Opinion ID: 682487
Heading Depth: 1
Heading Rank: 4

Heading: The Secretary's Post-1988 Regulations.

Text: 20 Following adoption of the 1988 amendment conferring discretion to impose a monetary penalty in lieu of permanent disqualification, the Secretary again promulgated implementing regulations. See 54 Fed.Reg. 18641 (May 2, 1989). Although FNS noted Congress's concern with small and innocent offenders, id. at 18642-43, the regulations in many respects reflect a reluctant or hostile attitude toward the alternative monetary sanction: 4 21 First, the regulations provide that [a] civil money penalty for hardship to food stamp households may not be imposed in lieu of a permanent disqualification, 7 C.F.R. Sec. 278.6(f)(1), and the final agency action against A & M noted that a hardship-to-households defense is not available. But the statute provides generally that any disqualification penalty may be replaced by a money penalty if the Secretary determines that [a store's] disqualification would cause hardship to food stamp households. 7 U.S.C. Sec. 2021(a). After the 1988 amendment to Sec. 2021(b)(3), the plain language of Sec. 2021(a) confers discretion to impose a monetary penalty in lieu of permanent disqualification based upon hardship to food stamp households. The agency's contrary regulation deprives food stamp beneficiaries of a statutory exception enacted for their benefit. Even if the agency's policy decision is more wise, which we doubt, Congress's unambiguous mandate must prevail. See Smithville R-II School Dist. v. Riley, 28 F.3d 55, 57-58 (8th Cir.1994). 22 Second, the post-1988 regulations initially limited the monetary penalty alternative to stores whose owners and managers did not participate in or benefit from the trafficking violation, and then defined manager to include an employee with financial functions that include ... closing out daily cash receipts. 55 Fed.Reg. 31809, 31812 (Aug. 6, 1990), amending 7 C.F.R. Sec. 278.6(i). In 1990, Congress expressed its dismay at this restrictive definition: 23 [T]he Managers expect the Secretary to narrow the current definition of manager to more fairly describe persons who supervise the work of other employees and who direct the activities and work assignments of store employees ... The definition should not include employees who do not have substantial supervisory responsibilities. 24 H.R.Conf.Rep. No. 916, supra, 1990 U.S.C.C.A.N. at 5623. The Secretary then amended Sec. 278.6(i) to comply with this informal directive. See 57 Fed.Reg. 3909, 3912 (Feb. 3, 1992). 25 The final agency action in this case issued on March 2, 1992, after Sec. 278.6(i) was amended. Yet the Secretary argues on appeal that Owais was an A & M manager because he handled cash receipts. In other words, the change in the regulation merely paid lip service to the Conference Committee's edict. To clarify this aspect of the case on remand, we hold that the prior version of Sec. 278.6(i) was an invalid interpretation of the statute. 26 Third, the statute as amended provides that only stores with effective compliance policies warrant the alternative monetary sanction. To implement that provision, the regulations require that a store seeking the lesser sanction present documentary proof of past and present policies, procedures, and a compliance training program. See 7 C.F.R. Sec. 278.6(i)(1), (2). These elaborate requirements may be appropriate to measure the compliance efforts of a two-hundred-store supermarket chain. They seem unsuitable for a one-clerk store in a low income trade area. 5 27 Fourth, turning to the critical issue of procedural safeguards, the regulations provide that permanent disqualification proceedings commence with an FNS charge letter to the store. See 7 C.F.R. Sec. 278.6(b)(1). Within ten days, the store must notify FNS that it wishes to be considered for a civil monetary penalty and must submit all supporting compliance evidence. If it fails to do so, it shall not be eligible for such a penalty. 7 C.F.R. Sec. 278.6(b)(2)(i), (iii). In response to a public comment that this time restraint was unreasonable, the agency stated, The Department believes that the 10-day response period is adequate to locate and copy these existing documents. 55 Fed.Reg. at 31812. Perhaps the general counsel of a supermarket chain could comply with this command in ten days, which is far shorter than the time for filing a one-paragraph notice of appeal to this court. See Fed.R.App.P. 4(a). We have little doubt that most sole proprietors of small grocery stores would find it virtually impossible to locate and hire an attorney who could master this area of the law and gather and file the necessary materials in ten days. Once again, the FNS regulations dramatically skew the administrative process to the disadvantage of small business. Thus, this agency procedural rule is arbitrary and capricious in that the agency entirely failed to consider an important aspect of the problem. Motor Vehicle Mfrs. Ass'n of the United States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 2867, 77 L.Ed.2d 443 (1983). 28 Because this procedural rule only governs a store's initial response to the FNS charge letter, its unreasonable ten-day time limit would not be of great concern if the innocent store owner retained a later opportunity to urge the agency's ultimate decision-maker to impose a lesser monetary sanction. When FNS imposes permanent disqualification, the store owner may seek informal administrative review by a food stamp review officer, whose determination is the final agency action. See 7 C.F.R. Sec. 279.3(b). The regulations regarding requests for review do not appear to limit the issues the aggrieved store owner may raise. See 7 C.F.R. Sec. 279.5-.6. However, in his letter decision sustaining the FNS permanent disqualification of A & M, the food stamp review officer stated: 29 Your client was advised of this [alternative sanction] in the [charge] letter of December 5, 1991 from the Field Office which also advised him that documentation of eligibility for that alternative sanction was to have been provided within a specific time limit. Having received no request for the alternative penalty, and in the absence of any documentation to support that possibility, a civil money penalty was not considered in lieu of permanent disqualification. Based on my review of the record, this decision is sustained as appropriate.... It might also be added [that] a civil money penalty in lieu of permanent disqualification cannot be imposed based on hardship to households in the area. 30 (Emphasis added.) In other words, relying upon an unfair procedural time limit, the Secretary refused at all stages of the administrative process even to consider exercising the discretion Congress conferred in the 1988 amendment to the statute. We must next consider our standard for reviewing this agency action. 31