Gerber Prods. Co. v. Perdue
| Decision Date | 30 May 2017 |
| Docket Number | Case No. 16-cv-01696. |
| Citation | 254 F.Supp.3d 74 |
| Parties | GERBER PRODUCTS COMPANY, Plaintiff, v. Sonny PERDUE, et al., Defendants. |
| Court | U.S. District Court — District of Columbia |
Jonathan D. Shaffer, Smith, Pachter, McWhorter PLC, Vienna, VA, for Plaintiff.
Joseph Evan Borson, U.S. Department of Justice, Washington, DC, Amanda Lynn Lavin, Virginia Office of the Attorney General, Richmond, VA, for Defendants.
This lawsuit arises out of a disputed contract to supply infant formula in the Commonwealth of Virginia under the federal Special Supplemental Nutrition Program for Women, Infants, and Children ("WIC"). Overseen by the U.S. Department of Agriculture ("USDA"), the WIC program provides grants to state agencies to fund food benefits and other related services to low-income women and children. In the spring of 2016, the Virginia Department of Health ("VDH") issued a notice of Intent to Award a contract for the supply of infant formula to Plaintiff Gerber Products Company. Plaintiff's competitor, Abbott Nutrition, challenged that preliminary award, claiming that VDH had evaluated the competing bids using the wrong data. VDH consulted with USDA officials, who agreed that state officials had relied on incomplete data when initially awarding the contract to Plaintiff. VDH then re-opened the bid process and ultimately awarded the contract to Abbott Nutrition.
Plaintiff believes it lost the Virginia infant formula contract because of the USDA's actions. Plaintiff claims that the USDA gave advice to VDH that was at odds with the agency's positions in other state procurements and directed VDH to rescind the Intent to Award and re-open the bid process. Plaintiff now brings suit to prevent such events from happening again. Plaintiff asks the court to issue an order requiring the USDA "to clarify and consistently apply guidance on required data to be included in State WIC solicitations" and "to cease providing inconsistent or disparate direction or advice regarding data requirements for State WIC infant formula procurements." Although Plaintiff paints a sympathetic picture, the court cannot grant the relief it seeks. As explained below, Plaintiff both lacks standing to bring suit and fails to challenge a final agency action under the Administrative Procedure Act. For those reasons, the court grants Defendants' Motion to Dismiss. The court also denies Plaintiff's request for leave to take discovery.
The U.S. Department of Agriculture ("USDA"), through its sub-component, the Food and Nutrition Service, runs the Special Supplemental Nutrition Program for Women, Infants, and Children ("WIC"). Am. Compl., ECF No. 24 [hereinafter Am. Compl.], ¶ 29. WIC is funded by the USDA but is administered by state agencies. Id. ¶¶ 29–30. Under the program, the federal government provides grants to states, which in turn provide "supplemental foods and nutrition education" to qualifying low-income women and children. Child Nutrition Act, 42 U.S.C. § 1786 ; Am. Compl. ¶¶ 29–30.
One of the products the WIC program provides is infant formula. See 42 U.S.C. § 1786(f)(15). Under the statutory scheme, states are required to administer a competitive bidding process, or similar cost containment system, in which companies bid to secure exclusive contract rights to provide infant formula to that state. Id. § 1786(h)(8)(A)(i). The USDA's regulations, generally speaking, require states to use a "single-supplier competitive system," whereby state WIC agencies "solicit[ ] sealed bids from infant formula manufacturers to supply and provide a rebate for infant formulas." 7 C.F.R. § 246.16a(b)(1) (2011). The prevailing manufacturer gives the state agency a rebate for each unit of formula purchased by WIC participants in exchange for an exclusive supplier contract. 42 U.S.C. § 1786(b)(17), (18).
In the spring of 2016, the Commonwealth of Virginia's WIC agency, the Virginia Department of Health ("VDH"), announced an Intent to Award its WIC infant formula contract to Plaintiff. Am. Compl. ¶ 41. Plaintiff's competitor, Abbott Nutrition, challenged VDH's decision, arguing that VDH had used incorrect data to determine the lowest bidder. Id. ¶ 44. According to Abbott Nutrition, VDH incorrectly used estimates of infants consuming only milk-based formula, when it should have included infants using soy-based and milk-based lactose free infant formula. Id.
Virginia WIC Director Michael Welch sought guidance from the USDA following Abbott Nutrition's protest. Welch e-mailed a group of USDA officials to ask whether the USDA's regulations required state agencies to consider all participating infants in evaluating bids, or just those using milk-based formula. Id. ¶¶ 47–49. The Food and Nutrition Service's WIC branch chief for the Mid–Atlantic Region, Jaime Van Lieu, informed Welch that the USDA's regulations required, for bidding purposes, an estimate of all participating infants, except those who are breastfeeding or prescribed exempt formulas. Id. ¶ 49; Compl., ECF No. 1 [hereinafter Compl.], Ex. 1, ECF No. 1–9 [hereinafter Pl.'s Ex. 1], at 7–9. Van Lieu admitted the regulations were ambiguous, but pointed to preambles to the relevant rules to support her conclusion, noting that "USDA's legal folks typically reference preambles when there is vagueness in the regs." Pl.'s Ex. 1 at 9. Van Lieu also reported that a recent winning bid from another state in her region, Pennsylvania, included all non-exempt infants that receive formula. Id. Following this exchange, VDH canceled its Intent to Award the contract to Plaintiff "due to missing data," reopened bidding, and thereafter awarded the contract to Abbott Nutrition. Am. Compl. ¶¶ 51, 53, 88–89.
Plaintiff challenged VDH's revocation of its Intent to Award at every turn. At the start, Plaintiff sent a letter to VDH protesting the revocation and sent a copy to the USDA. Am. Compl. ¶¶ 54–55, 61. The USDA deferred to VDH, and VDH, in turn, rejected the protest on the ground that Plaintiff could not challenge VDH's decision not to award a contract. Compl., Ex. 8, ECF No. 1–16; Am. Compl. ¶¶ 67–68. Plaintiff's subsequent administrative protests also proved unsuccessful. Compl., Ex. 11, ECF No. 1–19; Am. Compl. ¶¶ 75, 90. Plaintiff also twice sued VDH in Virginia state court—first, after VDH announced the re-bid, and then again after it awarded the contract to Abbott Nutrition—only to see VDH prevail in both cases. Am. Compl. ¶¶ 84, 93–94.
In September 2016, Plaintiff brought suit in this court against both federal and VDH officials, seeking a temporary restraining order ("TRO") enjoining VDH officials from announcing a new bid solicitation and requiring them to re-instate the original Intent to Award to Plaintiff. This court denied the motion for a TRO, finding that it lacked both personal jurisdiction over the Virginia state officials and subject matter jurisdiction to hear the claims against them. Gerber Prod. Co. v. Vilsack , No. 16-1696, 2016 WL 4734357, at *1 (D.D.C. Sept. 9, 2016). The court also held that, because it could not order the federal officials to grant the requested injunctive relief, Plaintiff lacked standing to sue them. Id.
Having failed to recapture the Virginia contract, Plaintiff embarked on a different strategy. It voluntarily dismissed the Virginia state officials from this suit, see Notice of Voluntary Dismissal, ECF No. 21, and then filed an Amended Complaint solely against USDA officials ("Defendants").1 The Amended Complaint alleges that the USDA violated the Administrative Procedure Act ("APA") (1) by treating the Virginia procurement differently than similarly situated state procurements, and (2) by violating its own regulations when it directed VDH to re-open bidding. Am. Compl. ¶¶ 109–23. As to its first APA claim, Plaintiff alleges that the USDA has not acted consistently when it comes to intervening in various states' infant formula procurements. Id. ¶¶ 109–13. Plaintiff points to a host of other instances in which state agencies awarded contracts based on the same purportedly deficient data that Plaintiff submitted to VDH, without any corresponding demand from the USDA to re-open bidding. Id. ¶¶ 95–102. As to its second APA claim, Plaintiff contends that the USDA violated its own regulations when it "usurped the role of the VDH procurement officer and improperly directed cancellation" of the Intent to Award. Id. ¶ 118. To remedy these alleged violations, Plaintiff asks the court to order the USDA "to clarify and consistently apply guidance on required data to be included in State WIC solicitations" and "to cease providing inconsistent or disparate direction or advice regarding data requirements for State WIC infant formula procurements." Id. at 31.
Defendants move to dismiss Plaintiff's Amended Complaint on several grounds. First, under Rule 12(b)(1) of the Federal Rules of Civil Procedure, they contend that the court is without subject matter jurisdiction to hear Plaintiff's claims because Plaintiff lacks Article III standing. Defs.' Mot. to Dismiss, ECF No. 25, Mem. in Supp., ECF No. 25–1 [hereinafter Defs.' Mot.], at 9–18. Second, under Rule 12(b)(6), Defendants argue that Plaintiff has not met the threshold requirement for challenging agency action under the APA because the action Plaintiff seeks to challenge is neither "agency action," under 5 U.S.C. § 702, nor "final," under 5 U.S.C. § 704. Defs.' Mot. at 8, 19–26. Third, also under Rule 12(b)(6), Defendants argue that Plaintiff fails to state a claim under the APA because (1) the regulation the USDA allegedly violated is an indemnity provision and does not impose any liability or duty on the USDA; and (2) Plaintiff did not sufficiently plead facts showing that the USDA treated similar state procurements differently. Id. at 26–36.
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