Commonwealth v. United States

759 F.3d 588

Commonwealth of KENTUCKY, Education and Workforce Development Cabinet, Office for the Blind, Plaintiff–Appellant,

v.UNITED STATES of America, by and through the Honorable Chuck HAGEL, Secretary of Defense, and the Honorable John McHugh, Secretary of the Army, Defendant–Appellee.

No. 12–6610.

United States Court of Appeals, Sixth Circuit.

July 21, 2014.

ON BRIEF: Patrick B. Shirley, Commonwealth of Kentucky, Frankfort, Kentucky, for Appellant. Candace G. Hill, United States Attorney's Office, Louisville, Kentucky, for Appellee.

Before: MOORE, WHITE, and DONALD, Circuit Judges.

OPINION

KAREN NELSON MOORE, Circuit Judge.

The Randolph–Sheppard Act (“the Act”), ch. 638, 49 Stat. 1559 (1936) (codified at 20 U.S.C. §§ 107–107e), gives blind persons a priority in winning contracts to operate vending facilities on federal properties. One of these properties is Fort Campbell in Kentucky, which operates a cafeteria for its soldiers. For at least the last two decades, Kentucky's Office for the Blind (“OFB”) has helped blind vendors apply for and win the base's contracts for various services. In 2012, the United States Army (“the Army”), the federal entity that operates Fort Campbell, published a solicitation, asking for bids to provide dining-facility-attendant services. Rather than doing so under the Act, as it had before, the Army issued this solicitation as a set aside for Small Business Administration Historically Underutilized Business Zones (“HUBZones”). OFB disagreed with this change in classification and, representing its blind vendor, filed for arbitration under the Act. OFB also sought a temporary restraining order (“TRO”) and a preliminary injunction in the district court, requesting that the court stay the awarding of a new contract pending arbitration. The district court denied the requests,finding that it lacked jurisdiction to consider a request for a preliminary injunction. OFB appealed to this court. We now hold that OFB's failure to seek and complete arbitration does not deprive the federal courts of jurisdiction. The district court erred to the extent that it found differently. Therefore, we VACATE the district court's judgment and REMAND for reconsideration.

I. BACKGROUND

A. Randolph–Sheppard Act

In 1936, Congress passed the Randolph–Sheppard Act to “enlarge[e] the economic opportunities of the blind” by giving them priority in the bidding of contracts to operate vending facilities on federal properties. 20 U.S.C. § 107(a). “[V]ending facilit[ies]” include cafeterias and snack bars on military bases, such as Fort Campbell. § 107e(7).

When everything runs smoothly, the priority works as follows: the Secretary of Education (“the Secretary”) designates a “licensing agency” for each state. § 107a(a)(5). These state licensing agencies then provide the blind with training, equipment, certification, and—if necessary—legal representation. See §§ 107b(2), (6); 107d–4; 107a(b); 34 C.F.R. § 395.33. When a federal agency, such as the Army, solicits vending-facility services, it must invite the state licensing agency to bid on the contract. 34 C.F.R. § 395.33(b). The state licensing agency will then select a blind vendor and submit a bid if the vendor can “provide food service at comparable cost and of comparable high quality....” Id. If the state licensing agency's proposal, according to neutral, pre-published criteria, is within “a competitive range” and the Department of Education (“DOE”) agrees with the state licensing agency's assessment of the vendor's qualifications, the blind vendor will be awarded the contract. § 395.33(a), (b). When a vending-facility-services contract nears expiration, the federal agency may directly negotiate with the state licensing agency to renew the contract, or it can open bidding to the general public, triggering the same procedure outlined above. § 395.33(d).

In the event that disputes arise, the Act and DOE's regulations provide for arbitration between the state licensing agency and the federal agency soliciting vending-facility services. See20 U.S.C. § 107d–1; 34 C.F.R. §§ 395.33(b), 395.37. The DOE and the parties will select and convene an arbitration panel, which then conducts a hearing and issues a decision. 20 U.S.C. § 107d–2(b); 34 C.F.R. § 395.37(b), (c), (f). The panel's decision is considered to be the final agency action and to be binding upon the parties. 20 U.S.C. § 107d–1(b); 34 C.F.R. § 395.37(b). If the federal agency is found to be non-compliant, the regulations provide that “the head of any such department, agency, or instrumentality ... shall cause such acts or practices to be terminated promptly and shall take such other action as may be necessary to carry out the decision of the panel.” § 395.37(d). The regulations then provide for judicial review of the panel's decision. Id.; see also5 U.S.C. §§ 701–706.

B. Facts and Procedural History

In Kentucky, OFB is the state licensing agency. In this role, it licenses and trains blind vendors. It also submits bids on their behalf for vending-facility-services contracts on federal properties. In 1995, the OFB appointed James E. Hardin as its blind licensed vendor and submitted a bid for the contract with the Army to perform full-food and dining-facility-attendant services ¹ in Fort Campbell's cafeteria. R. 1 at 5 (Compl. at ¶ 10) (Page ID # 5). DOE and the Army adjudged OFB's bid sufficiently competitive, and OFB received the contract. Id. Hardin formed a joint venture, First Choice Food Services (“First Choice”), and went about performing the contract. R. 1–1 at 3–4 (Pl. Mem. for TRO) (Page ID # 21–22).

In 2000, OFB contacted the Army regarding direct negotiations for the extension of the Fort Campbell contract. R. 1–5 at 5 (2002 Arbitration Decision) (Page ID # 49). The Army declined the invitation and posted a new solicitation for dining-facility-attendant services. Id. at 6 (Page ID # 50). The Army eventually declared that “[t]he new solicitation [would be] administered as a SBA ... set aside procurement and not as a Randolph–Shep [p]ard procurement.” Id. at 7 (Page ID # 51). OFB filed for arbitration pursuant to 34 C.F.R. § 395.33(b). The arbitration panel found in 2002 that the Act covers dining-facility-attendant services and ordered the Army to negotiate with the OFB regarding the continuation of the contract. R. 1–5 at 13 (Page ID # 57).

In 2007, the Army solicited bids for the performance of full-food and dining-facility-attendant services. Again, DOE and the Army adjudged OFB's bid competitive, and OFB received the contract. R. 1 at 5 (Compl. at ¶ 10) (Page ID # 5). First Choice ² performed the contract.

In August 2012, the Army decided to rely once again upon its own cooks for meal preparation and service. See R. 1–4 at 1 (Brinly Letter) (Page ID # 41). It also solicited bids for dining-facility-attendant services, a solicitation that the Army classified as a set aside for SBA HUBZones. See R. 1–2 at 1 (Solicitation) (Page ID # 36). OFB objected to the SBA HUBZones classification. R. 1–4 at 1–3 (Brinly Letter) (Page ID # 41–43). In a letter, OFB cited the 2002 arbitration decision, which held that dining-facility-attendant services were covered by the Act. Id. at 2–3 (Page ID # 42–43). The Army replied, stating that its “interpretation of the [Act] is that it applies only when contracting for the operation of military dining facilities,” meaning full-food services. R. 1–6 at 1 (Fletcher–Schiewe Letter) (Page ID # 59).

As a result of being rebuffed, OFB demanded arbitration with the DOE on September 14, 2012. R. 1–7 at 17 (Arbitration Compl.) (Page ID # 78). The arbitration complaint asked DOE to convene an arbitration panel, to find the Army in violation of the Act, and to order the Army to comply with the terms of the Act. Id. at 16–17 (Page ID # 77–78). Three days later, OFB filed a self-styled “Motion and Complaint for Temporary Restraining Order and Preliminary Injunction” in federal district court. R. 1 at 1 (Compl.) (Page ID # 1). This filing requested that the district court hold an expedited hearing and issue a TRO or preliminary injunction “prohibiting the Army from either conducting the procurement and/or making award to an offeror pursuant to [the solicitation] until such time as the arbitration proceeding required by 20 [U.S.C.] § 107d–1(b) is concluded.” Id. at 14 (Page ID # 14). The Army replied, arguing that OFB could not meet the standard for injunctive relief on the merits. R. 7 at 5–11 (Def. Resp. in Opp'n) (Page ID # 109–15). In the alternative, the Army argued that the district court lacked jurisdiction to entertain the motion because OFB had not exhausted its administrative remedies, namely that OFB had not completed arbitration. Id. at 11–16 (Page ID # 115–120). OFB disagreed. R. 8 at 1–16 (Pl.Reply) (Page ID # 374–389).

On October 9, 2012, the district court held a hearing on the preliminary injunction. It issued its decision two weeks later on October 23, denying the injunction and dismissing the action without prejudice. See R. 11 at 11 (D.Ct.Op.) (Page ID # 420). The district court found that it lacked jurisdiction to consider OFB's request because OFB had not exhausted its administrative remedies. Id. at 9–10 (Page ID # 418–19). In the alternative, the district court stated that “even if [it] were to find it had jurisdiction to issue a preliminary injunction, [OFB] has not shown that such an ‘extraordinary remedy’ is warranted in this case.... [I]n light of the DOE's evolving views on the applicability of the [Act] to [dining-facility-attendant]-only contracts, it is not clear that the [OFB] will prevail on the merits.” Id. at 11 (Page ID # 420). The Army alerted the district court to the fact that the blind licensed vendor's contract would expire on March 31, 2013 and that Federal Acquisition Regulation § 52.217–8 barred the Army from extending the contract further while arbitration was pending. R. 13 at 1 (Def. Mot. for Correction) (Page ID #...