“De Minimis No Longer” – Vermont Supreme Court Affirms Mandatory Disqualification for Recurring CACFP Deficiencies and Clarifies Agency Waiver of Procedural Rules

Introduction

In In re Butterfly Kisses Child Care Center, Inc. & Cindy Boyce, 2025 VT 46, the Vermont Supreme Court confronted two intertwined questions of administrative and programmatic law:

Whether repeated, allegedly “minor” violations of the federal Child and Adult Care Food Program (CACFP) rules can compel a State agency to terminate and permanently disqualify a childcare provider; and
Whether an Agency of Education (AOE) hearing officer could accept post-hearing written submissions despite an internal procedural rule stating that “no further evidence or argument shall be received after the hearing.”

The petitioners—Butterfly Kisses Child Care Center, Inc. and its owner, Cindy Boyce (“provider”)—operated two rural Vermont childcare facilities serving roughly one hundred children. Having been cited for recurring “serious deficiencies,” they appealed AOE’s proposed termination and disqualification from CACFP participation. The Supreme Court’s opinion, authored by Justice Carroll for a unanimous panel with a two-Justice dissent, sets clear precedent on the non-discretionary nature of CACFP termination once serious deficiencies re-occur and articulates the circumstances under which an agency may waive its own procedural rules for the sake of administrative efficiency without infringing due-process rights.

Summary of the Judgment

The Court affirmed AOE’s decision to terminate and disqualify the provider, holding that:
- Federal regulations define “serious deficiencies” exhaustively; once a deficiency recurs after a deferred determination, AOE must initiate termination and disqualification—regardless of the provider’s characterization of the errors as “de minimis.”
- The hearing officer correctly limited the scope of review to AOE’s compliance with federal procedures, not to a re-litigation of the “serious-deficiency” label itself (which the regulations say is not reviewable).
The Court held that the provider failed to preserve an objection to post-hearing submissions, and in the alternative that the hearing officer’s acceptance of such filings fell within the “American Farm Lines” exception permitting agencies to waive purely procedural rules that do not confer substantial rights and where no prejudice is shown.
The dissent (Justice Cohen, joined by Chief Justice Reiber) argued the opposite: that the bar on post-hearing submissions does confer an important procedural benefit (the right to confront evidence timely) and therefore is not waivable under Champlain Parkway.

Analysis

A. Precedents Cited

American Farm Lines v. Black Ball Freight Serv., 397 U.S. 532 (1970)
• Established that an agency may waive its own housekeeping-type procedural rules if no party is substantially prejudiced. The majority uses this as the backbone for approving post-hearing filings.
In re Champlain Parkway SW Discharge Permit, 2021 VT 34
• Vermont adoption of the American Farm Lines doctrine, adding a five-factor test. The majority found all factors satisfied; the dissent found factor 2 (rule confers important procedural benefit) unsatisfied.
Beasley v. Dep’t of Labor, 2018 VT 104
• Standard of review for agency findings (clearly erroneous) and legal conclusions (reasonable). Basis for Supreme Court deference to hearing officer.
Goldberg v. Kelly, 397 U.S. 254 (1970)
• Classic due-process case; cited for requirement of notice and an opportunity to be heard. Majority found those elements satisfied here.
Multiple federal CACFP regulations: 7 C.F.R. §§ 226.1-226.27; particularly § 226.6(c)(3) (serious-deficiency process) and § 226.6(k) (administrative review).

B. Legal Reasoning

Mandatory nature of termination once deficiencies recur.
The Court emphasized statutory language requiring that the state agency “must move immediately” to termination if a deficiency recurs after a deferred determination. Because the provider’s documentation errors (missing enrollment forms, mis-classification of income eligibility, etc.) matched listed serious deficiencies, AOE had no discretion to overlook them as mere paperwork glitches.
Scope of administrative review is limited by regulation.
7 C.F.R. § 226.6(k)(3)(ii) explicitly removes the underlying “serious-deficiency determination” from appellate review. Accordingly, the hearing officer—and the Supreme Court—examined only whether AOE followed correct procedures after finding the deficiencies.
Preservation of objections.
The provider did not voice its rule-based objection to post-hearing filings until after the hearing had closed. The Court held that objections must be timely to give the original tribunal an opportunity to correct course. The provider’s late objection therefore could not be grounds for reversal.
Waiver of procedural rules under American Farm Lines.
Even if preserved, the Court reasoned, the hearing officer’s deviation was permissible because:
- The rule is “procedural,” designed for orderly business and timeline compliance, not to secure substantive rights.
- No prejudice: AOE’s written submission introduced no new adverse evidence, and provider was allowed a written rebuttal.
- Independent discretion and non-discrimination were established: both sides could file; aim was to avoid a costly second hearing and meet the federal 60-day decision deadline.

C. Likely Impact

Higher Compliance Bar for CACFP Institutions
The Court signals that even “common paperwork mistakes” qualify as serious deficiencies if recurring. Childcare centers should expect zero tolerance once a corrective action has been marked “fully and permanently” resolved.
Administrative Procedure Doctrine
The decision fortifies Vermont’s embrace of the American Farm Lines/Champlain Parkway waiver doctrine, clarifying that a petitioner must show actual prejudice to undo an agency’s departure from internal procedural rules.
Dissent as Cautionary Note
Practitioners should note the two-Justice dissent emphasizing due-process implications. Future litigants may leverage that reasoning where late-filed agency evidence is more genuinely prejudicial.
Preservation Warning
The case reiterates the importance of contemporaneous objections in administrative hearings; delayed due-process claims will seldom succeed on appeal.

Complex Concepts Simplified

Serious Deficiency: A regulatory label under 7 C.F.R. § 226.6(c)(3) for specific non-compliances (e.g., bad record-keeping, meal eligibility errors). It triggers a formal corrective-action process and, if repeated, mandatory termination.
Deferred Serious Deficiency: If a provider’s corrective plan “fully and permanently” fixes the original issues, the State “defers” (pauses) the deficiency status. Any recurrence removes the deferral and automatically leads to termination/disqualification.
Administrative Review: An internal appeal within the agency, limited by regulation. Some determinations—like the initial finding of a serious deficiency—are not reviewable, but the proposed termination/disqualification is.
American Farm Lines Exception: A U.S. Supreme Court rule allowing agencies to waive minor procedural rules they created for housekeeping purposes provided there is no substantial prejudice. Vermont adopted a five-factor version in Champlain Parkway.
Preservation of Error: The principle that a party must raise an objection when the alleged error occurs; otherwise appellate courts will not consider it.

Conclusion

The Vermont Supreme Court’s decision in In re Butterfly Kisses serves as a dual precedent. Substantively, it underscores that recurring violations—no matter how small—strip the State of discretion and compel removal from CACFP. Procedurally, it clarifies how and when Vermont agencies may deviate from their own rules without violating due process, reinforcing the high bar for showing prejudice under the American Farm Lines/Champlain Parkway framework. Childcare providers, counsel, and administrators alike must therefore internalize two lessons: meticulous record-keeping is indispensable, and objections must be raised early and specifically if they are to be preserved for judicial review.