Sourceamerica v. U.S. Dep't of Educ.

• Decision Date: 15 March 2019
• Docket Number: Case No. 1:17-cv-893
• Citation: 368 F.Supp.3d 974
• Court: U.S. District Court — Eastern District of Virginia
• Parties: SOURCEAMERICA, et al., Plaintiffs, v. UNITED STATES DEPARTMENT OF EDUCATION, et al., Defendants.

368 F.Supp.3d 974

SOURCEAMERICA, et al., Plaintiffs,

v.UNITED STATES DEPARTMENT OF EDUCATION, et al., Defendants.

Case No. 1:17-cv-893

United States District Court, E.D. Virginia, Alexandria Division.

Signed March 15, 2019

Craig A. Holman, Sonia Tabriz, Arnold & Porter Kaye Scholer LLP, Washington, DC, for Plaintiffs.

Lauren A. Wetzler, United States Attorney Office, Jayna Genti, Jonathan Richard Mook, DiMuroGinsberg PC, Alexandria, VA, for Defendants.

MEMORANDUM OPINION

T.S. Ellis, III, United States District Judge

Plaintiffs SourceAmerica and Lakeview Center, Inc., nonprofits that seek to enhance economic opportunities for the blind, request judicial review of the decision of an arbitration panel, convened by the Secretary of Education, that concluded the Department of the Army ("Army") violated the Randolph-Sheppard Act when the Army sought to award to plaintiffs a contract for services in Army dining facilities rather than to intervenor, the Kansas Department for Children and Families, a state agency that also seeks to enhance economic opportunities for the blind. This is a somewhat curious situation—it is, in essence, a dispute between organizations, both of which seek to advance the economic interests of the blind, as to which is entitled to a preference in the Army's contracting decision. And this curious situation is further compounded by the involved factual, legal, and procedural history of this case.

At issues now are the parties' cross-motions for summary judgment. The motions have been fully briefed and argued and are now ripe for disposition.

I.

A.

Just as this case involves multiple organizations that seek to enhance economic opportunities available to the blind, it also involves multiple statutes that provide a preference for the blind in federal contracting decisions. In particular, the Randolph-Sheppard Act ("RSA"), 20 U.S.C. §§ 107 – 107f, and the Javits-Wagner-O'Day Act ("JWOD"), 41 U.S.C. §§ 8501 – 8506, both create a preference for the blind in federal contracting decisions, although they differ in important respects. A basic understanding of both statutes is necessary to understand the factual and procedural history of this case and the current dispute.

Congress enacted the RSA to "provid[e] blind persons with remunerative employment, enlarge[e] the economic opportunities of the blind, and stimulat[e] the blind to greater efforts in striving to make themselves self-supporting." 20 U.S.C. § 107(a). To effectuate these aims, the RSA provides a "priority ... to blind persons licensed by a State agency" in "the operation of vending facilities on Federal property." § 107(b). The RSA tasks the Secretary of Education ("the Secretary") with implementing this preference for blind vendors and promulgating regulations in accordance with the statute. §§ 107(b), § 107a(a). Specifically, the RSA directs the Secretary to designate a state licensing agency in each state. §§ 107a(a)(5), 107b. The designated state licensing agencies seek permits or contracts from federal departments, agencies, and instrumentalities for the operation of vending facilities, and state licensing agencies that are awarded such permits or contracts then must issue licenses to blind vendors to operate the vending facilities. § 107a(a)(5), (b).

The RSA also tasks the Secretary with reviewing federal departments', agencies', and instrumentalities' decisions to limit the placement or operation of vending facilities. § 107(b). Specifically, the RSA requires that "[a]ny limitation on the placement or operation of a vending facility based on a finding that such placement or operation would adversely affect the interests of the United States shall be fully justified in writing to the Secretary, who shall determine whether such limitation is justified." Id. This provision is referred to infra as the "RSA Review Requirement."

Anticipating that conflicts might arise between state licensing agencies and the federal departments, agencies, and instrumentalities from which state licensing agencies seek permits and contracts, Congress provided for a process for the arbitration of such disputes. Specifically, the RSA provides that state licensing agencies may compel the Secretary to convene an arbitration panel when they conclude that a federal department, agency, or instrumentality is violating the RSA or its regulations.¹ § 107d-1(b). The arbitration panel is to consist of three members: (i) a member designated by the state licensing agency; (ii) a member designated by the federal department, agency, or instrumentality involved; and (iii) a member jointly selected by these members. § 107d-2(b)(2). Importantly, the arbitration panel is authorized to determine only whether the federal department, agency, or instrumentality violated the RSA or its regulations. Id. ; Md. Dep't of Educ. v. Dep't of Veterans Affairs , 98 F.3d 165, 169 (4th Cir. 1996). If such a violation is found, the head of the federal department, agency, or instrumentality is responsible for remedying the violation. § 107d-2(b)(2); Md. Dep't of Educ. , 98 F.3d at 169. The RSA provides that arbitration decisions constitute final agency action for purposes of the judicial review provisions of the Administrative Procedure Act ("APA"), 5 U.S.C. § 701 et seq. § 107d-2(a).

Similar to the RSA, the JWOD aims to "increase employment and training opportunities for persons who are blind or have other severe disabilities." 41 C.F.R. § 51-1.1(a). And, similar to the RSA, the JWOD effectuates this aim by creating a preference that benefits blind persons in federal contracting. Unlike the RSA, however, the JWOD is not limited in scope to permits or contracts for the operation of vending facilities on federal property; rather, the JWOD's preference applies to nonprofit agencies that employ workers who are blind or have significant disabilities and that are included on the Act's procurement list. 41 U.S.C. § 8504(a). The United States AbilityOne Commission ("the Commission"), the federal agency charged with administering the JWOD, designates central nonprofit agencies to help select products and services offered by nonprofits employing the blind and severely disabled suitable for inclusion on the procurement list. § 8503(c). When the Committee places products and services on the procurement list, it designates a nonprofit agency as the mandatory source of supply for those products or services. 41 C.F.R. § 51-5.2(a). Federal entities seeking to procure products or services included on the procurement list must procure those products and services from the nonprofits selected by the Committee and included on that list. 41 U.S.C. § 8504(a).

A final statute, the John Warner National Defense Authorization Act for Fiscal Year 2007 ("JWNDA"), Pub. L. No. 109-364, merits brief mention before the factual and procedural history of this dispute is recounted. The JWNDA, as relevant here, provides that the RSA and the JWOD are inapplicable in certain circumstances. This provision is referred to infra is the "JWNDA No-Poaching Provision." Specifically, the provision provides that the RSA "does not apply to full food services, mess attendant services, or services supporting the operation of a military dining facility that, as of the date of the enactment of this Act, were services on the procurement list established under" the JWOD. Id. at § 856(a)(1). The JWNDA No-Poaching Provision further provides that the JWOD "does not apply at the prime contract level to any contract entered into by the Department of Defense as of the date of the enactment of this Act with a State licensing agency under the [RSA] for the operation of a military dining facility." Id. at § 856(a)(2).

B.

The parties to this action are involved with these statutory schemes to varying degrees. Plaintiff SourceAmerica is a creature of one of these schemes. Specifically, SourceAmerica is a JWOD central nonprofit agency. SourceAmerica works closely with plaintiff Lakeview Center, Inc. ("Lakeview"), a nonprofit agency that was designated by the Commission as the mandatory source of supply of certain services on the JWOD's procurement list. Intervenor, the Kansas Department for Children and Families ("Kansas"), is intimately familiar with the other primary statutory scheme in this case, the RSA, because of its status as an RSA state licensing agency. Defendant the Department of Education ("DOE"), through its Secretary, Betsy Devos, is charged with administering the RSA. The DOE, through its Secretary, convened the arbitration at issue here between the Army and Kansas.

C.

With the statutory schemes outlined and the principal players identified, it is appropriate next to outline the pertinent factual and procedural history of this case.² The dispute revolves around the procurement of a contract for services to be performed in the dining facilities at Fort Riley, an active military installation operated by the Army in Kansas. Pursuant to Army regulations, the Army contracts for two different types of services in its dining facilities, Full Food Services ("FFS") and Dining Facility Attendant ("DFA") services. The Army defines FFS as "a contract that covers those activities that comprise the full operation of an Army dining facility. It includes, but is not limited to, requisitioning, receiving, storing, preparing, and serving food ... [and] the performance of related administrative, custodial, and sanitation functions." Resp't's Pre-Arbitration Br. 4 (citing U.S. Dep't of Army, Reg. 30-22, Army Food Program, glossary (July 24, 2012) ), at Admin. R. 61. DFA services, according to Army regulations, are "[t]hose activities required to perform janitorial and custodial duties within dining facilities. [They] include [ ] ... sweeping, mopping, scrubbing, trash removal, dishwashing, waxing, stripping, buffing, window washing, pot and pan cleaning, and other sanitation-related functions." Id.

In 2006, the Army awarded Kansas a FFS contract pursuant to the RSA. As required by...