United States v. J & K Market Centerville, LLC
2012 U.S. App. LEXIS 9482
| 8th Cir. | 2012Background
- J & K Market Centerville, LLC was denied SNAP participation based on a prior owner’s trafficking violation.
- An informant-driven March 3, 2008 SNAP transaction occurred under Kris Koestner's ownership but executed by Chad Koestner.
- Kris sold the store to Chad, who then formed J & K Market Centerville, LLC and reapplied for SNAP enrollment.
- FNS denied the new entity under 7 C.F.R. § 278.1(b)(3)(iv) & (k)(3)(iv) and permanently under § 278.6(e)(1)(i).
- District court upheld permanent denial, concluding the civil penalty remedy did not apply and noting potential circumvention by the Kris-to-Chad transfer.
- J & K Market argued the permanent denial was arbitrary and capricious and that a civil penalty should have been available.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a civil penalty could substitute permanent disqualification | Kris argued civil penalty is available under §2021(b)(3)(B). | FNS may apply permanent disqualification per §278.6(e)(1)(i). | Not reversible; district court’s choice of permanent disqualification affirmed; civil-penalty option not shown properly applicable. |
| Whether the Kris-to-Chad transfer showed an intent to avoid penalties | Transfer aimed to circumvent penalties; ownership changed to evade sanctions. | Transfer was not shown to be an impermissible evasion; the current entity involved in violation. | Affirmed: Chad’s involvement meant penalties applied to current entity; transfer evidence did not negate loss of integrity. |
| Whether the transfer and trafficking findings justify permanent ineligibility under §278.6 | Ghattas and Corder suggest monetary penalties may be appropriate. | Trafficking and store hierarchy justify permanent disqualification; policy supports stringent sanction. | Permanent ineligibility upheld under the trafficking framework; not arbitrary and capricious given facts. |
Key Cases Cited
- Ghattas v. United States, 40 F.3d 281 (8th Cir.1994) (innocent owner trafficking case; monetary penalty consideration discussed)
- Corder v. United States, 107 F.3d 595 (8th Cir.1997) (arbitrary/capricious civil-penalty formula; innocent-clerk scenario)
- Sims v. U.S. Dep't of Agric. Food & Nutrition Serv., 860 F.2d 858 (8th Cir.1988) (fact-de novo review; defer to agency interpretations under proper standards)
- Ballanger v. Johanns, 495 F.3d 866 (8th Cir.2007) (deference to agency interpretation; regulatory framework interpretation)