therefore, the court finds that it was arbitrary and capricious and thus invalid.
V. PENALTY DETERMINATION.
The court now turns to a determination of the appropriate penalty, given the facts in this case. A brief observation on the weakness of the penalty scheme in 7 C.F.R. § 278.6 is in order. The fundamental problem in this scheme is the inconsistency in the bases for imposing penalties. In any rational scheme where penalties are imposed on the basis of multiple factors, those factors would change only one at a time.
Under the FNS regulation, in contrast, both factors change simultaneously with each penalty level. "Loopholes" such as the one in the present case, where one factor (previous warning) relating to the three-year penalty is met, while the other (firm practice) is not, are thus bound to occur. How can a court, or the FNS, for that matter, fairly and consistently impose penalties in such cases?
The regulations at issue proceed from the assumption that because recipients of food stamps "lack judgment as well as income" and will misuse them, the FNS (which knows their true needs) is justified in seeking to prevent the purchase of certain items, which recipients may find more desirable than those purchasable with food stamps. See Winter, "Poverty, Economic Equality and the Equal Protection Clause," 1972 Supreme Ct. Rev. 41, 70-74. Such regulations raise profoundly troubling issues, far beyond what is properly before this court. Ibid. Those matters aside, however, it is clear that a government that seeks to substitute its judgment for its citizens' must do so with internally consistent regulations, and any penalties imposed must logically relate to the conduct triggering them.
The question, therefore, is what penalty accords with plaintiff's conduct, as shown by the Government.
Because plaintiff was warned by the FNS, it might on the one hand appear that he should receive a penalty greater than a one-year disqualification. See 7 C.F.R. § 278.6(e)(4). However, as a result of the Government's failure to identify the clerks involved in the violative transactions, the second requirement for a one-year penalty -- that "ownership or management personnel" committed violations -- is not met. Because both prior warning and ownership or management involvement are necessary for the disqualification to exceed one year, that penalty is not appropriate.
It does appear from the record that "carelessness or poor supervision by the firm's ownership or management" -- namely, plaintiff -- resulted in violations. No other factor is specified as a condition of imposing a six-month disqualification. However, implicit in the penalty scheme is the idea that a previously-warned firm that commits a violation is deserving of greater sanctions than a firm that has not been warned. Thus it would be anomalous for this court to impose a penalty of six months' disqualification and ignore the intended enhancing effect of a prior warning.
Taking into account the violations that have been shown to have occurred as a result of carelessness or poor supervision, together with the prior warning (a factual combination apparently not anticipated by FNS regulators), therefore,
IT IS HEREBY ORDERED that the three-year disqualification imposed by the FNS be set aside and that Daldas Grocery be disqualified from participation in the Food Stamp Program for a period of nine months, retroactive to April 18, 1990.
DATED: August 6, 1990