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

• Decision Date: 26 March 2019
• Docket Number: Case No. 2:17-cv-873
• Citation: 377 F.Supp.3d 823
• Parties: State of OHIO, Opportunities for Ohioans with Disabilities, Bureau of Services of Visually Impaired, Business Enterprise Program, Petitioner, v. UNITED STATES DEPARTMENT OF EDUCATION, Rehabilitation Services Administration, et al., Respondent.
• Court: U.S. District Court — Southern District of Ohio

377 F.Supp.3d 823

State of OHIO, Opportunities for Ohioans with Disabilities, Bureau of Services of Visually Impaired, Business Enterprise Program, Petitioner,

v.UNITED STATES DEPARTMENT OF EDUCATION, Rehabilitation Services Administration, et al., Respondent.

Case No. 2:17-cv-873

United States District Court, S.D. Ohio, Eastern Division.

Signed March 26, 2019

Filed March 27, 2019

Katherine J. Bockbrader, Charissa Diane Payer, Health & Human Services Section, Columbus, OH, for Petitioner.

Mark Thomas D'Alessandro, United States Attorney's Office, Columbus, OH, for Respondent.

OPINION AND ORDER

EDMUND A. SARGUS, JR., CHIEF UNITED STATES DISTRICT JUDGE

This matter is before the Court on Petitioner State of Ohio, Opportunities for Ohioans with Disabilities, Bureau of Services for the Visually Impaired, Business Enterprise Program's ("BSVI") Motion for Judgment on the Administrative Record (ECF No. 23 ); Intervenor-Respondent James Cyrus's ("Mr. Cyrus") Motion to Enforce Arbitration and Memorandum in Opposition to Petitioner's Motion for Judgment on the Administrative Record (ECF No. 28 ); BSVI's Reply brief (ECF No. 29 ); Mr. Cyrus's Reply brief (ECF No. 31 ); and Mr. Cyrus's Motion to Supplement the Administrative Record Filed by Petitioner (ECF No. 32 ). For the reasons set forth below:

1) BSVI's Motion for Judgment on the Administrative Record (ECF No. 23 ) is GRANTED in part and DENIED in part ;

2) Mr. Cyrus's Motion to Enforce Arbitration (ECF No. 28 ) is GRANTED in part and DENIED in part ; and

3) Mr. Cyrus's unopposed Motion to Supplement the Administrative Record (ECF No. 32 ) is GRANTED .

I.

A. Randolph-Sheppard Act & Mini Randolph-Sheppard Act

Congress enacted the Randolph-Sheppard Act ("the Act") in 1936 to "provide blind persons with remunerative employment, enlarge their economic opportunities and stimulate them to greater efforts in becoming self-supporting." 117 A.L.R. Fed. 503, § 2 (1994). The Act, as amended, authorizes qualified individuals to operate vending facilities on federal property. Id. (citing 20 U.S.C. § 107(a) ). To facilitate the blind vendor program, the Act divides responsibilities between state and federal agencies. Tennessee Dep't of Human Services v. U.S. Dep't of Education. , 979 F.2d 1162, 1163 (6th Cir. 1992). The Secretary of the United States Department of Education, "who is responsible for interpreting and enforcing the Act, designates a state agency to issue licenses to qualified blind persons." 117 A.L.R. Fed. 503, § 2 (1994). In turn, the state licensing agencies issue licenses to qualified vendors and equip vending facilities. Id.

Some states, including Ohio, have passed Mini Randolph-Sheppard Acts to expand priority vending to state properties. See 33 O.R.C. §§ 3304.28 – 3304.35. Under Ohio's Mini Randolph-Sheppard Act, blind vendors have priority to operate on all "governmental property"—including "any real property, building, or facility owned, leased, or rented by the state or any board, commission, department, division, or other unit or agency thereof." 33 O.R.C. § 3304.28(C).

In addition to granting blind vendors priority to government facilities, both the Act and the Mini Act provide a method for addressing grievances. Under the Act, dissatisfied vendors have access to "an evidentiary hearing before the state agency and arbitration before a panel convened by the Secretary." 117 A.L.R. Fed. 503 (1994). The Mini Act provides for a hearing before a board comprised of: (1) a designee of BSVI, (2) a designee of the entity adversely affected, and (3) mutually-accepted third party. 33 O.R.C. § 3304.32. If a licensee is not satisfied with the result of the hearing, it may file an administrative appeal pursuant to Chapter 119.12 of the Ohio Revised Code. Id.

B. Mr. Cyrus's Grievances Against BSVI

Mr. Cyrus is a licensed blind vendor who operates vending facilities in Toledo, Ohio, pursuant to the Act and the Mini Act. (Cyrus Hearing Exhibit 4, ECF No. 20-49 ). Mr. Cyrus first became a Randolph-Sheppard vendor in 1989. (Agency Hearing Tr. 125:7–13, ECF No. 20-1 ). In 1992, Mr. Cyrus began operating vending facilities at several locations in Lucas County (also "the County"), including the Lucas County Corrections Center, the Lucas County Work Release Program, the Adult Treatment Center, the Youth Treatment Center, and the Lucas County Probation Department. (Id. at 129:1–9). In addition, Mr. Cyrus began providing vending services at the University of Toledo (also "the University") Health Science Campus. (Id. ).

As the designated Ohio agency responsible for implementing the Act and Mini Act, BSVI is also responsible for overseeing Mr. Cyrus's vending operations. (Id. at 70:16–71-8). BSVI is a division of Opportunities for Ohioans with Disabilities ("OOD"). The blind vendor program set up by OOD and overseen by BSVI is known as the "Business Enterprise Program." (Id. ). To facilitate the Business Enterprise Program, OOD negotiates Bureau Grantor Agreements with state or federal entities for the purpose of establishing blind vending facilities. (Id. at 71:14–72:15). OOD has the ability to enter Bureau Grantor Agreements with federal, state, county, municipal, and private locations. (Id. at 71:14–72:22). In addition, OOD executes Bureau Operator Agreements with vendors to establish the requirements "to manage their facilities, [comply] with the statute, [comply] with whatever Bureau Grantor Agreements are involved with their facility, and [detail] other duties that they are to follow." (Id. at 71:19–25).

In connection with the vendor sites operated by Mr. Cyrus, OOD executed Bureau Grantor Agreements with the University and Lucas County in 2006 and 2011 respectively. (Id. at 75:1–19). The Bureau Grantor Agreement between OOD and the University of Toledo contained a provision requiring vendors to make commission payments directly to the University. (Exhibit 19 at 397, ECF No. 20-19 ). Specifically, provision 11(a) read as follows:

11. Commission and Debit Card Reimbursement.

(a) In order to partially reimburse the University for utilities, data lines, and other amenities it provides to the Contractor in connection with the vending services provided by the Contractor under this Agreement, the Contractor, through the operator, shall pay to the University a 7% commission on gross sales less food and pastry sales representing vending revenue it obtains from the Vending Service Locations on the Campus (the "Commission"). The Commission shall be paid to the University on or before the 15^th day of each month based up the previous month's gross sales, less sales tax and shall be deposited in a band account designated by the University.

(Id. ) (emphasis in original). The Bureau Grantor Agreement between OOD and Lucas County included a similar provision, requiring the vendor to pay a commission directly to the County. (Exhibit 23-1 at 899, ECF No. 20-26 ). The amount of the commission that Mr. Cyrus paid varied by the vending location in Lucas County. (Id. at 886–894).

On March 19, 2010, Mr. Cyrus signed a Bureau Operator Agreement with ODD regarding his operation of a vendor facility at the University of Toledo (i.e., facility # 304). (Id. at 385). Under the terms of the Bureau Operator Agreement, Mr. Cyrus agreed to "[c]omply with all provisions of the Ohio Administrative Code Chapter 3304:1-21, including but not limited to operating the BEP Facility in accordance with said Administrative Code, Bureau-Grantor Agreement, facility permit(s), and any other agreements related to the facility." (Id. ).

The Lucas County Bureau Operator Agreement, executed in 1993, contained a similar provision. (Id. at 847–850). Under the terms of that contract, Mr. Cyrus agreed to "operated the facility in accordance with the requirements of the Bureau-Grantor Agreement, facility permit, or other BSVI contract for the facility." (Id. at 847). As required by the Bureau Grantor Agreements, Mr. Cyrus paid his commissions on time. (Agency Hearing Tr. 76:7–9). According to his testimony, Mr. Cyrus estimates that he paid at least $ 504,000 in commissions during his time as a licensed vendor. (Id. at 49:25–50:4) (see also Exhibit 23-1 at 943, ECF No. 20-49 ).

On March 14, 2014, the Ohio Attorney General issued Opinion 2014-008 ("AG Opinion") regarding the legality of obligating blind vendors to pay commissions out of their gross vending revenues. (Exhibit 17-1 at 432, ECF No. 20-19 ). The AG Opinion concluded: "BSVI has no authority, under the current statute or rules, to collect commission payments based on the sales of a vending facility from a blind vendor and pay those commissions to a college or university." (Id. at 438). This conclusion was specific to any "state university, medical university, technical college, state community college, community college, university branch district, or state affiliated college or university," and did not concern any other type of vending property. (Id. ).

Mr. Cyrus filed a grievance against OOD on April 29, 2014 to challenge the commission payments. (Exhibit 17-1 at 408, ECF No. 20-19 ). Citing the AG Opinion, Mr. Cyrus stated: "the BSVI has no legal authority to charge these commissions or to remit them to these government entities, including state or state affiliated colleges and universities." (Id. ). Mr. Cyrus further stated: "[c]ollection of all these unlawful commission charges should be immediately halted. I also wish to grieve the unlawful imposition of these charges in past years and demand reimbursement of all unlawfully imposed charges." (Id. ). During his agency hearing, Mr. Cyrus testified that he discontinued his commission payments to the University of Toledo on May 12, 2014. (Agency Hearing Tr. 40:2–7).

On May 28, 2014, OOD sent the University of Toledo a letter informing it that, pursuant to the AG Opinion, "the requirement in the contract to pay commissions is void and can longer be part of the agreement." (Id. at 411). Despite receiving notification of OOD's letter, Mr. Cyrus...