N.C. Div. of Servs. for the Blind v. U.S. Dep't of Educ.

• Decision Date: 23 August 2019
• Docket Number: 1:17cv1058
• Court: U.S. District Court — Middle District of North Carolina
• Parties: STATE OF NORTH CAROLINA DIVISION OF SERVICES FOR THE BLIND, Plaintiff, v. UNITED STATES DEPARTMENT OF EDUCATION, REHABILITATION SERVICES ADMINISTRATION, and LLOYD CHADWICK HOOKS, Defendants.

STATE OF NORTH CAROLINA DIVISION OF SERVICES FOR THE BLIND, Plaintiff, v. UNITED STATES DEPARTMENT OF EDUCATION,REHABILITATION SERVICES ADMINISTRATION,and LLOYD CHADWICK HOOKS, Defendants.

1:17cv1058

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

August 23, 2019

MEMORANDUM OPINION AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

Moving pursuant to the Randolph-Sheppard Act, 20 U.S.C. §§ 107-107f (the "RSA"), and the Administrative Procedure Act, see 5 U.S.C. §§ 701-706, the State of North Carolina Division of Services for The Blind (the "Plaintiff" or "NCDSB") seeks judicial review of an "Opinion and Award" dated September 26, 2017 (the "Arbitration Award"). (See Docket Entry 1 (the "Complaint/Petition") at 1.)¹ In response, Lloyd Chadwick Hooks (the "Defendant"), a blind vendor under the RSA, seeks confirmation of both the Arbitration Award and a supplemental arbitration award dated January 2, 2018 (the "Supplemental Award"). (See Docket Entry 14 at 8.) For the reasons that follow, the Court shouldaffirm in part and vacate in part the Arbitration Award and affirm the Supplemental Award as specified herein.

BACKGROUND

This dispute arises from the procedures used to award a vending contract at a federal rest area along Interstate 85 in Davidson County, North Carolina (the "I-85 Rest Stop"). (See Docket Entry 1-1 at 1-5 (detailing procedural background in Arbitration Award); Docket Entry 19-1 at 10-13 (summarizing same matters in Plaintiff's opening memorandum); see also Docket Entry 20 at 8 (setting forth Defendant's agreement that Plaintiff's opening memorandum adequately summarized procedural history).) Prior to the underlying arbitration, Plaintiff and Defendant "stipulated to the following facts" (A.R. 341)² of relevance to this proceeding:

"[Plaintiff] is the State Licensing Agency [(the "SLA")] responsible for administering the [RSA] and for implementing related regulations." (Id.) "[Defendant] is a licensed operator in [Plaintiff's] Business Enterprises Program" (the "BEP"). (Id.) "Around August 2014, [BEP] operators were notified of an opening at the I-85 [Rest Stop]." (A.R. 342.) Defendant and other operators "submitted their application[s] to be considered for the I-85 [RestStop]." (Id.) "An interview panel comprised of Clay Pope ([BEP] Chief), Steve Noble (Location Counselor), and Ron Eller (Vice-Chair of the Elected Committee of Blind Vendors) conducted all interviews . . . ." (Id.) "As part of the established interview process, discretionary points were awarded to all interviewees." (Id.) "Panel members Pope, Noble and Eller scored [Defendant] 8, 6, and 5 respectively on discretionary points." (Id.) "Panel members Pope, Noble and Eller scored the prevailing candidate 8, 6, and 8 respectively on discretionary points." (Id.)

"[Defendant] filed a written appeal to the Operator Relations Committee [(the "ORC")], which is a required step for an appeal in the [BEP]." (Id.) "[The ORC] entered a decision denying [Defendant's] appeal." (Id.) Next, "the [NCDSB] Director[] entered a decision upholding the ORC's determination." (Id.) "[Defendant] requested a Full Evidentiary hearing and one was held before [a] Hearing Officer . . . ." (A.R. 343.) "At the hearing, [Defendant] contended the established interview procedures were not followed and challenged the award of discretionary points by Mr. Eller." (Id.) "The hearing officer . . . den[ied Defendant's] appeal." (Id.) Thereafter, "[Defendant] filed a complaint with the United States Department of Education" (the "DOE"). (Id.)

The DOE convened an arbitration panel to adjudicate Defendant's complaint. (A.R. 327.) Defendant "submitted transcripts of the interviews conducted by the interview panel, ORChearing, and the transcript of the Full Evidentiary hearing to the Arbitration Panel." (A.R. 343.) A three-person arbitration panel³ conducted a hearing on Defendant's complaint, at which counsel for Plaintiff and Defendant appeared and Defendant testified as a witness. (See A.R. 368-70.) After the hearing, a divided panel issued the Arbitration Award.

As relevant to this matter, the Arbitration Award found that "the SLA failed to conduct a give and take interview as a basis for awarding discretionary points [in] violat[ion of] 10A [North Carolina Administrative Code] § 63C.0204(d)(5)(F)." (A.R. 1161.) As a result, it ordered (i) that "[a]ll of the discretionary points awarded for filling the I-85 [Rest Stop] under subsection (5)(F) shall be deleted from the scoring records of all applicants;" (ii) that "[Plaintiff] shall reconstitute the original interview panel with the same members, interview all of the original eight applicants, record and transcribe all interviews as well as award points in accordance with subsection (5)(F) and its 5 + 5 practice;" and (iii) that "[Plaintiff] conduct the reconstituted interview within sixty (60) days following its receipt of th[e Arbitration Award]." (Id.) It further ordered (i) Plaintiff to "provide licensees with access to all relevant financial dataincluding, but not limited to, gross sales, gross profit, costs of goods sold, overhead expenses and net profit for the I-85 [Rest Stop] in accordance with 20 U.S.C. § 107b-1;" and (ii) the DOE and Plaintiff to "set aside all regulations prohibiting or restricting licensee access to relevant financial data under 20 U.S.C. § 107b-1." (Id.)

Finally, the arbitration panel ordered that, "[i]n the event [Defendant] has the highest point total after points are awarded by the reconstituted interview panel, he shall be assigned the I-85 [Rest Stop] and recover compensatory damages from [Plaintiff];" and that, "[a]s the prevailing party in his section (5)(F) claim, [Defendant] shall recover attorney fees," in an amount to be determined after further briefing. (A.R. 1162.) The Supplemental Award subsequently directed "the SLA [to] pay [Defendant's] attorney fees, expenses and costs in the amount of $52,965.02." (Docket Entry 14-1 at 24.)

DISCUSSION

I. Relevant Standards

Under the RSA, "[a]ny blind licensee who is dissatisfied with any action arising from the operation or administration of the vending facility program may submit to a[n SLA] a request for a full evidentiary hearing." 20 U.S.C. § 107d-1. "If such blind licensee is dissatisfied with any action taken or decision rendered as a result of such hearing, he may file a complaint with the [DOE]who shall convene a panel to arbitrate the dispute . . . ." Id. "[T]he decision of such panel shall be final and binding on the parties except," id., that the decision "shall be subject to appeal and review as a final agency action for purposes of chapter 7 of such Title 5," 20 U.S.C. § 107d-2(a), "that is, to judicial review in accordance with the Administrative Procedure Act ([the] 'APA'), 5 U.S.C. § 500 et seq., and, specifically, 5 U.S.C. § 706," Jones v. DeNotaris, 80 F. Supp. 3d 588, 591 (E.D. Pa. 2015). See also Sauer v. United States Dep't of Educ., 668 F.3d 644, 650 (9th Cir. 2012) ("An arbitration decision under the [RSA] is 'subject to appeal and review as a final agency action' under the standards set forth in the [APA]." (quoting 20 U.S.C. § 107d-2(a))); Browder v. United States Dep't of Educ., No. 99-2290, 238 F.3d 410 (table), 2000 WL 1724027, at *2 (4th Cir. Nov. 20, 2000) ("The underlying arbitration panel decision we review today is deemed a final agency action under the [APA].").⁴

The APA provides that, "[t]o the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action." 5 U.S.C. § 706. As relevant here, the reviewing Court shall also

hold unlawful and set aside agency action, findings, and conclusions found to be —

(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;

(B) contrary to constitutional right, power, privilege, or immunity;

(C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right;

(D) without observance of procedure required by law;

(E) unsupported by substantial evidence . . .; or

(F) unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court.

5 U.S.C. § 706(2). "In making [such] determinations, the [C]ourt shall review the whole record or those parts of it cited by a party, and due account shall be taken of the rule of prejudicial error." 5 U.S.C. § 706.

In other words, as the United States Court of Appeals for the Fourth Circuit has explained, the Court "must uphold [an RSA arbitration panel] decision if it is supported by 'substantial evidence,' and is not 'arbitrary, capricious, an abuse ofdiscretion, or otherwise not in accordance with law.'" Browder, 2000 WL 1724027, at *2 (quoting 5 U.S.C. § 706(2)(A), (E)). Further, "[i]n determining whether final agency action," such as an RSA arbitration award, "violates [S]ection 706(2)(A) of the APA, '[the Court] perform[s] only the limited, albeit important, task of reviewing agency action to determine whether the agency conformed with controlling statutes, and whether the agency has committed a clear error of judgment.'" Id. (some internal quotation marks omitted) (quoting Maryland Dep't of Human Res. v. United States Dep't of Agric., 976 F.2d 1462, 1475 (4th Cir. 1992)).

II. Sovereign Immunity Challenge

In its first assignment of error, Plaintiff asserts that the arbitration panel erred in awarding compensatory damages to Defendant if he wins the I-85 Rest Stop after the reconvened interview, arguing that "[t]he Eleventh Amendment of the United States Constitution prohibits th[e a]rbitration [p]anel from awarding compensatory relief and bars enforcement of such awards in federal court." (Docket Entry 1 at 9; see also id. at 8.)⁵ Plaintiff makes the same contention regarding the award of attorney's fees. (See id. at 9.) In Plaintiff's view, "[...