Coalition for Gov. Procure. v. Fed. Prison

Decision Date08 August 2001
Docket NumberNo. 1:99-CV-919.,1:99-CV-919.
PartiesCOALITION FOR GOVERNMENT PROCUREMENT, et al., Plaintiffs, v. FEDERAL PRISON INDUSTRIES, et al., Defendants.
CourtU.S. District Court — Western District of Michigan
OPINION

ROBERT HOLMES BELL, Chief Judge.

In this federal question case Plaintiffs, Coalition for Government Procurement, et al., ("the Coalition"), allege that Defendants, Federal Prison Industries, et al., ("FPI"), have overstepped their statutory authority and violated the Administrative Procedures Act by illegally producing and selling office furniture. Before the Court are cross-motions for summary judgment pursuant to FED. R. CIV. P. 56. For the reasons discussed below, the Court grants summary judgment in favor of Defendants on all nine counts of the suit.

Facts

The Coalition is a trade association whose membership consists of over 300 private sector manufacturers, distributors, and dealers whose businesses are affected by Federal Prison Industries. Office furniture manufacturers Herman Miller, Inc., Haworth, Inc., and Knoll, Inc., are also Plaintiffs in this action.

Defendant Federal Prison Industries ("FPI") is a government corporation established by Congress in 1934 to provide work programs for federal prison inmates. Congress intended FPI "to provide work programs and training opportunities for inmates confined within the Federal Bureau of Prisons system." 28 C.F.R. § 345.11(a). Federal agencies are required to purchase FPI products unless they procure a waiver from FPI.1 Under 18 U.S.C. § 4122, FPI may not "significantly expand" production of a product until it obtains approval from FPI's Boards of Directors. Before the Board may approve a request for a significant expansion, 18 U.S.C. § 4122 requires a written analysis of the impact of the increase on industry, an announcement of the proposal to private vendors, and an invitation for comments.

The Coalition has brought nine counts against FPI. Counts 1-7 arise out of Plaintiffs' allegations that FPI engaged in illegal production expansions of office furniture between 1991 and 1995. Counts 1 through 3 allege unauthorized significant increases in systems furniture production, seating furniture production, and case goods production, respectively. Count 4 challenges the propriety of the Board's retroactive approval of those increases. Count 5 alleges that the 1996 Board approval of future expansion of production is illegitimate. Count 6 challenges the legality of the Significant Expansion Guidelines themselves. Count 7 asserts that Plaintiffs should be compensated for their loss of business due to FPI's expansions because those expansions amounted to a regulatory taking under the Fifth Amendment. Count 8 alleges that FPI's continued practice of "pass-through" sales2 to fill orders of government agencies are illegal. Count 9 alleges that FPI is illegally forcing private sector businesses that provide office furniture to federal government subcontractors in federal "turn-key" construction projects to purchase FPI furniture.

Analysis

Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). An issue concerning a material fact is genuine if the record as a whole could lead a reasonable trier of fact to find for the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

Under Rule 56 the court must view the evidence in a light most favorable to the nonmoving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). Summary judgment is not proper if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. See Anderson, 477 U.S. at 248, 106 S.Ct. 2505. Summary judgment is proper if the non-moving party fails to make a showing sufficient to establish the existence of an element essential to the party's case for which that party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

The moving party bears the initial burden of showing the absence of a genuine issue of material fact. See Celotex Corp., 477 U.S. at 323, 106 S.Ct. 2548. The burden then shifts to the nonmoving party to come forward with evidence showing that there is a genuine issue of material fact that must go to trial. See Anderson, 477 U.S. at 256, 106 S.Ct. 2505. If the non-moving party fails to make a sufficient showing on an essential element of its case with respect to which it has the burden of proof, the moving party is entitled to summary judgment as a matter of law. See Celotex Corp., 477 U.S. at 324, 106 S.Ct. 2548.

The Coalition seeks judicial review of federal agency action under the authority of the Administrative Procedure Act. In reviewing the merits of the counts raised in the complaint, the Court employs a narrow standard of review. The Court may "set aside the agency determination only if it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." Sierra Club v. Slater, 120 F.3d 623, 632 (6th Cir.1997), citing Marsh v. Oregon Natural Resources Council, 490 U.S. 360, 375, 109 S.Ct. 1851, 104 L.Ed.2d 377 (1989); Communities, Inc. v. Busey, 956 F.2d 619, 622 (6th Cir.1992). See also Mercer v. United States Medical Ctr. for Fed. Prisoners, 312 F.Supp. 1077, 1079 (W.D.Mo.1970) ("So long as Federal Prison Industries, Inc., and its board of directors do not administer the authority conferred by [Congress] in a manner which is arbitrary or capricious, Courts may not properly interfere with their performance of their delegated functions.").

From its inception, FPI was granted broad discretionary authority to carry out its mission: "It shall ... have power to do all things it is authorized to do by [Pub.L. No. 73-461], and all things incident to or necessary and proper in the exercise of its functions. Exec. Order No. 6917 (Dec. 11, 1934)."3 "Federal Prison Industries shall determine in what manner and to what extent industrial operations shall be carried on in Federal penal and correction institutions for production of commodities for consumption in such institutions or for sale to the departments or agencies of the United States ...." 18 U.S.C. § 4122(a).

This grant of broad discretion is not unlimited. Several restrictions were placed upon FPI. The most important is that no single industry should bear an "undue burden" as a result of the prison work program:

[FPI] shall have power to determine in what manner and to what extent industrial operations shall be carried on in the several penal and correctional institutions of the United States and shall, so far as practicable, so diversify prison industrial operations that no single private industry shall be forced to bear an undue burden of competition with the products of the prison workshops.4

In addition, although FPI is authorized to sell its products to the federal government, it may not sell to the public in competition with private enterprise. 18 U.S.C. §§ 4121-4122. The Board of FPI has the difficult task of balancing several seemingly incongruous public policy goals: It must employ "the greatest number of inmates ... as is reasonably possible," "diversify, so far as practicable, prison industrial operations," and operate the federal prison factories such that "no single private industry shall be forced to bear an undue burden of competition ... and to reduce to a minimum competition with private industry or free labor." 18 U .S.C. § 4122(b)(1).

Within these parameters, day-to-day decisions as to fulfilling its mandate are within the discretion of FPI. FPI has delegated authority to make these day-to-day decisions to operate individual factories to Associate Wardens who oversee FPI operations at those institutions where FPI maintains manufacturing facilities. 28 C.F.R. § 345.11(b).

Congress also established a Board to oversee FPI. The Board consists of "six directors, appointed by the President to serve at the will of the President without compensation." 18 U.S.C. § 4121. One of the six directors represents the Secretary of Defense, one represents the Attorney General, and the remaining four represent the private sector. Id. Decisions to "produce a new product or to significantly expand the production of an existing product shall be made by the board of directors of the corporation." 18 U.S.C. § 4122(b)(4). When proposing a significant increase to the Board, FPI is required to prepare a report evaluating the analysis of the increase on industry as well as provide private vendors with notice and an opportunity to comment on the proposed increases. 18 U.S.C. § 4122(b)(4)(A—C).

The Board has promulgated guidelines to help determine when an increase in production is significant. The guidelines pertaining to this case were in effect from 1989 to 1997. They were a two-tiered structure. The first tier acted as a trigger for application of the second tier. Only when production increases met the bar of the second tier were increases deemed significant.

A review of whether an increase was substantial was triggered by the...

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2 cases
  • Coalition for Gov. Procurement v. Federal Prison
    • United States
    • U.S. Court of Appeals — Sixth Circuit
    • 12 de abril de 2004
    ...underlying action challenging UNICOR's significant expansions in Office Furniture production. See Coalition for Gov't Procurement v. Federal Prison Indus., 154 F.Supp.2d 1140 (W.D.Mich.2001). The complaint specifically alleged seven classes of claims. The first class of claims (Counts I-III......
  • In re Anc Rental Corp., Bankruptcy No. 01-11220 (MFW).
    • United States
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    ...in other contexts, courts have held that a company's market share is not property. See Coalition for Government Procurement v. Federal Prison Industries, 154 F.Supp.2d 1140, 1153 (W.D.Mich.2001) ("A loss of market share is not a direct appropriation of private property requiring compensatio......

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