[00:00:03] Speaker 01:
Thank you, everyone.

[00:00:06] Speaker 01:
Good morning.

[00:00:07] Speaker 01:
The cases will be called in the order listed on the docket.

[00:00:11] Speaker 01:
The first two cases, Ramos Ribi versus Bondi and Serrano Osorio versus Bondi, have been submitted on the briefs.

[00:00:19] Speaker 01:
Our first and only case on calendar for argument today is Brothers Market versus United States.

[00:00:25] Speaker 01:
Council for Appellants, please approach and proceed.

[00:00:30] Speaker 04:
Good morning, Your Honors.

[00:00:32] Speaker 04:
May it please the court?

[00:00:33] Speaker 04:
My name is Andrew Tapp.

[00:00:35] Speaker 04:
I'm counsel for both Brothers Markets and both of their respective appeals.

[00:00:39] Speaker 04:
As I understand it, we have two minutes for rebuttal.

[00:00:41] Speaker 04:
I will mind the clock.

[00:00:43] Speaker 04:
There's two issues I want to primarily address this morning with you, and the first of which is this notion that neither of the Brothers Market cases offered any supporting evidence aside from unsubstantiated claims within affidavits.

[00:00:57] Speaker 04:
That's not factually accurate at all.

[00:01:00] Speaker 02:
Well, isn't your burden to provide

[00:01:02] Speaker 02:
Disputing evidence evidence that contradicts and for example you have a bunch of receipts but Is the agency correct that none of those receipts evidenced any of the transactions that they're relying on to establish the suspicious patterns?

[00:01:17] Speaker 04:
No, that is fundamentally inaccurate Okay now since the district court focused solely on scan b2 that is the close-in-time transactions at horror usually it's transactions for more than about $75 in the aggregate up to about 48 hours in time and

[00:01:32] Speaker 04:
We have a list of transactions in both cases brothers market one for example Transactions 49 and 50 relied upon by the agency to indicate that there was trafficking are actually contained within the record Those two itemized detailed receipts are located at er 404 Transactions 45 and 46 are located at er 403 So each of these transaction receipt receipts will tell you exactly what it was the household bought and

[00:02:02] Speaker 04:
Because EBT does not permit the retailers to question why the household is buying what they buy, as long as they're presenting eligible food items and they have their card and their PIN number, the retailer is forced to process the transaction.

[00:02:16] Speaker 03:
And so... But even if we take the receipt as evidence that the transaction reflected in the receipt was a genuine transaction,

[00:02:24] Speaker 03:
I think that the agency said there were 142 sets of very close-in-time transactions for the same household that they thought were suspicious and You produced really receipts for I believe 11 of those which leaves 131 that we

[00:02:43] Speaker 03:
that they think are suspicious and that you haven't given any explanation for.

[00:02:46] Speaker 03:
So what do we do with those?

[00:02:47] Speaker 04:
Well, so, Your Honor, a couple things.

[00:02:49] Speaker 04:
The first is that program specialist Ryan Ahern with the USDA acknowledged that it's not unusual for households to shop at the same retailer every day or so.

[00:02:59] Speaker 04:
So to some degree, a lot of those transactions, especially when you get outside of the same day, so you're talking about two consecutive days, I don't think that those carry as much weight.

[00:03:08] Speaker 04:
Now, with respect to the other transactions, I think we fall inside

[00:03:11] Speaker 04:
of what the Sixth Circuit considered in the Euclid Market case, which is it's not so much that the retailer has the obligation to explain each and every one of those transactions, but rather to contest that the transaction characteristics cited in the EBT analysis are not indicative of trafficking, but rather are the result of legitimate purchases of eligible food items on EBT.

[00:03:37] Speaker 03:
And what is, I mean, so I read Mr. Brown's declaration, I think.

[00:03:42] Speaker 03:
And he does explain why the nature of the population that you're serving might explain some of the very large purchases of coffee and that sort of thing.

[00:03:54] Speaker 03:
But I didn't really understand him to explain why the same person would make two separate transactions a minute apart.

[00:04:04] Speaker 03:
What is the explanation for that?

[00:04:07] Speaker 04:
So the explanation is, I'm going to go back to the fact that the retailer is not allowed to ask.

[00:04:12] Speaker 04:
We have to treat each one of these customers the same way we would cash debit credit.

[00:04:16] Speaker 04:
So if they don't normally ask cashed evident credit why they would do that, they're not allowed to ask these other individuals.

[00:04:22] Speaker 04:
Having said that, based upon my client's experience, these people are buying food for other homeless individuals.

[00:04:27] Speaker 04:
Now, these stores are both located in Skid Row.

[00:04:30] Speaker 04:
And the homeless population shops differently than your average household.

[00:04:35] Speaker 04:
Part of that is because they have nowhere to store.

[00:04:37] Speaker 04:
They may not have any means to cook.

[00:04:38] Speaker 04:
They might have like a Bunsen burner, effectively to heat water.

[00:04:41] Speaker 04:
But that's all that they've got.

[00:04:44] Speaker 04:
You can see sort of a similar situation in the Skyston USA versus US case out of Hawaii, where your local homeless population shops so much differently.

[00:04:54] Speaker 04:
The way that we see here, Scan B2 is implicated because these people don't have jobs, frequently have mental health or substance abuse issues.

[00:05:03] Speaker 04:
They come in, they buy for themselves repeatedly, they'll buy for their friends repeatedly, and they'll essentially exchange favors outside.

[00:05:09] Speaker 04:
So, you know, I can use your tent, I'll buy you the food.

[00:05:12] Speaker 04:
The other explanation for this is that we have a population.

[00:05:16] Speaker 03:
But again, that explains what they're buying.

[00:05:19] Speaker 03:
The bulk purchases of coffee, which you can resell.

[00:05:22] Speaker 03:
But it doesn't explain why, when you're buying a bunch of stuff, like within the space of a couple minutes, why you would do that in two transactions rather than one.

[00:05:34] Speaker 04:
So a lot of times, these households will split the transactions.

[00:05:37] Speaker 04:
They will get up to the counter.

[00:05:39] Speaker 04:
They will present their pile.

[00:05:40] Speaker 04:
And if they're buying for their friend, their friend will have a pile.

[00:05:43] Speaker 04:
And they'll agree, perhaps $50.

[00:05:45] Speaker 04:
You're going to have $50 or $100.

[00:05:47] Speaker 04:
And so you're going to tabulate this out while you're gathering items at the counter.

[00:05:51] Speaker 02:
But we're dealing with 10 to 15 second differences in time.

[00:05:58] Speaker 02:
And so no baskets, no carts, I guess armfuls of large Nescafe containers or other high value items.

[00:06:07] Speaker 02:
All of that is taking place.

[00:06:09] Speaker 04:
Recorded within 10 or 15 seconds I a lot of them are 10 or 15 seconds several of them are a minute or more I mean the majority are a minute or more if you look through the receipts that I pointed out in The record you can see the transactions process now part of that is because we have a computerized point-of-sale system And you can see the receipts are itemized or clearly computer generated and so you can process these two transactions Simultaneously you can but so you've got one declaration yes, sir

[00:06:38] Speaker 02:
And I think a series of customer statements were before the agency.

[00:06:42] Speaker 02:
For whatever their words.

[00:06:45] Speaker 02:
None of them describe a specific transaction or even, I think, over that one of the transactions and one of the patterns was actually conducted in the way that the Brown declaration speculates.

[00:07:03] Speaker 02:
Is that right?

[00:07:05] Speaker 04:
To begin with, I don't believe the Brown affidavit speculates.

[00:07:07] Speaker 04:
I think that's personal knowledge.

[00:07:09] Speaker 04:
But outside of that, the receipts support that.

[00:07:11] Speaker 02:
It has to be personal knowledge sufficient to create a genuine dispute of material fact.

[00:07:15] Speaker 02:
And when you have patterns of hundreds of transactions and Mr. Brown doesn't contest a single one or even a range of the transactions at issue, doesn't connect the dots to create a dispute, how is that enough to carry the burden on summary judgment?

[00:07:34] Speaker 04:
I think it's important for the court to consider.

[00:07:36] Speaker 04:
It's not that Mr. Brown is expected, or Brother's Markets are expected to address each and every single one of these transactions.

[00:07:42] Speaker 02:
But he doesn't address a single, not a customer, not a cashier, not even Mr. Brown addresses a single transaction.

[00:07:48] Speaker 02:
That's what the receipts do.

[00:07:49] Speaker 04:
And particularly Brothers Market 2.

[00:07:50] Speaker 04:
We have many more receipts in Brothers Market 2, including receipts that are very close in time, that show these transactions legitimately processing.

[00:07:57] Speaker 02:
Well, the receipts could just as much.

[00:07:59] Speaker 02:
Of course, there's going to be a receipt for even an illegal transaction, even a trafficking transaction.

[00:08:04] Speaker 02:
I think that's the agency's theory, that if you have a receipt for $100 and everything adds up, there's not even anything in the record or even an argument

[00:08:13] Speaker 02:
That does the math that would show for example why we'd see a couple dozen 99 and $100 transactions or anything time again There's there's a lot of evidence stacked against your client And there's just no narrative no sworn narrative in the record that directly refutes it You've got receipts over here, but there's no declaration that's explaining the receipts you do that in your briefs and

[00:08:43] Speaker 02:
You have the declaration over here, but the declaration doesn't identify the specific transactions that they're contesting.

[00:08:48] Speaker 02:
So how is that enough?

[00:08:50] Speaker 04:
Well, again, it's not the specific transactions.

[00:08:52] Speaker 04:
It's the transaction characteristics that the agency indicates are indicative of trafficking.

[00:08:56] Speaker 04:
Now, the other alert scan you just referenced is scan A2.

[00:09:00] Speaker 04:
And this is part of the problem that we talked about in whether or not this is actually admissible information coming from the agency.

[00:09:06] Speaker 04:
Scan A2 goes into effect in 2019.

[00:09:08] Speaker 04:
It's never tested.

[00:09:09] Speaker 04:
It's never statistically correlated.

[00:09:11] Speaker 04:
to trafficking to begin with.

[00:09:13] Speaker 04:
So the fact that there's 57 transactions out of 7,200 that happen to be in this $3 range doesn't necessarily mean anything evidentially unless you have some sort of nexus between that and the act of trafficking.

[00:09:25] Speaker 02:
Is that disputed, though?

[00:09:26] Speaker 02:
I mean, is there anything there that shows that, well, you could ring that up.

[00:09:34] Speaker 02:
I mean, for example, five containers of Nescafe ends up to be $100 or some other containers.

[00:09:40] Speaker 04:
There's no one who actually says that that's what they were purchasing That's what the receipts show that that's what they were purchasing on those transactions and I understand that the court's Frustration if I had every receipt certainly this would be a different store Well, you don't even have a cashier who says that I rang this up for a customer who says that I purchased this the bottom of the receipts and the customers are a different Complicated issue I'll get to in a moment the bottom of the receipt indicates which cashier is to was there is no record?

[00:10:07] Speaker 04:
I'm sorry, there's no affidavit in the record from those exact cashierists.

[00:10:11] Speaker 04:
I believe by the time we got to judicial review, they'd moved on and are not located, not capable of being located.

[00:10:16] Speaker 04:
The households are a different can of worms.

[00:10:18] Speaker 03:
But just to clarify on that judge Johnson mentioned the the 99 and $100 transactions and that this is a brothers market to issue it is I Didn't think that you did have receipts for those transactions Have you produced receipts to explain those I believe we had some so those are 99 and $100 those these transactions are duplicative right so you can have an alert scan that has the same transaction listed four times as long as it meets the criteria for all four

[00:10:49] Speaker 04:
So the fact that these transactions came to $99 and $100, there's a number of $100 receipts in the record.

[00:10:54] Speaker 04:
There's some $99 receipts in the record.

[00:10:56] Speaker 01:
Are you saying those receipts don't reflect actual purchases?

[00:11:00] Speaker 04:
No, ma'am.

[00:11:01] Speaker 04:
I'm saying they reflect actual, legitimate food purchases.

[00:11:04] Speaker 04:
And because we were here on summary judgment, this is an issue where we were supposed to be viewing the evidence in a light most favorable to the retailer.

[00:11:11] Speaker 04:
And again, I go back to the Euclid Market case, where we had a retailer who had some receipts, not all receipts,

[00:11:17] Speaker 04:
had very similar explanations to what this retailer has offered here.

[00:11:21] Speaker 04:
And the court allowed it to proceed to trial.

[00:11:23] Speaker 01:
Where are the receipts in the record for the $99 and $100 purchases?

[00:11:28] Speaker 01:
Where are those in the record?

[00:11:30] Speaker 04:
So if I may for just a moment.

[00:11:37] Speaker 01:
And because we have two- How many transactions were at issue in that category?

[00:11:42] Speaker 04:
So there were 50, I'm going to estimate, there were 57 transactions.

[00:11:46] Speaker 04:
that were at issue in that particular category.

[00:11:48] Speaker 04:
That's A2.

[00:11:49] Speaker 01:
And how many receipts were there?

[00:11:52] Speaker 04:
Off the top of my head, I can't tell you exactly how many receipts satisfy that.

[00:11:54] Speaker 01:
Can you tell us where we can go in the record to verify?

[00:11:57] Speaker 04:
Yes.

[00:11:57] Speaker 04:
So it's going to be exhibit E in both records.

[00:12:01] Speaker 04:
Brothers 2 is what I have in front of me right now.

[00:12:03] Speaker 04:
So for example, ER 359, and that's going to be AR 511, is going to be where those receipts are located.

[00:12:11] Speaker 01:
This is Brothers 2.

[00:12:12] Speaker 04:
This is Brothers 2.

[00:12:16] Speaker 04:
And the issue that we have, obviously, with both of these cases combined is there's a lot of documents to go around between the two.

[00:12:21] Speaker 04:
And there is differences between the two cases.

[00:12:24] Speaker 04:
With respect to Brothers One, they're located in the ballpark of ER 404.

[00:12:29] Speaker 04:
That's the beginning of my notes on them.

[00:12:31] Speaker 04:
So they're about ER 400.

[00:12:33] Speaker 04:
And again, those receipts show that the transaction characteristics that the USDA has identified as indicative of trafficking are not actually indicative of trafficking.

[00:12:44] Speaker 04:
Final issue I wanted to touch on.

[00:12:46] Speaker 04:
They show that they're legitimate purchases that these people are shopping the way that my client is saying that they shop So I've gone through that range and don't see a single receipt for a transaction between a hundred or ninety nine dollars by brothers which case market to brothers market to Well, I wait for mr.. Varshavis.

[00:13:05] Speaker 04:
I'll look through the record specifically but again, and I've got about 30 seconds before I'm going to step aside with respect to

[00:13:13] Speaker 04:
alert scan A2.

[00:13:14] Speaker 04:
This is not, there is no evidence anywhere that those particular transactions correlate to trafficking.

[00:13:20] Speaker 04:
I talk sort of extensively in the reply brief, so I won't hit it too much here.

[00:13:24] Speaker 04:
But the way that Congress set this up, the idea was to disqualify retailers quickly who they felt like were trafficking, and then to allow these retailers to go all the way through the judicial process under 7 U.S.C.

[00:13:36] Speaker 04:
2023 and have the entire case exposed to the federal evidentiary code.

[00:13:41] Speaker 04:
I'm going to go ahead and yield my time.

[00:14:00] Speaker 00:
Good morning, Your Honors.

[00:14:01] Speaker 00:
Assistant United States Attorney Zach Varshovy on behalf of the United States may please the court.

[00:14:08] Speaker 00:
Appellant's arguments fail under the law of this circuit and the relevant statutory text.

[00:14:14] Speaker 00:
Under Kim, the burden is on the retailer to create a genuine dispute of material fact as to whether they trafficked.

[00:14:22] Speaker 00:
And much of what is in appellant's briefing and much of their argument is an attempt to distract from that burden, which is firmly placed on them to produce competent evidence outside of the administrative stage.

[00:14:37] Speaker 00:
As to their complaints as to what transpired at the administrative stage, this court made clear in Kim that the administrative process satisfies the strictures of procedural due process.

[00:14:51] Speaker 00:
And that's why in this trial de novo setting, they can go outside of what happened administratively.

[00:14:57] Speaker 00:
They can track down their customers and ask their customers to explain the transactions.

[00:15:01] Speaker 00:
They can ask their employees to explain whether they process these flagged transactions the agency provided to them

[00:15:07] Speaker 00:
But in great detail each of the specific flag transactions as to the date the time the amount and the second mr. Varshovy how much would be enough for the plaintiff to contest to Defeat this this is kind of the pattern transaction issue sure I I think that for purposes of summary judgment the retailer should put forward a preponderance of

[00:15:33] Speaker 02:
Evidence and explanations as to why customers are shopping in these unusual ways at their store as opposed to we have lots of explanations I mean, I think I think that's the area that's the Declaration and the arguments are replete with explanations for the shopping patterns but if we're if Even then there's the assertion well

[00:15:58] Speaker 02:
How do you explain these particular sets of transactions do they have to come up with receipts for all of them?

[00:16:05] Speaker 00:
Not necessarily that they specifically have to produce receipts, but they do need to provide into your honors point earlier sworn Explanations they can do so in a variety of ways they're not limited if the explanation I mean for the explanation that's been suggested for the the large transactions like you know the six cases of coffee right is

[00:16:25] Speaker 03:
That the customers are reselling them right which is I think a violation of the rules on the part of the customer But it's not the stores job to police that is it well the store is obligated to prevent trafficking directly and indirectly the store has to Like make sure that the customers aren't going to resell the stuff that they're buying if the store is aware that that's happening Then the store is not permitted to conduct that transaction did the agency charge that?

[00:16:53] Speaker 00:
No, your honor

[00:16:54] Speaker 02:
OK, so that's not an issue here.

[00:16:56] Speaker 02:
So in other words, if we point to these large transactions and the instant coffee transactions, if that's the explanation, why isn't that enough to defeat that suspicion as to those large transactions?

[00:17:11] Speaker 00:
Well, that's only a thimbleful out of the ocean full of transactions that were flagged.

[00:17:16] Speaker 00:
And so, sure, they can explain that certain transactions were these large, vast purchases of Nescafe, which is reflected in their receipts.

[00:17:25] Speaker 00:
But to the district court's point, that only reflects what was entered.

[00:17:28] Speaker 00:
It still could be a fraudulent transaction.

[00:17:31] Speaker 00:
And they're not explaining why

[00:17:33] Speaker 00:
These households were spending in this fashion at their stores opposed to the other 57 and 58 stores within a one mile radius for such large transactions that would be better stocked I mean I guess they did explain that they have you because of where they're located like sort of a different population that maybe is more likely to engage in this sort of behavior and

[00:17:54] Speaker 03:
Moment ago you said they didn't have sworn explanations here.

[00:17:57] Speaker 03:
You're not suggesting that they need an explanation a declaration from the customer admitting to Engaging in trafficking are you no your honor, but they okay?

[00:18:07] Speaker 03:
So then what I mean they've sort of they've got receipts that are consistent with their view of how it works They have a declaration from mr.. Brown describing the customer population at least with respect to the

[00:18:21] Speaker 03:
And you have another issue, too, but with respect to the large transactions, what more would they need to do?

[00:18:27] Speaker 00:
I think that what they also could have done is have their own employees provide affidavits explaining.

[00:18:35] Speaker 00:
Specifically, I conducted these transactions on these dates.

[00:18:38] Speaker 00:
These customers were purchasing unusually large amounts for these very reasons and providing those swarms.

[00:18:45] Speaker 03:
But for these reasons, how on earth does the clerk know the reason?

[00:18:52] Speaker 03:
They're not required to and in my experience like I don't think I've ever been asked by a clerk at a grocery store You know why are you purchasing these items?

[00:19:01] Speaker 00:
Sure, I should be more specific your honor only in the sense that the actual cashiers could explain the nature of what was happening as to these large purchases so for instance if it was Nescafé front where the employee would ever under penalty of perjury that customers were coming in and

[00:19:19] Speaker 00:
with huge armfuls of Nescafe and checking out at our small checkout counter with no baskets.

[00:19:25] Speaker 00:
or carts.

[00:19:26] Speaker 00:
That would be something to go off of.

[00:19:28] Speaker 00:
But they don't even provide that.

[00:19:30] Speaker 00:
They had the opportunity to do so under the de novo review under 7 USC 2023, where they could go outside the administrative record.

[00:19:38] Speaker 00:
They had the opportunity to produce that kind of evidence, and they chose not to.

[00:19:42] Speaker 03:
Is it the agency's view that the receipts are not genuine?

[00:19:51] Speaker 03:
Because we have a declaration from Mr. Brown, and I think he says these are

[00:19:55] Speaker 03:
actual receipts from the store.

[00:19:57] Speaker 03:
So I mean, one possibility is that he's lying and that the receipts are just made up.

[00:20:02] Speaker 03:
But unless the receipts are just made up, it seems like that is reflective of transactions that people engaged in, right?

[00:20:14] Speaker 00:
They are reflective, Your Honor, but only of a small portion of the transaction.

[00:20:17] Speaker 00:
So there's other categories and types of transactions that were flagged as well, such as benefit-depleting transactions, the rapid transactions, the transactions in $99 and $100 and a varying amount of cents and change.

[00:20:31] Speaker 00:
And so the receipts can only explain so much for them to carry their burden that's placed on them under Kim.

[00:20:39] Speaker 00:
And so that's really the issue, is that the receipts only go so far.

[00:20:43] Speaker 00:
Even if each and every one of the receipts in the small amount corresponded to certain flag transactions, and some of them did, it still doesn't explain all the other suspicious patterns that were flagged and the shopping behavior there, and why it occurred at their store, as opposed to any of the other 36 or 37 other convenience stores within the one-mile radius.

[00:21:05] Speaker 02:
I think the markets frame this as maybe an issue of

[00:21:10] Speaker 02:
Whether there is the patterns were expert testimony or some of these but there is this I guess concern setting those evidentiary questions aside that this is Trial by spreadsheet that you that there's a long list of these transactions there is There's a charging document, and there's there's kind of argument as to what these patterns show

[00:21:40] Speaker 02:
to which we have a declaration that provides a threadbare but minimal response to explaining those transactions.

[00:21:49] Speaker 02:
And I guess I'm wondering from the agency side, where's the narrative theory that's kind of tying this all together from your end?

[00:21:59] Speaker 02:
I mean, we can't take the agency's speculation to grant summary judgment certainly any more than we could take the owner's explanation to deny it.

[00:22:09] Speaker 00:
Sure.

[00:22:09] Speaker 00:
A couple of responses, Your Honor.

[00:22:11] Speaker 00:
So as to the actual admissibility of the flagged transactions, Congress expressly permitted the agency under 7 USC 2021 A2 to base permanent disqualifications on transaction reports and inconsistent redemption data.

[00:22:29] Speaker 00:
But two, I want to emphasize, Your Honors, that was merely the starting point of the agency's analysis.

[00:22:33] Speaker 00:
It built on those flag transactions and this is at the case analysis document where it compared the average amount of the transactions to the state and county average.

[00:22:44] Speaker 00:
It compared those transactions to other nearby stores of a similar categorization, the convenience stores.

[00:22:50] Speaker 00:
It also, the agency did an in-store in-person inspection where it documented the inventory, the nature of the store and its layout as well as its stock.

[00:23:02] Speaker 00:
And then, too, the agency also did a household analysis and looked at specific shopping patterns of the households that shopped there.

[00:23:13] Speaker 00:
And so the respective case analysis document that lays out all this body of evidence is in Brother's Market 1, ER 99 to 137, and Brother's Market 2 is in ER 93 through 137.

[00:23:26] Speaker 00:
And so there's quite a bit of circumstantial evidence found and supported

[00:23:31] Speaker 03:
That the store had trafficked and and that's the schemes that congress expressly permitted and so if we think I mean Even assuming that there's no fraud right if we just look at all the stores that They use snap benefits And we make a list of you know how many large transactions do you have?

[00:23:51] Speaker 03:
How many you know close-in-time transactions?

[00:23:53] Speaker 03:
Do you have there's going to be some range right and and somebody is going to be an outlier and

[00:24:00] Speaker 03:
So one thing that's just a little bit odd about this whole mode of proceeding is that we It's not clear to me Having read the report I understand that they're an outlier on these metrics But it's not clear to me why that is enough to raise an inference that they're engaging in trafficking as opposed to just you know

[00:24:26] Speaker 03:
In the spectrum of stores that there are they happen to be at one end of the distribution, so what do we do with that I?

[00:24:34] Speaker 00:
Think that With respect to our it's was that the transaction spread over five months.

[00:24:41] Speaker 00:
It was a significant period of time So it was I would submit that were this an aberrant one-off transaction or just a small handful of transactions we might be talking about something quite different, but this was a whole slate of transactions over five months that then

[00:24:56] Speaker 00:
Two, did not get explained away by the in-store inspection, by the household shopping analysis, by the nature and stock of the store as opposed to other larger stores within the one mile radius.

[00:25:07] Speaker 00:
There were so many attempts to try and explain away the aberrant nature and fraudulent nature of the transactions and the patterns therein.

[00:25:14] Speaker 00:
And it never held up, even with what the retailer had the opportunity to submit.

[00:25:20] Speaker 00:
The nondescript bank statements did not explain this shopping behavior.

[00:25:23] Speaker 00:
The credit card statements didn't do that.

[00:25:26] Speaker 00:
The photos they provided did not do that.

[00:25:28] Speaker 00:
The receipts only covered so little.

[00:25:31] Speaker 00:
And then two, they always had access to their employees.

[00:25:33] Speaker 00:
And they also were able to get affidavits from their customers.

[00:25:37] Speaker 00:
They could have had explanations from

[00:25:40] Speaker 00:
their employees and their customers as to why these transactions were happening in the manner that they were.

[00:25:45] Speaker 02:
Well, I guess, you know, had this been a trial on the briefs, I think, you know, that would be pretty powerful in terms of respect to burdens of production, et cetera.

[00:25:54] Speaker 02:
But going to Judge Miller's question that there's no permissible inference here.

[00:26:00] Speaker 02:
A reasonable jury could not.

[00:26:04] Speaker 00:
Find based on this record that These were these patterns were all fraudulent No, your honor, and that's because they did not go beyond what was submitted a straight administratively other than the self-serving affidavit that the district court found submitted by Brad Brown where he did not explain that he actually conducted any of these transactions and all the other patterns that were flagged as suspicious and

[00:26:34] Speaker 00:
And so under this court's precedent, Kim, the burden really is on the retailer to establish a genuine... Yeah, the problem is, I guess, Kim is helpful only to a point.

[00:26:47] Speaker 02:
I mean, Kim, you're dealing with direct personal narrative evidence of the fraud.

[00:26:52] Speaker 02:
And again, we're just dealing with these spreadsheets of transactions that are alleged to be patterns.

[00:26:59] Speaker 00:
Fair enough and I would direct the court to this court's decision in pawn pawn is more recent case in time in 2021 that is on all fours compared to this case in terms of the numerous patterns of flag transactions that were not explained and Instead the only response that the retailer had provided was this Self-serving affidavit, which is not sufficient to defeat summary judgment, but pawn isn't published so we can't rely on that

[00:27:26] Speaker 00:
Fair enough, Your Honor.

[00:27:27] Speaker 00:
It is still persuasive authority, and it does lay out in very detailed fashion the relevant key points that the agency is allowed to rely on this exact type of evidence under 2021-A2, and two, that the retailer needs to explain at summary judgment the nature of the transactions.

[00:27:47] Speaker 00:
And it's as true as it was then, as it is in this case, they did not do so.

[00:27:54] Speaker 00:
See I'm low on time if court has no further questions.

[00:27:57] Speaker 04:
I'll submit Thank you your honor's Thank you your honor briefly to answer the court's question right before I sat down there is one transaction receipt in the brothers market to case that pertains to Scan a to that's going to be a $99.99 transaction located at

[00:28:24] Speaker 02:
Er 386 that correlates with transaction number eight from the charge letter and that's out of about 50 plus transactions in those I think that's a good example here, so you've We've got an ocean of 50 plus transactions that are alleged to be a pattern is one Substantiating receipt if we take it as such enough to create a genuine issue There's the Rhode Island case.

[00:28:51] Speaker 04:
Let me go pull the case name on that I think

[00:28:54] Speaker 04:
talks, and that's Lucius versus Rhode Island, 2018 U.S.

[00:28:58] Speaker 04:
District Court, Lexus 54357.

[00:29:03] Speaker 04:
This case talks specifically about the dangers of raw data interpretation.

[00:29:08] Speaker 04:
Our argument here is that that's pure chance.

[00:29:10] Speaker 04:
Whether or not there's a lot of transactions that land in 99 or $100 is pure chance.

[00:29:15] Speaker 04:
The government has offered that as indicative of trafficking, but has never provided an evidentiary support for that particular correlation.

[00:29:24] Speaker 04:
And that's why, again, I know I've argued this a thousand times and the courts probably think that I'm crazy, but the way that the 7 USC 2021 subsection A2 was set up was to allow the administrative process to move forward very quickly.

[00:29:39] Speaker 04:
They're allowed to use these EBT alert scans to be able to issue initial disqualifications.

[00:29:44] Speaker 04:
It was not to excuse the government's performance in showing that the evidence that they relied upon is admissible.

[00:29:50] Speaker 04:
And the Sanders case talks about that specifically.

[00:29:52] Speaker 04:
Just because it was OK at the administrative level does not mean that it's OK before the judiciary.

[00:29:59] Speaker 04:
We have to go through the evidentiary process.

[00:30:01] Speaker 04:
These are statistics.

[00:30:03] Speaker 04:
They're subject to federal rules of evidence 702 and 701.

[00:30:07] Speaker 03:
Can I ask you a question along these lines?

[00:30:13] Speaker 03:
You're right that as a matter of pure chance, you would expect some number of round number transactions.

[00:30:20] Speaker 03:
The government thinks that you're an outlier in terms of the number that you have.

[00:30:27] Speaker 03:
This seems to be something that one side or the other could put in some expert statistical analysis on to explain that the number is or is not greater than might be expected from random variation.

[00:30:42] Speaker 03:
Whose burden is it to do that?

[00:30:44] Speaker 04:
It's the government's, your honor.

[00:30:46] Speaker 04:
The government is offering this evidence to indicate that trafficking exists.

[00:30:49] Speaker 04:
Now obviously we're still, we have the burden of proof to show that trafficking did not exist, but for the government's part, they rely entirely upon these alert scans.

[00:30:58] Speaker 04:
And the government offering them as indicative of trafficking means that they have to find a mechanism that they can use to bring it into the court for consideration.

[00:31:07] Speaker 04:
When you go through the case analysis document, as Mr. Varshovy pointed out, it's rote speculation.

[00:31:12] Speaker 04:
Everything that the program specialist does is he guesses about why the household would or would not do that.

[00:31:18] Speaker 04:
And when they pick comparison stores, as we pointed out in both of our briefings to the district court, those comparison stores closed at 6 o'clock or 8 o'clock at night.

[00:31:27] Speaker 04:
You see these spikes in the transactions that happen at my client's stores, which are in the same general area.

[00:31:32] Speaker 04:
starting in the evening.

[00:31:33] Speaker 04:
It's because these are the only two stores in existence.

[00:31:35] Speaker 04:
So I believe from our standpoint, we're arguing that these transaction characteristics are not indicative of trafficking.

[00:31:41] Speaker 04:
I think we met our burden for summary judgment.

[00:31:46] Speaker 01:
So are you saying that the district court erred in receiving this information as part of the summary judgment proceedings?

[00:31:55] Speaker 04:
Yes, Your Honor.

[00:31:56] Speaker 04:
We argued before the district court that this was inadmissible and could not be considered by the court.

[00:32:00] Speaker 01:
So the district court

[00:32:02] Speaker 01:
did not accept your argument.

[00:32:03] Speaker 01:
So where is the error?

[00:32:06] Speaker 04:
The error is on a legal basis, in order to be able to consider that information, it would have had to have satisfied some rule of evidence for admission.

[00:32:13] Speaker 04:
And we contested that it shouldn't have been considered under the Rule 56 motion, because it didn't comply with the evidentiary requirements thereof.

[00:32:19] Speaker 01:
Evidentiary requirement, did it fail to comply with?

[00:32:22] Speaker 04:
So you're not allowed to just simply put in affidavits that aren't of personal knowledge, right?

[00:32:27] Speaker 04:
I think Sanders talks about that specifically.

[00:32:29] Speaker 01:
But if someone has reviewed

[00:32:31] Speaker 01:
information that's in the possession of the agency and summarizes that evidence.

[00:32:40] Speaker 01:
Why is that inadmissible?

[00:32:42] Speaker 04:
They do not have, so I believe it was John Yorgerson in this case who is the head of the administrative and judicial review branch.

[00:32:48] Speaker 04:
He verified that the administrative record was accurate.

[00:32:50] Speaker 04:
That was what his representation was.

[00:32:52] Speaker 04:
Brian Ahern was the program specialist who actually did all the analysis and work.

[00:32:56] Speaker 04:
Section Chief Okunovic is the one who reviewed it and made the decision.

[00:33:00] Speaker 04:
Mr. York.

[00:33:02] Speaker 01:
So is it your objection specifically lack of personal knowledge?

[00:33:06] Speaker 01:
Is that your objection?

[00:33:07] Speaker 04:
I mean technically it's a violation of rule 701 which requires that any specialized mathematical or statistical information, scientific information has to be admitted under 702 with an expert.

[00:33:17] Speaker 04:
Agency didn't name anyone as an expert, certainly not Mr. Yorgeson.

[00:33:21] Speaker 04:
So there's no vehicle for this information.

[00:33:23] Speaker 01:
So your objection is that because there was no expert,

[00:33:27] Speaker 01:
Testimony this evidence was inadmissible.

[00:33:29] Speaker 01:
Yes, your honor.

[00:33:29] Speaker 03:
That's correct When you stood up at the beginning of this rebuttal yes, I'm sort of make sure I got it was it er 386 er 386 that's Brothers Market to and then because I'm looking at that and that's a $27.85 or six cents I'm showing ar 538 in the bottom right hand corner of that page This is to oh That's that's your 380.

[00:33:56] Speaker 03:
I think

[00:33:57] Speaker 03:
So 386 that's a 99 dollar 99 cents.

[00:34:00] Speaker 03:
Yes, your transaction.

[00:34:01] Speaker 03:
I see.

[00:34:02] Speaker 03:
Okay.

[00:34:03] Speaker 04:
Thank you I believe I've exhausted my time.

[00:34:05] Speaker 01:
All right.

[00:34:05] Speaker 01:
Thank you.

[00:34:05] Speaker 01:
Thank you both counsel for your helpful arguments The case is argued is submitted for decision by the court that completes our calendar for the morning We are in recess until 930 a.m.

[00:34:15] Speaker 01:
Tomorrow morning