Morgan v. United States , 72 F. Supp. 3d 65 ( 2014 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
ROMEO MORGAN,
Plaintiff
v. Civil Action No. 14-684 (CKK)
UNITED STATES,
Defendant.
MEMORANDUM OPINION
(October 29, 2014)
Plaintiff Romeo Morgan has filed suit against Defendant United States, 1
seeking review of the Final Agency Decision of the Food and Nutrition Service (“FNS”), U.S.
Department of Agriculture, sustaining a decision by FNS Retailer Operations to withdraw the
authorization of Morgan’s Seafood, owned by Plaintiff, to participate as a retailer in the
Supplemental Nutrition Assistance Program (“SNAP”). Presently before the Court is
Defendant’s [22] Motion to Dismiss or, in the Alternative, for Summary Judgment. Upon
consideration of the pleadings, 2 the relevant legal authorities, and the record, the Court GRANTS
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At various times over the course of this litigation, Plaintiff has also named Jaime Regan, U.S.
Department of Agriculture, as a Defendant as well. By its June 4, 2014 Order, ECF No. [16], the
Court instructed Plaintiff to re-caption this case to name the United States as Defendant, as
required by 7 U.S.C. § 2023(13). Defendant did so in the operative complaint.
2
Compl., ECF No. [1]; Plaintiff’s Motion for Emergency Stay, ECF No. [2] (“Pl.’s Stay Mot.”);
Administrative Record, ECF No. [8] (“AR”); Defendants’ Opposition to Plaintiff’s Motion for
Emergency Stay of Administrative Action, ECF No. [9] (“Defs.’ Stay Opp’n”); Plaintiff’s
Answer to Defendants’ Opposition to Plaintiffs Motion, ECF No. [12] (“Pl.’s Stay Reply”);
Defendant’s Motion to Dismiss or, in the Alternative, for Summary Judgment, ECF No. [22]
(“Def.’s Mot.”); Plaintiff’s Answer to Defendant’s Motion to Dismiss, ECF No. [29] (“Pl.’s
Opposition”); and Defendant’s Reply in Support of Defendant’s Motion to Dismiss or, in the
Alternative, for Summary Judgment, ECF No. [32] (“Def.’s Reply”).
1
Defendant’s Motion for Summary Judgment and DENIES Defendant’s Motion to Dismiss
insofar as it seeks to dismiss the action for failure to state a claim. Accordingly, JUDGMENT
shall enter for the Defendant and this action shall be DISMISSED in its entirety.
I. BACKGROUND
A. Statutory Background
Congress created the food stamp program in 1964 to “permit those households with low
incomes to receive a greater share of the Nation’s food abundance.” The Food Stamp Act of
1964, Pub. L. No. 88-525, § 2, 78 Stat. 703, 703. “Retail stores authorized to participate in the
program may accept food stamp benefits instead of cash for designated food items.” Affum v.
United States, 566 F.3d 1150, 1153 (D.C. Cir. 2009) (citing 7 U.S.C. § 2013(a).). “The stores
then redeem these benefits with the government for face value.” Id. In 2008, Congress amended
the Food Stamp Act, renaming it the Food and Nutrition Act and renaming the “food stamp
program” the “supplemental nutrition assistance program” or “SNAP.” Id.
A business seeking approval as a “retail food store” under SNAP must comply with the
requirements of 7 U.S.C. § 2018. This provision authorizes the Secretary of Agriculture to issue
regulations governing the approval and reauthorization of retail food stores to participate in
SNAP. 7 U.S.C. § 2018(a)(2). Pursuant to this statutory authority, the Secretary has issued the
regulation at issue here, 7 C.F.R. § 278.1. This provision states, in relevant part, that the Food
and Nutrition Service of the Department of Agriculture (“FNS”), “shall withdraw the
authorization of any firm authorized to participate in the program for any of the following
reasons: . . . (iii) The firm fails to meet the requirements for eligibility under Criterion A or B, as
specified in paragraph (b)(1)(i) of this section . . . .” 7 C.F.R. § 278.1(l)(1).
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Criterion A and B are standards governing the variety and quantity of food sold by a
particular retailer. In order to meet Criterion A, the store must offer “for sale, on a continuous
basis, a variety of qualifying foods in each of the four categories of staple foods as defined in
§ 271.2 of this chapter, including perishable foods in at least two of the categories.” Id.
§ 278.1(b)(1)(i)(A). See also id. § 278.1(b)(1)(ii) (explaining this definition in greater detail).
Criterion B is satisfied if “more than 50 percent of the total gross retail sales of the establishment
or route [are] in staple foods.” Id. § 278.1(b)(1)(i)(A). See also id. § 278.1(b)(1)(iii) (explaining
this definition in greater detail). As defined by 7 C.F.R. § 271.2, “[s]taple food means those food
items intended for home preparation and consumption in each of the following food categories:
meat, poultry, or fish; bread or cereals; vegetables or fruits; and dairy products.” Id. § 271.2.
Another provision of 7 C.F.R. § 278.1 sets out “ineligible firms” for participation in
SNAP, and explicitly qualifies Criterion A and B. This provision states:
Ineligible firms under this paragraph include, but are not limited to, stores selling
only accessory foods, including spices, candy, soft drinks, tea, or coffee; ice
cream vendors selling solely ice cream; and specialty doughnut shops or bakeries
not selling bread. In addition, firms that are considered to be restaurants, that is,
firms that have more than 50 percent of their total gross retail sales in hot and/or
cold prepared foods not intended for home preparation and consumption, shall
not qualify for participation as retail food stores under Criterion A or B. This
includes firms that primarily sell prepared foods that are consumed on the
premises or sold for carryout. Such firms may qualify, however, under the special
restaurant programs that serve the elderly, disabled, and homeless populations, as
set forth in paragraph (d) of this section.
Id. § 278.1(b)(1)(iv) (emphasis added).
B. Factual Background
In March 2008, FNS authorized Morgan’s Seafood, an unincorporated business in
Washington, D.C., to participate in SNAP. AR 1-13. On June 14, 2013, Plaintiff, as the owner of
Morgan’s Seafood, completed an FNS-252-R reauthorization application in order to continue his
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participation in the program. AR 51. As part of its review of this application and its assessment
of the continued eligibility of Morgan’s Seafood to participate in SNAP, FNS contract review
officials conducted two separate store visits of Morgan’s Seafood. AR 14-50, 90-116. These
visits occurred on November 7, 2013, and January 3, 2014. The November 7, 2013, review
identified as issues “empty coolers” and “broken coolers” and provided the following
observations:
1) Owner stated that his display cooler is broken, forcing him to store most of his
seafood in the back coolers. The food used for making hot food was mixed []
with the raw (as-is) seafood but the reviewer asked what is what. Prepared
salads are also in the back coolers. The beef/meat/sausage in the storage
cooler was for cooking only, per owner.
2) The empty tank in photo #693 is of a tank that was full of lobsters that were
stolen by burglars, per owner statement.
3) Prices for the deli are not posted. Owner claims that he recently acquired the
cooler and deli products but has not created a price list. The menu did not
include sandwiches.
4) The prepared cold salads and the yams are also for sale as-is or by themselves,
per owner, if customers choose so. However, the cooked yams are on the
menu and salads come as sides to hot dishes.
AR 15.
In order to qualify for SNAP, applicants must submit information that would “permit a
determination to be made as to whether such applicant qualifies, or continues to qualify, for
approval.” 7 U.S.C. § 2018. Indeed, following the November 7, 2013, visit, Morgan was sent a
letter, dated November 26, 2013, requesting additional information to assist FNS in determining
whether Morgan’s Seafood was eligible to participate in SNAP. AR 51. Specifically, the letter
requested confirmation that the “sales information you provided to the FNS on your
Reauthorization application included all the items sold at this location.” Id. Plaintiff provided his
2011 tax records in response, but did not provide any of the other requested information. See AR
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117, Notice of Involuntary Withdrawal Reauthorization 2013 for Morgan’s Seafood (“Did not
submit sales tax documents, licenses/permits, verification of gross sales, other sales or non food
sales as requested”). The Court notes that Plaintiff has still not submitted this information.
In summarizing the January 3, 2014, visit, the reviewer noted “empty coolers” and “broken
coolers” and offered the following comments:
Store did not have prices posted for meat/cheese. Owner stated that alcohol is not
for sale, it’s for personal use even though it’s posted on the menu so I did not
mark alcohol on the survey. Sandwiches are made to order.
AR 91. Both reviewers took a number of photographs of the interior of Morgan’s Seafood, which
have been included in the administrative record. AR 20-50, 96-116.
A USDA final recommendation form, completed on January 10, 2014, listed several
factors justifying the recommended denial of Morgan’s Seafood’s reauthorization for SNAP:
• With respect to the stock available on day of visit, less than three items were available
in following categories: dairy, bread/cereals, fruits/vegetables. See AR 117
• “Froze[n] fish items are not displayed for sale or packaged for individual sale. No
prices advertise/posted for meat or cold cuts by the pound. Prices that are posted are
for take out – hot items, dinner specials, side orders.” Id.
• Owner failed to provide requested documentation by due date: “Owner submitted
requested Federal Tax Return for business & personnel. Did not submit sales tax
documents, licenses/permits, verification of gross sales, other sales or non food sales
as requested.” Id.
• “Criteria A: insufficient evidence to support sales of at least three varieties”: “The
store does not carry an ample variety of Dairy, Fruit/Vegt/Bread/Grain.” Id. at 117-
118. The recommendation also reiterated the comments of the reviewer discussing the
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November 7, 2013, visit, reprinted above as well. See id. (“Owner stated that his
display cooler is broken . . . However the cooked yams are on the menu and salads
come as sides to hot dishes.”); see AR 15.
• “Criteria B: insufficient evidence to support sales of more than 50% staple food”:
“85% per Reauthorization Form 252R. Store Visit shows business primarily a Take
Out business with a number of advertised hot food specialties. More than 95% of
business floor space is dedicated to food prep area, hot food serving area, seating area
with tables. Tax returns list business name as = MORGAN SEAFOOD BAR &
GRILL.” AR 117-118.
• The form recited another factor why the facility does not qualify for SNAP:
“278.1(b)(1)(ii)(C) Ineligible Firms. Ineligible firms under this paragraph include, but
not limited to, stores selling only accessory food, including . . . . specialty doughnut
shops and bakeries not selling bread.” AR 118.
By letter dated December 10, 2014 – but apparently issued January 10, 2014 – the FNS Retailer
Operations Branch informed Plaintiff that the authorization of Morgan’s Seafood to participate in
SNAP was being withdrawn. AR 119-121. The letter advised Plaintiff that based on the two
visits discussed above, FNS had concluded that Plaintiff’s business did not meet the eligibility
criteria for stores set forth in 7 C.F.R. § 278.1(b)(1). Id. The letter stated that “[i]t is the
determination of the Food and Nutrition Service that your firm is primarily a Restaurant . . . Your
firm does not meet the definition and requirements of a retail food store as set forth in section
271.2 and 278.1(b)(1) of the SNAP regulations because more than 50 percent of your firm’s total
sales is in hot and/or cold prepared, ready-to-eat foods that are intended for immediate
consumption and require no additional preparation.” AR 119.
6
Plaintiff requested an administrative review of the withdrawal action by letter dated
January 24, 2014. AR 122. FNS granted this appeal of the Retailer Operations Branch decision,
and implementation of the withdrawal of Plaintiff’s SNAP authorization was held in abeyance
pending completion of the administrative appeal. AR 132. By letter dated February 10, 2014,
Plaintiff provided a written response to the withdrawal determination, stating that the FNS visits
to his store “do not present a clear picture of my inventory for three reasons.” AR 127.
The first issue that may have been misleading is the fact that at the time of the
visits my display case was not up and running. The display case would normally
show a wide variety of seafood. It allows for a visual display of the inventory that
is available for retail sale.
The second reason is the unique nature of the seafood business. In order to be able
to keep my reputation of providing quality fresh seafood[,] I choose not [to]
maintain a large inventory of items that may or may not sell or that are extremely
perishable such as Crabs, Shrimp, Oysters and Clams. My inventory must be
replenished on a daily basis in order for the product to be acceptable to my
customers.
A third issue is the fact that my business is seasonal in nature. The bulk of my
sales are in the summer. At the time of the visits it was late fall and the start of the
holiday season. A large portion of my retail business comes from the sale of fresh
crabs. Not only are they extremely perishable but they are difficult to obtain
during the winter. There are times when due to availability I have no inventory of
crabs. Even when crabs are available the prices are so high, due to limited supply,
that I am unable to make a profit on them.
An additional point for you to consider when evaluating my application is the fact
that for many years Morgans Seafood has participated, without issue, in the food
stamp program the store has provided its customers with quality, healthy
nutritionally beneficial food choices in the inner city. If you were to deny
Morgans Seafood from participating in the SNAP program my customers will
have an additional financial burden of finding transporta[t]ion to other seafood
retail outlets.
Id. On March 6, 2014, an FNS Administrative Review Officer issued a Final Agency Decision
concluding that there was “sufficient evidence to support a finding that the Retailer Operations
Division . . . properly imposed the withdrawal of the authorization of Morgan’s Seafood . . . to
participate as a retailer in the Supplemental Nutrition Assistance Program (SNAP).” AR 131.
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After summarizing Plaintiff’s objections as stated in his February 10, 2014 letter, the Final
Agency Decision included the following analysis of Plaintiff’s appeal and the record compiled
by FNS:
The FNS onsite visit revealed that the establishment presents itself to the public as
a restaurant serving hot and cold prepared ready-to-eat foods intended for
immediate consumption or takeout requiring no additional preparation. There is a
prominent menu board for prepared items, and store signage advertises prepared
food items such as soul food, smoked ribs, beef and pork, and seafood meals. The
limited food inventory onsite is located behind service counters and in the kitchen
area. These foods appear to be used for the preparation of ready-to-eat meals as
posted and custom made sandwiches. The restaurant has a countertop for food
orders, and customer waiting for prepared orders. There are stools, table tops, and
a counter area for eating in. The firm has signage for beer, and alcohol is visible
in the photographs. There is a deli case with cheese and luncheon meat, and some
prepared pies and cakes in single serve containers. The kitchen and food
preparations area and equipment take up most of the space and are representative
that this is a restaurant rather than a retail food store. The inventory indicated that
there were no prices posted for meat/cheese and that sandwiches are made to
order. A Food Establishment Inspection Report by the District of Columbia
Department of Health submitted by the retailer indicated that the firm was out of
compliance with a number of rating criteria. The tax returns list the business name
as Morgan’s Seafood and Bar and Grill and the business is described as food and
drink service.
The January 3, 2014 inventory conducted by the FNS representative indicated that
the business lacked sufficient staple foods and did not meet Criteria A. Retailer
Operations determined that Appellant was ineligible for authorization under
Criterion B per 7 CFR § 278.1(b)(1)(iii) since staple food sales must comprise
more than 50 percent of a firm’s annual gross retail sales. More importantly,
Retailer Operations determined that not only does this business not meet Criteria
A or B for authorization as a retail food store, it does not meet the very definition
of a retail food store as set forth in sections 7 CFR § 271.2 and § 278.1(b)(1) cited
herein. Retailer Operations determined that the business had more than 50 percent
of its total gross retail sales in hot and/or cold prepared, ready-to-eat foods that
are intended for immediate consumption onsite or for carry-out, and require no
additional preparation, and by definition is not eligible for SNAP participation as
retail food store.
AR 134. Based on this determination, the Administrative Review Officer informed Plaintiff
through the Final Agency Decision that the decision to withdraw authorization for Morgan’s
Seafood to participate as a retailer in SNAP was sustained. AR 135. Consistent with 7 C.F.R.
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§ 278.1(k)(2), the Final Agency Decision noted that Plaintiff was ineligible to reapply for
participation in SNAP for a minimum period of six months from the effective date of
withdrawal. AR 135.
Through the Final Agency Decision, the Administrative Review Officer further informed
Plaintiff of the provisions governing judicial review of the denial of his appeal, 7 U.S.C. § 2023
and 7 C.F.R. § 279.7. Id.(“[I]f a judicial review is desired, the Complaint, naming the United
States as the defendant, must be filed in the U.S. District Court for the district in which the
Appellant’s owner(s) reside or are engaged in business . . . If any Complaint is filed, it must be
filed within thirty (30) days of receipt of this Decision.”). Shipping records included in the
administrative record indicate that Plaintiff received the Final Agency Decision on March 10,
2014. AR 136.
C. Procedural Background
Plaintiff filed suit in this Court on April 23, 2014, arguing that “Defendant improperly
denied Plaintiff an authorization to participate in the Department of Agriculture’s SNAP program
[sic] and its decision was arbitrary and improper” as “Plaintiff complied with 7 CFR
278.1(b)(1)(iii) and other CFR provisions.” Compl. ¶¶ 6-7. The following day, he filed a Motion
for an Emergency Stay, stating that if he remained unable to participate in SNAP, Morgan’s
Seafood would be forced out of business. See Pl.’s Motion for Emergency Stay, ECF No. [2], at
1. Defendants filed the administrative record and the accompanying Declaration of Completeness
on May 7, 2014. By a [16] Order and [17] Memorandum Opinion dated June 4, 2014, the Court
denied Plaintiff’s Motion, finding that Plaintiff was unlikely to succeed on the merits of his claim
and has not made a sufficient showing of irreparable harm in the absence of a stay. On July 2,
2014, Plaintiff filed an [21] Amended Complaint, as required by the Court by a previous
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[20] Order. Defendant filed the motion presently before the Court on July 18, 2014. Plaintiff
subsequently filed a one-page response, attaching receipts for seafood purchased and bank
statements showing purchases of a variety of goods. He submitted no other additional
documentation. Defendant in turn filed a reply. Accordingly, the motion is now ripe for review.
II. LEGAL STANDARD
A. Motion to Dismiss Standard
Defendant moves to dismiss this action on the grounds that Plaintiff has failed to state a
claim. Pursuant to Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss a
complaint on the grounds it “fail[s] to state a claim upon which relief can be granted.” Fed. R.
Civ. P. 12(b)(6). “[A] complaint [does not] suffice if it tenders ‘naked assertion[s]’ devoid of
‘further factual enhancement.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 557 (2007)). Rather, a complaint must contain sufficient factual
allegations that, if accepted as true, “state a claim to relief that is plausible on its face.” Twombly,
550 U.S. at 570. “A claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Iqbal, 556 U.S. at 678. In deciding a Rule 12(b)(6) motion, a court may consider “the
facts alleged in the complaint, documents attached as exhibits or incorporated by reference in the
complaint,” or “documents upon which the plaintiff's complaint necessarily relies even if the
document is produced not by the plaintiff in the complaint but by the defendant in a motion to
dismiss.” Ward v. D.C. Dep’t of Youth Rehab. Servs., 768 F. Supp. 2d 117, 119 (D.D.C. 2011)
(citations omitted).
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B. Summary Judgment Standard
In the alternative, Defendant moves for summary judgment. Summary judgment is
appropriate where “the movant shows that there is no genuine dispute as to any material fact and
[that it] is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The mere existence of
some factual dispute is insufficient on its own to bar summary judgment; the dispute must
pertain to a “material” fact. Id. Accordingly, “[o]nly disputes over facts that might affect the
outcome of the suit under the governing law will properly preclude the entry of summary
judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Nor may summary
judgment be avoided based on just any disagreement as to the relevant facts; the dispute must be
“genuine,” meaning that there must be sufficient admissible evidence for a reasonable trier of
fact to find for the non-movant. Id.
In order to establish that a fact is or cannot be genuinely disputed, a party must (a) cite to
specific parts of the record – including deposition testimony, documentary evidence, affidavits or
declarations, or other competent evidence – in support of its position, or (b) demonstrate that the
materials relied upon by the opposing party do not actually establish the absence or presence of a
genuine dispute. Fed. R. Civ. P. 56(c)(1). Conclusory assertions offered without any factual basis
in the record cannot create a genuine dispute sufficient to survive summary judgment. Ass’n of
Flight Attendants-CWA, AFL-CIO v. U.S. Dep’t of Transp., 564 F.3d 462, 465-66 (D.C. Cir.
2009). Moreover, where “a party fails to properly support an assertion of fact or fails to properly
address another party’s assertion of fact,” the district court may “consider the fact undisputed for
purposes of the motion.” Fed. R. Civ. P. 56(e).
When faced with a motion for summary judgment, the district court may not make
credibility determinations or weigh the evidence; instead, the evidence must be analyzed in the
light most favorable to the non-movant, with all justifiable inferences drawn in his favor. Liberty
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Lobby, 477 U.S. at 255. If material facts are genuinely in dispute, or undisputed facts are
susceptible to divergent yet justifiable inferences, summary judgment is inappropriate. Moore v.
Hartman, 571 F.3d 62, 66 (D.C. Cir. 2009). In the end, the district court’s task is to determine
“whether the evidence presents a sufficient disagreement to require submission to a jury or
whether it is so one-sided that one party must prevail as a matter of law.” Liberty Lobby, 477
U.S. at 251-52. In this regard, the non-movant must “do more than simply show that there is
some metaphysical doubt as to the material facts,” Matsushita Elec. Indus. Co., Ltd. v. Zenith
Radio Corp., 475 U.S. 574, 586 (1986); “[i]f the evidence is merely colorable, or is not
significantly probative, summary judgment may be granted.” Liberty Lobby, 477 U.S. at 249-50
(internal citations omitted).
III. DISCUSSION
A. Motion to Dismiss
Defendant first argues that Plaintiff’s Amended Complaint should be dismissed because
it fails to state a claim upon which relief may be granted. The Defendant’s cursory argument fails
as it focuses primarily on the evidence that has been submitted rather than on the extent to which
Plaintiff has stated a claim. A “pro se complaint, however inartfully pleaded, must be held to less
stringent standards than formal pleadings drafted by lawyers.” Erickson v. Pardus, 551 U.S. 89,
94 (2007) (citations omitted). While there is no doubt that Plaintiff’s complaint is far from the
handiwork of a lawyer, it “still meet[s] the notice requirements of Rule 8(a) of the Federal Rules
of Civil Procedure and give[s] the defendant ‘fair notice of the plaintiff's claim and the grounds
upon which it rests.’ ” Richards v. Duke Univ., 480 F. Supp. 2d 222, 235 (D.D.C. 2007). There is
no doubt what this action is about: Plaintiff argued before the agency that his facility was
wrongly disqualified from participation in SNAP and argues here that his “business sufficiently
12
meets all applicable agency regulations and that agency improperly and arbitrarily withdr[e]w
Plaintiff’s authorization.” Am. Compl. ¶ 5. In any event, the Court need not dwell on
Defendant’s argument since the evidence submitted, as discussed below, requires that the Court
grant summary judgment to Defendant. 3
B. Motion for Summary Judgment
In the alternative, Defendant moves for summary judgment arguing that Plaintiff has not
met his burden of showing that the agency’s action was invalid by a preponderance of the
evidence as necessary in order for him to prevail. There are no genuine disputes of material fact,
and the Court concludes that Plaintiff has not carried the burden assigned to him by statute.
1. Legal Framework
Pursuant to 7 U.S.C. § 2023(a)(15), “[t]he suit in the United States district court or State
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 . . . .” “If the court determines that such administrative
action is invalid, it shall enter such judgment or order as it determines is in accordance with the
law and the evidence.” Id. § 2023(a)(16).
3
In addition to seeking the reversal of the disqualification of his business, Plaintiff seeks money
damages for his loss of income, but does not cite any legal authority for such damages. Am.
Compl. ¶ 8. Because the Court concludes that Plaintiff’s claim fails under summary judgment,
the Court need not reach the issue of whether Plaintiff’s claim fails to state a claim with respect
to the monetary damages that he seeks. Nonetheless, Defendant appears to be correct that the
agency is not liable for monetary damages. “Absent a waiver, sovereign immunity shields the
Federal Government and its agencies from suit.” F.D.I.C. v. Meyer, 510 U.S. 471, 475 (1994).
Not only has Congress failed to waive sovereign immunity in this circumstance, it has
specifically barred monetary damages to compensate for sales lost in circumstances such as the
one that the Plaintiff faces. See 7 U.S.C. § 2023(a)(18)(a) (“If the disqualification is reversed
through administrative or judicial review, the Secretary shall not be liable for the value of any
sales lost during the disqualification period.”)
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“ ‘A trial de novo is a trial which is not limited to the administrative record – the plaintiff
‘may offer any relevant evidence available to support his case, whether or not it has been
previously submitted to the agency.’ ” Affum, 566 F.3d at 1160 (quoting Kim v. United States,
121 F.3d 1269, 1272 (9th Cir. 1997)). “The trial de novo provision of the Act ‘is clearly broader
than the review standard provided for under the Administrative Procedure Act. It requires the
district court to examine the entire range of issues raised, and not merely to determine whether
the administrative findings are supported by substantial evidence.’ ” Id. (quoting Modica v.
United States, 518 F.2d 374, 376 (5th Cir. 1975). “[T]he statutory requirement of a trial de novo
‘is compatible with a summary judgment disposition if there are no material facts in dispute.’ ”
Id. (citation omitted). In undertaking this inquiry, the burden of proof is “placed upon the store
owner to prove by a preponderance of the evidence that the violations did not occur.” Kim, 121
F.3d at 1272. Accord Fells v. United States, 627 F.3d 1250, 1253 (7th Cir. 2010); Warren v.
United States, 932 F.2d 582, 586 (6th Cir. 1991); Redmond v. United States, 507 F.2d 1007,
1011-12 (5th Cir. 1975).
In contrast to the standard of review for the underlying violation, “judicial review of the
agency’s choice of penalty is focused on whether the Secretary has abused his discretion.” Affum,
566 F.3d at 1162. See also id. at 1160-61 (“considering the statutory scheme as a whole, we
think that Congress meant to impose different standards of review for a judicial action
challenging the agency’s finding of a violation as opposed to a judicial action challenging the
Secretary’s choice of penalty.”); Lawrence v. United States, 693 F.2d 274, 276 (2d Cir. 1982)
(where plaintiff conceded the fact of the violations, “[t]he sole issue before the District Court . . .
was whether the FNS imposition of a one-year suspension as a penalty was arbitrary and
capricious”). “Under the applicable standard of review, the Secretary abuses his discretion in his
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choice of penalty if his decision is either ‘unwarranted in law’ or ‘without justification in fact,’
or is ‘arbitrary’ or ‘capricious.’ ” Affum, 556 F.3d at 1161 (internal citations omitted). Although
Plaintiff does not clearly dispute the choice of penalty, the Court addresses it below in the
interest of completeness.
2. Finding of underlying violation
Plaintiff seeks reversal of the agency’s decision, arguing that “his business sufficiently
meets all applicable agency regulations.” Am. Compl. ¶ 5. Because Plaintiff is challenging the
existence of a violation here, the Court reviews the FNS conclusion that Plaintiff is not eligible
for SNAP de novo. As noted, Plaintiff is not limited to relying on the administrative record in
pursuing his claim. Prior to the summary judgment briefing, Plaintiff had not provided the Court
with any materials outside the administrative record in support of his claim and had relied on
arguments with respect to evidence in the Administrative Record. See Pl.’s Stay Reply at 1-2. In
his opposition to Defendant’s motion for summary judgment, Plaintiff submitted bank statements
covering a period from January 2012 through June 2014, and selected receipts for purchases of
fish from June, July, and August 2014. 4 The Court reviews these sources of evidence in turn.
The Administrative Record includes evidence resulting from two visits to the facility by
review officials, on November 7, 2013, and January 3, 2014. The facility appears to be used
primarily for preparation of food for carryout and to eat in the store. The facility includes a
menu, above the counter, that describes various prepared items that can be purchased. See AR
4
Plaintiff also submitted a single receipt for the purchase of soft drinks and alcohol from July
2014. See Pl.’s Opp’n, Ex. at 53. Because the owner claimed that the alcohol is not for sale, see
Pl.’s Stay Reply at 1, this receipt does not aid Plaintiff in his attempt to portray the facility as one
selling groceries. If anything, the inclusion of this receipt suggests that Plaintiff was selling
alcohol – as indicated by the menu in the store – and was operating the facility primarily as a
restaurant.
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102. The categories on the menu include soul food, sides, seafood, crabs, and dinners. See id.
Many of the items on the menu are prepared items, such as baked chicken, pigs feet, rib
sandwiches, frog legs, fried okra, fried mussels, coleslaw, and steamed shrimp. See id. With
respect to the “dinners” category, no inference can be drawn other than understanding this as a
reference to prepared foods—available for consumption at the facility or at home. While some of
the foods may be available for purchase for home consumption, such as the crabs, scallops, and
oysters listed, see id., this does not undermine the conclusion that this facility focused on the sale
of prepared food. Similarly the listing of “combinations” of seafood available suggests multiple
types of seafood to eat as a single, prepared meal—not a discount if the customer purchasers two
types of seafood for home preparation. See AR 100. The foods that the facility presents itself as
serving show that it is disqualified from SNAP participation by virtue of qualifying as a
restaurant. See 7 C.F.R. §278.1(b)(1)(iv) (“In addition, firms that are considered to be
restaurants, that is, firms that have more than 50 percent of their total gross retail sales in hot
and/or cold prepared foods not intended for home preparation and consumption, shall not qualify
for participation as retail food stores under Criterion A or B. This includes firms that primarily
sells prepared foods that are consumed on the premises or sold for carryout.”) Numerous
additional photographs confirm this assessment of the facility. See AR 22-35, 36-49, 96-102,
103-116.
The two sketches of the layout of the facility also indicate a facility design focused on the
sale of prepared foods. See AR 19, 95. Both sketches reveal areas for sitting inside the facility.
See id. Both sketches also show areas devoted to hot food, prepared food, and sandwiches, in
addition to areas of fresh fish, fresh vegetables, and frozen fish. See id. While the owner
indicated to the inspectors that meat and cheese were available for purchase by the pound, in
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addition to the use of these ingredient in store-prepared sandwiches, no prices were posted for
by-the-pound purchase during either inspection. See AR 15, 91. Nor is there any indication from
the photographs that the meat and cheese is available for purchase in that format. See, e.g., AR
97. Certainly, Plaintiff is not required to price his foods, as he argues. See Pl.’s Opp’n at 1. But
the absence of prices, particularly given the existence of posted prices for many store-prepared
foods, does not assist Plaintiff in bearing his burden with respect to the proportions of store-
prepared food and food for home preparation. Moreover, a significant amount of the space in the
facility is given over to food preparation and equipment. See AR 15, 95, 118. Altogether the
design of the store provides a very strong indication that the facility qualifies as a “firm[] that
primarily sell prepared foods that are consumed on the premises or sold for carryout.” 7 C.F.R.
§278.1(b)(1)(iv). Plaintiffs arguments do not demonstrate the contrary.
In Plaintiff’s [29] Answer to Defendant’s Motion to Dismiss, Plaintiff provides six
explanations why the data supports his claim. The Court reviews these explanations, as well as
the data supporting them, in turn, and ultimately finds them unpersuasive.
First, Plaintiff states, “here are some receipts showing that my sales are mostly fresh sea
food and grocery. Look at the price of the crabs, shrimp, crab legs, etc. As I explained 67% of
my sales are fresh seafood.” Pl.’s Opp’n at 1. Plaintiff attaches approximately fourteen receipts
showing the purchase of seafood. Plaintiff also attaches bank records showing check card
purchases for numerous items, including some grocery and seafood purveyors. See, e.g.,
Attachment to Pl.’s Opp’n at 60 (“Crabs Express Inc,” “Safeway”). In the first instance, it is not
clear that these purchases are solely for Morgan’s Seafood – the name on the account is Romi
Rome Productions LLC. Moreover, no amount of evidence with respect to the facility’s inputs
can show that the facility’s outputs were foods for home preparation rather than ready-to-eat
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store-prepared foods. Cf. 7 C.F.R. §278.1(b)(1)(iv) (contrasting “hot and/or cold prepared foods”
with foods intended for “home preparation and consumption.”) In other words, even if it is true
that Morgan’s spends a significant amount of money in purchasing raw seafood that does not
demonstrate that the facility sells groceries for home preparation. Indeed, even if he operated the
facility as a seafood restaurant, that would require significant purchases of seafood to feed the
customers, whether they dined in or dined out.
Second, Plaintiff states that “if you go to the waterfront they buy the crabs and shrimp
and crabs legs, clams, oysters live and do the same as I do, cook them for free, what makes them
different from me?” Pl.’s Opp’n at 1. Plaintiff appears to be suggesting that he is receiving
disparate treatment from other food establishments. However, he does not even claim, let alone
provide any evidence demonstrating, that those establishments are participants in SNAP. Even if
his claim were true, alone it would provide him no assistance in the attempt to show that his
facility is SNAP eligible.
Third, Plaintiff states, “here are my bank statements that show the difference of sales
when I was excepting [sic] SNAP now and past.” Pl.’s Opp’n at 1. But changes to his income,
even if traceable to his SNAP disqualification, do not even suggest that he is eligible for SNAP.
Given that he was required to cease accepting SNAP, it is unsurprising that his facility’s income
would decline—regardless of whether he was actually qualified for SNAP when he participated
in it in the past.
Fourth, Plaintiff states, “if the cooler was broken, how is that that the crabs were still
alive and the other seafood was still fresh?” Pl.’s Opp’n at 1. He references the inspector’s
indication that Plaintiff’s seafood cooler was broken. AR 15. In reference to this question,
Plaintiff had previously explained that the seafood was, therefore, stored, in a cooler in the back
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of the facility. Accepting this explanation, the location in the store the food is stored is of no
moment; the lack of functionality of this cooler does not disturb the overall evidence that the
facility sold more store-prepared food than food for home preparation—evidence rooted in the
store’s design, displays, and presence of food that was evidently for sale, as described above.
Fifth, Plaintiff states, “I don’t have to price my food.” Pl.’s Opp’n at 1. While it may be
correct that Plaintiff is not required to price his foods in order to sell them or to participate in
SNAP, the pricing of some foods but not others is probative evidence that the Court can consider
in assessing the activities of the facility. It is important that many prepared foods were priced,
see, e.g., AR 102, while non-prepared foods that he claimed to sell, such as the meat and cheese,
without any other evidence, were not priced, see, e.g., AR 97. At a minimum, the absence of
pricing on these foods that could either be sold for home preparation or could serve as
ingredients in store-prepared foods, does not contribute to the requirement that Plaintiff show, by
a preponderance of the evidence, that no more than 50 percent of the facility’s sales were in
prepared foods. See 7 C.F.R. § 278.1(b)(1)(iv).
Sixth, and finally, Plaintiff states that, “the tank was empty because of a burglary which
cause me to empty lobster tank which was contaminated.” Pl.’s Opp’n at 1. As with his argument
regarding the broken cooler, this argument fails. The lack of functionality of this piece of
equipment does not negate the overall evidence that the facility sold more store-prepared food
than food for home preparation, disqualifying the facility from SNAP participation because of its
restaurant status. See 7 C.F.R. § 278.1.
None of these six arguments are persuasive. They do not show that the facility meets
Criteria A or B, as the facility must to qualify for SNAP, and do not show that Morgan’s is not
disqualified by virtue of being a “restaurant” pursuant to 7 C.F.R. § 278.1. The statute requires
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Plaintiff, as an applicant for participation in SNAP, to submit information that shows the
eligibility of his facility. See 7 U.S.C. § 2018. In response to FNS’s request for information that
would demonstrate his eligibility, he did not provide the requisite information. See AR 51, 117-
118. Nor has he provided adequately responsive information during the course of this litigation.
See Pl.’s Opp’n & Ex. Thus Plaintiff’s case has the same infirmity that it had before the agency:
he has not provided evidence demonstrating the eligibility of his facility for SNAP by providing
evidence that would support his claim that he sells more food for home preparation than food
that has been prepared at his business.
In Plaintiff’s previous briefing with respect to Plaintiff’s Emergency Motion to Stay,
specifically in his [12] Answer to Defendant’s Opposition to Plaintiff’s Motion, Plaintiff relied
on the materials in the administrative record to show that the FNS has wrongfully concluded that
Morgan’s Seafood is ineligible for participation in SNAP pursuant to 7 C.F.R. § 278.1(b)(1).
Although Plaintiff does not renew these arguments in his [29] Answer to Defendant’s Motion to
Dismiss, the Court reviews them here and concludes, as it did with respect to the Emergency
Motion to Stay, that Plaintiff’s arguments with respect to this evidence are unpersuasive.
Plaintiff relied primarily on a series of photographs of the interior of Morgan’s Seafood
which are contained in the administrative record. These photographs, apparently taken by the
two FNS reviewers who visited Morgan’s Seafood on November 7, 2013 and January 3, 2014,
respectively, show a series of food products contained in Plaintiff’s store. AR 20-50, 96-116.
Plaintiff pointed to these pictures as evidence that Morgan’s Seafood is operating as a “retail
establishment” selling fresh seafood, and not as a restaurant. See Pl.’s Stay Reply at 2 (“If Mr.
Morgan is not operating as a retail establishment what are pictures A.R. 21, A.R. 22, A.R. 23,
A.R. 24, A.R. 25, A.R. 26, A.R. 28, A.R. 29, A.R. 31, A.R. 33, A.R. 34, A.R. 36, A.R. 37, A.R.
20
38, A.R. 39, A.R. 40, A.R. 41, A.R. 42, A.R. 43, A.R. 44, A.R. 45, A.R. 48, A.R. 49, Clearly
shows retail items.”); id. (“Morgan has clearly shown according to their pictures which are listed
in #5 which shows unprepared foods in his establishment”).
Yet these photographs do not provide the clear evidence necessary for Plaintiff to
succeed with his claim. Importantly, Plaintiff did not clarify which of these photographs show
items for direct sale to consumers and which, by contrast, show items used in the preparation of
meals for carryout. For example, three of the photographs cited by Plaintiff, AR 22, AR 32, and
AR 39, show the menu board for Morgan’s Seafood. Other photographs in the administrative
record also show this menu board from various angles. See AR 98, 100, 102, 105, 106, 107, 113,
115, 116. This menu, as noted by the Final Agency Decision, lists a series of carryout options in
the categories Soul Food, Sides, Dinners, and Combinations. The menu options in these
categories include, among many others, “baked chicken,” “rib sandwich,” “pork chop,” “fried
mussels,” and “fried okra.” AR 113; see also AR 134 (“[T]he establishment presents itself to the
public as a restaurant serving hot and cold prepared ready-to-eat foods intended for immediate
consumption or takeout requiring no additional preparation. There is a prominent menu board for
prepared items, and store signage advertises food items such as soul food, smoked ribs, beef and
pork, and seafood meals.”). The photographs show other indicia of a carryout business, such as
condiments and packaging for take-out meals. AR 105. Although the photographs cited by
Plaintiff show a series of food products – including bread, cheese, vegetables, and various
seafood – he provides no evidence to show that these are anything but ingredients and inventory
used in preparing the meals for customers listed on the menu board. The Court is willing to
accept that some of the food items in these photos may be for sale directly to consumers without
preparation. Indeed, AR 36 shows several boxes of cereal stacked atop a cooler, apparently for
21
sale to consumers. Moreover, there appears to be no dispute that at least some of Plaintiff’s
business comes from the direct sale of fresh seafood. However, Plaintiff failed to define the
scope of his sale of staple foods in comparison to his sale of prepared foods. In light of the menu
board and other indicia that Morgan’s Seafood operates at least in part as a restaurant, Plaintiff’s
blanket statement that all of the photographs show “retail items” is simply unsupported. These
photographs do not provide sufficient evidence that Plaintiff complies with Criteria A or B, or
that Plaintiff is not a “restaurant” within the meaning of 7 C.F.R. § 278.1(b)(1)(iv). Without
further evidence, they do not show that (a) Plaintiff offers for sale foods in each of four
categories of staple food, including perishable foods in at least two of the categories, or (b) more
than 50 percent of Plaintiff’s total gross retail sales are in staple foods. See 7 C.F.R.
§ 278.1(b)(1)(i)(A). Furthermore, they do not undermine the conclusion that more than 50
percent of Plaintiff’s total gross retail sales are in hot and/or cold prepared foods not intended for
home preparation and consumption, rendering him an ineligible restaurant under 7 C.F.R.
§ 278.1(b)(1)(iv). These photos are insufficient to refute FNS’s conclusions as to the nature of
his business.
Plaintiff’s other previous related arguments fail for similar reasons. Plaintiff pointed to
the FNS’ reviewers’ photographs of his coolers. Because these coolers (which the Court notes
are partially empty) appear to contain seafood, Plaintiff contends that he has established his
seafood inventory. See Pl.’s Stay Reply at 1 (“According to pages A.R. 21, A.R. 24, A.R. 28,
A.R. 41, A.R. 43, and A.R. 45, clearly shows refrigeration in working order on all fresh seafood
inside are very perishable and would have spoiled, and if the coolers were empty it clearly shows
inventory.”). Yet, again, the Court has no proof from Plaintiff that these materials, along with the
other food products shown in these photographs, were for direct sale to customers, and not
22
simply ingredients used in preparing food for carryout. The Court is thus left guessing as to what
percentage of Plaintiff’s business comes from sale of staple foods and what percentage comes
from sale of carryout meals or meals consumed on the premises. In addition, to the extent
Plaintiff argued that the empty coolers are indicative of his inventory (apparently because he has
sold whatever was in the coolers), he goes too far. The Court is unpersuaded that an empty
cooler indicates that Plaintiff has sold out whatever supply of fresh seafood he offered for direct
sale to customers on a particular day. The array of receipts and bank statements that Plaintiff
provides over the course of a long time period do not provide the information necessary to show
that the coolers were empty because of this particular malfunction of the cooler.
Plaintiff also argued that the FNS reviewers’ depiction of his store’s layout, contained at
AR 19, “clearly does not show any hot food steam table with food ready to be served.” Pl.’s Stay
Reply at 1; see also id. at 2 (“nor does their drawing show on page A.R. 19 of equipment
showing consistent hot foods.”). The Court remains somewhat unclear as to this objection, but
notes that the reviewer’s sketch of the layout of Morgan’s Seafood at AR 19 does say “hot food”
in its description of the area behind several coolers in Plaintiff’s store. Photographs displaying
this area show what appears to be a grill or stove, although not clearly. AR 32, 105. In addition,
Plaintiff’s 2011 tax return lists business expenses associated with “stoves.” AR 56. In any case, if
Plaintiff were arguing that he does not actually prepare hot food, as he lacks equipment
consistent with preparation of hot food, that argument goes nowhere. First, the menu board
depicted in various photographs would appear to directly contradict Plaintiff’s claim, as it offers
for sale various items that are typically of the hot food prepared variety, such as “baked
chicken,” “rib sandwich,” “pork chop,” “fried mussels,” and “fried okra.” Second, the definition
of “restaurant” in 7 C.F.R. § 278.1 is not limited to firms selling hot prepared foods. See 7 C.F.R.
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§ 278.1(b)(1)(iv) (“firms that are considered to be restaurants, that is, firms that have more than
50 percent of their total gross retail sales in hot and/or cold prepared foods not intended for
home preparation and consumption, shall not qualify for participation as retail food stores under
Criterion A or B.”) (emphasis added).
Plaintiff’s remaining arguments are equally unpersuasive in showing that he meets
Criteria A or B or that he is not a “restaurant” pursuant to 7 C.F.R. § 278.1. First, Plaintiff
pointed to a photograph of the exterior of his store, and notes that the signage for the business
reads “Morgan’s Seafood” and not “Morgan’s Seafood Restaurant.” Pl.’s Stay Reply at 1 (citing
AR 20). Yet the mere fact that Plaintiff does not explicitly call his firm a restaurant is not
conclusive for purposes of applying the restaurant definition in 7 C.F.R. § 278.1(b)(1)(iv).
Moreover, it bears noting, that in his tax returns, Plaintiff has held out his business as a
restaurant, listing his business name as “Morgan Seafood Bar and Grill.” AR 55. Second, as an
additional argument for the stay, Plaintiff states, “[o]n page 8 when speaking with the inspector
[I] told them that [I] drink more alcohol than [I] sell, not that I do not sell alcohol, and at the time
of re-certifying [I] was not selling alcohol.” Pl.’s Stay Reply at 1. This objection is immaterial to
Plaintiff’s claim. Although mentioned in the Final Agency Decision, AR 134, the sale of alcohol
was not a basis for the withdrawal of Plaintiff’s authorization to participate in SNAP.
Accordingly, whether or not Plaintiff sold alcohol is irrelevant to the Court’s review of the
agency’s decision.
In sum, the administrative record contains a factual record developed during two site
visits to Morgan’s Seafood. Based on these visits, FNS determined that Morgan’s Seafood did
not meet Criteria A or B and was operating as a restaurant in violation of 7 C.F.R. § 278.1.
Reviewing the materials in the administrative record de novo, as well as the additional materials
24
that Plaintiff has submitted, the Court concludes that Plaintiff has not satisfied his burden of
“prov[ing] by a preponderance of the evidence that the violations did not occur.” Kim, 121 F.3d
at 1272.
3. Choice of penalty
Plaintiff does not clearly take issue with Defendants’ choice of penalty, see Am. Compl.;
Pl.’s Opp’n, but the Court briefly addresses the penalty in the interest of completeness. As
explained above, any review of the choice of penalty is only for abuse of discretion. See Affum,
566 F.3d at 1162. To the extent Plaintiff also challenges the choice of his penalty here –
withdrawal of eligibility and a six-month bar on reapplication – these penalties are set out in the
applicable regulations. See 7 C.F.R. § 278.1(l)(1) (“FNS shall withdraw the authorization of any
firm authorized to participate in the program . . . [if] (iii) The firm fails to meet the requirements
for eligibility under Criterion A or B, as specified in paragraph (b)(1)(i) of this section”)
(emphasis added); id. at 278.1(k)(2) (“Any firm that has been denied authorization on these bases
shall not be eligible to submit a new application for authorization in the program for a minimum
period of six months from the effective date of the denial.”) (emphasis added). “Under the
applicable standard of review, the Secretary abuses his discretion in his choice of penalty if his
decision is either ‘unwarranted in law’ or ‘without justification in fact,’ or is ‘arbitrary’ or
‘capricious.’ ” Affum, 556 F.3d at 1161 (internal citations omitted). Accordingly, the application
of these mandatory penalties here does not constitute an abuse of discretion by the Secretary.
Because the effective date of withdrawal was held in abeyance pending the resolution of
Plaintiff’s administrative appeal, AR 132, the Court understands the six-month period during
which Plaintiff was barred from reapplying to have from March 6, 2014, until September 6,
2014. In other words, Plaintiff may now reapply if he has not done so already.
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IV. CONCLUSION
For the foregoing reasons, the Court concludes that there are no genuine issues of
material fact in this dispute. The Court further concludes that the Plaintiff has not, as required in
order to prevail, established by the preponderance of the evidence, that Defendant’s withdrawal
of the authorization of Morgan’s Seafood, owned by Plaintiff, to participate as a retailer in the
Supplemental Nutrition Assistance Program was improper. Accordingly, the Court GRANTS
SUMMARY JUDGMENT to the Defendant. The Court GRANTS Defendant’s Motion insofar as
it seeks summary judgment and DENIES Defendant’s motion insofar as it seeks to dismiss this
action for failure to state a claim. JUDGMENT shall enter for the Defendant, and this action is
DISMISSED in its entirety. An appropriate Order accompanies this Memorandum Opinion.
Dated: October 29, 2014
____/s/________________________
COLLEEN KOLLAR-KOTELLY
United States District Judge
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