560 F.Supp.3d 892
D. Maryland2021Background
- A Baltimore 7‑Eleven franchise (Store) was investigated after undercover FNS visits in June 2020; one employee (Employee 1) twice exchanged EBT benefits for cash while another employee refused similar requests on two other visits.
- FNS issued a charge letter (Aug. 2020) and permanently disqualified the Store (Oct. 2020); the Store timely requested a civil money penalty (CMP) in lieu of disqualification and administratively appealed; ARO affirmed permanent disqualification in a Final Agency Decision (Dec. 2020).
- The franchise owner (Rashid) submitted evidence of a corporate training program (7‑Eleven University), employee acknowledgement forms, posted signage, and testimony that initial training occurred and informal/ongoing retraining happened on the job; Employee 1 had been hired and trained six months before the violations and was later terminated.
- FNS denied a CMP because the Store allegedly failed to provide documentation of periodic retraining and internal compliance reviews as required by 7 C.F.R. § 278.6(i).
- Plaintiffs sued for judicial review and moved for a preliminary injunction to stay disqualification pending litigation; the Court found plaintiffs likely to succeed on the claim that permanent disqualification was arbitrary and capricious given the Store’s evidence, small size, long clean record, and the flexible retraining requirement, and enjoined enforcement of the disqualification.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FNS abused its discretion by imposing permanent disqualification instead of a CMP | Rashid: Store had an effective compliance policy, initial training, informal periodic retraining, POS safeguards, and no owner/management involvement | Government: Plaintiffs failed to produce "substantial evidence" of periodic retraining and internal review required for a CMP | Court: Plaintiffs likely to succeed; FNS’s choice of permanent disqualification was arbitrary and capricious at this stage |
| Whether 7 C.F.R. § 278.6(i)(2) requires contemporaneous, dated retraining records identical to initial training documentation | Plaintiffs: Regulation is flexible/ambiguous about retraining form and timing; affidavits and informal training can suffice | Government: Retraining must be documented with dated curricula/attendance like initial training | Court: Regulation does not mandate the same strict documentary standard for retraining; allows flexibility; agency’s stricter view was unreasonable here |
| Whether the Store satisfied the four CMP criteria (policy, in‑place before violations, effective training, no ownership involvement) | Rashid: Submitted training materials, signage, employee acknowledgements, POS controls, affidavits; ownership not involved | Government: Lacked documentation of periodic training and internal compliance reviews; therefore failed multiple criteria | Court: Evidence sufficient, at least for purposes of preliminary injunction, to show likely satisfaction of Criteria 1, 2 and 4 and a plausible showing on Criterion 3 |
| Whether a preliminary injunction / stay of disqualification was appropriate | Plaintiffs: Irreparable harm (loss of franchise, customers in food desert) and likelihood of success on arbitrary-and-capricious claim | Government: No likelihood of success because the regulations require documentary proof | Court: Granted injunction; government did not contest stay availability or irreparable harm; balance favors relief pending full review |
Key Cases Cited
- Winter v. Natural Res. Def. Council, 555 U.S. 7 (2008) (standard for preliminary injunctions)
- Kisor v. Wilkie, 139 S. Ct. 2400 (2019) (limits and conditions for deference to agency regulatory interpretations)
- Chevron U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837 (1984) (framework for judicial deference to reasonable agency statutory interpretations)
- Affum v. United States, 566 F.3d 1150 (D.C. Cir. 2009) (substantial evidence may take flexible forms; affidavit and contemporaneous materials can suffice)
- Traficanti v. United States, 227 F.3d 170 (4th Cir. 2000) (store owners must prove anti‑fraud programs; relied on by government but distinguished)
- Idias v. United States, 359 F.3d 695 (4th Cir. 2004) (permanent disqualification is the presumptive sanction for trafficking)
- Ahmed v. United States, 47 F. Supp. 2d 389 (W.D.N.Y. 1999) (small‑store context; affidavits and limited documentary burdens may be persuasive)
- Castillo v. United States, 989 F. Supp. 413 (D. Conn. 1997) (similar analysis granting relief where documentary proof of retraining was limited)