## United States Court of Appeals FOR THE EIGHTH CIRCUIT

___________ No. 96-1448

___________ Mary Corder, doing business as * Corder Convenience Store, Inc., * dba 7-Eleven 27472B, * * Appellant, * Appeal from the United States * District Court for the v. * Eastern District of Missouri. * United States of America, * * Appellee. *

___________ Submitted: November 26, 1996 Filed: February 24, 1997

___________ Before BOWMAN, MAGILL, and LOKEN, Circuit Judges.

___________ LOKEN, Circuit Judge. Mary Corder owns a small 7-Eleven food store in St. Louis. In August 1994, an employee working alone at the store on thre e occasions exchanged a total of $305 in cash for $610 in food stamp coupons offered by a Department of Agriculture investigator. The Depart ment's Food and Consumer Service (FCS) then charged Corde r wit hillegal trafficking in violation of the Food Stamp Program

. See 7 U.S.C. §§ 2021, 2024(b)(1); 7 C.F.R. §§ 271.2, 278.2(a)

. Corder requested that she be assessed a civil monetary penalty in lieu of permanent disqualification from the Program. FC S det ermined that Corder meets the criteria for a monetary penalt y set fort h in 7 C.F.R. § 278.6(i) and imposed the maximum penalt y authorized by statute, $40,000. Corder commenced this actio n seeking judicial review of the sanction. The district court-2-

granted FCS summary judgment, and Corder appeals. Concluding that the formula used to determine this monetary penalty is arbitrar y and capricious, at least as applied to Corder, we reverse.

Co ngress has dealt harshly with food stamp traffickers -

- those who barter food stamps for cash, guns, drugs, or othe r inelig ible consideration. Prior to 1988, 7 U.S.C. § 2021(b)(3 ) mandated permanent disqualific ation of first offenders, a sanction
so harsh -- because of its devastating impact on stores doin g business in low income neighborhoods -- that reviewing court s struggled with the question whether innocent store owners sh ould be liable for employee trafficking. In 1988, Congress amended th e statute, authorizing FCS to impose a monetary penalty in lieu o f permanent disqualification in carefully limited circumstances. 7 U.S.C. § 2021(b)(3)(B) (1988). The legislative history clarified that innocent store owners are liable, while recognizing the need for a less harsh monetary sanction in some cases:

The permanent disqualification of retail food store s upon the first trafficking offense -- without an y evaluation of preventive measu res taken or complicity in the trafficking -- seems excessively harsh.
* * * * * The Committee expects [FCS] to continue t o vigorously pursue and punish t hose perpetrators involved infood stamp fraud, including store personnel and owner s that are culpable or negligent with respect t o traf ficking offenses. . . . However, innocent person s shou ldnot be subject to the harsh penalty o f disqualification where a store or concern has undertaken and implemented an effective program and policy t o prevent violations.
* * * * * With Secretarial discretion, we can be assured that the punishment will more closely fit the crime.
H.R. Rep. No. 100-828, pt.1 at 27-28 (1988). See generally GhattasTh e employee in question, who was not sanctioned, submitte d 1 a stat ement that he "willingly accept[ed] food stamps for cash " without Corder's knowledge or consent. -3- v. United States , 40 F.3d 281 (8th Cir. 1994); Freedman v. United States Dep't of Agric. , 926 F.2d 252, 255-59 (3d Cir. 1991).

In this case, it is undisputed that Corder timely requeste d andmet the criteria for the alternative monetary sanction. Sh e sub mitted substantial evidence that she was neither aware of no r be nefittedfrom the violations, and that she had in place befor e 1 the violations occurred a comprehensive compliance policy an d employee training program. See 7 C.F.R. § 278.6(i). Theref ore, in January 1995, FCS granted her request for the alternative sa nction, assessing a claim for $610 in actual loss, see 7 C.F.R. § 27 8.7(a), and a civil monetary penalty o f $40,000, the maximum authorized by 7 U.S.C. § 2021(b)(3)(B). Corder appealed, and an administrative review officer affirmed, concluding that the penalty was computed in accordance with the formula for first offenders set forth in 7 C.F.R. § 278.6(j)(1)-(3). The district court agreed.

The $40,000 penalty at issue is a quasi-criminal sanction

. See First Am. Bank v. Dole , 763 F.2d 644, 651 & n.6 (4th Cir

. 1985); United States v. Sanchez , 520 F. Supp. 1038, 1040 (S. D. Fla. 1981), aff'd , 703 F.2d 580 (11th Cir. 1983). From the standpoint of its economic impact on Corder and her enterprise, the pen alty is indistinguishable from a criminal fine. Congress has specif ied the fact ors that are relevant in imposing criminal fines, includin g defendant's ability to pay, the burden a fine will impose o n defe ndant and any dependents, the loss defendant inflicted upo n others, and so forth. See 18 U.S.C. § 3572. In reviewing c riminal fin es, this court ensures that the sentencing court has properl y considered those factors. See, e.g. , United States v. Bauer , 1 9 F.3d 409, 412-13 (8th Cir. 1994). Similarly, many statute s authorizing civil fines carefully prescribe the factors an agency-4-

mu st consider in imposing such penalties, and reviewing court s ensure that agencies obey those statutory mandates. See Mer ritt v. United States , 960 F.2d 15 (2dCir. 1992) (§ 13(c) of the Shipping Act); First Am. Bank , 763 F.2d at 651-52 & n.6 (Civil Aeronautics Act); F.A.A. v. Landy , 705 F.2d 624, 635-36 (2d Cir.) (Federa l Aviation Act), cert. denied , 464 U.S. 895 (1983).

In the 1988 amendment, Congress did not specify the factor s FCS must consider in imposing a civil monetary penalty in lieu of permanent disqualification. Instead, Congress generally directed FCS to exercise discretion so that "the punishment will mor e closely fit the crime." We do not construe this as a grant o f standardless discretion to impose whatever fine the agency p leases. Ra ther, we believe it is a clear signal that FCS should follo w principles of fairness that Congress has more clearly deline ated in other laws administered by the Department of Agriculture, such as the Packers and Stockyards Act, 7 U.S.C. § 213(b):

Indetermining the amount of the civil penalty to b e assessedunder this section, the Secretary shall conside r the gravity of the offense, the size of the busines s involved, and the effect of the penalty on the person's ability to continue in business.

Foll owing the 1988 amendment, FCS adopted a formula i n § 278.6(j) of the regulations that considers none of these f actors. The formula starts with one violator-specific fact -- th e violator's average monthly food stamp redemptions in the yea r prior to the violation. It then applies a series of arithmeti c multipliers designed, as best we can determine, to guarantee that
ne arlyevery unknowing first offenderwill incur the statutor y maximum$40,000 penalty. This is not the exercise of informe d agencydiscretion. It is another example of implementin g regulations that reflect a hos tile attitude toward the alternative monetary sanction Congress enacted in 1988. See Ghattas , 40 F.3d at 284-85 & n.4. We conclude that a fine based entirely on thisIn promulgating the regulations, FCS declared that "[t] o allow

payment of the civil money pen alty to be spread over a long period of time would undermine what the Department believes to be th e intent of Congress. . . ." See 54 Fed. Reg. 18641, 18645 (1989). As we noted in Ghattas , this reflects the oppressive enforcemen t tactic of promulgating "virtua lly unsatisfiable regulations [which the agency then ignores] at its pleasure." 40 F.3d at 285 n.5. -5- formul a, as Corder's fine admittedly was, must be overturned a s arbitrary, capricious, and contrary to the statute.

That leaves the question of how we should dispose of thi s case. Corder's $40,000 moneta ry penalty was payable within thirty days of assessment, see 7 C.F.R. § 278.6(k), and the distric t court denieda stay of that penalty. In response to Corder's plea o f inabilit yto pay, FCS in August 1995 agreed to accept an initia l payment of $4,000 and monthly payments thereafter of $1000, or $500 du ring months of slow business. Presumably, Corder has now mad e 2 payments under this agreement for one and one-half years and total payments in excess of one-half the statutory maximum. Accor dingly, th e judgment of the district court is reversed and the case i s remanded with instructions to enter an amended final judgment that commutes or voids any remaining unpaid portion of the $40,00 0 civil monetary penalty.

A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.