Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_05-cv-00657/USCOURTS-caed-1_05-cv-00657-7/pdf.json

Parties Involved:
Nabeel Abdulla
Plaintiff
Nassr Mohamed
Plaintiff
United States Department of Agriculture Food and Nutrition
Defendant
United States of America
Defendant

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

NASSR MOHAMED, et.al., CASE NO. CV-F-05-0657 SMS

 ORDER ON UNITED STATES’ MOTION

Plaintiff, TO DISMISS CERTAIN CLAIMS AND/OR FOR

PARTIAL JUDGMENT ON PLAINTIFF’S

 AMENDED COMPLAINT

vs. (Doc )

UNITED STATES OF AMERICA,

Defendant.

 / 

Pursuant to a notice filed on May 2, 2007, defendant United States of America moves to dismiss

plaintiffs’ fourth through eighth causes of action. Plaintiffs Nassar Mohamed, owner of Family Food

Market, Nassar Mohammed and Nabeel Abdulla, owners of Parkview Market (“plaintiffs”) filed an

opposition on May 22, 2007. The United States filed its reply on June 1, 2007. The motion was heard

on June 8, 2007 before the Honorable Magistrate Judge Sandra M. Snyder. Attorney Bruce Leichty

appeared on behalf of plaintiffs and Brian Enos appeared on behalf of defendant. Having considered

the moving, opposition, and reply papers, as well as the Court’s file, the Court issues the following

order. 

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs bring this action under 7 U.S.C. § 2023 to seek de novo review of an administrative

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determination of defendant, the United States Department of Agriculture Food and Nutrition

(“defendant”), to disqualify plaintiffs from participating in the Food Stamp program as persons

authorized to redeem Food Stamps vouchers. Plaintiffs were permanently disqualified from the food

stamp program in accordance with Section 14A of the Food Stamp Act, as amended. Plaintiffs contend

that the actions leading to their disqualification were the intentional and criminal actions of one or more

of their employees.

As a result of the illegal activity, employees of plaintiffs were arrested and charged with criminal

acts. The Government executed a search warrant during the course of the investigation and seized

approximately $100,000 in cash. In March 2004, plaintiffs entered into a written settlement agreement

with the Government forfeiting the sum of $20,000. Plaintiffs contend that this agreement bars this

debarment action. Defendants contend that it does not and that the disqualification process is wholly

distinct from the asset forfeiture proceeding and that the administrative ruling disqualifying plaintiffs

should be upheld.

Plaintiffs filed this action on May 19, 2005. Brian Leichty substituted in as plaintiffs’ counsel

on December 20, 2006 and on April 2, 2007, the parties stipulated to the filing of a first amended

complaint. The First Amended Complaint includes nine causes of action which can be categorized into

three groups: (1) the first through third and ninth causes of action generally challenge the USDA and

Food and Nutrition Service’s (“FNS”) administrative actions taken against them pursuant to their

employees’ trafficking food stamps; (2) the fourth cause of action, is a constitutional challenge to a food

stamp regulation (7 C.F.R. § 278.6) based on an alleged lack of Congressional endorsement; and (3) the

fifth through eighth causes of action challenge the imposition of civil money penalties against them

when they transfer their stores.

On May 2, 2007, defendant filed the instant motion to dismiss and/or judgment on the pleadings

regarding the fourth through eighth causes of action based on: (1) lack of ripeness; (2) lack of subject

matter jurisdiction; and (3) failure to state a claim upon which relief can be granted. 

LEGAL STANDARD

Rule 12(b)(1) of the Federal Rules of Civil Procedure governs dismissal of a case for lack of

jurisdiction over a case’s subject matter. “A federal court is presumed to lack jurisdiction in a

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particular case unless the contrary affirmatively appears.” Stock West, Inc. v. Confederated Tribes,

873 F.2d 1221, 1225 (9 Cir. 1989) th. 

Dismissal under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim may be

granted if the cause of action lacks a cognizable legal theory or there is an absence of sufficient facts

alleged under a cognizable legal theory. Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th

Cir. 1990). In considering a motion to dismiss for failure to state a claim, the court must accept as

true the allegations of the complaint in question, Hospital Bldg. Co. v. Rex Hospital Trustees, 425

U.S. 738, 740 (1976), construe the pleading in the light most favorable to the party opposing the

motion, and resolve all doubts in the pleader's favor. Jenkins v. McKeithen, 395 U.S. 411, 421, reh'g

denied, 396 U.S. 869 (1969), Parks School of Business, Inc. v. Symington, 51 F.3d 1480 1484 (9th

Cir. 1995). A motion to dismiss for failure to state a claim should not be granted unless it appears

beyond doubt that plaintiff can prove no set of facts in support of the claim that would entitle him to

relief. See Hishon v. King & Spalding, 467 U.S. 69, 73 (1984)(citing Conley v. Gibson, 355 U.S. 41,

45-46 (1957)); see also Palmer v. Roosevelt Lake Log Owners Ass'n, 651 F.2d 1289, 1294 (9th Cir.

1981). 

The Food Stamp Act provides for authorized stores to be disqualified (or, in exceptional

circumstances, a civil monetary penalty) if any store employee accepts or uses food stamps in

violation of the program. 7 U.S.C. § 2021 (a); 7 C.F.R. § 278.6(a). In the event any retail store that

has been disqualified to participate in the program is sold or otherwise transferred, “the person or

persons who sell or otherwise transfer ownership . . . shall be subjected to a monetary penalty in an

amount established by the Secretary through regulations to reflect that portion of the disqualification

period that has not yet expired. If the retail food store . . . has been disqualified permanently, the

civil money penalty shall be double the penalty for a ten-year disqualification period, as calculated

under the regulations issued by the Secretary.” 7 U.S.C. § 2021(e); 7 C.F.R. § 278.6(f)(2). 

DISCUSSION

A. Defendants’ Motion to Dismiss Claim Four

Plaintiff’s Fourth Cause of Action states:

63. Congress at no time conferred authority on the Department of

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Agriculture to promulgate the “transfer penalty” provisions of 7 C.F.

R. Section 278.6

64. The provisions for a “transfer penalty” found in 7 C.F.R. Section 278.6

are inconsistent with the authority conferred on the Department of

Agriculture by Congress, or alternatively, unconstitutionally

ambiguous and vague, in that, among other things, they appear to

condition eligibility for a fine in lieu of permanent disqualification for

food stamp trafficking on a set of criteria that are impossible to meet if

a violation of trafficking has already been found.

Defendant contends that plaintiffs’ claim that the “transfer penalty” imposed on business

owners for trying to sell businesses disqualified from the Food Stamp Program by 7 C.F.R. § 278.6

is unconstitutional is not viable because the regulation was expressly authorized by Congress

pursuant to 7 U.S.C. § 2021(e) and is uniformly upheld as proper by the Supreme Court and Ninth

Circuit. See Vasudeva v. United States, 214 F.3d 1155, 1159-61 (9 Cir. 2000) th. 

Plaintiff contends there is no ruling binding on this court which finds that 7 C.F.R. § 278.6 is

constitutional as applied under the circumstances of this case. Plaintiffs do not dispute that Congress

authorized and directed the Department of Agriculture to propound regulations providing for a

penalty upon the transfer of a market that is the subject of a proper regulatory action. Plaintiffs’

claim is that the agency lacks authority to condition eligibility for a fine in lieu of permanent

disqualification on a set of criteria that are impossible to meet if a violation of trafficking has already

been found. Plaintiffs argue that Vasudeva is a case involving the imposition of civil monetary

penalties instead of permanent disqualification, whereas the case at hand involves civil monetary

penalties added to permanent disqualification. 

In the fourth cause of action, plaintiffs make a constitutional challenge to 7 C.F.R. § 278.6,

arguing that the transfer penalty is not authorized by Congress.

“When a court reviews an agency’s construction of the statute which it administers, it is

confronted with two questions. First, always, is the question whether Congress has directly spoken

to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the

court, as well as the agency, must give effect to the unambiguous expressed intent of Congress.”

Chevron, U.S.A., v. Natural Resources Defense Counsel, Inc., 467 U.S. 837, 842-843 (1984). 

In 7 U.S.C. § 2021(e), Congress codifies the transfer penalty which 7 C.F.R. § 278.6

calculates and administers, and provides that in the event any retail food store that has been

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disqualified to participate in the program is sold or otherwise transferred:

[T]he person or persons who sell or otherwise transfer ownership of the retail food

store or wholesale food concern shall be subjected to a civil money penalty in an

amount established by the Secretary through regulations to reflect that portion of the

disqualification period that has not yet expired. If the retail food store or wholesale

food concern has been disqualified permanently, the civil money penalty shall be

double the penalty for a ten-year disqualification period, as calculated under

regulations issued by the Secretary. 

7 U.S.C. § 2021(e)(1). The statute plainly authorizes the transfer penalty challenged by plaintiffs. 

The Court agrees that the Vasudeva v. United States, 214 F.3d 1155, 1159-61 (9 Cir. 2000) th case

does not address the constitutionality of the transfer penalty specifically; however, the fact remains

that the statute clearly speaks to the “precise question at issue” in the challenged regulation

authorizing the imposition of transfer penalties as well as the creation of regulations to calculate and

impose the penalties. Accordingly, plaintiff’s fourth cause of action fails as a matter of law and

therefore fails to state a claim upon which relief can be granted.

At the hearing, plaintiffs’ counsel argued that the statute itself was unconstitutional as well as

the regulation and therefore the fourth cause of action is not precluded by Chevron, U.S.A., v.

Natural Resources Defense Counsel, Inc., 467 U.S. 837, 842-843 (1984). As pointed out by

defendant, the fourth cause of action does not challenge the statute itself as currently plead. 

Accordingly, the claim shall be dismissed with leave to amend.

B. Defendant’s Motion to Dismiss Claims Five through Eight.

In the fifth through eighth causes of action, plaintiffs challenge the constitutionality of the

regulation as imposed in this case. 

Defendants argue these claims are not ripe for review in that they are constitutional

challenges to the FNS’s imposing civil money penalties against plaintiffs pursuant to transferring

ownership of their food markets since the FNS has not imposed any “transfer penalties” on plaintiffs. 

Defendant contends plaintiffs have not made any allegations suggesting that they have tried to sell

their businesses which might lead to the imposition of such penalties. Defendant argues plaintiffs

have suffered no hardship and no controversy exists regarding possible yet thus far non-existent,

transfer penalties and therefore plaintiffs’ fifth through eighth causes of action are not ripe for

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review. 

Plaintiffs argue their injury is not speculative or contingent in that each letter at issue in this

action included the following verbiage, 

[S]hould your client sell or otherwise transfer ownership of your

client’s retail food business before completion of the disqualification,

your client will be subject to and liable for a civil money penalty in an

amount to reflect that portion of the disqualification period that has not

yet expired. 

Plaintiffs argue the letter effectuates a disability in the right that the owner of property

normally has to transfer his or her property without government interference. Plaintiffs therefore

contend the penalty is the imposition of the disability itself. Plaintiffs are experiencing the

equivalent of a lien or other encumbrance placed on real property which they would otherwise be

able to convey or sell for a profit absent a lien tor encumbrance, except in this case, plaintiffs argue it

is effectively a hidden statutory lien on their personal property. Plaintiffs point out that they have

alleged that they are “trying” to sell their property (see First Amended Complaint ¶¶ 47 - 50) and

nothing more is required under federal pleading standards. 

The ripeness doctrine prevents premature adjudication. It is aimed at cases that do not yet

have a concrete impact upon the parties. Thomas v. Union Carbide Agricultural Prod. Co., 473 U.S.

568, 580 (1985). Inquiries into ripeness generally address two factors. First, the court assesses

whether the relevant issues are sufficiently focused to permit judicial resolution without further

factual development. See Clinton v. Acequia, Inc., 94 F.3d 568, 572 (9 Cir. 1996) th . Second, the

court assesses the extent to which the parties would suffer any hardship by the postponement of

judicial action. Exxon Corp. v. Heinze, 32 F.3d 1399, 1404 (9 Cir. 1994) th. 

Administrative regulations are not ordinarily considered “ripe” for judicial review under the

Administrative Procedure Act “until the scope of the controversy has been reduced to more

manageable proportions and its factual components fleshed out, by some concrete action applying

the regulation to the claimant’s situation in a fashion that harms or threatens to harm him. Nat’l

Park Hospitality Ass’n v. Dept. of Interior, 538 U.S. 803, 808 (2003).

Here, as alleged in the complaint, the issues are not sufficiently focused to permit judicial

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resolution without further factual development and therefore claims five through eighth are unripe. 

Plaintiffs allege that they have been permanently disqualified from further participation in the Food

Stamp Program and they have been notified that if they sell or otherwise transfer the retail food

businesses before completing the period of disqualification, they will be subject to a monetary

penalty. First Amended Complaint, p.9, ¶ 41. Claims five through eight do not challenge the

disqualification itself but specifically challenge the “transfer penalty” as an excessive fine; an

unconstitutional taking; an impairment of contractual interest; and an impairment of a property

interest. However, the transfers penalty has not yet been imposed and may never be. 

 In Abbott Labs. v. Gardner, 387 U.S. 136, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967), overruled

on other grounds by Califano v. Sanders, 430 U.S. 99 (1977), the Supreme Court explained that the

ripeness doctrine serves “to prevent the court, through avoidance of premature adjudication, from

entangling themselves in abstract disagreements over administrative policies and also to protect the

agencies from judicial interference until an administrative decision has been formalized and its effect

felt in a concrete way by the challenging parties.” 

Here, there is not a direct and immediate effect on the day to day business of the complaining

parties. This is not a case where, as in Abbott Laboratories, the plaintiff is presented with an

immediate choice between foregoing potentially lawful behavior and risking prosecution. The

transfer penalty may never come to pass and even if it does, the amount of the penalty will depend on

when the transfer occurs. Until those penalties are actually imposed in a specific amount, any

decision by this Court would address a purely hypothetical situation. “Possible financial loss is not

by itself a sufficient interest to sustain a judicial challenge to governmental action.” Abbott Labs. v.

Gardner, 387 U.S. at 153 87 S.Ct. At 1517. Plaintiffs’ claims five through eighth are therefore unfit

for judicial decision because they are contingent both upon an a decision by plaintiffs to actually

transfer the retail food businesses and an administrative action not yet taken. 

////////////////////

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///// 

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CONCLUSION

For the foregoing reasons, the motion to dismiss is GRANTED. The fourth through eighth

causes of action are dismissed. Plaintiffs are granted leave to amend the fourth cause of action. 

Plaintiffs shall file an amended complaint within 20 days of this Order.

IT IS SO ORDERED.

Dated: June 29, 2007 /s/ Sandra M. Snyder 

icido3 UNITED STATES MAGISTRATE JUDGE

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