Tennessee Dept. of Human Services v. U.S. Dept. of Educ.

Decision Date18 November 1992
Docket NumberNo. 91-5768,91-5768
Citation979 F.2d 1162
PartiesTENNESSEE DEPARTMENT OF HUMAN SERVICES, Plaintiff-Appellee, v. UNITED STATES DEPARTMENT OF EDUCATION, Defendant-Appellee, Wayne Hinton, Defendant-Appellant.
CourtU.S. Court of Appeals — Sixth Circuit

Dianne Stamey Dycus, Asst. Atty. Gen. (argued and briefed), Charles W. Burson, Atty. Gen., Office of the Atty. Gen. of Tennessee, Nashville, Tenn., for plaintiff-appellee Tenn. Dept. of Human Services.

Jeffrey A. Rosen, U.S. Dept. of Educ., Office of Gen. Counsel, Michael S. Raab (briefed), William Kanter, U.S. Dept. of Justice, Civil Div. Appellate Staff, Washington, D.C., Gary Humble, Asst. U.S. Atty., Jerry G. Cunningham, U.S. Atty., Office of the U.S. Atty., Chattanooga, Tenn., for defendant-appellant U.S. Dept. of Educ.

Fielding H. Atchley, Jr. (argued and briefed), Dietzen, Atchley & Wright, Chattanooga, Tenn., for defendant-appellant Wayne Hinton.

Before: GUY, NORRIS, and BATCHELDER, Circuit Judges.

ALAN E. NORRIS, Circuit Judge.

A blind vendor appeals the district court's judgment that set aside, as violative of the Eleventh Amendment, a federal arbitration panel's award of retroactive damages against a state agency under the Randolph-Sheppard Act.

I.

This case requires us to decide whether arbitration awards for retroactive damages against state agencies under the Randolph-Sheppard Vending Stand Act, 20 U.S.C. §§ 107-107f, violate the Eleventh Amendment. We begin our analysis with a brief overview of the statutory scheme.

The Randolph-Sheppard Act was enacted in order to provide employment opportunities for the blind. The Act grants priority to those blind persons who desire to operate vending facilities on federal property. 20 U.S.C. § 107(b). The Act divides responsibility for the blind vendor program between the state and federal agencies. The Secretary of Education is responsible for interpreting and enforcing the Act's provisions, and more specifically, for designating state licensing agencies. 20 U.S.C. §§ 107a(a)(5), 107b; 34 C.F.R. §§ 395.5, 395.8. A person seeking a position as a blind vendor applies to the designated state agency and is licensed by that agency. The state agency in turn applies to the federal government for the placement of the licensee on federal property. 20 U.S.C. § 107b. Once the state and the federal government have agreed on an appropriate location for the vending facility, the state licensing agency is responsible for equipping the facility and furnishing the initial stock and inventory. 20 U.S.C. § 107b(2). The blind vendor thereafter operates as a sole proprietor who is entitled to the profits of the vending facility and who is responsible for the facility's losses.

The Act requires that if the state licensing agency operates vending machines that directly compete 1 with a vending facility operated by a blind vendor, then a percentage of the income from such competing machines must be given to the blind vendor licensed to do business on that property. 20 U.S.C. § 107d-3. If no licensee is operating a facility on the property, the income from state-operated vending machines is used for a variety of purposes that benefit all blind vendors in the state program. 20 U.S.C. § 107d-3(c).

In order to resolve disputes arising under the Act, both administrative and judicial remedies are available for licensed blind vendors. The Secretary of Education may decertify a state licensing agency that refuses to cooperate with the Secretary. 34 C.F.R. § 395.17. In all other situations, the Secretary must rely on a blind vendor to file a complaint in order to enforce the Act's substantive provisions. If a blind vendor has a complaint regarding the state's operation of the program, he or she may request an evidentiary hearing before the state licensing agency and, if dissatisfied with the outcome of the hearing, may ask the Secretary to convene an arbitration panel to resolve the dispute. 20 U.S.C. §§ 107d-1(a), 107d-2(b)(1). An arbitration panel's decision is subject to review as a final agency action. 20 U.S.C. § 107d-1(a).

From 1978 until 1986, Wayne Hinton was a blind vendor at the Tennessee Valley Authority's Watts Bar Nuclear Power Plant, a federal facility located in Tennessee. He was licensed by the Tennessee Department of Human Services (TDHS), the state agency designated by the Secretary. TDHS issued two permits to operate vending facilities at the plant. One permit authorized Hinton to conduct vending in the "power site." The second permit authorized vending in the "construction site." Vending machines were installed at the construction site in late 1978 or early 1979, and were operated by sighted vendors. TDHS used the income from the machines to purchase health insurance for blind vendors.

This dispute began in August 1984 when Hinton claimed the income from the construction site machines. Hinton asserted that the construction site was on the same premises as his stand and therefore was in direct competition with his stand. Acting upon Hinton's request for an evidentiary hearing before TDHS, the state hearing officer determined that the construction site was part of the same property as the power site, and was in competition with it. The state hearing officer then issued an order granting Hinton's claim to past and future income from the construction site machines. Thereafter, the Commissioner of TDHS reversed the award, finding that the two sites were separate properties, and entered a final order denying Hinton's claims.

Following this determination, Hinton filed a complaint with the Secretary of Education requesting an arbitration panel. The Secretary refused the request, noting that sovereign immunity precluded retroactive relief, and that prospective relief no longer was available because the vending facilities at the construction site recently were assigned to other blind vendors. Hinton filed an action in the district court to compel the Secretary to convene the arbitration panel. The district court determined that the Act created a mandatory duty and ordered the Secretary to convene the panel. Hinton v. United States Dep't of Educ., 700 F.Supp. 21, 23 (E.D.Tenn.1988).

The arbitration panel determined that the power plant was a single property, and that the vending facilities were in direct competition with Hinton's vending facility. Accordingly the panel ordered the state agency to pay Hinton the construction site vending machine income accrued from 1978 through 1986. The panel also awarded Hinton interest and attorneys' fees.

TDHS filed a petition for review in the United States District Court for the Eastern District of Tennessee, contending that the panel's factual findings were erroneous and that the Eleventh Amendment barred the award. The complaint named Hinton and the United States Department of Education as defendants, but the Department filed a memorandum in support of the state agency's position.

After all three parties moved for judgment on the pleadings, the district court granted judgment to TDHS and the Department of Education and vacated the arbitration panel's award. The district court determined that the award violated the Eleventh Amendment's restriction on damage suits against a state because the Act does not contain an unambiguously expressed congressional intent to abrogate the states' Eleventh Amendment sovereign immunity, as required by Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 105 S.Ct. 3142, 87 L.Ed.2d 171 (1985). Hinton appeals that decision.

II.

As a preliminary matter, the Department of Education urges us to avoid the Eleventh Amendment issue by finding that the Randolph-Sheppard Act does not authorize an arbitration panel to award retroactive damages against a state agency. Section 107d-1(a) of the Randolph-Sheppard Act provides, in relevant part:

Any blind licensee who is dissatisfied with any action arising from the operation or administration of the vending facility program may submit to a State licensing agency a request for a full evidentiary hearing.... If such blind licensee is dissatisfied with any action taken or decision rendered as a result of such hearing, he may file a complaint with the Secretary who shall convene a panel to arbitrate the dispute ... and the decision of such panel shall be final and binding on the parties except as otherwise provided in this Act.

20 U.S.C. § 107d-1(a) (emphasis added).

Similarly, section 107b(6) contains language requiring the state agency to provide a hearing for a blind vendor "dissatisfied with any action arising from the operation or administration of the vending facility program" and to agree to submit unresolved grievances to arbitration. The natural reading of these provisions is that the arbitration panel may consider and resolve any complaint of a vendor arising out of the program, including a complaint that the state agency has taken money to which the vendor is entitled. Congress added these provisions to the Act in 1974. Pub.L. No. 93-651, 89 Stat. 2-7 (1974). While the legislative history does not contain any statement regarding the scope of relief to be provided by the panel, Congress surely was aware that arbitration panels routinely awarded retroactive relief. See Delaware Dep't of Health v. United States Dep't of Educ., 772 F.2d 1123, 1136-37 (3d Cir.1985). 2

We therefore conclude that the arbitration panel did not exceed its statutory authority in finding that Hinton was entitled to retroactive relief against the state agency. Accordingly, we must consider the extent to which the circumstances of this case implicate the Eleventh Amendment.

III.

The Eleventh Amendment to the Constitution provides that "[t]he judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign...

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