Kentucky State University v. Kentucky Dept. for the Blind, 94-CA-2883-MR

• Decision Date: 12 April 1996
• Docket Number: No. 94-CA-2883-MR,94-CA-2883-MR
• Citation: 923 S.W.2d 296
• Parties: 110 Ed. Law Rep. 484 KENTUCKY STATE UNIVERSITY; Mary L. Smith, President of Kentucky State University; and Members of the Board of Regents of Kentucky State University, in their Official Capacity and Their Successors in Office, Appellants, v. KENTUCKY DEPARTMENT FOR the BLIND; Priscilla Rogers, Executive Director of the Kentucky Department for the Blind; Stephen M. Johnson, Director of the Kentucky Business Enterprises Program; and Jerry Grimes, a Licensed Vendor Under the Kentucky Business Enterprises Program, Appellees.
• Court: Kentucky Court of Appeals

Page 296

923 S.W.2d 296

110 Ed. Law Rep. 484

KENTUCKY STATE UNIVERSITY; Mary L. Smith, President of Kentucky State University; and Members of the Board of Regents of Kentucky State University, in their Official Capacity and Their Successors in Office, Appellants, v. KENTUCKY DEPARTMENT FOR the BLIND; Priscilla Rogers Executive Director of the Kentucky Department for the Blind Stephen M. Johnson, Director of the Kentucky Business Enterprises Program; and Jerry Grimes, a Licensed Vendor Under the Kentucky Business Enterprises Program, Appellees.

No. 94-CA-2883-MR.

Court of Appeals of Kentucky.

April 12, 1996.

Case Ordered Published by

Court of Appeals May 24, 1996.

Reginald L. Thomas, General Counsel, Kentucky State University, Frankfort, for Appellants.

Sue G. Simon, Office of General Counsel, Frankfort, Steven G. Bolton, Frankfort, for Appellees.

Before DYCHE, JOHNSON and JOHNSTONE, JJ.

JOHNSTONE, Judge.

Kentucky State University appeals a decision of the Franklin Circuit Court which construes KRS Chapter 163 as conferring upon the Kentucky Department for the Blind autonomy in product selection for the Randolph-Sheppard vending facility program within the Commonwealth. The trial judge also concluded that KRS 163.470(11) includes a right of first refusal in the establishment of food service operations on state property. Although we find no error in the determination concerning product selection, we are persuaded that the decision as to right of first refusal cannot be sustained and, accordingly, that portion of the judgment of the Franklin Circuit Court must be reversed.

The parties to this appeal have a history dating back to 1983 when a vending facility operation was established on the campus of Kentucky State University under the management of appellee, Jerry Grimes. By agreement, a minimal five percent (5%) commission was levied upon the proceeds from the vending operation to be paid to the university by the vendor Grimes. In 1989, the university indicated that it intended to terminate its contract with the department and enter a contract for vending services with a private vendor. Negotiations were undertaken to preserve the department's facility resulting in an agreement to renew the contract if the monthly commissions paid to the university were substantially increased. Grimes thereafter filed an action in the Franklin Circuit Court contesting the terms of the new contract. The issues raised in that proceeding were not resolved, however, as an agreed order was entered on April 22, 1992, acknowledging the department's statutory right to operate the vending facility on the university campus and the vendor's consent to pay the university 5 percent of the net monthly profits. As part of the agreed order, the department and the university were required to execute a conformed agreement to bring it into compliance with the terms of the agreed order.

Because the parties were unable to resolve certain points of conflict and a conformed vending services agreement could not be reached, the department sought declaratory and injunctive relief from the Franklin Circuit Court. The dispute between the parties centers on 1) the university's insistence on product and supplier control, and 2) the right of the university to license a private contractor for food cart services in competition with the vending facility operation. From adverse rulings on both issues, the university prosecutes this appeal.

Kentucky, with the enactment of KRS 163.470(11), extended the application of the Randolph-Sheppard vending facility program to state government:

There shall be established under the authority of the department to be directed by the commissioner, a Division of Business Enterprises. This division shall manage and supervise the Vending Facilities Program and license qualified blind persons as vendors. In connection therewith, the department shall be authorized to own or lease vending equipment for the operation of vending facilities in federal, state, private, and other buildings. The set-aside charges levied shall comply with the existing federal regulations as specified in 34 CFR 395.9. One (1) or more facility placement agents shall be employed to locate and establish additional vending facilities. The Department for the Blind shall make such surveys as may be deemed necessary to determine the vending facility opportunities for blind vendors in state buildings or on other property owned, leased, or otherwise occupied by the state government and shall install vending facilities in suitable locations on such property for the use of the blind. All of the net income from vending machines which are on the same property as a vending facility shall be paid to the blind vendor of the vending facility. Whenever there exists a conflict of interest between state agencies seeking to vend merchandise on the same state property, the agencies shall negotiate a fair agreement which shall protect the interest of both from unreasonable competition. The agreement shall be submitted to the custodial authority having jurisdiction over the property for approval. Provided, however, that in all situations the blind vendor shall be permitted to vend all items of merchandise customarily sold at similar vending facilities.

KRS 163.470(11). It is undisputed that Kentucky State University falls within the purview of this legislation. The product control issue developed because the university, in exchange for a substantial financial consideration extended to Coca-Cola an exclusive contract to sell its drink products on the university's campus. Despite the fact that neither the department nor vendor Grimes derives any benefit from this exclusive contract, the university insists that they are obligated to purchase only Coca-Cola brand products for resale on campus and demands contractual language reserving product and supplier control to the university. Like the trial judge, we are convinced that by virtue of the Kentucky enabling legislation, and guided by federal law and regulations, authority for supervision and control of vending services operations must be deemed to reside in the state licensing agency. Despite the university's argument to the contrary, we believe this supervisory authority includes a correlative right of product control.

Perhaps due to Randolph-Sheppard's two-tiered dispute resolution system, our research disclosed a paucity of case law defining specific rights and responsibilities under the act, although several federal cases proved generally instructive. An overview of the act's essential provisions is contained in Minnesota Department of Jobs & Training v. Riley, 18 F.3d 606, 608 (8th Cir.1994), including this synopsis:

The Randolph-Sheppard Act provides the framework for a comprehensive regulatory scheme giving blind persons licensed by state agencies priority to operate vending facilities on all federal property. 20 U.S.C. § 107(a), (b). As authorized by § 107(b), the Secretary of the Department of Education (DOE) has prescribed detailed regulations to implement the Act's provisions. Randolph-Sheppard Vendors of America, Inc. v. Harris, 628 F.2d 1364, 1365-66 (D.C.Cir.1980); see 34 C.F.R. pt. 395. Before establishing the vending facility, the state agency must submit a permit application that...