store from the Food Stamp Program for program violations.
2. As the plaintiff seeking de novo review of an administrative determination, the Uptown Fruit Ranch has the burden of showing that the violations of the Food Stamp Act and its implementing regulations did not occur as charged by the FCS. Goodman v. United States, 518 F.2d 505, 507 (5th Cir. 1975); Redmond v. United States, 507 F.2d 1007, 1011-12 (5th Cir. 1975); Sam's Silver, Inc. v. United States, 1994 U.S. Dist. LEXIS 752, No. 92 C 7642, 1994 WL 30620, at *1 (N.D. Ill. Jan. 28, 1994).
3. This Court is required to uphold the FCS's administrative determination unless the Uptown Fruit Ranch shows by a preponderance of the evidence that the determination is invalid. Abdel v. United States, 670 F.2d 73, 76 n. 8 (7th Cir. 1982); Modica v. United States, 518 F.2d 374, 376 (5th Cir. 1975); Brooks v. United States Dep't of Agriculture, 841 F. Supp. 833, 839 (N.D. Ill. 1994), aff'd, No. 94-1570 (7th Cir. Aug. 2, 1995); Barbosa v. United States, 633 F. Supp. 16, 18 (E.D. Wisc. 1986).
4. Food Stamp Program trafficking, in this case the purchase of food stamps for a lesser cash value, is a violation of the FCS program and the penalty for a single occasion of trafficking is permanent disqualification of the store from the Food Stamp Program. 7 U.S.C. § 2021(b)(3)(B); 7 C.F.R. §§ 271.29 and 278.6(e)(1)(i). The FCS cannot impose a civil monetary penalty for trafficking if the store's management was involved in trafficking violations. 7 U.S.C. § 2021(b)(3)(B).
5. The FCS established three separate violations of 7 C.F.R. § 278.2(a) by showing that the Uptown Fruit Ranch employees accepted food stamps on three separate occasions in exchange for cash. Wehab v. Yeutter, 743 F. Supp. 1353, 1357 (N.D. Cal. 1990); Wilson v. United States, 651 F. Supp. 701, 705 (E.D. Wis. 1986).
6. The Uptown Fruit Ranch has not shown by a preponderance of the evidence that Steve Karas, who discounted the food stamps, was not an employee of the store.
7. As detailed herein, the Court finds Michael Floros' testimony inherently incredible and certainly not sufficient to meet the Uptown Fruit Ranch's burden of proof in this case.
8. The trial evidence established that Michael Floros was a member of the Uptown Fruit Ranch's management, as that term is defined in 7 U.S.C. § 2021(b)(3)(8). On December 7, 1995, when he took part in food stamp trafficking by actively participating with Steve Karas in the purchase of $ 195.00 worth of food stamps for $ 150.00 from Investigator Gately.
9. The Uptown Fruit Ranch has not shown by a preponderance of the evidence that its store manager, Michael Floros, was not involved in the December 7, 1994, food stamp trafficking transaction.
10. The Uptown Fruit Ranch's mere denial of any wrongdoing is not sufficient to meet its burden of proof. Wehab v. Yeutter, 743 F. Supp. 1353, 1357 (N.D. Cal. 1990).
11. A store is liable for the acts of its employees, regardless of the owner's non-involvement. Wolf v. United States, 662 F.2d 676, 678 (10th Cir. 1981); Kulkin v. Bergland, 626 F.2d 181, 183 (1st Cir. 1980); Wilson v. United States, 651 F. Supp. 701, 705 (E.D. Wis. 1986).
12. This Court's review of the FCS's penalty of permanent disqualification has given this Court some pause. This penalty can be seen as unduly harsh because of the fact that the Uptown Fruit Ranch is so heavily reliant upon the Food Stamp Program for its economic existence. The store, however, was given many prior written warnings about the dire consequences of trafficking in food stamp coupons. In addition, this Court takes judicial notice of the huge multi-million dollar cost that is borne by the Food Stamp Program because of fraudulent trafficking. This concern led Congress to enact the 1990 Amendments which mandate permanent disqualification. 7 U.S.C. § 2021(b)(3)(B). Additionally, the FCS's final administrative decision is entitled to deference. Carlson v. United States, 879 F.2d 261, 263 (7th Cir. 1989). A penalty may be set aside only if it is arbitrary and capricious Brooks v. United States, 64 F.3d 251, 1995 U.S. App. LEXIS 20665, Slip. Op. at 8 (7th Cir. 1995).
13. The Food Stamp Act indicates that a disqualification is permanent upon the first occasion of trafficking. 7 U.S.C. § 2021(b)(3)(B). This case involved three separate trafficking violations. Moreover, this statute does not allow the FCS to impose a civil money penalty if management is involved in trafficking, as the Court has found was the case here.
14. After careful consideration of all the relevant factors, regulations and statutory objectives, this Court finds that the Uptown Fruit Ranch has failed to show that the penalty of permanent disqualification from the Food Stamp Program imposed by the FCS was arbitrary and capricious. Nowicki v. United States, 536 F.2d 1171, 1178 (7th Cir. 1976), cert. denied, 429 U.S. 1092, 51 L. Ed. 2d 537, 97 S. Ct. 1103 (1977).
Plaintiff Uptown Fruit Ranch failed to establish by a preponderance of evidence that the final administrative decision of the FCS was not supported by substantial evidence or that the FCS's sanction of permanent disqualification was arbitrary and capricious. This Court, after de novo review of all the relevant evidence, hereby affirms the FCS's administrative determination that the Uptown Fruit Ranch shall be permanently disqualified from participation in the Food Stamp Program for trafficking in food stamp coupons. This Court hereby dissolves the temporary stay of the final administrative decision as of September 25, 1995. The Court has used this date to allow for an orderly permanent disqualification of the Uptown Fruit Ranch from the Food Stamp Coupon Program. This Court does not believe that a stay of the disqualification order pending any potential appeal of this order is appropriate. The September 25, 1995, disqualification effective date, however, will give the Uptown Fruit Ranch time to seek a stay from the Seventh Circuit Court of Appeals if it believes such a motion is appropriate.
The Clerk of the Court is directed to enter judgment for the defendant United States of America and against plaintiff J&M Food Store, Inc., doing business as the Uptown Fruit Ranch. This case is hereby dismissed with prejudice with the parties to bear their own costs.
United States District Judge
September 8, 1995
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