Coalition for Gov. Procurement v. Federal Prison

• Decision Date: 12 April 2004
• Docket Number: No. 01-2231.,01-2231.
• Citation: 365 F.3d 435
• Parties: COALITION FOR GOVERNMENT PROCUREMENT, et al., Plaintiffs-Appellants, v. FEDERAL PRISON INDUSTRIES, INC., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

365 F.3d 435

COALITION FOR GOVERNMENT PROCUREMENT, et al., Plaintiffs-Appellants, v. FEDERAL PRISON INDUSTRIES, INC., et al., Defendants-Appellees.

No. 01-2231.

United States Court of Appeals, Sixth Circuit.

Argued: February 6, 2003.

Decided and Filed: April 12, 2004.

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Stephen M. Ryan (argued and briefed), Michael T. Brown (briefed), Manatt, Phelps & Phillips, Washington, DC J. Terrance Dillonm Nyers, Nelson, Dillon, Grand Rapids, MI, for Appellants.

Charles R. Gross (argued and briefed), United States Attorney, Grand Rapids, MI, for Appellees.

David T. Ralston, Jr. (briefed), Hopkins & Sutter, Washington, DC, Philip A. Nacke (briefed), Foley & Lardner, Washington, DC, for Amicus Curiae.

Before GILMAN and GIBBONS, Circuit Judges; ECONOMUS, District Judge.^*

ECONOMUS, D.J., delivered the opinion of the court, in which GILMAN, J., joined. GIBBONS, J., concurred in the judgment only.

OPINION

ECONOMUS, District Judge.

I. OVERVIEW

This appeal draws the court into the longstanding conflict between the government's policy of employing federal inmates in the manufacture of goods and the challenges faced by the private industries compelled to compete with inmate-produced wares. Nearly seven decades ago, the United States Supreme Court addressed the "evil" posed by "the sale of convict-made goods in competition with the products of free labor," and opined, "[F]ree labor, properly compensated, cannot compete successfully with the enforced and unpaid or underpaid convict labor of the prison." Whitfield v. Ohio, 297 U.S. 431, 439, 56 S.Ct. 532, 80 L.Ed. 778 (1936). Since Whitfield, the debate over the use of inmate labor largely has been reserved for the policymakers operating in the other branches of government. The role of the courts has been limited to examining whether the terms and conditions of inmate employment comply with constitutional and statutory standards. See generally Hope v. Pelzer, 536 U.S. 730, 122 S.Ct. 2508, 153 L.Ed.2d 666 (2002) (examining liability of prison officials pursuant to 42 U.S.C. § 1983 where said officials disciplined an inmate for refusal to work on a "chain-gang"); Richardson v. McKnight, 521 U.S. 399, 405-06, 117 S.Ct. 2100, 138 L.Ed.2d 540 (1997) (acknowledging that privately-operated prisons may be held liable for injuries suffered by inmates employed on "chain gangs" and "work-farms"). This appeal requires, however, that the court re-enter the conflict and examine whether the agency charged by Congress to manage inmate labor — Federal Prison Industries, Inc. — has acted within its administrative authority.

Specifically, the appellants-plaintiffs, the Coalition for Government Procurement ("CGP") — a non-profit trade association representing manufacturers of office furniture — and several CGP members,¹ appeal the district court's award of summary judgment in favor of Federal Prison Industries, Inc. ("FPI" or "UNICOR"),² and its Board of Directors (the "Board"), in this action brought pursuant to UNICOR's organic statute, 18 U.S.C. §§ 4121-4129 (2003), the judicial review provisions of the Administrative Procedures Act ("APA"), 5 U.S.C. §§ 701-706, and the Just Compensation Clause of the Fifth Amendment to the United States Constitution, U.S. Const. amend. V.³ The Coalition asserts that UNICOR violated the foregoing provisions from 1991-1995 when it significantly expanded its production of office furniture without initiating the public notice and comment procedures required by section⁴ 4122. The Coalition further asserts that the Board violated the organic statute and the APA when it authorized UNICOR's 1995-1996 requests to significantly expand production of office furniture. Finally, the Coalition contends that UNICOR's direct dealings with private manufacturers and purchasers of office furniture violate the organic statute and the APA.

As the issues raised in this appeal are matters of first impression among the courts of appeals, we begin our analysis with an extensive examination of the statutory and regulatory framework governing UNICOR's operations. We thereafter address the specific assignments of error.

II. BACKGROUND

A. The Historical Underpinnings of UNICOR's Organic Statute

In the words of one leading scholar, "The history of the prison is in large measure a history of prison labor."⁵ While the issues underlying the instant appeal are steeped in this lengthy history, we narrow our focus to the historical events giving rise to UNICOR.

1. Early Congressional Responses to Inmate-Labor Programs

The emergence of the penitentiary system at the end of the eighteenth century resulted in the states taking custody of large and restless inmate populations whose ward placed considerable pressures on state treasuries.⁶ The states responded with efforts designed to reduce "idle hands" among the inmates while promoting the self-sufficiency of the penitentiary.⁷ Central to these efforts were inmate-labor programs.⁸

As the use of inmate-labor increased throughout the nineteenth and early-twentieth centuries, so too did the cries from the private enterprises, trade associations and labor unions that viewed such programs as threats to free markets and employment. State legislatures responded by enacting measures limiting the scope of inmate-manufactured products. See, e.g., Whitfield, 297 U.S. at 435-440, 56 S.Ct. 532 (examining an Ohio statute barring the sale of inmate goods manufactured outside of the state of Ohio). Similarly, Congress enacted a series of measures designed to curtail the interstate sale of inmate-produced goods.⁹

Notwithstanding the apparent hostility exhibited by the federal government to the states' use of inmate labor, Congress promoted inmate-labor programs within the federal penitentiary system. For instance, Congress authorized the Attorney General in 1918

to establish, equip, maintain, and operate at the United States Penitentiary in Atlanta, Georgia, a factory or factories for the manufacture of cotton fabrics to supply the requirements of the War and Navy Departments, the Shipping Corporation, cotton duck suitable for tents and other army purposes and canvas for mail sacks and for the manufacture of mail sacks and other similar mail-carrying equipment for the use of the United States Government.

Act of July 10, 1918, ch. 144, § 1, 40 Stat. 896, 896. Similarly, Congress authorized a factory to be constructed at the Leavenworth, Kansas federal penitentiary for the "manufacture of shoes, brooms, and brushes." Act of April 3, 1924, ch. 81, 43 Stat. 33, 44-45.

Congress thereafter expanded the use of inmate labor to all federal penitentiaries. See Act of May 27, 1930, ch. 340 § 1, 46 Stat. 391, 391 (hereinafter the "1930 Act") ("[T]he Attorney General shall provide employment for all physically fit inmates in the United States penal and correctional institutions."). Congress expressly authorized the use of inmate labor in two areas. First, the Attorney General was "to make available the services of United States prisoners" for use by federal agencies and departments in the "construction or repairing roads ...; clearing, maintaining, and reforesting public lands; building levees; and for constructing or repairing any public ways or works." Act of May 27, 1930, ch. 340 § 2, 46 Stat. at 391. Secondly, the Attorney General was "to establish such industries as w[ould] produce articles and commodities for consumption in the United States penal and correctional institutions or for sale to the departments and independent establishments of the Federal Government." Act of May 27, 1930, ch. 340 § 3, 46 Stat. at 391. The 1930 Act also created a limited market for inmate-produced wares providing that, "The several Federal departments and independent establishments and all other Government institutions of the United States shall purchase at not to exceed current market prices, such products of the industries herein authorized to be carried on their requirements and as may be available." Act of May 27, 1930, ch. 340 § 7, 46 Stat. at 392.

Congress did not, however, authorize the unfettered use of inmate labor. It directed the Attorney General to establish only those industries "as [would] give the inmates a maximum opportunity to acquire a knowledge and skill in trades and occupations which w[ould] provide them with a means of earning a livelihood upon release." Act of May 27, 1930, ch. 340 § 7, 46 Stat. at 392. Similarly, while the 1930 Act "provide[d] employment for all physically fit inmates," it did so only in such "diversified forms as [would] reduce to a minimum competition with private industry or free labor." Act of May 27, 1930, ch. 340 § 1, 46 Stat. at 391. Moreover, Congress explicitly directed that inmate-manufactured products were "not for sale to the public in competition with private enterprise." Act of May 27, 1930, ch. 340 § 3, 46 Stat. at 391.

2. The Creation of UNICOR

Four years later, Congress charged the President "to create a body corporate of the District of Columbia to be known as `Federal Prison Industries.'" Act of June 23, 1934, ch. 736 § 1, 48 Stat. 1211, 1211 (hereinafter the "1934 legislation").¹⁰ The 1934 legislation otherwise mirrored the 1930 Act with one significant addition: the creation of a board of directors (the "board"). Congress directed the President to appoint a five-member board of directors, with industry, labor, agriculture, retailers/consumers, and the Attorney General each represented by one member. See Act of June 23, 1934, ch. 736 § 2, 48 Stat. at 1211. While Congress vested UNICOR with broad discretion to manage inmate-operations, it empowered the board with the authority to balance such operations with the need to protect private industries. See Act of June 23, 1934, ch. 736 § 3, 48 Stat. at 1211 ("It shall be the duty of the board of directors to diversify so far as...