State v. United States

• Decision Date: 25 January 2021
• Docket Number: No. 19-3397,19-3397
• Parties: STATE of Ohio, Opportunities for Ohioans with Disabilities, Bureau of Services of Visually Impaired, Business Enterprise Program, Petitioner-Appellee, v. UNITED STATES Department of Education, et al., Respondents, James Cyrus, Intervenor-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

986 F.3d 618

STATE of Ohio, Opportunities for Ohioans with Disabilities, Bureau of Services of Visually Impaired, Business Enterprise Program, Petitioner-Appellee,

v.UNITED STATES Department of Education, et al., Respondents,James Cyrus, Intervenor-Appellant.

No. 19-3397

United States Court of Appeals, Sixth Circuit.

Argued: February 6, 2020

Decided and Filed: January 25, 2021

ARGUED: Paul T. Belazis, MALONE, AULT & FARELL, Toledo, Ohio, for Appellant. Katherine J. Bockbrader, OFFICE OF THE OHIO ATTORNEY GENERAL, Columbus, Ohio, for Appellee. ON BRIEF: Paul T. Belazis, MALONE, AULT & FARELL, Toledo, Ohio, for Appellant. Katherine J. Bockbrader, Charissa Payer, OFFICE OF THE OHIO ATTORNEY GENERAL, Columbus, Ohio, for Appellee. Franklin J. Hickman, HICKMAN & LOWDER CO., L.P.A., Cleveland, Ohio, for Amici Curiae.

Before: BATCHELDER, STRANCH, and NALBANDIAN, Circuit Judges

NALBANDIAN, Circuit Judge.

To participate in a program that provided opportunities to blind vendors under federal and state law, James Cyrus signed a contract with a state agency establishing vending facilities. As a condition of participating in the program, he agreed to pay commissions to state and county facilities in Ohio. But everything changed after the Ohio Attorney General issued a formal opinion finding the commissions paid to state facilities illegal. Cyrus stopped making those payments and sought damages from a state agency for about a halfmillion dollars in commissions he had paid both to a state facility and to county facilities. The state agency rejected his arguments. But a federal arbitration panel agreed with Cyrus and awarded him damages, attorneys’ fees, and prospective relief.

The State sought review of the arbitration order by suing in federal court. And the district court mainly ruled in the State's favor. Cyrus now appeals. He urges us to overturn the district court's decision and reinstate his damages awards and prospective relief. Because we believe that the district court got it right except as to prospective relief for the commissions charged by counties, we AFFIRM in part and REVERSE in part.

I.

Congress enacted the Randolph-Sheppard Vending Stand Act (RSA) in 1936 to "provid[e] blind persons with remunerative employment, enlarg[e] the economic opportunities of the blind, and stimulat[e] the blind to greater efforts in striving to make themselves selfsupporting." 20 U.S.C. § 107(a). To achieve its goal, Congress authorized blind persons to "operate vending facilities on any Federal property." Id. Congress also authorized the Department of Education Secretary to "prescribe regulations" to carry out and enforce the RSA. Id. § 107(b). And Congress required the Secretary to "[d]esignate [in each State] ... the State agency" that meets the Secretary's requirements and that will issue licenses to blind persons operating those vending facilities "on Federal and other property in such State." 20 U.S.C. §§ 107a(a)(5), 107b ; see 34 C.F.R. § 395.3.

Like other states, Ohio has enacted parallel legislation (Ohio's "mini-RSA") to expand the RSA's priority for blind merchants to state properties. See 33 Ohio Rev. Code §§ 3304.28 – 3304.35. It created its own state agency, Opportunities for Ohioans with Disabilities (OOD), to set up the state's blind vendor program (the Business Enterprise Program). Id. § 3304.12. It also designated Ohio's Bureau of Services for the Visually Impaired (BSVI), a division of OOD, to implement the RSA and mini-RSA. Id. §§ 3304.28 – 3304.29. As part of its responsibilities, BSVI licenses blind persons to operate vending facilities on the state's "governmental property"—"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." Id. §§ 3304.28(C), 3304.29(C).

The BSVI acts as a middleman by creating two different kinds of contracts. The first kind—the Bureau-Grantor agreement—establishes a property or facility as part of the RSA program and defines the terms for granting use of the facility for RSA vending. See Ohio Admin. Code 3304:1-21-01(G). The second kind—the Bureau-Operator agreement—brings a blind vendor into the program and defines the terms for operating an RSA facility. Id. at 3304:1-21-01(F).

The RSA also sets up a two-tiered scheme for resolving vendors’ grievances that result from the state agency's actions carrying out the RSA program. The state agency must first hear and decide the grievance. 20 U.S.C. § 107d-1(a). A vendor dissatisfied with the agency's decision may then request arbitration (RSA arbitration) by a federal panel convened by the Department of Education (RSA panel). Id. That arbitration decision is a final agency action subject to judicial review under the Administrative Procedure Act. Id. § 107d-2; see 5 U.S.C. §§ 701 – 706.

James Cyrus is a blind vendor who has participated in the RSA program in Ohio since July 1989. Since then, he has operated facilities in Ohio under the program, including one at the University of Toledo (a state university in Toledo, Ohio) and others in Lucas County, including at the Lucas County Corrections Center. (Id. at 1576–79.) To participate in the program, he signed a Bureau-Operator Agreement that required Cyrus to comply with the terms of the Bureau-Grantor Agreement at any place where he operated a vending facility. BSVI's Bureau-Grantor Agreements with both Lucas County and the University of Toledo required vendors to pay commissions directly to the grantors—the university and the county. Ohio v. U.S. Dep't of Educ. , 377 F. Supp. 3d 823, 827–28 (S.D. Ohio 2019). So because his Bureau-Operator Agreement effectively incorporated the terms of the Bureau-Grantor Agreements, Cyrus had to pay commissions to both grantors. Cyrus estimates that he has paid $504,000 in commissions as a licensed RSA vendor. Ohio , 377 F. Supp. 3d at 828.

In March 2014, the Ohio Attorney General (AG) issued a formal opinion on the legality of conditioning RSA-vending opportunities at state or state-affiliated universities on commission payments. He found them illegal after concluding that "BSVI has no authority, under current statutes 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." (R. 20-27, AG Opinion, PageID 2412 (explaining that those commissions "contravene[ ] the letter and spirit of the pertinent state and federal laws").) But he distinguished "set-aside" payments—funds "set aside, or caused to be set aside, from the net proceeds of the operation of the vending facilities" for enumerated purposes—as legal. § 107b(3).

Based on that opinion, Cyrus filed a grievance against BSVI challenging all the commission payments and stopped making payments to the University of Toledo. Ohio , 377 F. Supp. 3d at 828. He did not, however, stop paying commissions to Lucas County. BSVI contacted the University of Toledo, stating that based on the AG's opinion, "OOD believes the [contractual] requirement ... to pay commissions is void and can no longer be part of the agreement." (R. 20-49, Letter, PageID 2703.) On that basis, BSVI denied Cyrus's grievance but took no action on the Lucas County commissions. Cyrus then requested a state administrative hearing, but the hearing officer denied relief. See Ohio , 377 F. Supp. 3d at 829 ; §§ 107b(6), 107d-1. BSVI adopted the hearing officer's recommendation.

Unsatisfied, Cyrus filed an arbitration complaint with the Secretary under the RSA's grievance procedures. See Ohio , 377 F. Supp. 3d at 829 ; §§ 107d-1, 107d-2. Cyrus maintained the illegality of the compelled commission payments at all RSA-vending sites (including Lucas County) under both the RSA and the State's mini-RSA. Ohio , 377 F. Supp. 3d at 829. On those grounds, he sought compensatory damages for all illegally imposed commission payments, monetary damages for losses, declaratory and injunctive relief, interest, and attorneys’ fees and costs. Id. at 829–30.

The divided RSA panel found in Cyrus's favor. It found that BSVI breached its duties by requiring commission payments to both the University of Toledo and Lucas County in violation of the RSA and the mini-RSA. For that violation, the panel awarded Cyrus "an award in the amount of commissions [ ] paid under the ... Bureau-Operator Agreement to the University of Toledo and to Lucas County" to be paid by the state. (R. 20-43, Panel Decision, PageID 2661.) It also awarded Cyrus prospective relief—enjoining the BSVI from compelling Cyrus to pay commissions under the Bureau-Grantor agreements and preventing the agency from taking any adverse action against Cyrus for nonpayment of those commissions. And it awarded Cyrus preand post-judgment interest as well as attorneys’ fees.

Seeking review of the arbitration decision, BSVI sued. See § 107d-2 (subjecting the RSA panel's decision "to appeal and review as a final agency action for purposes of" 5 U.S.C. § 706 ). Before the district court, BSVI raised three arguments:

First, the monetary damages award was improper because sovereign immunity applies to Article I proceedings and the State did not waive it. Second, attorney fees are barred by sovereign immunity or are otherwise unavailable under the [RSA]. Third, ... the Panel's decision was "arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with law."

Ohio , 377 F. Supp. 3d at 830 (citations omitted). In response, Cyrus moved to enforce the panel's award and opposed BSVI's arguments before the district court. Id.

After reviewing the arguments, the district court granted in part and denied in part BSVI's arguments as well as granted in part and denied in part Cyrus's motion to enforce the panel's decision. Because it found the Eleventh Amendment barred the panel's award of damages and attorneys’ fees against BSVI, the court overruled that part of the panel's decision. Id. at 838, 842. It also agreed with BSVI and...