BCFS Health & Human Servs. v. United States Dep't of Labor, SA-21-CV-0776-JKP

• Court: United States District Courts. 5th Circuit. Western District of Texas
• Writing for the Court: JASON PULLIAM, UNITED STATES DISTRICT JUDGE
• Docket Number: SA-21-CV-0776-JKP
• Parties: BCFS HEALTH AND HUMAN SERVICES, Plaintiff, v. UNITED STATES DEPARTMENT OF LABOR, et al., Defendants.
• Decision Date: 17 March 2022

BCFS HEALTH AND HUMAN SERVICES, Plaintiff,
v.
UNITED STATES DEPARTMENT OF LABOR, et al., Defendants.

No. SA-21-CV-0776-JKP

United States District Court, W.D. Texas, San Antonio Division

March 17, 2022

MEMORANDUM OPINION AND ORDER

JASON PULLIAM, UNITED STATES DISTRICT JUDGE

In this complex case involving various federal statutes and accompanying jurisdictional issues, Plaintiff seeks declaratory and injunctive relief. The parties present their issues and arguments in three motions and related briefing: (1) Plaintiff's Motion for Preliminary Injunction (ECF No. 6), which the Court has converted to summary judgment, see ECF No. 23; (2) Defendants' Motion to Dismiss or, in the alternative, Cross-Motion for Summary Judgment (ECF No. 25), which is also Defendant's response to Plaintiff's motion (ECF No. 24); and (3) Plaintiff's Request for Oral Hearing (ECF No. 30). Both sides have submitted additional briefing and evidence.^[1] After considering the motions, related briefing, relevant evidence, and the applicable law the Court finds that it lacks jurisdiction over this matter and thus grants the motion to dismiss while denying or mooting the other motions for reasons set forth herein.

I. PROCEDURAL BACKGROUND

Plaintiff commenced this civil action against various federal agencies and officials

1

(hereinafter collectively referred to as “the Government”) by filing a Complaint for Preliminary Injunctive Relief and Declaratory Judgment [hereinafter Complaint] (ECF No. 1) with twenty-five exhibits (ECF No. 1-1 to 1-25). That same day it filed a corrected Exhibit 21 (ECF No. 5) and its motion for preliminary injunction (ECF No. 6). According to Plaintiff:

This case is the result of a seven year odyssey by the U.S Department of Labor (“DOL”) to grossly overstep its legal authority regarding another federal agency's grant system and the U.S. Department of Health and Human Services' (“HHS”) decision to keep its providers in the dark regarding the conflict as to whether the jurisdiction of the Service Contract Act (“SCA”), a prevailing wage statute applicable to federal procurement contracts for services, extends to Cooperative Agreements issued by the Office of Refugee Resettlement (“ORR”) pursuant to the Federal Grants and Cooperative Agreements Act (“FGCAA”) for the establishment and operation of shelters for unaccompanied minor children. From 2014 through the end of 2020, HHS resisted DOL's insistence that the SCA's jurisdiction should extend to such shelters and did not take proper steps to make the SCA enforceable. Yet, a month after the 2020 presidential election, HHS changed course and halfheartedly began attempting to add SCA clauses and wage determinations to cooperative agreements in an inconsistent and incomplete manner. This legally unsupported expansion of SCA jurisdiction exposes all ORR providers to the potential threat of DOL investigations, significant financial penalties, and federal debarment. Notably, this self-inflicted-crisis also occurs against a backdrop of an unprecedented surge of unaccompanied minor children crossing the U.S. border; a global pandemic that spreads especially virulently in crowded conditions and has resulted in a severe shortage of provider staff; overtaxed and depleted ORR budgets; and a political environment super-charged with hostility around the topic of immigration that threatens the very existence of ORR shelters

See Compl. ¶ 1.^[2] Plaintiff invokes “jurisdiction pursuant to 28 U.S.C. § 1331 (federal question) and the Administrative Procedure Act (“APA”), 5 U.S.C. § 701 et seq.” Id. ¶ 14.

The Court set an initial briefing schedule on Plaintiff's motion, see ECF No. 10, and later extended that schedule to include the filing of a joint advisory, see ECF No. 18. Upon receipt of such advisory, the Court, pursuant to Fed.R.Civ.P. 65(a)(2), converted the motion to one seeking summary judgment and set a new briefing schedule. See ECF No. 23. The Court also stated: “If,

2

after reviewing the completed briefing, the Court deems a hearing warranted, it will set the matter for hearing. And to the extent feasible, it will conduct the hearing via video or telephone as requested by the parties.” Id.

In addition to various exhibits submitted with the complaint, the parties have submitted voluminous briefing on the motions including numerous exhibits. Having a complete record before it, the Court is prepared to rule. Based on the record before it, the Court concludes that it is unnecessary to hold a hearing and thus denies the request for oral hearing.

II. STATUTORY AND REGULATORY BACKGROUND

In 1965, Congress enacted the McNamara-O'Hara Service Contract Act, 41 U.S.C. §§ 6701-07 (“SCA” or “Act”) (formerly codified at 41 U.S.C. §§ 351-58), to protect the wage standards of employees furnishing services to or performing services for federal agencies. See McNa-mara-O'Hara Service Contract Act of 1965, Pub. L. No. 89-286, 79 Stat. 1034; Lear Siegler Servs., Inc. v. Rumsfeld, 457 F.3d 1262, 1266 (Fed. Cir. 2006); Fort Hood Barbers Ass'n v. Herman, 137 F.3d 302, 305 (5th Cir. 1998) (per curiam). Subject to various exceptions not relevant here, the Act, as amended in 2011,

applies to any contract or bid specification for a contract, whether negotiated or advertised, that -- (1) is made by the Federal Government . . . (2) involves an amount exceeding $2, 500; and (3) has as its principal purpose the furnishing of services in the United States through the use of service employees.

41 U.S.C. § 6702(a) (altering structure into one paragraph).

As recognized in Fort Hood, “the primary purpose of the Act was to protect wage standards of employees, ” and “[b]y requiring service contractors to pay their employees the prevailing wage rate, Congress sought to neutralize the federal government's inordinate purchasing power and its depressive effect on the market's natural resolution of wage and benefit rates.” 137 F.3d at 309. Accordingly, “the SCA prevents contractors from underbidding each other (and hence being awarded government contracts) by cutting wages or fringe benefits to its service workers.” Lear Siegler,

3

457 F.3d at 1266.

“Congress granted the Secretary [of Labor] a wide girth of discretion with which to implement the Act. If the regulation reasonably comports with the purposes of the Act and the amendments, it must be deemed valid.” Fort Hood, 137 F.3d at 309. By statute, Congress granted the Secretary of Labor authority to implement and enforce the SCA in accordance with the administrative and enforcement provisions of the Walsh-Healey Act, 41 U.S.C. §§ 6506-07. See 41 U.S.C. § 6707(a); 15A Fed. Procedure, Lawyer's Ed. § 39:321 (Mar. 2022 update) (noting that, through § 6707 “[t]he provisions of the Walsh-Healey Act regarding judicial review govern in proceedings under the Service Contract Act” and referencing §§ 6506-07). And the Secretary of Labor has promulgated regulations that provide a comprehensive administrative scheme for implementing and enforcing the Act's requirements. See 29 C.F.R. §§ 4.1 et seq., §§ 6.1 et seq., §§ 8.1 et seq.

By statute, covered contracts must contain specific terms, including provisions “specifying the minimum wage to be paid” and “the fringe benefits to be provided to each class of service employee engaged in the performance of the contract or any subcontract.” 41 U.S.C. § 6703(1)-(2). And by regulation, they must also “contain, as an attachment, the applicable, currently effective wage determination specifying the minimum wages and fringe benefits for service employees to be employed thereunder.” 29 C.F.R. § 4.5. Further, they must include specific clauses set out by regulation. See Id. § 4.6.

In accordance with the promulgated regulations, “[t]he Department of Labor (and not the contracting agencies) has the primary and final authority and responsibility for administering and interpreting the Act, including making determinations of coverage.” Id. § 4.101(b) (citing various cases and “43 Atty. Gen, Ops. (Mar. 9, 1979)”). The Supreme Court has recognized that 43 Op. Atty. Gen. No. 14 (1979) states: “Secretary has final authority to determine whether particular contracts are covered by Walsh-Healey or Service Contract Acts.” See Univs. Rsch. Ass'n, Inc. v. Coutu,

4

450 U.S. 754, 761 n.9 (1981).

“On matters which have not been authoritatively determined by the courts, it is necessary for the Secretary of Labor and the Administrator to reach conclusions as to the meaning and the application of provisions of the law in order to carry out their responsibilities of administration and enforcement.” 29 C.F.R. § 4.101(c). Furthermore, being remedial in nature, the SCA

is intended to be applied to a wide variety of contracts, and the Act does not define or limit the types of services which may be contracted for under a contract the principal purpose of which is to furnish services. Further, the nomenclature, type, or particular form of contract used by procurement agencies is not determinative of coverage. Whether the principal purpose of a particular contract is the furnishing of services through the use of service employees is largely a question to be determined on the basis of all the facts in each particular case.

29 C.F.R. § 4.111(a). That some coverage questions may not require a determination as to the SCA's applicability to a particular type or form of contract does not mean that the Secretary's authority to interpret the SCA and to make coverage decisions excludes applicability determinations. To the contrary, §§ 4.101(c) and 4.111(a) indicate that applicability determinations are within the final authority of the DOL or its authorized representative to determine whether the SCA covers particular contracts.

Regulations permit coverage determinations to be retroactively applied to a contract when the Secretary or his...