Jerusalem Halal Meats, Inc. v. United States ( 2020 )

Case: 19-20170 Document: 00515499049 Page: 1 Date Filed: 07/22/2020
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 19-20170 July 22, 2020
Lyle W. Cayce
JERUSALEM HALAL MEATS, INCORPORATED, Clerk
Plaintiff - Appellant
v.
UNITED STATES OF AMERICA,
Defendant - Appellee
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.
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
Case: 19-20170 Document: 00515499049 Page: 2 Date Filed: 07/22/2020
No. 19-20170
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, attaching
1 See 7 C.F.R. § 278.2(a) (“Coupons may be accepted by an authorized retail food store
. . . only in exchange for eligible food.”); 7 U.S.C. § 2013(a) (SNAP benefits “shall be used only
to purchase food from retail food stores which have been approved for participation in the
supplemental nutrition assistance program.”).
2 In a letter dated January 10, 2017, FNS informed JHM that it was being charged
with “accepting SNAP benefits in exchange for merchandise which, in addition to eligible
foods, included major non-food items.” According to the charge letter, the misuse of SNAP
benefits “warrant a disqualification period of 1 year.” Enclosed with the charge letter was the
FNS Investigator’s report documenting the six violative transactions. After consideration of
JHM’s response letter, FNS recommended that JHM be disqualified from participating in
SNAP for one year based on JHM’s violations in 2016 and its past violations. JHM requested
administrative review of the recommendation and submitted to FNS two affidavits, electronic
benefit transfer receipts, and photographs of the store. On April 6, 2017, the Administrative
Review Branch of the FNS issued a Final Agency Decision upholding both FNS’ finding that
JHM had violated the SNAP guidelines and the one-year disqualification.
3 JHM was sanctioned by FNS in 2008 for exchanging ineligible items for SNAP
benefits.
2
Case: 19-20170 Document: 00515499049 Page: 3 Date Filed: 07/22/2020
No. 19-20170
as 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. 5
4 In its analysis of JHM’s affidavits, the magistrate judge concluded, “the affidavits do
not specifically deny that the violations occurred.” The magistrate judge also noted that
despite the opportunity to conduct discovery in its federal proceedings, JHM chose to rely on
the same evidence it had presented to FNS: “JHM chose not to serve requests for production,
interrogatories, or requests for admission on the United States. JHM took no depositions.”
5 JHM’s sole argument on appeal is that it produced sufficient evidence to create a
genuine dispute of material fact as to the existence of the violations, specifically challenging
the district court’s analysis of its affidavits. JHM does not challenge on appeal the district
court’s finding that the FNS’ penalty was not arbitrary or capricious or its rejection of JHM’s
due process claim. Accordingly, these arguments are waived. See United States v.
Thibodeaux, 211 F.3d 910, 912 (5th Cir. 2000) (“It has long been the rule in this circuit that
3
Case: 19-20170 Document: 00515499049 Page: 4 Date Filed: 07/22/2020
No. 19-20170
JHM 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 ownership
any issues not briefed on appeal are waived.” (citing Yohey v. Collins, 985 F.2d 222, 224–25
(5th Cir. 1993))).
6 JHM contends that the overwriting of the videos was a result of its belated notice of
the violations. However, JHM was notified of the investigation within 30 days of the CI’s last
visit, which occurred on December 13, 2016. FNS sent a notice letter and report of the
investigation to JHM on January 10, 2017.
4
Case: 19-20170 Document: 00515499049 Page: 5 Date Filed: 07/22/2020
No. 19-20170
or 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 of
7 Compare 7 C.F.R. § 278.6(e)(5) (discussing sanctions for violations “due to
carelessness or poor supervision”), with 7 C.F.R. § 278.6(e)(1)(iii), (2)(v), (3)(vi) (discussing
sanctions for “knowingly” engaging in violations).
8 In accordance with the USDA’s investigative practice, the FNS Investigator’s
Report—submitted under penalty of perjury—documented the date the confidential
informant (CI) visited the store; the items purchased; the price of each individual item (if
available); and the total deducted from the CI’s electronic benefits transfer (EBT) card on
each of the six alleged unauthorized transactions. See Irobe v. U.S. Dep’t of Agric., 890 F.3d
371, 379 (1st Cir. 2018) (“Congress has expressly authorized consideration of . . . reports of
on-site investigations as [a] tool[] in the USDA’s efforts to detect fraud.” (citing 7 U.S.C. §
2021(a)(2); 7 C.F.R. § 278.6(a))). Additionally, the dates and totals match and are
corroborated by the EBT receipts produced by JHM. As recognized by JHM, the receipts
“correspond with the transactions set forth in the letter of charges.” Thus, the receipts are
further evidence the violative transactions occurred.
Deviating from the argument JHM raises on appeal, the dissent largely focuses on the
government’s use of an unidentified CI to support the sales violations. Central to the dissent’s
holding is its determination that the “government’s proof of violations is CI hearsay.”
However, because JHM fails to adequately brief on appeal any argument challenging the
reliability or admissibility of the CI or agency’s investigative report, we need not address this
issue. See United States v. Reagan, 596 F.3d 251, 254 (5th Cir. 2010) (stating that
inadequately briefed arguments in counseled briefs are deemed waived); United States
v. Still, 102 F.3d 118, 122 n.7 (5th Cir. 1996) (noting that an appellant abandons any issues
not raised in his initial brief). JHM does not point to a single discrepancy in the report or
investigative process and at no point during the judicial proceedings did JHM seek discovery
in an attempt to identify or challenge the CI. Cf. Betesfa, Inc. v. United States, 410 F. Supp.
3d 132, 139, 141 (D.D.C. 2019) (“Although an unadorned denial, standing alone, might not be
sufficient to withstand a motion for summary judgment, Plaintiffs also reasonably [sought]
discovery regarding the comparators that FNS used and the methodology it employed in
determining that Plaintiff committed trafficking.”). Besides, the FNS investigator states in
the report that he accompanied the CI to the “vicinity of the store” and “observed the CI enter
. . . [and] depart the subject store” on each visit. The FNS investigator submitted the
investigative report under penalty of perjury and confirmed that all information documented
in the report was true and correct.
5
Case: 19-20170 Document: 00515499049 Page: 6 Date Filed: 07/22/2020
No. 19-20170
proof 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.
6
Case: 19-20170 Document: 00515499049 Page: 7 Date Filed: 07/22/2020
No. 19-20170
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. 1 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, the
1 Months later, JHM voluntarily provided receipts that corroborate the total amounts
of the relevant purchases. However, there is no way to know from the receipts and the total
amounts they show whether eligible or ineligible items were purchased.
7
Case: 19-20170 Document: 00515499049 Page: 8 Date Filed: 07/22/2020
No. 19-20170
clerk 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. 2
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. 3 At this stage, the only question before the court is
2 Ms. Ali’s denial under oath is that: “I have never knowingly sold ineligible items for
SNAP benefits.” The government notes the offenses are strict liability, implying that Ali’s
denial is inadequate. However, her affidavit makes clear that she denies making the unlawful
sales, that she had been trained not to accept SNAP benefits for ineligible items, and that
“[she] told [her] employer to pull the videotapes from the dates and times of the transactions,
and they would see that [she] did not do what is being claimed.”
3 It is important to recognize that the review officer’s determination was limited to her
role: confirming only that JHM’s denial affidavits—absent in-person testimony or cross-
examination—did not show by a preponderance of the evidence that the violations had not
occurred. Furthermore, the reviewer acknowledged her lack of authority to discount the
8
Case: 19-20170 Document: 00515499049 Page: 9 Date Filed: 07/22/2020
No. 19-20170
whether 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 findings, “the court was required to resolve the conflict in the versions
of events” by holding a hearing and making factual findings).
On the one hand, the government has offered its investigator’s report of
statements from an unidentified CI to support the sales violations. On the
other, JHM has offered its sworn witness denials of the same, in two, detailed
two-page affidavits, supporting its pleading allegation of no violation. This
contradiction equates to a genuine factual dispute for trial. 4 Betesfa, 410 F.
Supp. 3d at 141 (concluding that an affidavit denying the FNS’s allegations,
which were based on circumstantial evidence, created a dispute issue of fact
that precluded summary judgment). Ms. Ali’s affidavit denial provides more
than merely “some metaphysical doubt as to the material facts,” “conclusory
government’s hearsay evidence. “Since the procedures followed at the administrative level do
not provide for discovery or testing the evidence of the Department of Agriculture by cross-
examination, it is particularly important that an aggrieved person who seeks judicial review
in a trial de novo not be deprived of these traditional tools unless it is clear that no issue of
fact exists.” Saunders v. United States, 507 F.2d 33, 36 (6th Cir. 1974). These important
rights cannot be vindicated at the summary judgment stage.
4 Other courts have ultimately reversed based on similar evidence when they did not
find government witnesses credible. See, e.g., Sharifi v. United States, 754 F. Supp. 1543,
1547 (N.D. Ala. 1991) (holding that plaintiff had established the invalidity of the agency
finding based on the testimony of an undercover informant who allegedly conducted illegal
SNAP transactions because the court did not find the informant’s testimony at the federal
hearing credible); Gilmore v. U.S. Dep’t of Agric., Food & Nutrition Serv., 468 F. Supp. 540,
542 (E.D. Mo. 1979) (overturning the administrative finding that disqualification was
warranted because “[t]he testimony of the government’s sole alleged witness to the
transactions is unreliable, incredible and not worthy of belief”).
9
Case: 19-20170 Document: 00515499049 Page: 10 Date Filed: 07/22/2020
No. 19-20170
allegations,” “unsubstantiated assertions,” or “only a ‘scintilla’ of evidence.”
Little v. Liquid Air Corp., 37 F.3d 1069, 1076 (5th Cir.1994) (citations omitted).
The conflict between the hearsay statements of the CI who is never
identified, without evidence that the USDA investigator who prepared the
report ever even saw the ineligible items allegedly purchased, and the sworn,
contrary statement of the grocery store salesperson, seems to me squarely to
implicate a triable issue of fact as to the existence of these violations. 5
This is especially so because the Supreme Court has made clear that at
summary judgment, “the evidence of the non-movant is to be believed, and all
justifiable inference are to be drawn in his favor.” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 255 (1986). Whether JHM will ultimately prevail in proving
its innocence at trial given its burden of proof under our caselaw, see Redmond
v. United States, 507 F.2d 1007, 1012 (5th Cir. 1975) (holding that ultimately,
after a de novo trial with findings of fact, “unless proven to be invalid, the
agency action prevails”); see also Fells v. United States, No. 08-C-782, 2010 WL
55844, at *3–*5 (E.D. Wis. Jan. 5, 2010), aff’d, 627 F.3d 1250 (7th Cir. 2010)
(discussing the legal landscape after Redmond and concluding that “the
plaintiff must prove by a preponderance of the evidence that the violations
found by the Agency did not occur”), is not the issue before us. This court must
5 There are various compendiums of challenges to agency disqualification in federal
court. See, e.g., 53 Am. Jur. Proof of Facts 3d 301 (June 2020 update); 120 A.L.R. Fed. 331(Originally published in 1994); 7 U.S.C. § 2021 Westlaw Notes of Decisions. Reviewing those,
I am concerned that the government nearly always provides more robust and admissible
evidence of a violation than in this case. See, e.g., Abdel v. United States, 670 F.2d 73, 75–76
(7th Cir. 1982) (finding the evidence sufficient after a hearing based on testimony and
transaction reports where “after leaving the store, [the undercover purchaser] immediately
would take her bag of purchases and the change” to the USDA employee, who “would go
through the bag . . . and record the items purchased on a Transaction Report form”); Kingway
Supermarkets Inc. v. United States, 545 F. Supp. 2d 613, 617 (S.D. Tex. 2008) (discussing the
reliability of disqualifications “based on an analysis of electronic benefit transfer system
data” over a period of months).
10
Case: 19-20170 Document: 00515499049 Page: 11 Date Filed: 07/22/2020
No. 19-20170
review the district court’s grant of summary judgment, which requires us to
determine whether a material dispute of fact exists as to whether the alleged
violations occurred. When the government’s proof of violations is CI hearsay,
and the plaintiff-retailer’s contradictory proof is a sworn affidavit of denial,
such a dispute exists.
For these reasons, I dissent.
11