United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 96-1448

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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. *

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 Submitted: November 26, 1996

 Filed: February 24, 1997

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Before BOWMAN, MAGILL, and LOKEN, Circuit Judges.

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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 three

occasions exchanged a total of $305 in cash for $610 in food stamp

coupons offered by a Department of Agriculture investigator. The

Department's Food and Consumer Service (FCS) then charged Corder

with illegal 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. FCS

determined that Corder meets the criteria for a monetary penalty

set forth in 7 C.F.R. § 278.6(i) and imposed the maximum penalty

authorized by statute, $40,000. Corder commenced this action

seeking judicial review of the sanction. The district court
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granted FCS summary judgment, and Corder appeals. Concluding that

the formula used to determine this monetary penalty is arbitrary

and capricious, at least as applied to Corder, we reverse. 

Congress has dealt harshly with food stamp traffickers --

those who barter food stamps for cash, guns, drugs, or other

ineligible consideration. Prior to 1988, 7 U.S.C. § 2021(b)(3)

mandated permanent disqualification of first offenders, a sanction

so harsh -- because of its devastating impact on stores doing

business in low income neighborhoods -- that reviewing courts

struggled with the question whether innocent store owners should be

liable for employee trafficking. In 1988, Congress amended the

statute, authorizing FCS to impose a monetary penalty in lieu of

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 stores

upon the first trafficking offense -- without any

evaluation of preventive measures taken or complicity in

the trafficking -- seems excessively harsh. 

* * * * *

The Committee expects [FCS] to continue to

vigorously pursue and punish those perpetrators involved

in food stamp fraud, including store personnel and owners

that are culpable or negligent with respect to

trafficking offenses. . . . However, innocent persons

should not be subject to the harsh penalty of

disqualification where a store or concern has undertaken

and implemented an effective program and policy to

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 Ghattas
The employee in question, who was not sanctioned, submitted

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a statement that he "willingly accept[ed] food stamps for cash"

without Corder's knowledge or consent. 

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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 requested

and met the criteria for the alternative monetary sanction. She

submitted substantial evidence that she was neither aware of nor

benefitted from the violations, and that she had in place before

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the violations occurred a comprehensive compliance policy and

employee training program. See 7 C.F.R. § 278.6(i). Therefore, in

January 1995, FCS granted her request for the alternative sanction,

assessing a claim for $610 in actual loss, see 7 C.F.R. § 278.7(a),

and a civil monetary penalty of $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 penalty is

indistinguishable from a criminal fine. Congress has specified the

factors that are relevant in imposing criminal fines, including

defendant's ability to pay, the burden a fine will impose on

defendant and any dependents, the loss defendant inflicted upon

others, and so forth. See 18 U.S.C. § 3572. In reviewing criminal

fines, this court ensures that the sentencing court has properly

considered those factors. See, e.g., United States v. Bauer, 19

F.3d 409, 412-13 (8th Cir. 1994). Similarly, many statutes

authorizing civil fines carefully prescribe the factors an agency
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must consider in imposing such penalties, and reviewing courts

ensure that agencies obey those statutory mandates. See Merritt v.

United States, 960 F.2d 15 (2d Cir. 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.) (Federal

Aviation Act), cert. denied, 464 U.S. 895 (1983).

In the 1988 amendment, Congress did not specify the factors

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 more

closely fit the crime." We do not construe this as a grant of

standardless discretion to impose whatever fine the agency pleases.

Rather, we believe it is a clear signal that FCS should follow

principles of fairness that Congress has more clearly delineated in

other laws administered by the Department of Agriculture, such as

the Packers and Stockyards Act, 7 U.S.C. § 213(b):

In determining the amount of the civil penalty to be

assessed under this section, the Secretary shall consider

the gravity of the offense, the size of the business

involved, and the effect of the penalty on the person's

ability to continue in business. 

Following the 1988 amendment, FCS adopted a formula in

§ 278.6(j) of the regulations that considers none of these factors.

The formula starts with one violator-specific fact -- the

violator's average monthly food stamp redemptions in the year prior

to the violation. It then applies a series of arithmetic

multipliers designed, as best we can determine, to guarantee that

nearly every unknowing first offender will incur the statutory

maximum $40,000 penalty. This is not the exercise of informed

agency discretion. It is another example of implementing

regulations that reflect a hostile 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 this
 In promulgating the regulations, FCS declared that "[t]o allow

payment of the civil money penalty to be spread over a long period

of time would undermine what the Department believes to be the

intent of Congress. . . ." See 54 Fed. Reg. 18641, 18645 (1989).

As we noted in Ghattas, this reflects the oppressive enforcement

tactic of promulgating "virtually unsatisfiable regulations [which

the agency then ignores] at its pleasure." 40 F.3d at 285 n.5.

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formula, as Corder's fine admittedly was, must be overturned as

arbitrary, capricious, and contrary to the statute. 

That leaves the question of how we should dispose of this

case. Corder's $40,000 monetary penalty was payable within thirty

days of assessment, see 7 C.F.R. § 278.6(k), and the district court

denied a stay of that penalty. In response to Corder's plea of

inability to pay, FCS in August 1995 agreed to accept an initial

payment of $4,000 and monthly payments thereafter of $1000, or $500

during months of slow business. Presumably, Corder has now made

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payments under this agreement for one and one-half years and total

payments in excess of one-half the statutory maximum. Accordingly,

the judgment of the district court is reversed and the case is

remanded with instructions to enter an amended final judgment that

commutes or voids any remaining unpaid portion of the $40,000 civil

monetary penalty.

A true copy.

Attest:

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