State v. Sourceamerica

• Decision Date: 31 October 2017
• Docket Number: No. 16-3228.,16-3228.
• Citation: 874 F.3d 1226
• Parties: State of KANSAS, BY AND THROUGH the KANSAS DEPARTMENT FOR CHILDREN AND FAMILIES, Plaintiff-Appellee, v. SOURCEAMERICA; Lakeview Center, Inc., Intervenors Defendants-Appellants, and United States, by and through Honorable James Mattis, Secretary of Defense, and Honorable Ryan D. McCarthy, Secretary of the Army, Defendants.
• Court: U.S. Court of Appeals — Tenth Circuit

874 F.3d 1226

State of KANSAS, BY AND THROUGH the KANSAS DEPARTMENT FOR CHILDREN AND FAMILIES, Plaintiff-Appellee,
v.
SOURCEAMERICA; Lakeview Center, Inc., Intervenors Defendants-Appellants,
and
United States, by and through Honorable James Mattis, Secretary of Defense, and Honorable Ryan D. McCarthy, Secretary of the Army,^* Defendants.

No. 16-3228.

United States Court of Appeals, Tenth Circuit.

FILED October 31, 2017

Craig A. Holman (Robert A. DeRise and Sonia Tabriz with him on the briefs), Arnold & Porter LLP, Washington, DC, for Intervenors Defendants-Appellants.

Peter A. Nolan, Winstead PC, Austin, Texas (David W. Davies, General Counsel, Kansas Department for Children and Families, Topeka, Kansas, with him on the briefs), for Plaintiff-Appellee.

Before BACHARACH, PHILLIPS, and McHUGH, Circuit Judges.

McHUGH, Circuit Judge.

This interlocutory appeal concerns a contract dispute about the provision of food services at the Fort Riley Army base in Kansas. The root of the dispute is the intersection of two federal statutes that both address the procurement of food services at federal facilities: (1) the Randolph-Sheppard Vending Facility Act of 1936 (RSA), and (2) the Javits Wagner O'Day Act (JWOD). The parties disagree as to which of these statutes governs the award of the Fort Riley food services contract. And due to events that have occurred since this action was filed, the parties also dispute whether this appeal has been rendered moot.

We first conclude that the issue raised by this appeal falls within an exception to the mootness doctrine for matters capable of repetition yet evading review. Next, we hold that the district court properly exercised subject-matter jurisdiction over this matter. But given the current posture of this case, we decline to address which statute governs the contract at issue or whether the district court properly granted injunctive relief.

I. BACKGROUND

The Department of the Army (Army) contracts with outside vendors for food preparation and related supporting services for its cafeteria dining facilities at Fort Riley. Since 2006, the State of Kansas, through the Kansas Department for Children and Families (Kansas), has successfully bid under the RSA on those food preparation and related services contracts at Fort Riley. Kansas's most recent contract

874 F.3d 1231

awarded under the RSA was scheduled to expire in February 2016.

As that date approached, the Army determined that its next dining contract at Fort Riley would be for supporting services only. The Army therefore decided that it need not solicit bids under the RSA and it approached another vendor directly, as permitted by the JWOD. Kansas took exception to the Army's decision because it eliminated Kansas's ability to bid on the contract. So Kansas initiated arbitration proceedings under the RSA's dispute resolution provisions. And upon learning that the Army intended to contract with the other vendor despite the commencement of arbitration proceedings, Kansas sued in federal court, seeking to preliminarily enjoin the Army from executing the JWOD contract pending arbitration.

The district court granted Kansas's request for a preliminary injunction pending arbitration. Two entities with an interest in the JWOD contract, SourceAmerica and Lakeview Center, Inc. (collectively, Intervenors), then intervened, and argued, among other things, that the district court lacked subject-matter jurisdiction to issue the preliminary injunction. The district court rejected Intervenors' arguments; Intervenors filed a timely appeal. Exercising jurisdiction under 28 U.S.C. § 1292(a)(1), we now affirm.

To place our analysis in context, we begin with an overview of the RSA and the JWOD, as well as relevant legislative developments. Next, we provide the factual and procedural history of the dispute between Kansas and the Army. Finally, we address the legal issues raised by this appeal. We first conclude that the case is not moot, despite the arbitration decision rendered during the pendency of this appeal. Second, we conclude that the district court properly exercised subject-matter jurisdiction over this matter.

A. Statutory and Regulatory Background

1. The RSA

Congress enacted the RSA to "enlarg[e] the economic opportunities of the blind" by giving them priority in the bidding of contracts "to operate vending facilities on any Federal property." 20 U.S.C. § 107. Vending facilities under the RSA include cafeterias on military bases like Fort Riley. See id. § 107e(7); Kentucky v. U.S. ex rel. Hagel , 759 F.3d 588, 592 (6th Cir. 2014). Although the RSA applies to all federal agencies, Congress charged the Secretary of the Department of Education (DOE) with administering, interpreting, enforcing, and resolving disputes arising under the RSA. See 20 U.S.C. §§ 107(b), 107a, 107d-1. Indeed, the Secretary must "prescribe regulations to establish a priority for the operation of cafeterias" on federal property by blind vendors. Id. § 107d-3(e). Those regulations provide that all contracts "pertaining to the operation of cafeterias on Federal property" are subject to the RSA. 34 C.F.R. § 395.33(c).

Under the RSA, the Secretary designates a State Licensing Agency (SLA) in each state to issue licenses to qualified blind persons to operate vending facilities on federal property. 20 U.S.C. § 107a(a)(5). Plaintiff-Appellee Kansas Department for Children and Families is the designated SLA in Kansas. When a federal agency procures vending-facility services, it does not contract directly with a blind vendor. The agency instead negotiates a contract directly with the SLA or solicits competitive bids for the contract. 34 C.F.R. § 395.33(b), (d) ; see Kansas v. United States , 171 F.Supp.3d 1145, 1148 (D. Kan. 2016). If the federal agency solicits bids, it must invite the SLA to bid on the contract. 34 C.F.R. § 395.33(b). The

874 F.3d 1232

SLA then selects a licensed blind vendor and submits a bid on that vendor's behalf if the vendor can provide services "at comparable costs and of comparable high quality." Id. If the SLA's bid is "within a competitive range and has been ranked among those proposals which have a reasonable chance of being selected for final award," then the procuring agency must consult with the Secretary. Id. The Secretary must then give priority to the blind vendor if she determines that the "operation can be provided at a reasonable cost" and at a comparatively "high quality." Id. § 395.33(a). If the SLA and its blind vendor are awarded the contract, then the blind vendor operates the dining facility and manages the day-to-day operations. When a contract nears expiration, the federal agency may negotiate directly with the SLA to renew the contract, or it may open bidding to the general public, triggering the procedures outlined above. 34 C.F.R. § 395.33(d) ; Hagel , 759 F.3d at 592.

The RSA provides for arbitration of all disputes between an SLA and a federal agency that has solicited vending-facility services. 20 U.S.C. § 107d-1(b). If an SLA determines that a federal agency "is failing to comply" with the RSA or any regulation issued thereunder, then the SLA "may file a complaint with the Secretary" of the DOE. Id. In the event the SLA files a complaint, the Secretary "shall convene a panel to arbitrate the dispute ... and the decision of such panel shall be final and binding on the parties." Id. If the arbitration panel "finds that the acts or practices" of the federal agency are in violation of the RSA or any regulation issued thereunder, then 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." Id. § 107d-2(b)(2). The arbitration panel's decision is subject to judicial review as a final agency action under the Administrative Procedure Act (APA). Id. § 107d-2(a); see 5 U.S.C. § 706(2)(A) (stating a court may set aside an agency's decision only if it was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law").

2. The JWOD

The JWOD likewise applies to services rendered on federal properties. The JWOD's purpose is "to increase employment and training opportunities for persons who are blind or have other severe disabilities through the purchase of commodities and services from qualified nonprofit agencies employing persons who are blind or have other severe disabilities." 41 C.F.R. § 51-1.1(a) ; see also 41 U.S.C. § 8502 (titled "Committee for Purchase From People Who Are Blind or Severely Disabled"). To implement this policy, Congress created a committee now known as the AbilityOne Commission (Commission), see 41 U.S.C. § 8502 ; Committee for Purchase From People Who Are Blind or Severely Disabled, 71 Fed. Reg. 68492-01 (Nov. 27, 2006) (to be codified at 41 C.F.R. pts. 51-1, 51-2, 51-3, 51-4, and 51-6), and charged it with promulgating implementing regulations, see 41 U.S.C. § 8503(d).

The Commission oversees the so-called AbilityOne Program (Program), under which the Commission must "maintain and publish in the Federal Register a procurement list." Id. § 8503(a). The procurement list consists of products produced and...