Tyler v. U.S. Dep't of Educ. Rehab. Servs. Admin.

• Decision Date: 26 September 2018
• Docket Number: No. 17-6074,17-6074
• Citation: 904 F.3d 1167
• Parties: Noel TYLER, as interim director of the Oklahoma Department of Rehabilitation Services, Plaintiff Counter Defendant - Appellant, v. UNITED STATES DEPARTMENT OF EDUCATION REHABILITATION SERVICES ADMINISTRATION, Defendant - Appellee, and David Altstatt, Sr., Intervenor Defendant Counterclaimant - Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

904 F.3d 1167

Noel TYLER, as interim director of the Oklahoma Department of Rehabilitation Services, Plaintiff Counter Defendant - Appellant,

v. UNITED STATES DEPARTMENT OF EDUCATION REHABILITATION SERVICES ADMINISTRATION, Defendant - Appellee,andDavid Altstatt, Sr., Intervenor Defendant Counterclaimant - Appellee.

No. 17-6074

United States Court of Appeals, Tenth Circuit.

September 26, 2018

Peter A. Nolan, Winstead PC, Austin, Texas (Richard Olderbak, Oklahoma Office of Attorney General, Department of Rehabilitation Services, Oklahoma City, Oklahoma, with him on the briefs), for Plaintiff-Appellant.

Kay Sewell, Assistant United States Attorney, Oklahoma City, Oklahoma (Robert J. Troester, Acting United States Attorney, Chad A. Readler, Acting Assistant Attorney General, Mark B. Stern and Laura E. Myron, Attorneys, Appellate Staff, United States Department of Justice, Washington, D.C., with her on the briefs), for Defendant-Appellee.

Kevin R. Donelson, (Anh Kim Tran with him on the briefs), Fellers, Snider, Blankenship, Bailey & Tippens, P.C., Oklahoma City, Oklahoma, for Intervenor Defendant Counterclaimant-Appellee.

Before MATHESON, McHUGH, and EID, Circuit Judges.

MATHESON, Circuit Judge.

The Oklahoma Department of Rehabilitation Services ("ODRS") appeals from the district court’s affirmance of an arbitration decision rendered under the Randolph-Sheppard Act (the "RSA"), 20 U.S.C. §§ 107 et seq. The statute authorizes designated state agencies such as ODRS to license and assign blind vendors to operate vending facilities on federal property. It establishes an arbitration scheme to resolve disputes arising from this program.

In accordance with the statute, the Department of Education ("DOE") convened an arbitration panel (the "Panel") to hear the grievances of David Altstatt, a blind vendor, challenging ODRS’s selection of another blind vendor, Robert Brown, for a particular vending assignment. Both Mr. Altstatt and Mr. Brown had applied for the assignment. The Panel found for Mr. Altstatt and ordered ODRS to remove Mr. Brown from the disputed assignment, appoint Mr. Altstatt in Mr. Brown’s place, and pay damages and attorney fees to Mr. Altstatt.

ODRS brought suit in district court against DOE, seeking to vacate the Panel’s decision, which the Randolph-Sheppard Act subjects to judicial review as a final agency action under the Administrative Procedure Act (the "APA"), 5 U.S.C. §§ 551 et seq. Mr. Altstatt intervened as a defendant and counterclaimant, requesting that the court affirm the arbitration decision. DOE participated in the litigation only to the extent of filing the administrative record of the Panel proceedings. The district court entered judgment in favor of Mr. Altstatt and ordered ODRS to comply with the Panel’s decision. ODRS now appeals.

Exercising jurisdiction under 28 U.S.C. § 1291, we affirm the district court’s decision as to the Panel’s award of injunctive relief in the form of Mr. Brown’s removal and Mr. Altstatt’s appointment to the disputed assignment, but we reverse as to the Panel’s award of damages and attorney fees.

I. BACKGROUND

This section provides background on: (A) the RSA, (B) Mr. Altstatt’s grievances against ODRS, (C) the Panel’s decision in favor of Mr. Altstatt, and (D) the federal district court proceedings.

A. The Randolph-Sheppard Act

The RSA, 20 U.S.C. §§ 107 et seq. , enacted in 1936 and amended in 1954 and 1974, established a federal program (the "RSA Program") to enhance blind individuals’ economic opportunities by granting them priority to operate vending facilities on federal property. States participate in the RSA Program through state licensing agencies ("SLAs") designated by the DOE, which administers the RSA. Id. §§ 107a(a), 107(b). SLAs promulgate and implement policies and standards, which DOE must approve, governing the licensure and selection of blind vendors to operate vending facilities on federal property. 34 C.F.R. § 395.4 ; see also id. § 395.3(a)(7).

As amended in 1974, the RSA establishes a two-tiered scheme for resolving blind vendors’ grievances arising from SLAs’ operation of the RSA program. First, SLAs must hear and render a decision on a blind vendor’s grievance. 20 U.S.C. § 107d-1(a). Second, a vendor who is dissatisfied with the SLA’s decision may then request arbitration by a panel convened by DOE. Id. RSA arbitration decisions are subject to judicial review in federal court as final agency actions under the APA. Id. § 107d-2.

B. Mr. Altstatt’s Grievances against ODRS

ODRS, Oklahoma’s designated licensing agency, issues licenses to blind vendors and assigns them to manage vending contracts with the federal government. See Okla. Admin. Code § 612:25-4-1(a). In late 2012, ODRS initiated a selection process for a licensed blind vendor to assume the management of the Fort Sill vending contract (the "Contract") with the Army. It solicited applications through a position announcement (the "Announcement"), which enumerated "eligibility criteria specific to this announcement." App., Vol. 7 at 1135, 1139. To be eligible, the applicant must not "have had any delinquency on taxes for the past 3 years." Id. at 1139. In accordance with its regulations, Okla. Admin. Code §§ 612:25-4-57, 612:25-4-59, ODRS convened a selection committee (the "Committee") to interview the candidates, evaluate their applications, and make a recommendation for the Contract assignment. The Committee recommended Mr. Brown over the other candidates, which included Mr. Altstatt. ODRS accepted the Committee’s recommendation and selected Mr. Brown to manage the Contract.

After Mr. Brown’s selection, Mr. Altstatt filed a grievance with ODRS, complaining about the Committee’s selection procedures. He argued that Mr. Brown’s selection was null and void because the Committee had not considered a required scoring factor under ODRS’s regulations.¹ ODRS, after a full evidentiary hearing, ordered the Committee to reconvene within 30 days to consider the previously omitted factor. In the meantime, ODRS appointed Mr. Brown as the interim Contract manager so that he could begin preparations to operate Fort Sill’s vending facility. ODRS also assigned each candidate a score for the previously omitted factor based on the available data and provided this information to the Committee. The reconvened Committee considered the additional scores and again recommended Mr. Brown for the Contract assignment. ODRS again accepted the Committee’s recommendation.

Following ODRS’s interim appointment of Mr. Brown and again after ODRS’s permanent re-selection of Mr. Brown, Mr. Altstatt filed grievances with ODRS to challenge these actions. He complained, among other things, that (1) ODRS’s re-selection process was "infirm," App., Vol. 7 at 1227, (2) one of the Committee members—Charles Pride—was biased, and (3) Mr. Brown was ineligible for the Contract assignment because he was delinquent on his taxes. Mr. Altstatt also filed a complaint with DOE to request arbitration of his grievances against ODRS.

ODRS granted Mr. Altstatt a second full evidentiary hearing. After the hearing, it affirmed Mr. Brown’s interim and permanent appointments, concluding that they "complied with the applicable regulations and due process." App., Vol. 4 at 718-19. Dissatisfied with ODRS’s decision, Mr. Altstatt filed a second complaint with DOE requesting arbitration of his grievances.

C. The Panel’s Decision

In July 2014, DOE notified the parties that it was consolidating Mr. Altstatt’s requests for arbitration and "authoriz[ing] the convening of [the Panel] to hear and render a decision on the issues raised in the two complaints." App., Vol. 5 at 766, 768. DOE stated that "[t]he central issue is whether [ODRS]’s process for selecting a blind vendor for the Ft. Sill food service contract violated the Randolph-Sheppard Act , implementing regulations and state rules and regulations." Id.

In his second complaint to DOE, Mr. Altstatt had specified that he sought the following relief: "that the selection process for the putative winner, Robert Brown, be declared invalid and that Altstatt be awarded the current Contract and profits which he would have received during the period of time in which he would have been operating the Contract from ODRS." App., Vol. 4 at 715. DOE’s notices to the parties incorporated this language by reference: "A complete statement of ... the relief sought is contained in this complaint for arbitration." App., Vol. 5 at 765, 767. The notices did not advise the parties of any limitations on the types of relief the Panel could award.

In January 2016, after a hearing in November at which "[c]ounsel for the parties presented opening statements and then called witnesses to give sworn testimony," the Panel rendered a decision in favor of Mr. Altstatt. App., Vol. 4 at 635, 643. As relevant to this appeal, the Panel concluded that ODRS’s re-selection of Mr. Brown for the Contract assignment was invalid because (1) "[ODRS’s] utiliz[ation] of the same ... Committee again after it had violated its own rules deprived Altstatt of due process and was fundamentally unfair," (2) "one of the committee members (Pride) was personal friends with Brown and was known to socialize with him," and (3) "Brown was not eligible [for the Contract assignment] by the clear meaning of the words set forth in the [Announcement]" for having been delinquent in his taxes in the relevant time period. Id. at 641-42. The Panel ordered that ODRS remove Mr. Brown from the Contract assignment, appoint Mr. Altstatt in Mr. Brown’s place, and pay damages² and attorney fees to Mr. Altstatt.

D. Federal District Court Proceedings

ODRS sued DOE in the U.S. District Court for the Western District of Oklahoma, seeking judicial review of the Panel’s decision. Mr. Altstatt intervened as a defendant and counterclaimant, requesting that the court affirm the arbitration decision. After filing the administrative record of the Panel proceedings, DOE obtained the parties’ stipulation that it...