Sauer v. United States Dep't of Educ., Rehab. Servs. Admin.

Decision Date03 February 2012
Docket Number10–55877.,Nos. 10–55642,s. 10–55642
Citation668 F.3d 644,25 A.D. Cases 1575,12 Cal. Daily Op. Serv. 1417
PartiesAnthony P. SAUER, Director of the California Department of Rehabilitation, Plaintiff–Appellant, v. UNITED STATES DEPARTMENT OF EDUCATION, Rehabilitation Services Administration, Defendant–Appellee,David Zelickson, Intervenor–Appellee.Anthony P. Sauer, Director of the California Department of Rehabilitation, Plaintiff–Appellee, v. United States Department of Education, Rehabilitation Services Administration, Defendant–Appellant,andDavid Zelickson, Intervenor.
CourtU.S. Court of Appeals — Ninth Circuit

OPINION TEXT STARTS HERE

Ismael A. Castro (argued), Supervising Deputy Attorney General, and Julie Weng–Gutierrez (argued), Supervising Deputy Attorney General, Sacramento, CA, for plaintiff, appellant, and cross-appellee Anthony P. Sauer, Director of the California Department of Rehabilitation.

Jeffrica J. Lee (argued), DOJ, Washington, D.C., for defendant-appellee and cross-appellant United States Department of Education, Rehabilitation Services Administration.

George Langendorf, Esq. (argued), Arnold & Porter LLP, San Francisco, CA, for intervenor-appellee David Zelickson.Appeal from the United States District Court for the Central District of California, A. Howard Matz, District Judge, Presiding. D.C. No. 2:09–cv–01161–AHM–PLA.Before: JOHN T. NOONAN, RONALD M. GOULD, and SANDRA S. IKUTA, Circuit Judges.

OPINION

IKUTA, Circuit Judge:

The California Department of Rehabilitation (DOR) and the United States Department of Education appeal from the district court's decision enforcing a 2008 arbitration award issued pursuant to 20 U.S.C. § 107d–1(a) of the Randolph–Sheppard Vending Stand Act (the Act). We have jurisdiction pursuant to 28 U.S.C. § 1291, and we reverse.

I

Some familiarity with the structure of the Randolph–Sheppard Act and the manner in which it provides for resolution of disputes is necessary to understand the sequence of events in this case. We briefly provide the relevant background.

A

The Randolph–Sheppard Act establishes a cooperative program between the federal government and the states to assist blind persons who wish to operate vending facilities on federal property. See 20 U.S.C. § 107. The stated purposes of the Act are “providing blind persons with remunerative employment, enlarging the economic opportunities of the blind, and stimulating the blind to greater efforts in striving to make themselves self-supporting.” § 107(a). The Rehabilitation Services Administration within the Department of Education administers the Act with the help of state agencies designated by the Secretary of Education. §§ 107(b), 107a(a), 107b. In participating states, these state agencies (referred to as “state licensing agencies”) issue licenses to blind persons that make them eligible to operate vending facilities on federal properties within that state. § 107a(b). In order to establish a vending site, a state licensing agency must seek authorization in the form of a permit from the federal agency in control of the property on which the site is to be located. § 107a(c); 34 C.F.R. § 395.16.

State participation in the Randolph–Sheppard program is voluntary. See 20 U.S.C. § 107b. A state agency that wishes to participate must apply to the Secretary for designation as a state licensing agency and agree to “cooperate with the Secretary in carrying out the purpose” of the Act, § 107b(1), as well as comply with a number of more specific requirements, see, e.g., § 107b(2)(6). For example, a state licensing agency must “give preference to blind persons who are in need of employment” when issuing licenses, § 107a(b); provide each licensed blind vendor with “such vending facility equipment, and adequate initial stock of suitable articles to be vended therefrom, as may be necessary,” § 107b(2); make periodic reports to the Secretary of Education, § 107b(4); provide licensed blind vendors with relevant financial data, § 107b–1; conduct a biennial election of a Committee of Blind Vendors to represent all blind licensees in the state program, § 107b–1(2); cooperate with the Committee in the training of blind licensees, § 107b–1(3); disburse vending machine income to licensed blind vendors according to a particular formula, § 107d–3; 34 C.F.R. § 395.8(a)(b); and use any remaining vending machine income to establish retirement and other benefits plans for the blind and to purchase, maintain, and replace vending equipment, 20 U.S.C. § 107d–3(c); 34 C.F.R. § 395.8(c).

B

The Act also provides for proceedings to resolve two types of disputes: (1) disputes between the licensed blind vendor and the state licensing agency, on the one hand, and (2) disputes between the state licensing agency and the federal agency in control of the property on which the vending site is located, on the other.

The first type of dispute, between the blind licensee and the state licensing agency, is governed by the procedures set forth in §§ 107b(6), 107d–1(a), 107d–2(a), and 107d–2(b)(1) of the Act. At the request of any blind licensee who is dissatisfied with the operation of the program, the state licensing agency must give the blind licensee a full evidentiary hearing. 20 U.S.C. §§ 107b(6); 107d–1(a). If the blind licensee's grievances are not resolved by such a hearing, the blind licensee “may file a complaint with the Secretary who shall convene a panel to arbitrate the dispute.” § 107d–1(a).1

The second type of dispute, between a state licensing agency and the federal entity in control of the property on which a vending site is located, is governed by §§ 107d–1(b), 107d–2(a), and 107d–2(b)(2) of the Act. If a state licensing agency determines that the federal entity in control of the property on which a vending site is located is failing to comply with the Act, the state agency “may file a complaint with the Secretary who shall convene a panel to arbitrate the dispute.” § 107d–1(b).2

If a blind licensee triggers an arbitration proceeding, it is governed by § 107d–2(b)(1) of the Act.3 In these circumstances, the arbitration panel is composed of one member chosen by the blind licensee, one member chosen by the state licensing agency, and one member jointly designated by the other two members. § 107d–2(b)(1). If a state licensing agency triggers an arbitration proceeding, it is governed by § 107d–2(b)(2) of the Act. 4 In this case, the panel is composed of one member chosen by the state-licensing agency, one member chosen by the federal agency, and one member jointly designated by the other two members. § 107d–2(b)(2). Decisions by both types of panels are “final and binding on the parties,” §§ 107d–1(a), 107d–1(b), except that each is “subject to appeal and review as a final agency action for purposes of chapter 7 of [the Administrative Procedure Act],” § 107d–2(a).

The Act treats vendor-triggered arbitrations differently than state-triggered arbitrations in one significant respect. Whereas § 107d–2(b)(1) is silent as to the type of relief that a vendor-triggered arbitration panel may grant, the Act provides that if a state licensing agency triggers arbitration, and the arbitration panel determines that the federal agency is in violation of the Act, the head of the federal agency “shall cause such acts or practices to be terminated promptly and shall take such other action as may be necessary to carry out the decision of the panel.” § 107d–2(b)(2).

II

We now turn to the facts of this case. The California DOR is the state licensing agency designated by the Secretary to administer the Act in California. In 1993, the federal General Services Administration (GSA), which manages the Roybal Federal Building in downtown Los Angeles, granted DOR a permit to establish a vending facility in the building.5 The DOR contracted with David Zelickson, a blind vendor licensed under the Act, to operate a snack shop in the building.

In 1997, GSA notified DOR that it intended to terminate Zelickson's employment at the Roybal Building because of allegedly unprofessional behavior. The DOR opposed Zelickson's termination, arguing that GSA had not established “good cause” for Zelickson's removal as required by state laws governing the operation of the Randolph–Sheppard Act program, and that DOR, and not GSA, was in charge of vendor licensing and selection under the Act. Despite DOR's efforts, GSA suspended DOR's permit to operate a vending facility at the Roybal Building and issued a revocable license to another party.

In October 1998, DOR filed an administrative complaint against GSA with the Secretary and requested arbitration pursuant to § 107d–1(b) of the Act. On December 26, 2000, the arbitration panel ruled that GSA had violated the Act by expelling Zelickson without going through California's hearing process, and concluded that GSA had to reinstate Zelickson. Nonetheless, the panel determined that GSA should have an opportunity to litigate Zelickson's qualifications, and therefore directed DOR to provide GSA with a forum in which to do so. The arbitration panel held that [i]f GSA does not exercise its options to litigate the question of Mr. Zelickson's qualifications within [30 days from the date of decision], then it must pay Mr. Zelickson the damages to which he is entitled, namely the difference between what he has been able to earn and what [the interim vendor] earned ... plus interest on those amounts of money.”

When GSA failed to reinstate Zelickson or take any steps to litigate Zelickson's qualifications within the 30–day period, DOR made numerous unsuccessful attempts to secure GSA's compliance with the 2000 arbitration award. In March 2001, DOR sent a letter to GSA insisting that GSA terminate its contract with the new vendor and reinstate Zelickson. The following month, DOR sent GSA a letter demanding GSA's compliance with the panel's decision. DOR and GSA then met with a Department of Education official who attempted...

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