Divided Court affirms disqualification of provider from food care program, rejecting due process argument that agency failed to follow its own rules and improperly considered post-hearing documentation

 Inre Butterfly Kisses Child Care Center, Inc. , 2025 VT 46 [8/14/2025]

CARROLL, J.   Childcare provider Butterfly Kisses Child Care Center, Inc. and its owner Cindy Boyce1 appeal a decision of the Agency of Education (AOE) to terminate and disqualify provider from participating in the Federal Child and Adult Care Food Program (CACFP) based on provider’s failure to correct noncompliance with program requirements.  Provider argues that the recurring serious deficiencies found by AOE were de minimis and did not require termination.  Provider also argues that the AOE hearing officer committed reversible error by allowing the parties to submit post-hearing documentation.  We hold that hearing officer applied the appropriate standard in terminating and disqualifying provider from the program.  As to the post-hearing submissions, we conclude that provider did not properly preserve this argument for appeal and, in any event, has failed to demonstrate reversible error.  We therefore affirm.

“Generally, administrative agencies must follow their own regulations until they rescind or amend them.”  In re Champlain Parkway SW Discharge Permit, 2021 VT 34, ¶ 12 (collecting cases).  The U.S. Supreme Court adopted an exception in American Farm Lines v. Black Ball Freight Serv., 397 U.S. 532, 538-39 (1970), which allows an agency to waive a procedural rule “adopted for the orderly transaction of business” if the waiver does not result in “substantial prejudice.”  This Court adopted American Farm Lines as a “sound principle of state administrative law.”  Champlain Parkway, 2021 VT 34, ¶ 16.

 

“To invoke the exception, the agency action must first and foremost be consistent with governing statutes. Second, the rule at issue must be a procedural rule adopted for the orderly transaction of business to aid the agency in exercising its discretion, not one intended to confer important procedural benefits upon individuals. Third, the agency action must not substantially prejudice a complaining party. Fourth, the agency action cannot constitute a failure to exercise independent discretion mandated by regulation. Finally, the agency must apply the rule consistently, not arbitrarily, unreasonably, or discriminatorily.” Champlain Parkway, 2021 VT 34, ¶ 17. (citations omitted)

 

The hearing officer’s action to allow post-hearing submissions by both parties meets this test. The limit on post-hearing memoranda is a “procedural rule” aiding the agency in exercising its discretion and is not intended to confer “important procedural benefits upon individuals.” It allows the review process to conclude in an efficient manner.

 

 The dissent claims that the rule against post-hearing submissions is meant to ensure that centers have a meaningful opportunity to respond to AOE materials.  But the allowance of post-hearing submissions had no impact on provider’s ability to respond. The hearing officer here allowed post-hearing submissions by both parties and provider filed its own post-hearing memoranda and also responded to AOE’s filing.

 

The  hearing officer allowed post-hearing submissions for a valid procedural reason and with fairness to both sides.  Allowing post-hearing submissions in this instance was not arbitrary or discriminatory and did not prejudice provider.  The hearing officer’s decision thus fell within the American Farm Lines exception.  

 

Affirmed.

 

 COHEN, J., joined by Chief Justice Reiber, dissenting.   The Vermont Agency of Education (AOE) terminated and disqualified petitioners Butterfly Kisses Child Care Center, Inc., and its owner, Cindy Boyce, from participation in the federal Child and Adult Care Food Program (CACFP) based on a hearing officer’s finding that, although there was no evidence of intentional dishonesty or fraud, petitioners nonetheless failed to fully and permanently correct certain “serious deficiencies” by stringently satisfying each of the procedural commitments in their corrective-action plan.  Ironically, however, AOE failed to adhere to its own administrative-review procedures in reaching this decision because the hearing officer summarily waived a rule barring post-hearing submissions.

 

 The majority concludes that petitioners did not preserve their challenge to this ruling, but nonetheless proceeds to analyze the issue, reasoning—in what I view as dicta—that the agency had discretion to waive this rule under the exception first articulated by the U.S. Supreme Court and adopted by this Court in In re Champlain Parkway SW Discharge Permit, 2021 VT 34.

 

I would instead conclude that petitioners’ argument is preserved, and that the Champlain Parkway exception does not apply because AOE’s bar on post-hearing submissions confers an important procedural benefit on those facing termination and disqualification from CACFP participation: it secures the fundamental requirement of due process, which is the right to be heard at a meaningful time and in a meaningful manner.  I conclude that the hearing officer lacked discretion to waive the rule and would reverse and remand for a fresh hearing. I therefore respectfully dissent.