Texas Health and Human Services Commission v. Shanressa Craddock

Reversed and Rendered and Memorandum Opinion filed February 5, 2026.

In The

Fifteenth Court of Appeals

NO. 15-25-00010-CV

TEXAS HEALTH AND HUMAN SERVICES COMMISSION, Appellant

V.

SHANRESSA CRADDOCK, Appellee

On Appeal from the 250th District Court
Travis County, Texas
Trial Court Cause No. D-1-GN-22-007315

MEMORANDUM OPINION

A fraudster made a $930 purchase at a Sam’s Club using SNAP benefits
belonging to Shanressa Craddock. Craddock acknowledged that the unauthorized
transaction occurred not through any fault of the Texas Health and Human
Services Commission (HHSC), but because she was scammed into disclosing to an
unknown third party the card and PIN numbers linked to her benefits. After HHSC
denied Craddock’s request to replace the benefits, she filed a suit for judicial
review in district court, which reversed HHSC’s decision and ordered it to restore
the benefits. HHSC now appeals, arguing that its decision is supported by
substantial evidence and consistent with state and federal law. We agree and
reverse and render judgment affirming its decision.

BACKGROUND
The federally funded, state administered Supplemental Nutrition Assistance
Program (SNAP) provides food assistance benefits to low-income households.1 In
Texas, SNAP is administered by HHSC.2 HHSC distributes SNAP benefits to
eligible households through an Electronic Benefit Transfer (EBT) system—an
electronic system in which benefits are “issued to a client via a debit card” called
the Lone Star Card.3 To access the benefits, the “Lone Star Card is swiped at a
retailer location for payment in the same way that a commercial debit card … is
swiped.”4 To complete the transaction, the cardholder must enter a personal
identification number (PIN), which “protects the card from use by unauthorized
people.”5 The amount of the transaction is then deducted from the Lone Star Card
account.6
Shanressa Craddock receives SNAP benefits. On August 19, 2022, she got
the following text message from a number affiliated with
“@yourtexasbenefits.com”:

1
See 7 U.S.C. §§ 2011, 2013, 2020.
2
TEX. HUM. RES. CODE §§ 33.0006, 33.002(a).
3
1 TEX. ADMIN. CODE §§ 372.1510, 372.1511(b), 372.1701(8), (11).
4
TEX. HEALTH & HUM. SVCS., ELECTRONIC BENEFIT TRANSFER PROGRAM,
https://www.hhs.texas.gov/business/electronic-benefit-transfer-program.
5
Id.; see 1 TEX. ADMIN. CODE § 372.1501(9) (“The PIN is used to verify the identity of a
cardholder”).
6
TEX. HEALTH & HUM. SVCS., LONE STAR CARD, https://www.hhs.texas.gov
/services/financial/lone-star-card.

2
Craddock thought the text was from HHSC, and so she called the number. An
automated message prompted her to enter her Lone Star Card number and PIN
number, which she did. The next day, someone used the card and PIN numbers
matching Craddock’s Lone Star Card to make a $930 purchase at a Sam’s Club.7
When Craddock went to buy groceries the following day, she discovered that her
Lone Star Card had a balance of only $0.54. Craddock contacted HHSC and was
told the text message was a scam. Her card was “statused” as stolen as of August,
21, 2022, the day after the unauthorized transaction.
Craddock requested to have her stolen SNAP benefits replaced. HHSC EBT
Operations investigated but, having found no “system error,” denied Craddock’s
request by letter dated September 7, 2022.
Craddock appealed the denial by requesting a fair hearing.8 At the hearing,
Sandra Sosa with EBT Operations testified that they “performed an administrative
review of Ms. Craddock’s account to determine whether the State was at fault for
the reported unauthorized transaction[].” Sosa explained that in conducting the
review, EBT Operations applied Texas Works Handbook Policy B-341 and Texas
Administrative Code Rule 372.1521, which defines a “system error.” EBT
Operations ultimately denied Craddock’s request to replace the benefits because it
“found no system error and no error on the part of State personnel or the State’s

7
As Craddock concedes, this likely occurred through the use of a “cloned card,” or at least
“stolen data.”
8
See 1 TEX. ADMIN. CODE § 357.3 (right to fair hearing regarding certain SNAP-related
actions); see also 7 C.F.R. § 273.15(a) (“Except as provided in § 271.7(f), each State agency
shall provide a fair hearing to any household aggrieved by any action of the State agency which
affects the participation of the household in the [SNAP].”).

3
vendor.”9
Craddock testified that she called the phone number in the text message and
entered her card and PIN numbers, that the message was fraudulent, that she was
scammed, and that HHSC was not at fault. But she asked to have her benefits
replaced because they belonged to her and she thought the situation was unfair.10
By order dated October 13, 2022, the hearings officer sustained HHSC’s
decision to deny Craddock’s request to replace the stolen benefits. He found that
the unauthorized transaction occurred the day before Craddock reported her card
stolen, that there was no card or PIN number error, and that neither HHSC nor one
of its contractors committed an unlawful or erroneous act. He made the following
conclusion of law:
Texas Works Handbook, Section B-341, stipulates the Agency
replaces benefits issued via EBT when lost through unauthorized use
of the account, only if the loss occurred after the individual reports the
Lone Star Card lost or stolen, there has been a EBT card/PIN
issuances error, or when there is unlawful or other erroneous action on
the part of HHSC or HHSC personnel. In this case, the unauthorized
transaction occurred prior to the report, by the Appellant, of a stolen
card. In addition, there were no Agency EBT card or PIN issuance
errors, and there were no erroneous actions made by the Agency.
Therefore, based upon a preponderance of the evidence and testimony
presented, the Agency action to deny replacement of the Appellant’s
stolen SNAP benefits is SUSTAINED.
Craddock requested an administrative review of the fair hearing decision.11
An administrative law judge reviewed the record and authorities and upheld the

9
A different HHSC witness confirmed that the phone number in the text message that
Craddock received is not one of HHSC’s numbers.
10
Craddock also testified that she filed a police report, contacted USDA.gov, and contacted
the Sam’s Club where the unauthorized transaction occurred about obtaining video footage. She
further testified that she had heard from others that the same person who had sent her the
fraudulent text message was responsible for other SNAP-related scams.
11
See TEX. GOV’T CODE § 545.0153 (formerly TEX. GOV’T CODE § 531.019(c)).

4
hearing officer’s decision.
Craddock then filed a suit for judicial review in Travis County District
Court.12 The suit was “governed by Subchapters G and H, Chapter 2001” of the
Government Code and reviewed “under the substantial evidence rule.”13 After
briefing and arguments, the district court signed a final order concluding “that
substantial evidence does not support [HHSC’s] decision to deny replacement
SNAP benefits to [Craddock] under the facts of this case; and that [HHSC’s]
decision to deny replacement benefits to [Craddock] is contrary to law.” The
district court further concluded that HHSC’s “policy in Texas Works Handbook
§ B-341 is outdated, unworkable, and in conflict with the law. See 7 U.S.C.
§ 2020(e)(11); 7 C.F.R. § 273.17(a)(1); 7 U.S.C. § 2016(e); 7 C.F.R. § 276.2(b)(7);
7 C.F.R. § 277.18(m)(1); and 1 Tex. Admin. Code § 372.1519); Skipper v. Duffy,
703 F. Supp. 697 (ND Ill 1988).” The district court ordered HHSC to restore
Craddock’s SNAP benefits in the amount of $930.

DISCUSSION
HHSC argues that substantial evidence supports its decision to deny
Craddock’s request to replace the SNAP benefits because the decision comports
with section B-341 of its Texas Works Handbook and does not conflict with any of
the federal authorities listed by the district court in its final order. Craddock
responds that HHSC’s decision is not supported by substantial evidence because
section B-341 conflicts with the law, a “system error” must have occurred, and the
decision otherwise conflicts with several federal authorities, as the district court
concluded. We agree with HHSC.
Like the district court, our review is governed by the substantial evidence

12
See id. § 545.0154 (formerly TEX. GOV’T CODE § 531.019(d)–(i)).
13
Id. § 545.0154(a)(1), (e)(2).

5
standard. As relevant here, reversal is required when the agency violates a statutory
provision or commits an “error of law,” or when its decision is not “reasonably
supported by substantial evidence.”14 We consider “whether the evidence as a
whole is such that reasonable minds could have reached the conclusion that the
agency must have reached in order to justify its action.”15 The issue “is not whether
the agency’s decision was correct, but only whether the record demonstrates some
reasonable basis for the agency’s action.”16 At the administrative level, HHSC bore
the burden of proof to support its decision by a preponderance of the evidence.17

I. Substantial Evidence Supports HHSC’S Decision
HHSC evaluated Craddock’s request to replace the stolen benefits under
section B-341 of its Texas Works Handbook, a collection of policies that “informs
[HHSC’s] agents as to how to address requests for reimbursement.” The version in
effect then stated as follows,
HSSC replaces benefits issued via EBT when lost through
unauthorized use of the account only if the loss occurred:
• after the individual reports the Lone Star Card lost or stolen;
• because of a local eligibility determination office card/PIN
issuance error; or
• because of an unlawful or other erroneous action on the part of
HHSC or an HHSC contractor.
Do not replace benefits withdrawn from an account before the
individual reports the Lone Star Card lost or stolen.
HHSC also considered Texas Administrative Code Rule 372.1521, which
defines “system error” to mean “an error resulting from a malfunction at any point

14
Id. § 2001.174(2)(A), (D), (E).
15
Tex. Alcoholic Beverage Comm’n v. Sierra, 784 S.W.2d 359, 360 (Tex. 1990).
16
Mireles v. Tex. Dep’t of Pub. Safety, 9 S.W.3d 128, 131 (Tex. 1999).
17
See 1 TEX. ADMIN. CODE § 357.9.

6
in the redemption process: from the system host computer, to the switch, to the
third-party processors, to a store’s host computer or point-of-sale terminal.”18
Substantial evidence supports HHSC’s denial decision. There was no dispute
that the $930 charge occurred the day before Craddock reported that she had
disclosed her card and PIN numbers to an unknown third party, upon which HHSC
changed her Lone Star Card’s status to “stolen.” HHSC also submitted evidence
that a Lone Star Card and valid PIN number matching Craddock’s card and PIN
numbers were used to make the unauthorized transaction, that the unauthorized
transaction therefore did not result from a “system error,” and that neither HHSC
nor a contractor committed any other error. Each of the three section B-341 prongs
address different ways in which HHCSC could be at fault for an unauthorized
transaction, and Craddock acknowledged that HHSC was not at fault. This
evidence demonstrates a reasonable basis upon which HHSC could have denied
Craddock’s replacement request.19
Craddock argues that HHSC improperly relied on section B-341 because it
applies only when the physical Lone Star Card is reported lost or stolen, and
HHSC “admitted the card was never stolen yet denied the claim.” Craddock claims
that HHSC therefore applied section B-341 “mechanically, without regard for Ms.
Craddock’s specific facts or the regulatory requirements.” This is incorrect.
There is nothing in the administrative record to support that HHSC denied
Craddock’s replacement request because her physical Lone Star Card was not lost
or stolen. Rather, HSSC construed the policy to apply when, as here, a card and

18
1 TEX. ADMIN. CODE § 372.1521.
19
Craddock complains that HHSC “ignored uncontroverted evidence” that she never lost
her actual Lone Star Card or gave it to someone else, reported the theft promptly, and was at
work when the unauthorized transaction occurred.” But this disregards the standard of review, as
well as the evidence we have detailed above and her own testimony that she was scammed into
turning over her card and PIN numbers to an unknown third party.

7
PIN number have been compromised. HSSC then denied the replacement request
in part because the unauthorized transaction occurred before, not after, Craddock
made her report to HSSC. Craddock correctly asserts that an “agency cannot rely
on internal manuals or guidance when they contradict binding statutes or
administrative code provisions,”20 but HHSC’s interpretation and application of
section B-341 does not contradict state law. Under the Administrative Code,
HHSC “replaces benefits removed without authorization after the
household … reports a lost or stolen EBT card or compromised personal
identification number.”21 Because Craddock’s SNAP benefits were removed
without authorization before she notified HHSC that her PIN number had been
compromised, HHSC denied her replacement request consistent with controlling
law.
Craddock also argues that HHSC failed to comply with its obligation under
§ 372.1521 of the Administrative Code to determine whether there was a “system
error” because instead of evaluating for potential error the “multiple points of
system operation” listed in § 372.1521(a),22 EBT Operations only confirmed that a
matching card and PIN number were used to make the unauthorized transaction.
Craddock contends that there must have been a “system error” because “$930 in
SNAP benefits were issued through HHSC’s system without the physical
presentation of the recipient’s actual Lone Star Card.”
But § 372.1521 only defines what constitutes a “system error”—an error

20
See HHSC v. Estate of Burt, 689 S.W.3d 274, 285 (Tex. 2024) (“Written employee
guidance cannot be used to contravene a statute.”); United States v. Ford Motor Co., 516
F.Supp.2d 770, 780 (W.D. Tex. 2007) (“[A]n agency’s internal guidelines and manuals do not
have the equivalent force of law as a federal statute or regulation.”).
21
1 TEX. ADMIN. CODE § 372.1519(a). Section 372.1519 is not limited to “card
replacement,” as Craddock suggests. It expressly covers “Replacing … Stolen Benefits.” See id.
22
The “system host computer,” “switch,” “third-party processors,” and “store’s host
computer or point-of-sale terminal.” 1 TEX. ADMIN. CODE § 372.1521(a).

8
“resulting from a malfunction at any point in the redemption process.”23 It contains
no language detailing how HHSC must go about determining whether a system
error occurred. In that vein, a reasonable person could have concluded that EBT
Operations determined that the unauthorized EBT transaction occurred not because
of any error in the redemption process, but because Craddock was scammed into
giving her card and PIN numbers to an unknown third party, who then illegally
used them to make the purchase at Sam’s Club. The same conclusion could have
been drawn based on the September 7, 2022 letter EBT Operations sent to
Craddock notifying her that it “didn’t find a system error,” and based on Sosa’s
testimony stating the same at the fair hearing.
At bottom, Craddock’s real complaint is that the EBT system is not
sophisticated enough to detect the difference between someone who uses a
physical Lone Star Card issued to a SNAP household and someone who uses a
cloned card to illegally use a SNAP household’s valid card and PIN numbers. She
even acknowledges this in her brief: “The Agency’s system and Handbook seem
unable to address computer scams arising from information security gaps.” This
Court is in no position to remedy that issue.
But Congress is, and it has taken steps to protect SNAP households
victimized by fraud. As part of the Consolidated Appropriations Act of 2023,
Congress authorized state agencies to replace SNAP benefits that were “stolen
through card skimming, card cloning, or similar fraudulent methods,” but only for
benefits that were stolen “beginning on October 1, 2022.”24 Unfortunately for
Craddock, her SNAP benefits were stolen on August 20, 2022, so she was not
eligible for replacement benefits under the revised federal law.
We sustain HHSC’s issue arguing that substantial evidence supports its
23
Id.
24
See Pub. L. No. 117-328, 136 Stat. 5986–87 (Dec. 29, 2022).

9
denial decision.

II. No Conflict with Federal Law
HHSC also challenges the district court’s conclusion that its decision
conflicts with federal authorities. As the Texas agency responsible for
administering SNAP, HSSC must comply with federal SNAP statutes and
regulations.25
The first federal provision cited by the district court requires a participating
State’s plan of operation to provide “for the prompt restoration in the form of
benefits to a household of any allotment … which has been wrongfully denied or
terminated.”26 An “allotment” is a defined term that means “the total value of
benefits a household is authorized to receive during each month.”27 Section
2020(e)(11) thus has no application here because Craddock did not seek
replacement of benefits not allotted to her for a particular month; she sought
replacement of benefits that were allotted to her but later stolen.28
The district court also cited 7 U.S.C. § 2016(e), which should be construed
in light of the preceding provision, § 2016(d). Section 2016(d) requires the
Secretary of Agriculture to “prescribe appropriate procedures for the delivery of
benefits to benefit issuers and for the subsequent controls to be placed over such
benefits by benefit issuers in order to ensure adequate accountability.”29 7 U.S.C.
§ 2016(e) then says that “the State agency shall be strictly liable to the Secretary

25
See 7 U.S.C. § 2020(d), (e); Pimentel v. Dreyfus, 670 F.3d 1096, 1099 (9th Cir. 2012)
(“participating states must … comply with applicable federal laws and regulations”).
26
7 U.S.C. § 2020(e)(11) (emphasis added).
27
7 U.S.C. § 2012(b).
28
Craddock also cites 7 U.S.C. § 2020(b), but that provision requires a State agency to
restore “improperly denied, terminated, or underissued benefits” only “to the extent required by
subsection (e)(11),” which we have explained does not apply here.
29
7 U.S.C. § 2016(d).

10
for any financial losses involved in the acceptance, storage and issuance of
benefits.”30 Section 2016(e) thus addresses (1) State agency liability to the
Secretary for (2) losses resulting from the State’s acceptance, storage, and issuance
of benefits to SNAP households, not (1) a State agency’s liability to a SNAP
household for (2) a third party’s fraudulent access and use of the household’s
benefits.
Likewise, 7 C.F.R. § 276.2(b)(7) addresses State agency liability to “FNS,”
the Food Nutrition Service of the U.S. Department of Agriculture, for
“overissuances” resulting from EBT “system errors and unauthorized account
activities.”31 Again, that addresses liability to FNS, not a SNAP household, and it
is for an overissuance—i.e., from the agency to the household—not for stolen
benefits.
The last two federal regulations cited are also inapplicable. 7 C.F.R.
§ 273.17(a)(1) requires a State agency to restore benefits that “were lost whenever
the loss was caused by an error by the State agency.” As already explained,
substantial evidence (including Craddock’s own admission) supports HHSC’s
determination that it did not commit any error. And 7 C.F.R. § 277.18(m)(1)
simply says that State agencies are responsible for the security of the Information
System that they are required to install and implement for the administration of
SNAP. The breach here occurred not because the agency’s information system was
hacked, but because Craddock was tricked into giving away access to it.
Lastly, Skipper v. Duffy has no application here, nor does Craddock defend
its citation by the district court.32 The case involved a summary judgment
regarding replacing denied food stamps and whether two Illinois Department of
30
7 U.S.C. § 2016(e) (emphasis added).
31
7 C.F.R. § 276.2(b)(7).
32
703 F.Supp. 697 (N.D. Ill. 1988).

11
Public Aid rules could apply to “non-mail issuance systems.”33
We sustain HHSC’s issue that the district court erred by concluding that
HHSC’s denial decision conflicted with federal law.

CONCLUSION
Having sustained HHSC’s issues, we reverse the district court’s final order
and render judgment affirming HHSC’s decision denying Craddock’s request to
replace SNAP benefits.

/s/ Scott A. Brister
Scott A. Brister
Chief Justice

Before Chief Justice Brister and Justices Field and Farris.

33
Id. at 698–99.

12