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BISHARA WEHAB v. YEUTTER

August 6, 1990

BISHARA WEHAB, d/b/a DALDAS GROCERY, Plaintiff,
v.
CLAYTON YEUTTER, Secretary of the United States Department of Agriculture, et al., Defendants



The opinion of the court was delivered by: WALKER

 VAUGHN R. WALKER, UNITED STATES DISTRICT JUDGE

 I. BACKGROUND.

 Plaintiff brought this action pursuant to 7 U.S.C. § 2023(a) seeking declaratory and injunctive relief from the decision of the Food and Nutrition Service ("FNS") to disqualify his store, Daldas Grocery, from accepting food stamps for a three-year period for violations of the food stamp program regulations. *fn1" Plaintiff's application for a stay of the penalty, filed simultaneously with the complaint, was denied after a hearing on April 18, 1990. Currently before the court are the parties' cross-motions for summary judgment, which were taken under submission after a hearing on June 29, 1990.

 Plaintiff's motion asks this court to determine (1) that the Food and Nutrition Service violated its own regulations in investigating and sanctioning Daldas Grocery and (2) that the three-year disqualification imposed is arbitrary and capricious. The Government, in turn, seeks summary judgment that Daldas Grocery did violate program regulations and that the sanction imposed is appropriate. *fn2"

 II. STANDARD OF REVIEW.

 The statutory authority for judicial review of an administrative action provides, in part, "The suit in the United States district court . . . shall be a trial de novo by the court in which the court shall determine the validity of the questioned administrative action in issue." 7 U.S.C. § 2023(a)(1988). District courts in the Ninth Circuit are to apply a bifurcated standard of review in proceedings under this section. "Whereas the FNS finding that a firm violated the Food Stamp Act is reviewed de novo, review of the sanction imposed by the FNS is governed by the arbitrary and capricious standard." Wong v. United States, 859 F.2d 129, 132 (9th Cir. 1988).

 III. THE FNS ADMINISTRATIVE RECORD.

 The administrative record (" AR ") reveals the following. The application of Daldas (also identified as "Daldus") Grocery to participate in the food stamp program was authorized on January 19, 1983. AR 132. On June 3, 1983, FNS representative Betty Carey visited the store because it was "statistically excessive" in its rate of food stamp redemptions. Although plaintiff "stated that no violations were occurring in his store," Ms. Carey "warned [him] that he should take special care to prevent violations because they could result in disqualification." The store was to be monitored for 90 days because of its redemption rate, location and the receipt of "an anonymous telephone call suggest[ing] the subject firm is trafficking in food stamps." AR 129-132. B. Earl Daniels, officer in charge of the San Francisco field office, then sent a letter dated June 6, 1983 which stated: "You should take special care to prevent violations because they may lead to your being disqualified from the Food Stamp Program." AR 128.

 On October 20, 1983, in response to an "anonymous telephone caller alleg[ing] the subject firm is trafficking in food stamps," Mr. Daniels requested an investigation of Daldas Grocery. AR 126-127. On February 27, 1984, after an investigation involving two visits to the store during which clerks refused to sell ineligible items (toilet paper, detergent, bleach, soap, etc.) for food stamps, a negative compliance review was filed and the case was closed. AR 122-123.

 Following another anonymous telephone call on June 7, 1984 claiming that Daldas Grocery bought food stamps at a discount, AR 121, and because of continued statistically excessive redemptions, Ms. Carey visited Daldas Grocery on June 8, 1984. Plaintiff again denied that violations took place. Ms. Carey warned him of the potential for disqualification and ordered monitoring for 90 days. AR 117-119. Mr. Daniels sent another letter to plaintiff on June 11, 1984, which contained a clear warning. *fn3" AR 116

 On August 7, 1984, an anonymous caller telephoned Ms. Carey and claimed that Daldas Grocery buys $ 65 books of food stamps for $ 30-35 cash. AR 115. Mr. Daniels requested an investigation, and after a two-visit investigation which proved negative, the case was again closed on January 15, 1985. AR 109-110.

 A different FNS representative, Nicanor Lozada, visited plaintiff's store on November 18, 1985 because of continued statistically excessive redemptions. AR 106-107. Mr. Daniels sent a follow-up letter on November 22 containing the same warning as the June 11, 1984 letter. AR 105.

 On April 23, 1986, because "it is believed ineligible items are being sold for food stamps and/or trafficking is occurring at the subject store," Mr. Daniels requested another investigation. AR 103-104. After two visits by Sharon Johnston, another negative compliance review was filed on July 9, 1986 and the case was closed. AR 99.

 The FNS then received a flurry of unsigned written accusations against Daldas Grocery, on June 23, *fn4" July 21 *fn5" and October 5, 1987. *fn6" As a result, Mr. Lozada visited the store on October 16, 1987, and Mr. Daniels sent a follow-up letter on October 20 containing the same warning as the previous letters. AR 91.

 An "anonymous Whistleblower Complaint" alleging that plaintiff "sends his employees to FS issuance of by FS's from recipients as they leave the office" resulted in Mr. Daniels' requesting another investigation on August 25, 1988. AR 87-88. Shortly thereafter, two identical written complaints were received, both on September 19, 1988. *fn7" This investigation, in contrast to the others, disclosed prohibited transactions. *fn8" Other anonymous complaints were received: a letter dated March 20, 1989, ...


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