796 F.2d 400 (Fed. Cir. 1986), 85-1954, Texas State Com'n for the Blind v. United States

Docket Nº:Appeal No. 85-1954.
Citation:796 F.2d 400
Party Name:TEXAS STATE COMMISSION FOR THE BLIND and State of Texas, Appellees, v. The UNITED STATES, Appellant.
Case Date:June 26, 1986
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
 
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796 F.2d 400 (Fed. Cir. 1986)

TEXAS STATE COMMISSION FOR THE BLIND and State of Texas, Appellees,

v.

The UNITED STATES, Appellant.

Appeal No. 85-1954.

United States Court of Appeals, Federal Circuit

June 26, 1986

Page 401

Ronald A. Schechter, Commercial Litigation Branch, Dept. of Justice, of Washington, D.C., argued for appellant. Richard K. Willard, Acting Asst. Atty. Gen., David M. Cohen, Director, and Thomas W.B. Porter, Commercial Litigation Branch, Dept. of Justice, were on the brief for appellant. Charles G. Symmonds, Office of General Counsel, Army & Air Force Exchange Service, of counsel.

Philip Durst, Asst. Atty. Gen., Austin, Tex., argued for appellee. With him on the brief were Jim Mattox, Atty. Gen. of Texas, David R. Richards, Executive Asst. Mary F. Keller, Sp. Asst. and J. Patrick Wiseman, Chief, State & County Affairs.

Before MARKEY, Chief Judge, FRIEDMAN, RICH, DAVIS, BALDWIN, SMITH, NIES, NEWMAN, BISSELL and ARCHER, Circuit Judges. 1

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NIES, Circuit Judge.

The United States appeals from the judgment of the U.S. Claims Court 2 holding the United States liable under the income-sharing provisions of the Randolph-Sheppard Vending Stand Act, 20 U.S.C. Secs. 107-107f (1982), to the Texas State Commission for the Blind and the State of Texas (collectively hereafter, TSCB) for income derived from vending machines operated by the military exchanges of the Department of Defense. We reverse.

I.

This appeal involves a question of statutory interpretation of the Randolph-Sheppard Act (the Act). More precisely, the issue is whether a regulation of the Department of Defense (DOD) reasonably interprets the scope of the statutory exemption provided for military exchanges from the requirements of the Act that income from vending machines on federal property be shared with blind vendors and/or state blind agencies.

In 1936, Congress passed the Randolph-Sheppard Act, Ch. 638, 74 Stat. 1559 (1936) (current version at 20 U.S.C. Secs. 107-107f (1982) ), to provide blind persons with remunerative employment and economic opportunities by permitting them to operate vending stands in federal buildings. The program was only moderately successful. Part of the problem was general apathy to the program among the agencies. In addition, civilian employee welfare and recreation groups were being permitted by agencies to place vending machines in federal buildings to finance the activities of such groups. The competition from these machines diverted income from blind vendors and made the establishment of new vending stands economically unattractive.

The practice of allowing employee groups, such as unions, to utilize federal property free of charge and to retain the funds without any accountability was of questionable legality. In 1952, the Comptroller General issued an opinion advising the Attorney General that funds derived from vending machines at the Federal Bureau of Investigation were received "for the use of the United States" within the meaning of that phrase in 31 U.S.C. Sec. 484 and were required to be deposited into the Treasury as miscellaneous receipts. Comp.Gen.Dec. B-111,086, 32 Comp.Gen. 124 (1952). In view of that opinion, the Comptroller General, in a related opinion that year, ruled that the practice of allowing postal employee groups to install vending machines on federal property and retain the profits was of "doubtful" legality. However, the Comptroller General concluded that his office would "interpose no objection to the continued use of proceeds by employee groups" pending action on clarifying legislation which the Controller General had recommended to Congress. 3

In 1954, Congress amended the Randolph-Sheppard Act to make it more effective. Amendments to the Randolph-Sheppard Vending Stand Act, Pub.L. No. 83-565, Sec. 4, 68 Stat. 663 (1954). These amendments mandated that blind vendors be given a "preference," so far as feasible, in establishing new stands on federal property and authorized the heads of agencies to assign vending machine income to blind vendors with whom vending machines directly competed in order to assure such "preference." However, it appears that the assignment of income power was virtually ignored. In 1962, Senator Randolph, in proposing further amendments to improve the opportunities for the blind, specifically recognized that vending machines of civilian employee groups were the source of the problem and urged that such groups could and should find "other means of financing [their] projects." Operation of Vending Stands for the Blind in Federal Buildings: Hearing on S. 394 Before

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the Special Subcomm. of the Senate Comm. on Government Operations, 87th Cong., 2d Sess. 10 (1962).

In 1974, over strong opposition by civilian employee groups, particularly the Postal Workers Union, significant changes were made in the Act because of continued congressional dissatisfaction with the limited expansion of the blind vendor program. Randolph-Sheppard Act Amendments, Pub.L. No. 93-516, Title II, 88 Stat. 1622 (1974). These amendments were in large part, again, the result of the efforts of Senator Randolph and included provisions by which blind vendors were given "priority" (not merely a preference) in operating new facilities so as to increase their numbers; the items allowed to be sold were expanded; and income from vending machines--with some exemptions--was required to be shared either with blind vendors directly or with state agencies for the blind. The sharing percentages are 100% for machines in direct competition with blind vendors; 50% where there is no direct competition unless at least half of the hours worked on the premises where the machines are located are outside normal working hours; and 30% in the latter case. 20 U.S.C. Sec. 107d-3(b)(1) (1982).

The exemption provided in the 1974 amendments, which concerns us here, is found in 20 U.S.C. Sec. 107d-3(d) (1982) and provides:

Subsections (a) and (b)(1) [income sharing] of this section shall not apply to income from vending machines within retail sales outlets under the control of exchange or ships' stores systems authorized by title 10, or to income from vending machines operated by the Veterans Canteen Service, or to income from vending machines not in direct competition with a blind vending facility at individual locations, installations, or facilities on Federal property the total of which at such individual locations, installations, or facilities does not exceed $3,000 annually. [Emphasis added.]

A DOD regulation, 32 C.F.R. Sec. 260.3(i)(3)(i) (1985), interprets this exemption to exclude:

Income from vending machines operated by or for the military exchange or ships' stores systems.

A number of state agencies, TSCB being one, nevertheless, sought to share in the income of military exchanges. In May, 1979, TSCB filed a complaint with HEW which resulted in the convening of an arbitration panel, as provided in the statute (20 U.S.C. Sec. 107d-1(a) (1982) ), to adjudge the validity of its asserted right to a share of vending machine income of the military exchanges. TSCB argued that the statutory exemption covered only those vending machines of the military exchanges physically located within the four walls of military exchange stores.

In a split decision, the arbitration panel of three held that the position of TSCB was the correct interpretation of the statute. Texas (Texas State Commission for the Blind) v. Department of Defense, No. RS 79-4 (Sept. 2, 1981). The majority of the arbitrators stated that the statutory language did not "appear to be ambiguous." Slip op. at 11. "Within retail sales outlets," per the two arbitrators, would normally be understood to mean "inside the four walls of an exchange system store." They then recognized that "within" could also mean "a part of" but concluded that this would render the phrase "retail sales outlets" meaningless. Slip op. at 11-12. On the other hand, the unequivocal legislative history against reaching income of the military exchanges raised questions in their minds as to the "clarity" of the language. Slip op. at 12. Ultimately, the two arbitrators resolved the question of the scope of the military exemption by reliance "on the general intent and approach of the legislation itself. These facts argue for a narrow reading of any limitation on opportunities for the blind." Slip op. at 15. To be exempt, they concluded, vending machines had to be "within the four walls of an exchange system store" but "expressly [did] not decide the issue of whether vending

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machines directly outside retail sales outlets are to be deemed inside or outside these stores." Slip op. at 18 and n. 27. The majority found final support for its position in regulations of the Department of Health, Education and Welfare (HEW), the principal agency under the Act charged with its administration. The majority did not rely on specific language in the HEW regulations (the regulations simply repeat the statute), but on HEW's refusal to amend its regulations to include the broad exemption language requested by DOD. Slip op. at 16-17.

The dissenting arbitrator, in reaching his conclusion that DOD's position was correct, relied on the essentially different nature of the military exchanges from civilian employee welfare and recreation groups. Through the profits generated by military exchanges, essential governmental support services were provided for military service personnel and their families. He noted that extracts from Congressional Hearings and Reports of record dated 1949, 1953, 1970, 1972, 1974, 1978 and 1979 on non-Randolph-Sheppard legislation established that this arrangement had been recognized and approved by Congress as mutually beneficial to service personnel and to the public fisc...

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