Wisconsin v. U.S. Dept. of Educ.

Decision Date03 November 2009
Docket NumberNo. 09-cv-011-bbc.,09-cv-011-bbc.
Citation667 F.Supp.2d 1007
PartiesState of WISCONSIN DEPARTMENT OF WORKFORCE DEVELOPMENT, DIVISION OF VOCATIONAL REHABILITATION, Plaintiff, v. UNITED STATES DEPARTMENT OF EDUCATION, Margaret Spellings, in her official capacity as Secretary of the United States Department of Education, and Janet Dickey, Defendants.
CourtU.S. District Court — Western District of Wisconsin

David C. Rice, Steven Carl Kilpatrick, Wisconsin Department of Justice, Madison, WI, for Plaintiff.

Richard D. Humphrey, U.S. Attorney's Office, Lisa Claire Goldman, Lawton & Cates, S.C., Madison, WI, for Defendants.

OPINION and ORDER

BARBARA B. CRABB, District Judge.

Plaintiff State of Wisconsin Department of Workforce Development, Division of Vocational Rehabilitation, seeks review of an arbitration panel's decision under the Randolph-Sheppard Act, 20 U.S.C. § 107. The panel found plaintiff liable to defendant Janet Dickey for monetary and other relief because of its negligence in managing a food service contract at Fort McCoy, Wisconsin, for which defendant Dickey was the licensed blind vendor. Plaintiff contends that the arbitration award was arbitrary and capricious, lacked sufficient evidence, violated the Randolph-Sheppard Act and violated the Eleventh Amendment.

After reviewing the administrative record and considering the parties' arguments, I am persuaded that the arbitration panel's award of prospective relief should be confirmed but that the Eleventh Amendment bars enforcement of its award of retroactive money damages. The Act makes it clear that a state's participation in the Randolph-Sheppard program is conditioned upon its agreement to arbitrate disputes; but nothing in the Act says, either expressly or by "overwhelming implication," Edelman v. Jordan, 415 U.S. 651, 673, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974), that the state may be required to pay retroactive damages to blind vendors dissatisfied with state actions. Because I find that the Eleventh Amendment bars the panel's award of money damages, plaintiff's challenge to the panel's statutory authority to award damages is moot, as is its contention that the arbitration panel lacked any factual basis on which to award money damages to defendant Dickey.

I will uphold the panel's determination of liability and its holding that plaintiff must help defendant Dickey develop, expand and upgrade her present facility. By failing to object to defendant Dickey's right to a substantive remedy before the panel, plaintiff waived any argument on this point. Finally, plaintiff has not shown that the panel's decision was arbitrary or capricious or that it was not based on substantial evidence.

RECORD FACTS
A. The Randolph-Sheppard Act

The Randolph-Sheppard Act was enacted to provide employment opportunities for the blind by granting priority to 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 state and federal agencies. At the federal level, the Secretary of Education is responsible for interpreting and enforcing the Act's provisions and for designating state licensing agencies. 20 U.S.C. §§ 107a(a)(5), 107b; 34 C.F.R. §§ 395.5, 395.8. At the state level, state licensing agencies implement the program. Plaintiff State of Wisconsin Department of Workforce Development, Division of Vocational Rehabilitation, is the state agency designated to administer the Randolph-Sheppard Act in Wisconsin.

The Act gives state agencies the opportunity to gain access to vending and food service sites in federal buildings. Agencies who want such access must apply to the Secretary of Education and agree to certain federal requirements. State participation in the program is voluntary.

A person seeking a position as a blind vendor applies to the designated state agency and is licensed by that agency. The state agency then applies to the federal government for placement of the licensee on federal property. 20 U.S.C. § 107b. Once the state and 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.

Among the conditions of state participation in the Randolph-Sheppard program is the state's agreement to provide any blind licensee dissatisfied with any action arising from the operation or administration of the vending facility program an opportunity for a hearing before the state agency. § 107b(6). If the hearing does not resolve the matter, the licensee must be given an opportunity to submit any unresolved grievances to an arbitration panel convened by the Secretary of Education. Id. The Act makes the arbitration panel's decision subject to judicial review in federal court as a final agency action. 20 U.S.C. § 107d-1(a).

The State of Wisconsin has enacted legislation to insure its participation in the Randolph-Sheppard program. Wis. Stat. § 47.02. In addition, the Wisconsin Department of Workforce Development has promulgated standards and guidelines for the administration of a program of supervised business enterprises operated by blind persons. Wis. Admin. Code § DWD 60.01.

B. The Fort McCoy Food Service Contract

In the late fall of 2002, plaintiff was awarded a contract under the Randolph-Sheppard Act by the Department of the Army to provide full food and dining attendant service at Fort McCoy, Wisconsin. The contract had a six-month base period of April 1, 2003 to September 30, 2003 and four one-year renewable options that could be exercised at the Army's discretion.

To carry out its responsibilities under the Fort McCoy food service contract, plaintiff entered into a management services agreement with Blackstone Consulting, Inc., a full food service contractor known to have experience in military food service contracts and in managing contracts under the Randolph-Sheppard Act. Under the management service agreement, Blackstone agreed to provide technical and management services to plaintiff and whomever plaintiff appointed as the Randolph-Sheppard "blind business manager." Joseph D'Costa, the head of the Wisconsin Division of Vocational Rehabilitation Business Enterprise Program, supervised the management services agreement with Blackstone on behalf of plaintiff.

Plaintiff designated defendant Janet Dickey as the blind business manager for the Fort McCoy contract. With plaintiff's approval, defendant Dickey and Blackstone Consulting entered into a joint venture agreement under which Blackstone would "[p]rovide full food services" to Fort McCoy and "carry out a program of thorough training which is sufficient to prepare Janet Dickey to perform all duties associated with managing a military food service contract."

Defendant Dickey acted as the blind business manager at Fort McCoy from April 1, 2003 to August 2006. Although the Army rated the performance of the food service contract for the period of April 1, 2003 to September 30, 2003 as either "very good" or "exceptional" in all categories, it found the performance of the contract only "acceptable" in 2004 and 2005. In 2006, it started issuing deficiency notices to plaintiff regarding the performance of the contract and notified D'Costa of serious service problems at various Fort McCoy food service locations. Additional communications followed but plaintiff was unable to effect changes in the performance of the contract that met the Army's requirements.

On August 2, 2006, D'Costa wrote to the Army to say that it was increasing staffing and had appointed defendant Dickey as the on-site interim primary contract manager, with responsibility for the overall management and coordination of the food service contract. The Army found this unacceptable because Dickey did not have the experience or education required under the contract.

Eventually, plaintiff chose not to challenge the Army's evaluation of its performance or to seek to exercise its option for a fourth year of the contract. On October 1, 2006, the Army contract for full food services at Fort McCoy ended.

C. Procedural History

On November 10, 2006, using the administrative remedies afforded under the Randolph-Sheppard Act, defendant Dickey requested a hearing with plaintiff, in which she sought determination of the sufficiency of plaintiff's supervision of Blackstone Consulting and the Fort McCoy contract. A state evidentiary hearing was held on March 14, 2007. The hearing examiners concluded that it was not plaintiff's fault that the Fort McCoy contract was not renewed.

Following this determination, Dickey filed a complaint with the Secretary of Education, requesting arbitration. In her request, Dickey stated that plaintiff "was negligent in its oversight, responsibility of, and management of the Randolph-Sheppard Program in regards to the full food service contract at Fort McCoy. . . ." Three arbitrators, one appointed by plaintiff, one appointed by Dickey and one neutral chairman, convened a full evidentiary hearing to address Dickey's complaint in May 2008. On August 2, 2008, the panel ruled unanimously in favor of Dickey, finding that plaintiff had failed to perform its duties under the Randolph-Sheppard Act. In particular, the panel's decision provides:

After review of the detailed record, it is abundantly clear that the Army has held Mr. D'Costa as primarily responsible for the failure of the contract. . . . [I]t is clear that after due notice and an opportunity to correct the deficiencies, the Army was about to cancel the contract, because of the repeated failures of [plaintiff] to provide the full service required and because of the inadequate staffing and missed meals. While Ms. Dickey undoubtedly had a...

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