12 F.3d 1256 (3rd Cir. 1993), 93-1196, Chem Service, Inc. v. Environmental Monitoring Systems Laboratory-Cincinnati of United States E.P.A.

Docket Nº:93-1196.
Citation:12 F.3d 1256
Party Name:CHEM SERVICE, INC., Appellant, v. ENVIRONMENTAL MONITORING SYSTEMS LABORATORY-CINCINNATI OF the UNITED STATES ENVIRONMENTAL PROTECTION AGENCY; Thomas A. Clark, in His Capacity as Director of the Environmental Monitoring Systems Laboratory-Cincinnati of the United States Environmental Protection Agency; United States Environmental Protection Agency;
Case Date:December 27, 1993
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

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12 F.3d 1256 (3rd Cir. 1993)

CHEM SERVICE, INC., Appellant,




A. Clark, in His Capacity as Director of the Environmental

Monitoring Systems Laboratory-Cincinnati of the United

States Environmental Protection Agency; United States

Environmental Protection Agency; NSI Environmental Solutions, Inc.

No. 93-1196.

United States Court of Appeals, Third Circuit

December 27, 1993

Argued Sept. 23, 1993.

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[Copyrighted Material Omitted]

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F. Michael Friedman (argued), Pagano, Wills & Friedman, Media, PA, for appellant.

Stuart E. Schiffer, Acting Asst. Atty. Gen., Robert S. Greenspan, Henry D. Gabriel (argued), U.S. Dept. of Justice, Civ. Div., Appellate Staff, Washington, DC, Michael J. Rotko, U.S. Atty., Joan K. Garner, Deputy Chief, Civ. Div., Karen E. Rompala, Sp. Asst. U.S. Atty., Philadelphia, PA, for appellees Environmental Monitoring Systems Laboratory of the U.S.E.P.A., and Thomas Clark.

James A. Hourihan, Martha R. Moffett, Hogan & Hartson, Washington, DC, Harry A. Short, Jr., Liebert, Short & Hirshland, Philadelphia, PA, for appellee NSI Environmental Solutions, Inc.

Before: STAPLETON, ROTH and LEWIS, Circuit Judges.


ROTH, Circuit Judge:

This case arises from a dispute over three cooperative research and development agreements ("CRADAs") entered into by the Environmental Monitoring Systems Laboratory-Cincinnati ("EMSL-CI") of the Environmental Protection Agency ("EPA"). Chem Service, Inc., a non-party to the CRADAs, brought suit against EMSL-CI, the laboratory's director, and EPA, seeking to enjoin the government from performing certain functions agreed to under the CRADAs. The district court held that Chem Service lacked standing under the Administrative Procedure Act ("APA") to bring this suit, because it did not fall within the zone of interests Congress intended to protect when establishing the authority for government laboratories to enter these types of cooperative arrangements, 816 F.Supp. 328. We disagree and find that, as to its first claim, Chem Service does fall within the zone of interests. We will therefore remand to the district court to determine whether the sections of the CRADAs in dispute are actually procurement contracts, pursuant to 31 U.S.C. Sec. 6303, which would require the government to comply with the federal procurement laws.


In 1986, Congress passed the Federal Technology Transfer Act ("FTTA"), Pub.L. No. 99-502, 100 Stat. 1785, codified at 15 U.S.C. Sec. 3710a et seq. (1988). Among the primary purposes of the FTTA was that of increasing the nation's economic competitiveness by encouraging technology transfer from federal government-operated laboratories to private industry. To effectuate this purpose the FTTA authorized federal agencies to permit the director of any government-operated laboratory to enter into CRADAs with private entities. 15 U.S.C. Sec. 3710a(a)(1). In defining the term CRADA, 1 Congress intended to establish a new type of contractual relationship between a federal laboratory and a non-federal party for research and development purposes. Congress specifically intended that a CRADA was not to be a procurement contract, a grant agreement, or a cooperative agreement within the definition of 31 U.S.C. Secs. 6303 and 6305 (1988). 2

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On January 4, 1991, EMSL-CI entered into a CRADA with NSI Technology Services Corporation ("NSI") pursuant to the FTTA. 3 EMSL-CI entered into similar CRADAs with Ultra Scientific, Inc., ("Ultra") on January 21, 1991, and with Spex Industries, Inc., ("Spex") on May 9, 1991. The language of these CRADAs provides that they were designed to continue the efforts of EMSL-CI in refining and distributing reference materials for calibration of analytical instruments. 4 Plaintiff Chem Service is in the business of selling organic chemical analytical and reference standards, although it did not enter into a CRADA with EMSL-CI. Chem Service contends that contrary to the expressed purpose of CRADAs as established by Congress, included within these CRADAs is the authorization for NSI, Spex and Ultra to sell reference materials manufactured according to pre-existing technologies. Chem Service urges that the commercial exploitation of such pre-existing technologies violates the provisions of the FTTA, which was established to encourage cooperative research and development efforts.

Prior to entering into the CRADAs, EPA ran several programs for the production and distribution of reference materials. Two of these programs were the Repository for Toxic and Hazardous Materials ("THM") and the Pesticides Repository. In 1989, NSI contracted with EPA to provide support services for both the THM Repository and the Pesticides Repository. The contract covered the period from October 1, 1989, to September 30, 1990, with the government retaining the option to extend the term of the contract for up to four additional annual periods. This contract was awarded in compliance with the federal procurement laws and the Federal Acquisition Regulation. 5

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The contract between EPA and NSI provided that the "[THM] Repository contractor [NSI] will produce, test, and distribute analytical reference standards of high-purity for the calibration of measurement instrument systems and tests of analytical methods." Joint Appendix at A-264. Specifically, the contract required NSI to "[s]ynthesize chemicals that are unobtainable, overly expensive, or unavailable in satisfactory pure form ... [and] [p]roduce calibration standards or other special materials by preparing solutions of each chemical and transferring and sealing aliquots in individual glass ampules." Id. at A-264-65. The contract also required NSI to maintain the integrity and purity of bulk stock of THM Repository chemicals, procure additional chemicals, verify the purity and identity of new chemicals stocks, and conduct stability studies on the THM Repository.

In 1991, EMSL-CI and NSI entered into a CRADA. Chem Service averred in its amended complaint that the "CRADA between NSI and EMSL-CI authorizes, but does not require, NSI to produce and distribute additional reference samples after the existing ampule inventory is exhausted." Id. at A-177. 6 The CRADA's Statement of Work provides that "EPA is primarily entering into this CRADA to assure the availability of accurate and reliable liquid organic standards for EPA methods.... The standards will come from two sources; those available from the EPA [THM] Repository and those produced by NSI [under the CRADA]." Id. at A-62. Reference materials produced under both the competitive contract with NSI and the CRADA with NSI were intended by EPA to support EPA regulatory methods and agency endorsed monitoring programs. Id. at A-63 & A-264.

Prior to the NSI CRADA, EPA provided THM Repository reference materials free of charge to federal laboratories and non-federal parties. The NSI CRADA altered this arrangement. It provided that a one year supply of these reference materials would be provided "to the EPA Family" on a complimentary basis, but after this supply was distributed, NSI was authorized to sell the reference materials. Id. at A-62-66. The CRADA provided that EPA would receive a percentage of the receipts from these sales by NSI, to compensate EPA for the use of equipment and materials provided under the competitive contract, and for research and development. Id. at A-49-50. 7

In addition, prior to finalizing the CRADAs, EMSL-CI began developing specifications for reference material standards in conjunction with the American Association for Laboratory Accreditation ("A2LA"), a private organization. During this period, Chem Service received accreditation by A2LA. Chem Service contends that in order to obtain and maintain its accreditation by A2LA it was, and is, required to submit to rigorous testing by independent laboratories and inspections by A2LA.

On June 18, 1991 EMSL-CI and A2LA entered into a Memorandum of Understanding ("MOU"). According to the terms of the MOU, the parties entered this agreement "to establish the relationship between A2LA's Certification Program for Reference Materials and USEPA's Certified Reference Materials which are produced for USEPA by commercial firms under Cooperative Research and Development Agreements." Id. at A-142. The MOU provides that EMSL-CI and A2LA will work together to develop equivalent technical specifications and requirements for reference materials. In addition, the MOU states that the parties agree that the certification program run by each entity with respect to reference materials would contain these equivalent technical specifications. These specifications were later finalized.

Chem Service maintains that the MOU commits the defendants to limiting the label "EPA Certified" to reference materials which meet the same technical specifications as "A2LA Certified" standards. Chem Service

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contends that the defendants allow NSI, Ultra and Spex to sell pre-CRADA, pre-MOU Repository reference materials labeled as "EPA Certified" even though these reference materials were not produced according to the specifications agreed pursuant to the terms of the MOU.

Chem Service asserts two grounds for relief. First, Chem Service contends that the production and distribution of reference material by NSI and Spex, under the CRADAs, using technology that was developed and existed prior to the CRADAs, is essentially a government procurement contract that should be governed by the Competition in Contracting Act, Pub.L. No. 98-369, title VII, 98 Stat. 1175, and other government procurement laws. 8 Chem Service asserts that...

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