to shop than folks in higher-income areas . . . .");
121. Sarah Okeson, The Grocery Gap, PEORIA J. STAR, Mar. 31, 1996, at B1.
122. New development of "supercenters," stores with both full-service supermarkets and other merchandise, has also been concentrated outside of urban areas. See Fred Faust, Wal-Mart Starting to Satisfy Large Appetite for Food, ST. LOUIS POST-DISPATCH, June 29, 1997, at 1E ("As it did with its discount stores, Wal-Mart seems to be focusing on small towns for its supercenters, forming rings around major metropolitan areas."). Some chains are, however, planning to open supermarkets in inner-city areas, according to the Food Marketing Institute, a supermarket trade association. See Boisseau, supra, at 2C.
123. The FCS's data support the proposition that small grocery stores are more expensive than supermarkets. At supermarkets in high-poverty urban areas, the cost of the FCS's market basket is 102% the cost of the same market basket at an average supermarket. See CHARACTERISTICS, supra note 114, at 22 & tbl.9. At small grocery stores, the price jumps to 141% of the cost at an average supermarket. See id.; see also Boisseau, supra note 114, at 2C ("[P]oor families [are forced] to shop at small grocery and convenience stores where they pay higher prices for less-nutritious food."); Okeson, supra note 114, at B1 ("[Velmon Cleveland] refuses to shop at the nearby Downtown 66 gas station, where milk is $2.79 a gallon and eggs are $1.79 a dozen, a third higher than to almost double the prices at a discount grocery store."). The poor nutritional value of convenience store food is so widely accepted that it has even become a subject for satire: "I suddenly realized that I was trapped in the [Kwik-E-Mart] with . . . no food!" "But Uncle Apu, what about the heat lamp dogs and nacho chips with synthetic cheese-covering?" "Tsk, tsk. How soon you seem to be forgetting lesson 12 - 'Food from Kwik-E can make you sicky.'" Matt Greening, Apu Nahasapeemapetilon's Kwik-E-Comics, in SIMPSONS COMICS: STRIKE BACK! 61, 65 (1996). At urban supermarkets, the situation is somewhat better. The FCS notes that "[a]lthough the cost, availability, and quality of food do not vary between urban supermarkets in high-poverty and other areas, the total shopping experience does. Supermarkets in high-poverty urban areas offer substantially fewer full-service departments and non-food product lines than supermarkets in other areas." CHARACTERISTICS, supra note 114, at 25.
124. The average small or medium grocery store redeems approximately $46,000 per year in food stamps. See RETAILER ACTIVITY REPORT, supra note 58, at 4. By definition, small groceries have annual gross sales of under $500,000. See CHARACTERISTICS, supra note 114, at 5. This means that a small grocery doing the maximum possible business for a small grocery, with an average food stamp redemption program, would be losing almost 10% of its business by losing its food stamp privileges.
125. Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843 (1984).
126. See supra notes 97-100 and accompanying text.
127. See Okeson, supra note 114, at B1 ("A study by the Food Marketing Policy Center at the University of Connecticut . . . found that lower-income areas had fewer grocery stores than more affluent neighborhoods.").
128. While many food stamp recipients are urban, one Republican Congressman from a rural district noted that his constituents would also benefit from the availability to stores of a hardship-to-households defense. See House Panel Approves Food-Stamp Bill, 46 CONG. Q. WKLY. REP., 1995, 1995 (1988) ("[Congressman Bill] Emerson said the added [Secretarial] discretion [is] needed because stores [are] being disqualified for small infractions and in some rural areas, only one store is available to serve a community.").
129. See Kim v. United States, 121 F.3d 1269, 1276 (9th Cir. 1997) (acknowledging "the obvious merit of considering hardship to food stamp households in the section 2021(b)(3)(B) calculus"). The majority of trafficking offenses are taking place at small stores, which do not always provide the high-quality food that people in poor neighborhoods need. See THE EXTENT OF TRAFFICKING, supra note 66, at 4. Trafficking is higher at all stores in poor neighborhoods, however, see id., and the hardship-to-households evidence exclusion applies to all stores, even those that do provide high quality food and service, see 7 C.F.R. § 278.6(f)(1) (1994).
130. 7 U.S.C. § 2011 (1994).
131. See 7 U.S.C. § 2021(b)(3)(B) (Supp. II 1996); 7 C.F.R. § 278.6(b).
132. See 7 C.F.R. § 278.6(j).
133. This section addresses the merits of the argument referred to in note 33, supra, and the accompanying text.
134. See 7 U.S.C. § 2023(15) (1994) ("The suit in the United States district court or State court shall be a trial de novo by the court in which the court shall determine the validity of the questioned administrative action . . . .").
135. Compare K-Mart Corp. v. Cartier, Inc., 486 U.S. 281, 291 (1988) ("In determining whether a challenged regulation is valid, a reviewing court must first determine if the regulation is consistent with the language of the statute.") with Goldstein v. United States, 9 F.3d 521, 523 (6th Cir. 1993) ("If the agency properly applied [its] regulations, then the court's job is done and the sanction must be enforced."); see also discussion supra Part I.A.
136. The Sixth Circuit has consistently done this. See Bakal Bros. v. United States, 105 F.3d 1085, 1089 (6th Cir. 1997); Goldstein, 9 F.3d at 524; Woodard v. United States, 725 F.2d 1072, 1076-78 (6th Cir. 1984); Martin v. United States, 459 F.2d 300, 301 (6th Cir. 1972) ("The statute authorizes a review only on the merits of the cases, and not on the period of disqualification."). See also Ibay, Inc. v. United States, No. 97-1558, 1997 WL 741365, at *2 (4th Cir. Dec. 2, 1997) (per curiam) (unpublished) (citing Goldstein).
137. See Freedman v. United States Dept. of Agric., 926 F.2d 252, 261 (3d Cir. 1991) ("[7 U.S.C. § 2023] requires the district court to examine the entire range of issues raised . . . ."); Modica v. United States, 518 F.2d 374, 376 (5th Cir. 1975).
138. 386 U.S. 361, 368 (1967) ("[T]he . . . Act provides that the court . . . 'shall review de novo the issues presented.' . . . The critical words to us seem to be 'de nova' and 'issues presented.' They mean to us that the court should make an independent determination of the issues.").
139. The First City National Bank case dealt with particular administrative decisions, not an agency rule of the kind discussed here. The discussion of First City National Bank is included only to explain the standards of de novo review, which apply to all agency actions under the Food Stamp Act. See 7 U.S.C. § 2023(a) (1994). An agency rule, such as 7 C.F.R. § 278, is considered an agency action. See Food Stamp Program; Civil Money Penalties in Lieu of Permanent Disqualification for Trafficking, 55 Fed. Reg. 31,809 (1990) (to be codified at 7 C.F.R. pt. 278) ("7 CFR Part 278 . . . ACTION: Final rule . . . . This final rule establishes eligibility criteria for firms seeking a civil money penalty in lieu of a permanent disqualification for trafficking . . . . This action is effective retroactively to October 1, 1988.").
140. The Food Stamp Act language differs slightly from the language of the statute considered in First City National Bank, but preserves the important "de novo" language. See 7 U.S.C. § 2023(a) ("The suit . . . shall be a trial de novo . . . in which the court shall determine the validity of the questioned administrative action in issue . . . ."). The critical difference in the Food Stamp Act language is the inclusion of the word "validity." See Martin v. United States, 459 F.2d 300, 302 (6th Cir. 1972) (Edwards, J., dissenting) ("My brothers construe the language which follows 'trial de novo by the court' as a limitation upon that term. On its face, however, the phrase 'in which the court shall determine the validity of the questioned administrative action in issue' describes but does not limit."); see also Doe v. United States, 821 F.2d 694, 70S (D.C. Cir. 1987) (en bane) (Wald, C.J., dissenting) ("The term 'de novo' is hardly vague - to a court of law . . . . The court should determine the matter 'anew,' BLACK'S LAW DICTIONARY 392 (5th ed. 1979), without deference to the prior administrative proceedings and decision.").
141. Compare 7 U.S.C. § 2023(a) (1994) with 5 U.S.C. § 706(2)(A) (1997) ("[T]he reviewing court shall decide all relevant questions of law . . . and determine the meaning or applicability of the terms of an agency action. The reviewing court shall . . . hold unlawful and set aside agency action, findings, and conclusions found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law . . . ."); see also Ibrahim v. United States, 834 F.2d 52, 53 (2d Cir. 1987) ("The Food Stamp Act's de novo review provision embodies a different and broader scope of review than that available under the APA, 5 U.S.C. § 706(2)(A)."); Modica, 518 F.2d at 376.
142. See First City Natl. Bank, 386 U.S. at 368 (citing with approval a comment in the legislative record that in de novo review, a court should not "give any special weight to the determination of the . . . supervisory agency").
143. See, e.g., Kulkin v. Bergland, 626 F.2d 181, 184-85 (1st Cir. 1980) ("While the de novo review provision of the Food Stamp Act raises certain problems, it does not, in our view, call for a departure from the usual standard of review concerning sanctions. . . . [We] believe the court must still be guided by the concepts implicit in the Butz v. Glover Livestock Commission Co. standard."). The Kulkin standard is still followed in the First Circuit, see Massachusetts Dept. of Pub. Welfare v. Secretary of Agric., 984 F.2d 514, 520 (1993), and is also the standard adopted by the Sixth Circuit in Goldstein v. United States, 9 F.3d 521, 523 (6th Cir. 1993) (citing Kulkin).
144. 411 U.S. 182, 185-86 (1973).
145. See Kulkin, 626 F.2d at 185 ("From a practical standpoint, it would not make sense for a court to substitute its judgment for that of the agency charged with administering the food stamp program as to the appropriate penalty for a given violation."); Nowicki v. United States, 536 F.2d 1171, 1178 (7th Cir. 1976) ("[W]e feel compelled to reverse that part of the judgment of the district court which reduced the sanction . . . as an impermissible intrusion into the administrative domain . . . ."); Cross v. United States, 512 F.2d 1212, 1218 (4th Cir. 1975) (en banc) ("[T]he scope of review of a sanction is not as broad as the scope of review of the fact of violation. The more limited scope of review of a sanction results from the vesting of discretion by Congress in the Secretary to devise and administer a scheme of disqualifications . . . .").
146. See Packers and Stockyards Act, 7 U.S.C. § 210(0 (1994). Section 210 has been amended only once since Glover, and the amendment made no change to § 210(f). See 7 U.S.C. § 210 note (Amendments).
147. See Glover, 411 U.S. at 185.
148. See supra notes 130-34 and accompanying text (explaining the differences between de novo review and review under the Administrative Procedure Act).
149. See H.R. REP. NO. 95-345, at 397-98, reprinted in 1997 U.S.C.C.A.N. 2326-27 ("[T]he Committee does not intend that, in the trial de novo in the United States district court or state court of the final administrative determination of disqualification, the sanction or period of disqualification imposed would itself be subject to judicial review as several courts have held that it is. . . . The trial de novo . . . should be limited to the determination of the validity of the administrative action, but not of the severity of the sanction." (citations omitted)).
150. See, e.g., Broad St. Food Mkt., Inc. v. United States, 720 F.2d 217, 219-20 (1st Cir. 1983).
151. See Hough v. United States Dept. of Agric., 707 F.2d 866, 868 n.1 (5th Cir. 1983) (per curiam) ("What Congress intended to do is thus plain enough, but what it actually did do is another matter entirely. . . . [Congress] reenact[ed] the 1964 provisions without, for our purposes, making any changes at all. The intent. . . stated in the legislative history, in other words, seems not to have found expression in the statute itself." (citations omitted)).
152. See Pierce v. Underwood, 487 U.S. 552, 567 (1988) ("Quite obviously, reenacting precisely the same language is a strange way to make a change."). Although there was no change in the language of the statute, the 1977 legislative history specifically disapproves of those cases that had reviewed the sanction de novo. See H.R. REP. NO. 95-464, at 706 (1997).
153. See 7 C.F.R. § 278.6(j) (1994) (showing that the only variable in the formula is the store's average monthly food stamp redemption).
154. See H.R. REP. NO. 100-828, at 28; see also Corder v. United States, 107 F.3d 595, 598 (8th Cir. 1997) ("[A] fine based entirely on this formula . . . must be overturned as arbitrary, capricious, and contrary to the statute."). But see Vasudeva v. United States, No. C96-1252Z, 1998 WL 279223, at *7 (W.D. Wash. May 27, 1998) (finding that the FCS's formula is not arbitrary and capricious: "An agency may decide to exclude certain factors from a formula because evaluating those factors accurately costs more than any benefit gained.").
155. Food Stamp Program; Civil Money Penalties in Lieu of Disqualification for Trafficking, 55 Fed. Reg. 31,809, 31,810 (1990) (to be codified at 7 C.F.R. pt. 278).
156. See 7 C.F.R. § 278.6(j)(3) ("For the first trafficking offense by a firm, [apply formula] if the largest amount . . . involved in a single trafficking transaction had a face value of $99 or less. If the . . . value . . . was $100 or more, the amount of the product obtained in this paragraph shall be doubled . . . .").
157. See 7 C.F.R. § 278.6(j)(1)-(3) ("Multiply the average monthly redemption figure by 10 percent . . . multiply the product obtained . . . by 60 . . . .").
158. Working through the formula: "X" represents a store's annual food stamp redemptions. The first step of the formula is to convert that to a monthly figure, A712. See 7 C.F.R. § 278.6(j)(1). This figure is then multiplied by 10%, bringing the figure to X/120. See 7 C.F.R. § 278.6(j)(2). The figure is then multiplied by 60, bringing the total to 60X/120, or X/2. See 7 C.F.R. § 278.6(j)(3). This total, X/2 (half of the annual redemptions), is the final fine for violations of "$99 or less." See 7 C.F.R. § 278.6(j)(3). If the transaction was "$100 or more," the X/2 total is doubled, leaving a fine of X, the annual food stamp redemption total. See 7 C.F.R. § 278.6(j)(3).
159. See 7 C.F.R. § 278.6(j)(4) (multiplying by 120 instead of 60, as it does for the first offense).
160. See 7 U.S.C. § 2021(b)(3)(B) (Supp. II 1996).
161. See 7 C.F.R. § 278.6(j).
162. Based on data from fiscal year 1994, the average medium or small grocery in the food stamp program redeems approximately $46,000 in food stamps annually - a far cry from the $540,000 redeemed annually at the average supermarket in the food stamp program, but still enough to receive the maximum fine. See RETAILER ACTIVITY REPORT, supra note 58, at 4.
163. See Corder v. United States, 107 F.3d 595, 598 (8th Cir. 1997) ("The formula . . . applies a series of arithmetic multipliers designed, as best we can determine, to guarantee that nearly every unknowing first offender will incur the statutory maximum $40,000 penalty.").
164. In Escal Year 1994, the FCS conducted 902 trafficking investigations, involving $224,503 in food stamps and $124,779 in cash. See RETAILER ACTIVITY REPORT, supra note 58, at 12 tbl. The average investigation therefore involved approximately $250 in food stamps and $140 in cash, easily enough to qualify for the higher penalty.
165. See Bakal Bros., v. United States, 105 F.3d 1085, 1087 (6th Cir. 1997) ("[A 17-year-old store clerk] followed [the officer] into the parking lot and offered to purchase food stamps. The officer then sold [him] $270 in food stamps for $150 in cash."); see also Emshwiller, supra note 66, at B1 ("An early and typical Cleveland case involved Amin Salem, currently serving a 42-month prison sentence for his role in some $6.6 million of illegal food-stamp transactions."); Dean Murphy, Spotlight Shines on Food Stamp Fraud, L.A. TIMES, Feb. 7, 1994, at B1 ("[A] Los Angeles man was sentenced to 15 months in prison last year after he sold $29,400 in food stamps to an undercover agent for $25,000 in cash. Agents also found $82,000 in food stamps in the man's home.").
166. See 7 C.F.R. § 278.6(j).
167. Take the example of a small grocery store with average sales of $200,000, which redeems $20,000 in food stamps annually. If an employee sells $100 in food stamps for cash on two separate occasions, the store can be subjected to the maximum $40,000 penalty. This means the store would lose 20% of its annual income, not profits. This could be devastating in an industry that traditionally has very low profit margins. See Faust, supra note 114, at 1E ("Margins on food are notoriously tight.").
168. See 7 U.S.C. § 2021(b)(3)(B)(i) (1994) ("[N]either the ownership nor management of the store . . . was aware of, approved, benefited from, or was involved in the conduct or approval of the violation . . . .").
169. See Vasudeva v. United States, No. C96-1252Z, 1998 WL 279223, at *7 (W.D. Wash. May 27, 1998) ("Agency discretion is exercised . . . in the choice among formulas.").
170. Cf. First Am. Bank v. Dole, 763 F.2d 644, 651 n.6 (4th Cir. 1985) ("Civil penalties may be considered 'quasi-criminal' in nature.").
171. See 18 U.S.C. § 3572(a)(1) (1994) (regulating criminal sentences).
172. See 18 U.S.C. § 3572 (a)(1), (8) ("[T]he court shall consider . . . the size of the [defendant] organization and any measure taken by the organization to discipline any officer, director, employee, or agent of the organization responsible for the offense and to prevent a recurrence of such an offense . . . .").
173. See 18 U.S.C. § 3572(a)(1), (7) ("[T]he court shall consider .
174. See Bakal Bros., v. United States, 105 F.3d 1085, 1090 (6th Cir. 1997) ("[W]e sympathize with plaintiffs position . . . .").