Court Opinion

ID: 3017998
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:18:27.961502+00
Date Added: 2024-06-11T11:47:07.940180
License: Public Domain

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 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
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

                                 -2-
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,1 and that she had in place before
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

     1
      The employee in question, who was not sanctioned, submitted
a statement that he "willingly accept[ed] food stamps for cash"
without Corder's knowledge or consent.

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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

                                          -4-
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.2    Presumably, Corder has now made
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.

     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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