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Morrar v. United States

United States District Court, E.D. California

June 28, 2019

TAWFIQ MORRAR and AMNA SALAMEH, Plaintiffs,
v.
UNITED STATES and USDA FOOD & NUTRITION SERVICE, Defendants.

          ORDER

         On May 29, 2019, plaintiff Tawfiq Morrar moved to preliminarily enjoin the United States and the USDA Food & Nutrition Service (“FNS” or collectively, “defendants”) from further posting his name on the General Service Administration's System for Award Management's Excluded Parties List. Mot., ECF No. 7-1. Plaintiff represents that if his name is not removed from the list by June 28, 2019, he will be terminated from his employment as general counsel for Children's Choice Pediatric Dental Care. Id.; Saladin Decl., ECF No. 7-4, ¶¶ 10-18. Defendants opposed the motion, Opp'n, ECF No. 7, and plaintiff replied, Reply, ECF No. 21. On June 26, 2019, the court heard oral argument on the motion. Stewart Fried and Bashar Ahmad appeared on behalf of plaintiff; Edward Olsen appeared on behalf of defendants. After thorough consideration of the arguments and governing authority, the court GRANTED plaintiff's motion for preliminary injunction on June 27, 2019. ECF No. 26. The court's reasons for its decision are provided below.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         Plaintiff, a practicing attorney admitted to the California bar, serves as general counsel for Children's Choice Pediatric Dental Care (“Children's Choice”), which is located in Sacramento, California. Compl., ECF No. 1, ¶ 12. Children's Choice participates in federal healthcare programs, including Medicare and Medicaid, which means it is subject to possible disgorgement, fines and penalties should it employ any person identified on the General Service Administration's System for Award Management's Excluded Parties List (“SAM list” or “EPL”). Id. ¶ 13; Saladin Decl. ¶ 11. Plaintiff also owns[1] Folsom Food Market (“the Market”), a retail food store located in Folsom, California. Compl. ¶¶ 17, 19. In 2015, the Market obtained authorization to participate in Supplemental Nutrition Assistance Program (“SNAP”), a program of the Food and Nutrition Act of 2008. Id. ¶ 21.

         On March 6, 2017, following an undercover investigation, FNS sent plaintiff a letter charging the Market with “trafficking” in SNAP benefits in violation of FNS's SNAP regulations as set forth in 7 C.F.R. § 271.2. Id. ¶ 25; Admin. Rec. (“AR”), ECF No. 14-1, at 72. On March 15, 2017, plaintiff responded by letter to the FNS charges, explained what efforts he had made to rectify the purported violation and requested imposition of a civil monetary penalty in lieu of being disqualified from participating in SNAP, as allowed by the regulations. AR 116- 19. After considering plaintiff's response, and the documentation he presented, FNS denied plaintiff's request for a civil monetary penalty and permanently disqualified the Market from participating in SNAP. Compl. ¶ 28; AR 165-66, ECF No. 14-1 (reporting “your firm shall be permanently disqualified”). On August 15, 2017, in light of this disqualification, FNS added plaintiff's name to the SAM list.[2] Compl. ¶ 29.

         On or about April 9, 2019, Children's Choice conducted a sanctions check as part of a multi-pronged compliance program it had begun implementing. Compl. ¶ 32; Saladin Decl. ¶¶ 9-10. In the course of the sanctions check Children's Choice discovered plaintiff's name on the SAM list and then immediately notified him of the discovery. Compl. ¶ 32. Plaintiff was unaware his name had been placed on the SAM list until he heard the news from Children's Choice. Morrar Decl., ECF No. 7-3, ¶ 14. On April 17, 2019, Children's Choice suspended plaintiff from his job because of the potential adverse effect his continued employment might have on its eligibility to receive federal and state subsidies. Saladin Decl. ¶ 11. Children's Choice will reinstate plaintiff, however, if his name is removed from the SAM list. Id. ¶ 12. Children's Choice has extended plaintiff's time to obtain removal of his name from the SAM list, but if he is unable to accomplish this goal by June 28, 2019, Children's Choice will permanently terminate plaintiff's employment. Id. ¶ 16.

         On April 26, 2019, plaintiff filed a petition with FNS Administrator and USDA Deputy Acting Under Secretary, Brandon Lipps, requesting that plaintiff's name be removed from the SAM list. Compl. ¶ 33. As plaintiffs' counsel reported at hearing, plaintiff's petition was granted in part and denied in part, but FNS ultimately declined to remove his name from the SAM list.

         On May 10, 2019, plaintiff and his wife co-plaintiff Amna Salameh, filed suit in this court seeking declaratory and injunctive relief on the following grounds: (1) FNS acted outside the authority delegated it by Congress, engaging in actions ultra vires in listing plaintiffs on the SAM list, and (2) those acts violated the Due Process Clause of the Fifth Amendment because FNS failed to provide procedural due process protections before listing plaintiffs on the SAM list. See generally Compl. Plaintiff asserts, without opposition, that the court's jurisdiction over these claims and authority to grant declaratory relief is predicated on 28 U.S.C. §§ 1331, 1346, 2201-2202. On May 29, 2019, plaintiff filed his preliminary injunction motion seeking to enjoin FNS from further posting his name on the SAM list. Mot.

         II. STATUTORY AND REGULATORY FRAMEWORK

         In 2008, Congress enacted the Food and Nutrition Act of 2008 (the “Act”), 7 U.S.C. §§ 2011-2036, a modern iteration of the Food Stamp Act of 1964. The purpose of the Act is “to safeguard the health and well-being of the Nation's population by raising levels of nutrition among low-income households.” Id. § 2011. SNAP is a key component of the Act because it provides financial aid to low-income families in order to assist with monthly food expenses. Id. §§ 2011, 2013(a). Participating families receive an electronic benefit transfer card, which they can use to purchase eligible food items from participating food retail stores. Id. § 2016.

         To become a SNAP-eligible retailer, a store must apply and receive authorization from FNS. Id. § 2018. Once approved, a store is subject to stringent FNS regulatory standards, with prevention of SNAP-benefit trafficking being chief among these regulatory goals. See Id. § 2021; 7 C.F.R. § 271.2. The import of a trafficking offense is clear: violators face potential permanent disqualification, even as first-time offenders. 7 U.S.C. § 2021(b)(3)(B). Apart from the statutory and regulatory language itself, SNAP application, training and violation notice materials all advise participating retailers of the consequences of violating SNAP regulations. Id. § 2071; 7 C.F.R. § 278.1; AR 19, 28, 73, 144. If a violation determination becomes final, after a firm charged with a violation has exhausted or waived administrative review, FNS regulations provide that the violator is subject to the following disclosure provision:

Public disclosure of firms sanctioned for SNAP violations. FNS may disclose information to the public when a retail food store has been disqualified or otherwise sanctioned for violations of the Program after the time for administrative and judicial appeals has expired. This information is limited to the name and address of the store, the owner(s') name(s) and information about the sanction itself. FNS may continue to disclose this information for as long as the duration of the sanction. In the event that a sanctioned firm is assigned a civil penalty in lieu of a period of disqualification, as described in § 278.6(a), FNS may continue to disclose this information for as long as the duration of the period of disqualification or until the civil penalty has been paid in full, whichever is longer.

7 C.F.R. § 278.1(q)(5). While the FNS regulations do not reference the SAM list, FNS represents that it has posted the names of owners of disqualified firms on the SAM list since 2012. Ocanovic Decl., ECF No. 13-1, ¶ 2.

         As noted above, the SAM list is maintained by the federal General Services Administration; the list includes information regarding individuals who are suspended, debarred or disqualified from covered procurement-related transactions. See 2 C.F.R. §§ 180.45(a)(1), 180.500. As relevant here, disqualification is meaningfully different from suspension or debarment. It is undisputed that plaintiff's disqualification is not from participating in procurement-related transactions. AR 165 (advising of permanent disqualification from SNAP). As explained by the USDA, a disqualified individual is barred from participation in specific agency programs, such as SNAP, whereas suspended or debarred individuals are barred from participating in programs government-wide. Departmental Regulation (“DR”) 2280-001, Fried Decl., ECF No. 7-2, Ex. B, at 28 (section entitled “Disqualification”). FNS's practice of disclosing a disqualified person such as plaintiff on the SAM list, rather than providing public disclosure in some other manner, is at the heart of this dispute.

         III. LEGAL STANDARD

         “A preliminary injunction is an extraordinary remedy never awarded as of right[, ]” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 24 (2008), and “should not be granted unless the movant, by a clear showing, carries the burden of persuasion[, ]” Lopez v. Brewer, 680 F.3d 1068, 1072 (9th Cir. 2012) (quoting Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (emphasis in original)). In determining whether to issue a preliminary injunction, federal courts must consider whether the moving party “[1] is likely to succeed on the merits, . . . [2] is likely to suffer irreparable harm in the absence of preliminary relief, . . . [3] the balance of equities tips in [the movant's] favor, and . . . [4] an injunction is in the public interest.” Id. at 20.

         The Ninth Circuit has “also articulated an alternate formulation of the Winter test.” Farris v. Seabrook, 677 F.3d 858, 864 (9th Cir. 2012). That formulation is referred to as the “serious questions” or the “sliding scale” approach: “‘serious questions' going to the merits and a balance of hardships that tips sharply towards the plaintiff can support issuance of a preliminary injunction, so long as the plaintiff also shows that there is a likelihood of irreparable injury and that the injunction is in the public interest.” Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1135 (9th Cir. 2011) (“the ‘serious questions' approach survives Winter when applied as part of the four-element Winter test, ” id. at 1132). “In other words, ‘serious questions going to the merits' and a hardship balance that tips sharply toward the plaintiff can support issuance of an injunction, assuming the other two elements of the Winter test are also met.” Id. at 1132. Under the “serious questions” approach to a preliminary injunction, “[t]he elements of the preliminary injunction test must be balanced, so that a stronger showing of one element may offset a weaker showing of another.” Lopez, 680 F.3d at 1072.

         If a moving party asks the court to “order[] a responsible party to ‘take action, ” as plaintiff does here, that requested “relief is treated as a mandatory injunction.” Garcia v. Google, Inc., 786 F.3d 733, 740 (9th Cir. 2015) (quotations omitted). “The ‘district court should deny such relief unless the facts and law clearly favor the moving party.'” Id. (citing Stanley v. Univ. of S. Cal., 13 F.3d 1313, 1320 (9th Cir.1994) (some internal quotations omitted)). In other words, “mandatory injunctions should not issue in ‘doubtful cases.'” Id. (citing Park Vill. Apartment Tenants Ass'n v. Mortimer Howard Trust, 636 F.3d 1150, 1160 (9th Cir. 2011)). This standard does not supersede the Ninth Circuit's “serious questions” test. Rather, the severity of the legal questions correlates with a movant's likelihood of success; the greater the likelihood of success, the less doubtful the case. Cf. Fonseca v. Kaiser Permanente Med. Ctr. Roseville, 222 F.Supp.3d 850, 874 (E.D. Cal. 2016) (denying preliminary injunction where plaintiff failed to present serious questions, reasoning that “[m]andatory injunctions are incompatible with doubtful cases like this one.”).

         Moreover, in each case and irrespective of the approach to resolving a preliminary injunction, a court must balance the competing alleged harms while considering the effects on the parties of the granting or withholding of the injunctive relief. Winter, 555 U.S. at 24. In exercising that ...


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