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Shanaa v. United States

United States District Court, E.D. Wisconsin

June 30, 2017

FAYEZ A. SHANAA and HAIM A. DAKWAR, D/B/A MR. F'S FOODS Plaintiff,
v.
UNITED STATES OF AMERICA, Defendant.

          DECISION AND ORDER ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

          NANCY JOSEPH, UNITED STATES MAGISTRATE JUDGE

         Plaintiff, Mr. F's Foods, brought this action for judicial review of the Food and Nutrition Service's (“FNS”) final agency decision to permanently disqualify Plaintiff from participation in the Supplemental Nutrition Assistance Program (“SNAP” or “Program”). Defendant filed a motion for summary judgment on September 12, 2016. (Docket # 24.) To date, Plaintiff has not filed a response. Because the time to file a response has long since passed, I will consider the motion fully briefed and decide it on the present record. For the reasons explained below, Defendant's motion for summary judgment is granted.

         BACKGROUND

         1. Regulatory Background

         In 1964, Congress established the “Food Stamp Program” for low-income individuals. Fells v. United States, 627 F.3d 1250, 1252 (7th Cir. 2010) (citing 7 U.S.C § 2011). In 1996, Congress set a deadline for states to replace the paper coupons that were used for Food Stamps with Electronic Benefit Transfer (“EBT”) systems, “which use debit- type cards to deduct benefits from a central location.” Fells, 627 F.3d at 1252. In 2008, Congress changed the name of the program to the Supplemental Nutrition Assistance Program. Id. (internal citation omitted). The Program is administered by the FNS division of the United States Department of Agriculture (“USDA”). (Def.'s Undisputed Facts ¶ 2, Docket # 27.) Retail stores must comply with certain regulations to be a participant in the Program. Fells, 627 F.3d at 1252; 7 U.S.C. § 2021(a)(1). The USDA has the authority to disqualify a retail store for certain offenses including trafficking food stamps, or exchanging food stamp benefits for cash or something other than eligible food. Fells, 627 F.3d at 1252 (internal citations omitted).

         2. Factual Background

         Mr. F's Foods is a convenience store owned by Fayez A. Shanaa and Haim A. Dakwari located at 3246 N. 15th St. in Milwaukee, Wisconsin. (Docket # 27 ¶ 1.) Mr. F's Foods was an authorized participant in the Program. (Id. ¶ 3.) The Program provides monthly benefits to qualifying households through the use of EBT cards. (Id. ¶¶ 5-6.) The EBT card essentially functions as a debit card, where a customer would swipe to make purchases and enter a personal identification number. (“PIN”) (Id. ¶ 7.) Mr. F's Foods is also a participant in the Women, Infant, and Children (“WIC”) program. (See Id. ¶ 67.) The WIC program distributes paper checks to eligible enrollees that can be used to purchase specific food items. (Id.)

         FNS opened an investigation of Mr. F's Foods after receiving notifications of unusual EBT transactions from its Anti-Fraud Locator using Electronic Benefits Retailer Transactions (“ALERT”) computer program. (Id. ¶¶ 9-12.) The investigation ran from February 2014 through April 2014 (“Review Period”). (Id. ¶ 13.) During the investigation, FNS identified “(1) rapid and repetitive transactions within short time frames by the same EBT customer; (2) a high number of excessively large dollar transactions; and (3) excessively large purchases by a single EBT customer.” (Id.) For example, FNS identified 20 sets of EBT transactions conducted in less than 24 hours. (Id. ¶ 14.)

         Furthermore, FNS identified 109 transactions for over $28.50 during the Review Period, an amount considered to be “excessively large” when compared to the average Wisconsin convenience store transaction of $7.31. (Id. ¶¶ 17-18.) FNS also conducted a comparison study of the 67 stores located within one mile of Mr. F's Foods. (Id. ¶¶ 19-20.) Of the stores in the comparison study, Mr. F's Foods had the highest revenue, totalling $33, 670. (Id. ¶ 22.)

         FNS selected and compared the “shopping habits” of four EBT customers who shopped at Mr. F's Foods during the Review Period. (Id. ¶ 24.) FNS found that while all four SNAP customers shopped at larger stores with more inventory, they made large purchases at Mr. F's Foods. (Id. ¶ 25.) For example, one customer, identified as Household 3637, spent 77 percent of their SNAP benefits at Mr. F's Food during the Review Period despite living approximately 8.7 miles away. (Id. ¶¶ 26-27.) Household 3637 only made two other transactions during the 89-day Review Period-one at Aldi for $129 and one at Holyland Grocery and Deli for $200. (Id. ¶ 30.)

         Moreover, FNS identified Household 6338, a customer who spent 72 percent of their SNAP benefits and conducted 14 out of 15 total transactions at Mr. F's Foods during the Review Period. (Id. ¶ 32-33.) The only transaction not completed at Mr. F's Foods was a purchase at Sam's Club for $188. (Id. ¶ 33.) Additionally, Household 6338 conducted four transactions on February 6, three on February 7, two on March 13, and three on March 14. (Id. ¶ 34.) Next, FNS identified Household 9501 who made six out of 10 total EBT transactions at Mr. F's Foods during the Review Period. (Id. ¶ 36.) The other four transactions took place at two different Wal-Marts. (Id. ¶ 37.) Lastly, FNS tracked Household 5190, a customer who made three EBT transactions for a total of $135 in one day. (Id. ¶ 39.)

         In April 2014, an FNS independent contractor conducted a store inspection of Mr. F's Foods. (Id. ¶ 40.) During the inspection, the FNS Contractor took photographs, observed inventory, pricing, and general store capabilities. (Id.) Among the FNS Contractor's observations, he noted that Mr. F's Foods contained no optical scanners, no conveyor belts, and no shopping carts to accommodate large purchases. (Id. ¶¶ 41-42) The FNS Contractor noted that owner Fayez Shanaa “primarily works the store himself” and the highest profits in the store were from alcohol, tobacco, and soda sales. (Id. ¶¶ 44-45.) Also, because Mr. F's Foods buys goods from other stores for resale, its prices are generally more expensive than its competitors. (Id. ¶¶ 46-48.)

         On July 24, 2014, FNS delivered a letter charging Mr. F's Foods with trafficking SNAP benefits. (Id. ¶ 52.) Mr. F's Foods responded to the Charge Letter stating that most of the large transactions involved baby formula purchases. (Id. ¶¶ 51-52.) After receiving receipts produced by Shanaa, FNS calculated that Mr. F's Foods purchased 41 cans of baby formula per month (or 9.5 cans per week) during the Review Period. (Id. ¶¶ 53-54.) As a participant in the WIC program, Mr. F's Foods asserted that most customers bought baby formula through the WIC program and not SNAP. (Id. ¶ 55.) As of 2013, Mr. F's Foods averaged $33, 943 in WIC redemptions per year averaging out to $2, 828 per month. (Id. ¶ 56.)

         FNS collected EBT data on baby formula purchases for each month of the Review Period. (Id. ¶¶ 57-59.) The February 2014 EBT data showed that 31 cans of baby formula were bought by SNAP customers in the following prices: “one pack of six (6) for $110.94; one pack of four (4) for $73.96 and seven packs of three (21) for $55.47.” (Id. ¶ 57.) Further, in March 2014, 32 cans of baby formula were bought for: one pack of six (6) for $110.94; five packs of four (20) for $73.96 and two packs of three (6) for $55.47. (Id. ΒΆ 58.) In April 2014, 37 cans of baby formula were ...


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