Background
Mt. Zion’s Loving Day Care Ministry, a church-based Indianapolis nonprofit, had participated in the federal Child and Adult Care Food Program since 1999. The program reimburses institutions for meals and snacks served to children and other eligible participants, while state agencies administer federal compliance rules. Mt. Zion served more than 100 children, most from underserved communities. Indiana’s Department of Education reviewed the day care in 2015 and 2018, found meal-pattern problems, and accepted corrective action both times.
A delayed 2022 review identified missing child-nutrition labels, inadequate documentation, and several meal-pattern deficiencies. Mt. Zion attributed part of the problem to difficulty obtaining labels from its food distributor, Sysco. After an initial plan was rejected, Mt. Zion submitted a revised plan that DOE accepted as having “fully and permanently corrected” the deficiencies. DOE nevertheless warned that recurrence would trigger immediate proposed termination without another chance to correct. A 2023 review found recurring label and meal-pattern issues. DOE proposed termination and seven-year disqualification even though the vendor acknowledged the label problem, and it refused to consider Mt. Zion’s later efforts to hire a specialist, buy compliance software, and press Sysco for the records.
An administrative law judge upheld termination, but the Hamilton Superior Court reversed and ordered reinstatement and technical assistance. A unanimous Court of Appeals panel then sided with DOE. The Indiana Supreme Court granted transfer, vacating the appellate opinion, and considered whether DOE’s handling of the recurring deficiency was arbitrary, capricious, an abuse of discretion, or contrary to law under Indiana’s Administrative Orders and Procedures Act.
The Court’s Holding
The Supreme Court affirmed the trial court and reinstated Mt. Zion’s eligibility. Justice Christopher Goff’s opinion recognized that federal regulations required DOE to provide only one corrective-action opportunity after the initial serious-deficiency finding. But the federal program handbook also gave DOE discretion to accept additional corrective action until the administrative hearing began or the hearing officer ruled. DOE did not exercise that discretion case by case. Its blanket policy automatically rejected anything offered after proposed termination, making later compliance work pointless.
The majority distinguished a discretionary denial from a refusal to exercise discretion at all. DOE’s own letter and its representative’s hearing testimony showed that the agency would not consider further correction once termination started. That categorical position ignored relevant evidence: Mt. Zion’s repeated compliance efforts, the vendor’s role in missing labels, the absence of danger to children, and the severe consequences of a seven-year exclusion. Because the program aims to keep eligible institutions serving meals, DOE had to genuinely consider the circumstances rather than treat its authority as unavailable.
DOE also failed its statutory duty to provide sufficient technical assistance. Sending a guide and template that Mt. Zion already possessed did not address the actual obstacle—obtaining and interpreting the required food labels. The Court further found DOE’s notices ambiguous: describing deficiencies as permanently corrected while calling termination only temporarily deferred left unclear when an old deficiency could recur and when the process would begin anew. Justices Massa concurred, and Chief Justice Rush concurred in the judgment. Justices Slaughter and Molter dissented, reasoning that federal law permitted DOE to deny further correction and did not make technical assistance a defense to termination.
Key Takeaways
- An Indiana agency acts arbitrarily when governing law gives it discretion but an unwritten blanket policy prevents any individualized exercise of that discretion.
- Evidence offered after a proposed administrative sanction may remain relevant when the governing program expressly permits the agency to accept corrective action through the hearing stage.
- Statutorily required technical assistance must respond meaningfully to the participant’s identified compliance problem; generic materials may not be sufficient.
- Agency notices should clearly explain whether correction closes a deficiency, merely defers enforcement, or permits a later recurrence to trigger immediate sanctions.
Why It Matters
The decision gives Indiana administrative-law practitioners a strong framework for challenging agency policies that silently convert discretionary authority into an inflexible rule. The key proof came from the agency’s notices and testimony describing what it would never consider. Counsel should build a similar record identifying the source of discretion, the evidence the agency excluded, and the real-world consequences of refusing to evaluate it.
The holding is important beyond child-nutrition programs. Regulated entities facing licensing, eligibility, or disqualification decisions can argue that an agency must actually exercise the discretion the law confers. At the same time, the divided Court shows the limit of the rule: the majority did not create an automatic right to repeated correction. It required an individualized, adequately supported decision and meaningful compliance assistance where federal law requires it.