United States District Court, E.D. Virginia, Alexandria Division
Ellis, III, United States District Judge
SourceAmerica and Lakeview Center, Inc., nonprofits that seek
to enhance economic opportunities for the blind, request
judicial review of the decision of an arbitration panel,
convened by the Secretary of Education, that concluded the
Department of the Army ("Army") violated the
Randolph-Sheppard Act when the Army sought to award to
plaintiffs a contract for services in Army dining facilities
rather than to intervenor, the Kansas Department for Children
and Families, a state agency that also seeks to enhance
economic opportunities for the blind. This is a somewhat
curious situation-it is, in essence, a dispute between
organizations, both of which seek to advance the economic
interests of the blind, as to which is entitled to a
preference in the Army's contracting decision. And this
curious situation is further compounded by the involved
factual, legal, and procedural history of this case.
issues now are the parties' cross-motions for summary
judgment. The motions have been fully briefed and argued and
are now ripe for disposition.
this case involves multiple organizations that seek to
enhance economic opportunities available to the blind, it
also involves multiple statutes that provide a preference for
the blind in federal contracting decisions. In particular,
the Randolph-Sheppard Act ("RSA"), 20 U.S.C.
§§ 107-107f, and the Javits-Wagner-O'Day Act
("JWOD"), 41 U.S.C. §§ 8501-8506, both
create a preference for the blind in federal contracting
decisions, although they differ in important respects. A
basic understanding of both statutes is necessary to
understand the factual and procedural history of this case
and the current dispute.
enacted the RSA to "provid[e] blind persons with
remunerative employment, enlarge[e] the economic
opportunities of the blind, and stimulat[e] the blind to
greater efforts in striving to make themselves
self-supporting." 20 U.S.C. § 107(a). To effectuate
these aims, the RSA provides a "priority ... to blind
persons licensed by a State agency" in "the
operation of vending facilities on Federal property."
§ 107(b). The RSA tasks the Secretary of Education
("the Secretary") with implementing this preference
for blind vendors and promulgating regulations in accordance
with the statute. §§ 107(b), § 107a(a).
Specifically, the RSA directs the Secretary to designate a
state licensing agency in each state. §§
107a(a)(5), 107b. The designated state licensing agencies
seek permits or contracts from federal departments, agencies,
and instrumentalities for the operation of vending
facilities, and state licensing agencies that are awarded
such permits or contracts then must issue licenses to blind
vendors to operate the vending facilities. § 107a(a)(5),
also tasks the Secretary with reviewing federal
departments', agencies', and instrumentalities'
decisions to limit the placement or operation of vending
facilities. § 107(b). Specifically, the RSA requires
that "[a]ny limitation on the placement or operation of
a vending facility based on a finding that such placement or
operation would adversely affect the interests of the United
States shall be fully justified in writing to the Secretary,
who shall determine whether such limitation is
justified." Id. This provision is referred to
infra as the "RSA Review Requirement."
that conflicts might arise between state licensing agencies
and the federal departments, agencies, and instrumentalities
from which state licensing agencies seek permits and
contracts, Congress provided for a process for the
arbitration of such disputes. Specifically, the RSA provides
that state licensing agencies may compel the Secretary to
convene an arbitration panel when they conclude that a
federal department, agency, or instrumentality is violating
the RSA or its regulations. § 107d-l(b). The arbitration
panel is to consist of three members: (1) a member designated
by the state licensing agency; (ii) a member designated by
the federal department, agency, or instrumentality involved;
and (iii) a member jointly selected by these members. §
107d-2(b)(2). Importantly, the arbitration panel is
authorized to determine only whether the federal department,
agency, or instrumentality violated the RSA or its
regulations. Id.; Md. Dep't of Educ. v.
Dep't of Veterans Affairs, 98 F.3d 165, 169 (4th
Cir. 1996). If such a violation is found, the head of the
federal department, agency, or instrumentality is responsible
for remedying the violation. § 107d-2(b)(2); Md.
Dep't of Educ, 98 F.3d at 169. The RSA provides that
arbitration decisions constitute final agency action for
purposes of the judicial review provisions of the
Administrative Procedure Act ("APA"), 5 U.S.C.
§ 701 et seq. § 107d-2(a).
to the RSA, the JWOD aims to "increase employment and
training opportunities for persons who are blind or have
other severe disabilities." 41 C.F.R. § 51-1.1(a).
And, similar to the RSA, the JWOD effectuates this aim by
creating a preference that benefits blind persons in federal
contracting. Unlike the RSA, however, the JWOD is not limited
in scope to permits or contracts for the operation of vending
facilities on federal property; rather, the JWOD's
preference applies to nonprofit agencies that employ workers
who are blind or have significant disabilities and that are
included on the Act's procurement list. 41 U.S.C. §
8504(a). The United States AbilityOne Commission ("the
Commission"), the federal agency charged with
administering the JWOD, designates central nonprofit agencies
to help select products and services offered by nonprofits
employing the blind and severely disabled suitable for
inclusion on the procurement list. § 8503(c). When the
Committee places products and services on the procurement
list, it designates a nonprofit agency as the mandatory
source of supply for those products or services. 41 C.F.R.
§ 51-5.2(a). Federal entities seeking to procure
products or services included on the procurement list must
procure those products and services from the nonprofits
selected by the Committee and included on that list. 41
U.S.C. § 8504(a).
statute, the John Warner National Defense Authorization Act
for Fiscal Year 2007 ("JWNDA"), Pub. L. No.
109-364, merits brief mention before the factual and
procedural history of this dispute is recounted. The JWNDA,
as relevant here, provides that the RSA and the JWOD are
inapplicable in certain circumstances. This provision is
referred to infra is the "JWNDA No-Poaching
Provision." Specifically, the provision provides that
the RSA "does not apply to full food services, mess
attendant services, or services supporting the operation of a
military dining facility that, as of the date of the
enactment of this Act, were services on the procurement list
established under" the JWOD. Id. at §
856(a)(1). The JWNDA No-Poaching Provision further provides
that the JWOD "does not apply at the prime contract
level to any contract entered into by the Department of
Defense as of the date of the enactment of this Act with a
State licensing agency under the [RSA] for the operation of a
military dining facility." Id. at §
parties to this action are involved with these statutory
schemes to varying degrees. Plaintiff SourceAmerica is a
creature of one of these schemes. Specifically, SourceAmerica
is a JWOD central nonprofit agency. SourceAmerica works
closely with plaintiff Lakeview Center, Inc.
("Lakeview"), a nonprofit agency that was
designated by the Commission as the mandatory source of
supply of certain services on the JWOD's procurement
list. Intervenor, the Kansas Department for Children and
Families ("Kansas"), is intimately familiar with
the other primary statutory scheme in this case, the RSA,
because of its status as an RSA state licensing agency.
Defendant the Department of Education ("DOE"),
through its Secretary, Betsy Devos, is charged with
administering the RSA. The DOE, through its Secretary,
convened the arbitration at issue here between the Army and
the statutory schemes outlined and the principal players
identified, it is appropriate next to outline the pertinent
factual and procedural history of this case. The dispute
revolves around the procurement of a contract for services to
be performed in the dining facilities at Fort Riley, an
active military installation operated by the Army in Kansas.
Pursuant to Army regulations, the Army contracts for two
different types of services in its dining facilities, Full
Food Services ("FFS") and Dining Facility Attendant
("DFA") services. The Army defines FFS as "a
contract that covers those activities that comprise the full
operation of an Army dining facility. It includes, but is not
limited to, requisitioning, receiving, storing, preparing,
and serving food... [and] the performance of related
administrative, custodial, and sanitation functions."
Resp't's Pre-Arbitration Br. 4 (citing U.S. Dep't
of Army, Reg. 30-22, Army Food Program, glossary (July 24,
2012)), at Admin. R. 61. DFA services, according to Army
regulations, are "[t]hose activities required to perform
janitorial and custodial duties within dining facilities.
[They] include ... sweeping, mopping, scrubbing, trash
removal, dishwashing, waxing, stripping, buffing, window
washing, pot and pan cleaning, and other sanitation-related
2006, the Army awarded Kansas a FFS contract pursuant to the
RSA. As required by the RSA, Kansas awarded the contract to a
blind vendor. In 2011, the Army awarded Kansas a follow-on
contract for the provision of FFS that was scheduled to
expire in August 2015.
Army subsequently determined that it no longer needed a FFS
contract because Army soldiers formerly deployed in Iraq and
Afghanistan could perform most of the duties, including
cooking, at the Fort Riley dining facilities. However,
because Army regulations prohibited soldiers from performing
DFA services, the Army was required to contract out these
services. Thus, the Army decided that it would procure a new
contract, effective upon the conclusion of Kansas's
contract, that covered only DFA services. Specifically, this
new DFA contract would be for "janitorial and custodial
duties within dining facilities [and] [i]include...
cleaning, sweeping, mopping, scrubbing, trash removal,
dishwashing, waxing, stripping, buffing, window washing, pot
and pan cleaning and other sanitation related
functions." Draft of Solicitation, Offer, and Award for
DFA Services 7 (July 20, 2015), at Admin. R. 1002. Believing
that a contract covering only DFA services did not constitute
the operation of vending facilities, the Army concluded that
the new contract would not be subject to the RSA's
preference for blind vendors in the operation of vending
facilities. Accordingly, the Army instead sought to procure a
contract pursuant to the JWOD. To that end, the Commission
proposed adding the Fort Riley DFA services to the JWOD's
procurement list through publication in the Federal Register
in July 2015. The Commission ultimately added the DFA
services to the procurement list and formally designated
Lakeview as the mandatory source of supply, effective
February 2016. Source America facilitated the process.
March 2015, the Army informed Kansas that, following the
conclusion of Kansas's contract, the Army would purchase
only DFA services through a new contract not subject to the
RSA. Dissatisfied with this turn of events and convinced that
the new DFA contract was subject to the RSA, Kansas, in May
2015, filed a request with the Secretary for arbitration with
the Army. As required by the RSA, the Secretary, in October
2016, convened a three-member panel to arbitrate the
dispute. See 20 U.S.C. § 107d-l(b).
Kansas also filed suit in the United States District Court
for the District of Kansas and obtained a preliminary
injunction preventing the Army from proceeding with the JWOD
procurement during the pendency of arbitration. Kansas v.
United States, 2016 WL 3129397, at *3 (D. Kas. Feb. 26,
2016). SourceAmerica and Lakeview- plaintiffs
here-successfully intervened in the litigation. See
Kansas v. United States, 192 F.Supp.3d 1184, 1187 (D.
Kas. 2016). The Army complied with the injunction and awarded
a bridge contract to Kansas.
also sought to intervene in the arbitration between Kansas
and the Army based on plaintiffs' interest in the DFA
contract at issue in the arbitration. To this end, plaintiffs
sent two letters to the DOE requesting to intervene in the
arbitration, dated April 8, 2016 and August 31, 2016.
Plaintiffs did not receive a response to either letter.
advance of the arbitration, the Army submitted an amended
witness list that represented that it intended to call
witnesses employed by plaintiffs and the Commission to
support its position that the RSA does not apply to contracts
for DFA services at military dining facilities. Specifically,
the Army represented that it intended to call: (i) Barry
Lineback, Director of Business Operations at the Commission;
(ii) Joe Diaz, Vice President of Operations at SourceAmerica;
and (iii) Gary Murphy, Representative at Lakeview.
arbitration hearing was held on January 10, 2017. Plaintiffs
attended the hearing and sought to be heard through counsel,
but the panel denied this request. The panel also refused to
hear testimony proffered by the Army from three witnesses
employed by plaintiffs and the Commission-the three witnesses
the Army had previously informed the panel that it intended
the hearing, the Army filed a request for a new hearing,
citing fundamental unfairness in the proceeding and concerns
about the panel's lack of impartiality. First, the Army
argued that the panel chair improperly excluded relevant
testimony from the three witnesses employed by plaintiffs and
the Commission. Specifically, the Army argued that the
exclusion of the witnesses was improper because
(i) the panel chair had previously found one of the witnesses
essential for the Army's defense and ordered the DOE to
fund his travel to the hearing;
(ii) the panel did not raise any relevancy concerns when the
Army provided the panel with a summary of the witnesses'
testimony twenty days before the hearing;
(iii) the panel chair asked an Army contract specialist about
the Commission and JWOD preference but refused to hear
evidence about the same from the Commission's and
plaintiffs' employees, who had direct knowledge of these
(iv) the panel chair knew or should have known that
SourceAmerica and Lakeview had successfully intervened in the
related federal litigation.
the Army argued that the panel chair acted inappropriately in
riding to the airport with Kansas's counsel after
requesting permission from the Army's counsel "to
ride to the airport with your enemy" in the presence of
the public and witnesses. Dep't of the Army's
Post-Arbitration Br. & Request for New Hearing 9 (Feb.
17, 2017), at Admin. R. 1590. Third, the Army argued that
"the Panel Chair and [Kansas's] Counsel made it
known... that they both had flights" at the beginning of
the hearing and repeatedly referenced these flights, thereby
inappropriately "set[ting] the tone ... that their
schedules were more important than obtaining evidence."
Id. Finally, the Army questioned the panel's
lack of impartiality because one of the panel members had
represented a client and obtained a favorable outcome in an
arbitration proceeding presided over by the panel chair at
the same time that the two sat on an arbitration panel
together in a separate proceeding.
arbitration panel issued its decision on May 9, 2017. The
two-member majority denied the Army's request for a new
hearing and held (i) that the Fort Riley DFA contract was
subject to the RSA's preference; (ii) that the Army
violated the RSA when it failed to apply the RSA's
preference to the Fort Riley DFA contract; (iii) that the
Army violated the RSA Review Requirement when, without
consulting the Secretary, it included services formerly
performed by an RSA vendor in a new contract that would not
be performed by an RSA vendor; and (iv) that the Army
violated the JWNDA No-Poaching Provision when it worked with
the Commission to place services formerly performed by an RSA
vendor on the JWOD's procurement list.
Carey, the panel's third member, dissented. He concluded
that the RSA's preference did not apply to the Fort Riley
DFA contract and that he would have granted the Army's
request for a new hearing owing to concerns about the
fairness of the proceeding. Following the panel's
decision, the preliminary injunction issued by the district
court in Kansas was dissolved, and the lawsuit was
voluntarily dismissed by the parties in February 2018.
Kansas Dep't for Children & Families v. United
States, 2018 WL 1087848, at *1 (D. Kan. Feb. 21, 2018).
the issuance of the arbitration panel's decision,
SourceAmerica and Lakeview initiated this action against
defendants the DOE and its Secretary, Betsy DeVos; the Army
and its Acting Secretary, Ryan D. McCarthy; and the
Department of Defense ("DOD") and its Acting
Secretary, Patrick M. Shanahan challenging the arbitration
panel's decision. Kansas subsequently intervened in the
action. Plaintiffs, defendants, and intervenor have all moved
for summary judgment on various grounds.
argue that the arbitration decision is contrary to the RSA
and the JWOD, in violation of the APA; that the arbitration
panel engaged in improper exparte communications in
violation of the APA; that the arbitration panel violated 5
U.S.C. § 555(b) of the APA by refusing to allow
plaintiffs to participate in the proceeding; and that the
arbitration panel violated plaintiffs' Fifth Amendment
right to procedural due process. Plaintiffs request vacation
of the arbitration decision, a declaration that the Fort
Riley DFA services are covered by the JWOD and not the RSA,
and an injunction preventing defendants from implementing or
enforcing the arbitration decision.
respond that only a state licensing agency may seek judicial
review of an arbitration panel decision, and thus argue that
plaintiffs cannot seek judicial review here. With respect to
the merits, however, defendants agree with plaintiffs that
the Army did not violate the RSA and thus contend that the
arbitration decision was incorrect in this respect. But
defendants argue that plaintiffs' remaining challenges to
the arbitration decision should be rejected. Specifically,
defendants argue that the panel's alleged ex
parte communications should not be addressed because
they are outside the scope of the complaint; that although
the panel erred when it refused to allow plaintiffs to
participate in the arbitration pursuant to 5 U.S.C. §
555(b), the error was harmless; and that plaintiffs'
Fifth Amendment rights were not violated. Finally, defendants
argue that the equitable relief plaintiffs request is
inappropriate and that the proper remedy is remand to the
intervenor argues that the arbitration decision was correct
and is not contrary to either the RSA or the JWOD. Intervenor
also argues that the panel did not violate 5 U.S.C. §
555(b) because plaintiffs lacked standing to intervene in the
arbitration proceeding. Finally, intervenor argues that
plaintiffs' Fifth Amendment rights were not violated.
judgment is appropriate under Rule 56, Fed. R. Civ. P., where
"the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a
matter of law." A genuine factual dispute exists
"if the evidence is such that a reasonable jury could
return a verdict for the nonmoving party." Anderson
v. Liberty Lobby, Inc.,477 U.S. 242, 248 (1986).
Summary judgment is especially appropriate in APA actions, as
they do not ordinarily involve fact-finding because "the
focal point for judicial review [under the APA] should be the
administrative record already in existence." Camp v.
Pitts,411 U.S. 138, 142 (1973) (per curiam).
It is clear the material ...