Filed: Sep. 26, 2018
Latest Update: Mar. 03, 2020
Summary: FILED United States Court of Appeals PUBLISH Tenth Circuit UNITED STATES COURT OF APPEALS September 26, 2018 Elisabeth A. Shumaker FOR THE TENTH CIRCUIT Clerk of Court _ NOEL TYLER, as interim director of the Oklahoma Department of Rehabilitation Services, Plaintiff Counter Defendant - Appellant, v. No. 17-6074 UNITED STATES DEPARTMENT OF EDUCATION REHABILITATION SERVICES ADMINISTRATION, Defendant - Appellee, and DAVID ALTSTATT, SR., Intervenor Defendant Counterclaimant - Appellee. _ Appeal from
Summary: FILED United States Court of Appeals PUBLISH Tenth Circuit UNITED STATES COURT OF APPEALS September 26, 2018 Elisabeth A. Shumaker FOR THE TENTH CIRCUIT Clerk of Court _ NOEL TYLER, as interim director of the Oklahoma Department of Rehabilitation Services, Plaintiff Counter Defendant - Appellant, v. No. 17-6074 UNITED STATES DEPARTMENT OF EDUCATION REHABILITATION SERVICES ADMINISTRATION, Defendant - Appellee, and DAVID ALTSTATT, SR., Intervenor Defendant Counterclaimant - Appellee. _ Appeal from ..
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FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS September 26, 2018
Elisabeth A. Shumaker
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
NOEL TYLER, as interim director of the
Oklahoma Department of Rehabilitation
Services,
Plaintiff Counter Defendant -
Appellant,
v. No. 17-6074
UNITED STATES DEPARTMENT OF
EDUCATION REHABILITATION
SERVICES ADMINISTRATION,
Defendant - Appellee,
and
DAVID ALTSTATT, SR.,
Intervenor Defendant
Counterclaimant - Appellee.
_________________________________
Appeal from the United States District Court
for the Western District of Oklahoma
(D.C. No. 5:16-CV-00137-W)
_________________________________
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
2
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,
3
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
4
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
1
At the relevant time, ODRS regulations provided that selection committees’
scoring of applicants “shall be based on” four “factors,” one of which was called
“[m]onthly location reviews and annual evaluation.” Okla. Admin. Code § 612:25-4-59
(2012). Mr. Altstatt complained—and ODRS does not dispute—that the Committee
failed to consider the “monthly location reviews and annual evaluation” factor. ODRS
has instead defended the omission of this factor by offering evidence to show that “data
was [not] available for [this factor] at the time that the . . . Committee needed to conduct
th[e] selection process.” Aplt. Br. at 10 (citing App., Vol. 6 at 1053-58).
5
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
6
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.
2
The Panel ordered ODRS to pay Mr. Altstatt damages “in an amount equal to
Brown’s net revenue share during the time that he served as the Interim and Permanent
[Contract manager] along with interest at the legal rate.” App., Vol. 4 at 643-45. At the
arbitration hearing, Mr. Altstatt had called a damages expert to testify. The Panel had
rejected the expert’s calculations, which were based on the historical financial statements
of Mr. Brown’s predecessor. Following the Panel’s decision, Mr. Altstatt filed a motion
requesting the Panel to set a specific amount of damages and to rely on the expert’s
damages calculations or to order the production of and independently review Mr.
Brown’s financial statements. App., Vol. 4 at 653-57. The Panel denied this motion,
stating that it “set the damages in its original order with parameters sufficient to calculate
the amount of damages and has no authority to hear additional evidence or modify said
order.” Id. at 650.
7
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 “is a nominal defendant in terms of the rights, claims and remedies sought to be
reviewed [in the case].” Dist. Ct. Doc. 21 at 4. The court accepted the parties’
stipulation and designated DOE a nominal defendant, such that it “[was] not required to
participate in any substantive proceedings . . . unless [specifically] directed to do so.” Id.
at 1.3
Disallowing any discovery, the court ordered ODRS and Mr. Altstatt to submit
briefs on all of the issues. In its brief, ODRS attacked, as arbitrary or capricious and
unsupported by substantial evidence, the Panel’s following bases for concluding that its
permanent selection of Mr. Brown for the Contract assignment was contrary to the RSA:
(1) the re-selection process was infirm, (2) Mr. Pride and Mr. Brown were friends at the
relevant time, and (3) Mr. Brown was ineligible for the Contract Assignment because of
his tax delinquency. ODRS also challenged each type of relief granted by the Panel:
(1) the removal of Mr. Brown from the Contract assignment as violating Mr. Brown’s
due process, (2) the appointment of Mr. Altstatt to the Contract assignment as exceeding
3
Mr. Brown did not seek to intervene in the district court proceedings at any
point. After the entry of final judgment, Mr. Brown filed a motion in this court to
intervene in ODRS’s appeal. We denied this motion as untimely.
8
the scope of the Panel’s remedial authority under the RSA and alternatively as arbitrary
or capricious, (3) the damages award as barred by sovereign immunity, and (4) the
attorney fee award as exceeding the scope of the Panel’s remedial authority under the
RSA and alternatively as barred by sovereign immunity.
After receiving briefs from ODRS and Mr. Altstatt on these issues, the district
court upheld the Panel’s decision in favor of Mr. Altstatt and all relief granted. The court
rejected on the merits all but one of ODRS’s claims—the due process challenge to the
Panel’s order to remove Mr. Brown from the Contract assignment. The court determined
that ODRS lacked standing to assert the rights of Mr. Brown, a non-party to the litigation,
through this claim. The court later entered final judgment, in which it affirmed the
“Findings of Fact and Conclusions of Law set forth in the [Panel’s decision] . . . in favor
of [Mr.] Altstatt.” App., Vol. 8 at 1384. It further ordered ODRS to remove Mr. Brown
as the Contract manager, replace him with Mr. Altstatt, and pay damages and attorney
fees to Mr. Altstatt as provided for in the Panel’s decision.
ODRS appealed from the district court’s affirmance of the Panel’s decision,
reasserting all of the arguments it presented below. After oral argument, we ordered the
parties, including DOE, to submit supplemental briefs on issues pertaining to sovereign
immunity and the scope of the Panel’s remedial power under the RSA. DOE attached to
its supplemental brief a document titled “Revised Interim Policies and Procedures for
Convening and Conducting an Arbitration Pursuant to Sections 5(a) and 6 of the
Randolph-Sheppard Act as Amended” (“RSA Arbitration Policies”). This document,
which the Commissioner of DOE’s Rehabilitation Services Administration approved in
9
1978, establishes the policies and procedures governing the arbitration of blind vendors’
grievances against SLAs under the RSA.
II. DISCUSSION
We begin with our standard of review. We then turn to ODRS’s various
challenges to the Panel’s decision, providing additional background as needed.
A. Standard of Review
“We review de novo a district court’s decision in an APA case.” Biodiversity
Conservation All. v. Jiron, 762 F.3d 1036, 1059 (10th Cir. 2014). Accordingly, we apply
the standards for reviewing final agency actions set forth in the APA:
To the extent necessary to decision and when presented, the
reviewing court shall decide all relevant questions of law,
interpret constitutional and statutory provisions, and
determine the meaning or applicability of the terms of an
agency action. The reviewing court shall—
...
(2) hold unlawful and set aside agency action, findings, and
conclusions found to be—
(A) arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law;
(B) contrary to constitutional right, power, privilege, or
immunity;
(C) in excess of statutory jurisdiction, authority, or
limitations, or short of statutory right;
(D) without observance of procedure required by law; [or]
(E) unsupported by substantial evidence in a case . . .
reviewed on the record of an agency hearing provided
by statute . . . .
5 U.S.C. § 706 (emphases added).
10
B. ODRS’s Challenges under the APA
ODRS raises various APA challenges to (1) the Panel’s conclusion that ODRS’s
permanent selection of Mr. Brown for the Contract assignment violated the RSA, and (2)
specific types of relief awarded to Mr. Altstatt, whom the Panel determined should have
received the Contract assignment instead of Mr. Brown. We affirm the district court’s
decision as to the Panel’s order to remove Mr. Brown from the Contract assignment and
replace him with Mr. Altstatt, but we reverse as to the Panel’s award of damages and
attorney fees.
We first review the Panel’s conclusion that Mr. Brown’s selection violated the
RSA. ODRS attacks as arbitrary or capricious or as unsupported by substantial evidence
the Panel’s reasons for this conclusion: infirmity in ODRS’s re-selection process, the
friendship between Mr. Brown and Mr. Pride, and Mr. Brown’s ineligibility. We need
only consider ODRS’s arguments regarding the Panel’s third reason—Mr. Brown’s
ineligibility for the Contract assignment due to tax issues. Based on our review of the
record, we conclude that the Panel’s finding of ineligibility was not arbitrary or
capricious or unsupported by substantial evidence. Because this reason alone supports
the Panel’s conclusion that Mr. Brown’s selection violated the RSA, we do not consider
ODRS’s arguments regarding the Panel’s remaining reasons.
We then turn to the Panel’s remedies awarded to Mr. Altstatt. ODRS challenges:
(a) Mr. Altstatt’s appointment to the Contract assignment as exceeding the scope of the
Panel’s remedial authority under the RSA and as arbitrary or capricious; (b) the damages
award as violating sovereign immunity; and (c) the attorney fee award as exceeding the
11
scope of the Panel’s remedial authority and as violating sovereign immunity.4 We
conclude that (a) the Panel had statutory authority to order Mr. Altstatt’s appointment to
the Contract; (b) ODRS is entitled to sovereign immunity from the damages award; and
(c) the Panel exceeded its statutory authority in awarding Mr. Altstatt attorney fees.5
The Panel’s Conclusion that ODRS Violated the RSA
Under the APA, the reviewing court must “hold unlawful and set aside agency
action,” 5 U.S.C. § 706(2), that is “arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law,” id. § 706(2)(A), or “unsupported by substantial
evidence,”
id. § 706(2)(E). ODRS contends the Panel’s finding that Mr. Brown was
ineligible for the Contract assignment due to tax issues “is not supported by substantial
evidence and is arbitrary.” Aplt. Br. at 40. We disagree.
4
ODRS also challenges the Panel’s removal of Mr. Brown as violating Mr.
Brown’s due process rights. See Aplt. Br. at 28-31. We decline to address this claim,
which the district court dismissed for lack of standing. App., Vol. 8 at 1372 n.28
(“Ordinarily a litigant may only assert its own constitutional rights and a plaintiff cannot
sue for the deprivation of another’s civil rights; the Court therefore has disregarded this
argument.”). On appeal, ODRS fails to address its standing to bring the due process
claim, both in its opening brief and in its reply brief, even after Mr. Altstatt argued lack
of standing in his response brief. Under these circumstances, ODRS has waived any
argument that it has standing to pursue a due process claim on Mr. Brown’s behalf, and
we therefore do not entertain such a claim. See Colorado Outfitters Ass’n v.
Hickenlooper, 823 F.3d 537, 552 (10th Cir. 2016) (“[T]he plaintiffs don’t argue on
appeal that [one of the plaintiffs] had standing. . . . Thus, the plaintiffs have waived that
argument.”).
5
We do not address ODRS’s contention that sovereign immunity bars the attorney
fee award because we conclude the RSA does not authorize attorney fees. We reverse the
district court’s affirmance of the Panel’s attorney fee award on this basis alone.
12
We (a) summarize the evidence before the Panel relating to the tax eligibility
requirement for the Contract assignment and Mr. Brown’s tax issues; (b) provide legal
background on the federal contracting regulations ODRS relies on to challenge the
Panel’s finding that Mr. Brown was tax delinquent and therefore ineligible for the
Contract assignment; and (c) analyze the Panel’s finding in light of the administrative
record and conclude that the finding was neither unsupported by substantial evidence, nor
was it arbitrary or capricious.
a. Relevant evidence in the administrative record
We summarize the evidence relating to (i) the Contract assignment’s tax eligibility
requirement and (ii) Mr. Brown’s tax issues in the period leading up to ODRS’s selection
process.
i. The tax eligibility requirement
The Announcement for the Contract assignment enumerated several “eligibility
criteria,” including that applicants must not “have had any delinquency on taxes for the
past 3 years.” App., Vol. 7 at 1139.
The administrative record contains the affidavit of Michael Jones, who served as
ODRS’s Division Administrator from July 2011 to April 2013. App., Vol. 7 at 1124-25.
In his affidavit, Mr. Jones stated that he “wrote the applicant requirements for the
[Announcement].” Id. at 1124. He stated that “[o]ne of these requirements was that the
successful applicant could not have any tax delinquencies” and that he had “included the
tax delinquency provision . . . based on requirements found in the Defense Finance
Acquisition Regulations, or ‘DFARS’ that govern all federal contracts.”
Id. at 1124,
13
1125. He also stated that, “if [this requirement] was not met, [it] would be grounds for
the federal contracting officer administering [the Contract] to ‘debar’ or deem the
selected manager disqualified from continuing to work at the facility.” Id. at 1124.
At the arbitration hearing, ODRS called Mike Hamrick, its Operations Coordinator
for the RSA Program, to testify. He testified that the tax eligibility requirement is not in
ODRS’s rules and regulations but instead “comes from the DFARS.” App., Vol. 6 at
1049. He also testified that ODRS had not undertaken to check whether the candidates
for the Contract assignment satisfied the tax eligibility requirement, “since it w[as] the
Army’s [rather than ODRS’s own] requirement[].” Id. at 1050.
ii. Mr. Brown’s tax issues
The administrative record contains notices of two federal tax liens filed against
Mr. Brown’s property within the three years preceding the application due date for the
Contract assignment, December 21, 2012. App., Vol. 7 at 1141-42. In both notices, the
Internal Revenue Service (the “IRS”) stated that “taxes . . . have been assessed against
[Mr. Brown and his wife]” and that the United States “ha[s] made a demand for payment
of this liability, but it remains unpaid.” Id. In the first notice, prepared on February 18,
2011, the IRS assessed an unpaid balance of $15,117.95 from tax years 2008 and 2009.
In the second notice, prepared on November 1, 2012, the IRS assessed an unpaid balance
of $6,481.96 from tax year 2010. In both notices, the IRS also stated that “there is a lien
in favor of the United States on all property and rights to property belonging to [Mr.
Brown and his wife] for the amount of these taxes.”
Id.
14
The administrative record also contains Mr. Brown’s sworn affidavit, in which he
states that he had entered into an installment payment plan for his unpaid taxes with the
IRS before ODRS selected him for the Contract assignment:
At the time that I received the invitation to apply [for the
Contract assignment] I was concluding negotiation of a
payment plan with the U.S. Internal Revenue Service for
certain personal income taxes that had not been properly filed
on my behalf in prior years. I did enter into an agreed
payment plan before the [ODRS] selection process had
concluded. My monthly payments at an agreed amount began
in February, 2013. To the extent that the IRS has filed any
liens relating to taxes owed by me, those claimed taxes due
are covered by the repayment plan and I have been assured
that the IRS will not attempt any collection or treat me as a
delinquent taxpayer while I am making the agreed payments
according to the agreed payment plan.
Id. at 1126.
In his affidavit, Mr. Brown also stated that he had “discussed the above matter
with Division Manager Mike Jones before applying for the selection process” and that
Mr. Jones had “referred to particular U.S. Army regulations for contracting (DFARS) as
the reason for including in the [Announcement] a section stating that the successful
applicant would need to be clear of any tax delinquency.” Id. at 1127. Mr. Brown stated
that Mr. Jones had “advised [him] that DFARS itself contained a provision saying that
taxes covered by an agreed repayment plan do not constitute a delinquency, and that
[ODRS] would not consider [his] tax matter covered by a payment plan to be a
delinquency.”
Id.
Mr. Jones’s affidavit corroborated Mr. Brown’s affidavit. In his affidavit, Mr.
Jones stated: “Prior to submitting his application for the [Contract assignment], Robert
15
Brown advised me that he had learned that he had some unpaid federal taxes but that he
had previously entered into a payment plan to satisfy his tax obligations and was making
his payments as agreed.” Id. at 1125. Mr. Jones also stated: “Applying both the DFARS
standards and common sense, I determined that the payment plan being in place and not
being breached meant that Mr. Brown did not have a tax ‘delinquency’ that would
disqualify him from the selection process or from performing [the Contract] if selected,
and I advised him of that position.”
Id.
Mr. Brown also testified at the arbitration hearing regarding unpaid taxes and his
installment plan with the IRS. He elaborated on the plan’s terms: “I was to pay back a
set amount monthly, and then if there were ever any issues where I might [] be late, then
they needed me to make sure I contacted them so that I would continue to be considered
in good standing.” App., Vol. 6 at 1031.
b. Legal background
The Federal Acquisition Regulations System (“FARS”) is a set of regulations
jointly promulgated by the Department of Defense, the General Services Administration,
and the National Aeronautics and Space Administration to establish “uniform policies
and procedures for acquisition by all executive agencies.” 48 C.F.R. §§ 1.101, 1.103.
Under the regulations, “[a]cquisition means the acquiring by contract with appropriated
funds of supplies or services . . . by and for the use of the Federal Government through
purchase or lease . . . .” Id. § 2.101.
16
Under FARS, a federal contractor may be debarred “based upon a preponderance
of the evidence” for, among other things, “[d]elinquent Federal taxes in an amount that
exceeds $3,500.” Id. § 9.406-2(b)(1)(v).6 FARS provides that:
(A) Federal taxes are considered delinquent for purposes of
this provision if both of the following criteria apply:
(1) The tax liability is finally determined. The liability
is finally determined if it has been assessed. A
liability is not finally determined if there is a
pending administrative or judicial challenge. In
the case of a judicial challenge to the liability, the
liability is not finally determined until all judicial
appeal rights have been exhausted.
(2) The taxpayer is delinquent in making payment. A
taxpayer is delinquent if the taxpayer has failed to
pay the tax liability when full payment was due and
required. A taxpayer is not delinquent in cases
where enforced collection action is precluded.
(B) Examples.
...
(2) The IRS has filed a notice of Federal tax lien with
respect to an assessed tax liability, and the taxpayer
has been issued a notice under I.R.C. § 6320
entitling the taxpayer to request a hearing with the
IRS Office of Appeals contesting the lien filing,
and to further appeal to the Tax Court if the IRS
determines to sustain the lien filing. In the course
of the hearing, the taxpayer is entitled to contest
the underlying tax liability because the taxpayer
has had no prior opportunity to contest the liability.
This is not a delinquent tax because it is not a final
6
“Debarment means action taken . . . to exclude a contractor from Government
contracting and Government-approved subcontracting for a reasonable, specified period;
a contractor that is excluded is ‘debarred.’” 48 C.F.R. § 2.101.
17
tax liability. Should the taxpayer seek tax court
review, this will not be a final tax liability until the
taxpayer has exercised all judicial appeal rights.
(3) The taxpayer has entered into an installment
agreement pursuant to I.R.C. § 6159. The taxpayer
is making timely payments and is in full
compliance with the agreement terms. The
taxpayer is not delinquent because the taxpayer is
not currently required to make full payment.
...
Id. § 9.406-2(b)(1)(v) (emphases added).
c. Analysis
The Panel’s finding that Mr. Brown was ineligible for the Contract assignment
because he had a tax delinquency during the relevant time period was neither
unsupported by substantial evidence, nor arbitrary or capricious.7 Because this finding
alone supports the Panel’s conclusion that ODRS violated the RSA in selecting Mr.
Brown, we need not address ODRS’s challenges to the Panel’s other bases for it
conclusion.8
7
We address both ODRS’s substantial evidence and arbitrary or capricious
challenges together because “[t]he arbitrary and capricious standard of review has been
equated to the substantial evidence test.” AllCare Home Health, Inc. v. Shalala, 278 F.3d
1087, 1089 (10th Cir. 2001). Our review under both standards is “narrow and highly
deferential to the agency.” Jake’s Fireworks Inc. v. Acosta,
893 F.3d 1248, 1257 (10th
Cir. 2018). Under these standards, we do not overturn an agency’s factual findings if “a
reasonable mind would consider the evidence adequate to support the conclusion
reached.”
Id. (quotations omitted).
8
Under the RSA, participating SLAs must “[t]ake effective action . . . to carry out
full responsibility for the supervision and management of each vending facility in its
program in accordance with its established rules and regulations, [DOE regulations], and
the terms and conditions governing the permit [for each vending facility].” 34 C.F.R.
18
The administrative record adequately supports the Panel’s finding that Mr. Brown
had tax delinquencies in the three-year period before the Announcement’s publication in
December 2012 and was therefore ineligible for the Contract assignment. ODRS’s
Announcement expressly “deemed as [an] eligibility criteri[on]” an applicant’s not
having “had any delinquency on taxes for the past 3 years.” App., Vol. 7 at 1139
(emphasis added). ODRS contends that the term “delinquency” as used in the
Announcement should be given the same meaning it has under FARS debarment rules.
But even accepting the FARS definition, the Panel did not err in concluding that Mr.
Brown had a delinquency sometime in the three years before December 2012. In Mr.
Brown’s notices of federal tax lien, the IRS stated that it had “assessed” tax liabilities
against Mr. Brown in tax years 2008, 2009, and 2010 and that Mr. Brown failed to
comply when the IRS had previously “made a demand for payment.” Id. at 1141, 1142.9
§ 395.3(a)(11)(ii). Accordingly, whether the tax eligibility requirement published in the
Announcement was ODRS’s rule or, as ODRS maintains, the Army’s rule, ODRS’s
failure to enforce the requirement violated the RSA Program’s terms.
9
Under FARS, a tax liability is not a delinquency “if there is a pending
administrative or judicial challenge.” 48 C.F.R § 9.406-2(b)(1)(v)(A)(1). Accordingly,
when the IRS files a federal tax lien and the taxpayer requests a hearing to “contest the
underlying tax liability,” the liability is not a delinquency. Id. § 9.406-2(b)(1)(v)(B)(2).
And “[s]hould the taxpayer seek tax court review, this will not be a final tax liability until
the taxpayer has exercised all judicial appeal rights.”
Id. ODRS relies on § 9.406-
2(b)(1)(v)(B)(2) for the proposition that “the mere existence of a Notice of Federal Tax
Lien is not evidence of a tax delinquency.” Aplt. Br. at 40. And it contends that “[s]ince
the burden of proof was on Altstatt and his only evidence on Brown’s tax delinquency
was the Notice of Federal Tax Liens, the Panel’s conclusion that Brown was delinquent is
not supported by substantial evidence and is arbitrary.”
Id. We disagree.
Taken together, §§ 9.406-2(b)(1)(v)(A)(1) and 9.406-2(b)(1)(v)(B)(2) mean that
an assessed tax liability is not a delinquency only to the extent the taxpayer pursues an
administrative or judicial challenge. Here, the administrative record does not show that
19
Mr. Brown’s installment plan to repay his taxes does not compel a contrary
conclusion. Under FARS, a taxpayer who “has entered into an installment agreement”
and “is making timely payments and is in full compliance with the agreement terms” is
not delinquent. 48 C.F.R § 9.406-2(b)(1)(v)(B)(3). According to his affidavit and
testimony, Mr. Brown learned of his unpaid taxes sometime in 2012 and entered into an
installment agreement with the IRS after ODRS published the Announcement in
December 2012. See App., Vol. 6 at 1028, 1030-31; App., Vol. 7 at 1126. But he had a
tax delinquency as early as February 18, 2011, when the IRS prepared the first notice of
federal tax lien. App., Vol. 7 at 1141. His later installment plan cannot erase the fact that
he had a tax delinquency during the three-year period preceding the Announcement’s
publication, contrary to its stated eligibility requirements. See App., Vol. 7 at 1139
(requiring applicants “[n]ot to have had any delinquency on taxes for the past 3 years”
(emphasis added)). The record therefore contains substantial evidence that Mr. Brown
was ineligible for the Contract assignment.
The Relief Granted to Mr. Altstatt by the Panel
Having rejected ODRS’s challenges to the Panel’s conclusion that Mr. Brown’s
selection violated the RSA, we now turn to ODRS’s challenges to the types of relief the
Mr. Brown pursued such a challenge. Despite Mr. Brown’s participation in the
arbitration hearing as a witness, he never mentioned such a challenge. Instead, he
testified that he did not learn of his tax liabilities until “the 2012 time frame,” App.,
Vol. 6 at 1028, despite the IRS’s filing notice of tax lien in February 2011 based on
unpaid taxes from 2008 and 2009, App., Vol. 7 at 1141. He further testified that after he
learned of the liabilities, rather than pursue a challenge, he began negotiating an
installment plan with the IRS. App., Vol. 6 at 1030-31. In light of this record, we
conclude that “a reasonable mind would consider the evidence adequate to support the
[Panel’s] conclusion.” Jake’s Fireworks Inc., 893 F.3d at 1257 (quotations omitted).
20
Panel granted to Mr. Altstatt, whom the Panel determined should have received the
Contract assignment instead. Providing additional legal background as needed, we
address (a) the Panel’s order to appoint Mr. Altstatt to the Contract, (b) the Panel’s award
of damages to Mr. Altstatt, and (c) the Panel’s award of attorney fees to Mr. Altstatt.
a. Order to appoint Mr. Alstatt to the Contract
Under the APA, the reviewing court must “hold unlawful and set aside agency
action,” 5 U.S.C. § 706(2), that is “in excess of statutory jurisdiction, authority, or
limitations,” id. § 706(2)(C). ODRS contends the Panel exceeded its remedial authority
under the RSA in ordering Mr. Altstatt’s appointment to the Contract assignment. We
disagree.
We begin with legal background on arbitration panels’ power to grant prospective,
or injunctive, relief to aggrieved blind vendors under the RSA. We then analyze whether
the Panel’s order to appoint Mr. Altstatt to the Contract assignment exceeded the scope of
the Panel’s authority and conclude that it did not.
i. Legal background
This court has not previously considered what forms of relief arbitration panels
may grant aggrieved blind vendors under the RSA. Although this question has received
limited judicial attention, the approaches to prospective relief in three out-of-circuit cases
help inform our analysis: (1) Delaware Department of Health & Social Services v.
United States Department of Education, 772 F.2d 1123 (3d Cir. 1985); (2) Georgia
Department of Human Resources v. Nash,
915 F.2d 1482 (11th Cir. 1990); and (3)
Wisconsin Department of Workforce Development v. United States Department of
21
Education, 667 F. Supp. 2d 1007 (W.D. Wis. 2009). We summarize the relevant
discussion from each case.10
1) Delaware Department of Health and Social Services—
interpreting the RSA in light of established arbitration principles
In Delaware Department of Health and Social Services, the Third Circuit
considered whether the RSA authorizes arbitration panels to grant retrospective relief to
aggrieved blind vendors. The district court had vacated an arbitration award of
retrospective damages based on its “conclu[sion] that prospective arbitral relief against
Delaware was clearly within the authority of the arbitrators . . . , but that . . . Congress
could not have intended that the arbitrators have the authority to award retrospective
relief.” 772 F.2d at 1136.
The Third Circuit reversed, holding that “the district court erred in concluding that
the arbitrators in a Randolph-Sheppard arbitration were not authorized to award
compensatory damages.” Id. at 1137. In reaching this outcome, and as relevant to our
concern about prospective relief, the court considered the legal backdrop against which
Congress had provided for arbitration of blind vendors’ grievances under the RSA. The
court considered that, “[w]hen Congress [amended the RSA] in 1974 [to] provide[] that
states desiring to gain access to blind vendor locations in federal facilities must agree to
submit to arbitration their disputes with blind vendors, the term arbitration had a well-
recognized meaning.”
Id. at 1136.
10
We describe these decisions, not to opine on their holdings or results, but to detect
approaches to remedial authority that may help us in deciding whether the injunctive
relief awarded in this case was proper.
22
The court further considered that, in enacting the 1974 amendments, “Congress
was surely aware that arbitrators proceeding under the authority of the Federal
Arbitration Act or under the authority of the Uniform Arbitration Act, as a matter of
course awarded retrospective compensatory relief in appropriate cases.” Id. It also
reviewed the legislative history materials and found “no . . . support[] [for] any reading of
the term arbitration other than the conventional one.”
Id. at 1137.
Although Delaware also “contend[ed] that even prospective relief was improper,”
the Third Circuit did not address that question because the arbitration was limited to the
claims of the blind vendor, who did not seek prospective relief. Id. at 1137 n.9; see
id.
at 1132. The court did not speak directly to whether an RSA arbitration panel may grant
prospective relief, but it noted that the RSA “lends no support for the distinction drawn
by the district court between prospective and compensatory relief.”
Id. at 1136-37.
2) Georgia Department of Human Resources—interpreting the RSA
in view of the differences between §§ 107d-2(b)(1) and 107d-
2(b)(2)
In Georgia Department of Human Resources, the Eleventh Circuit considered
whether the RSA authorizes arbitration panels to award damages to a blind vendor “based
on [the SLA’s] failure to complain when a federal entity closed a vending stand located
on property under its control.” 915 F.2d at 1483. The district court had “upheld an
award of compensatory damages to the blind vendor made by an arbitration panel
convened under the Act” based on its “interpret[ation] [of] the statute to provide a blind
vendor with [such] an action.”
Id.
23
The Eleventh Circuit reversed, holding that “the district court ha[d] misinterpreted
the statute” and that such a “cause of action is inconsistent both with the Act’s express
language and its remedial structure.”
Id. at 1483, 1484-85. Again, as relevant to our
concern, the court observed that the RSA provides separately for the arbitration of blind
vendors’ grievances against SLAs under § 107d-1(a) and for the arbitration of SLAs’
grievances against federal entities under § 107d-1(b).
Id. at 1487. It determined that the
procedures for the two types of arbitration “are similar, but different, and these
differences undermine the cause of action at issue.”
Id. at 1490.
Sections 107d-2(b)(1) and 107d-2(b)(2) of the RSA, which respectively establish
procedures for vendor-versus-SLA and SLA-versus-federal entity arbitrations, mirror
each other in structure—with one notable exception. The last sentence in § 107d-2(b)(2),
which lacks a counterpart in § 107d-2(b)(1), provides:
If the [arbitration panel appointed to hear an SLA’s
complaint] finds that the acts or practices of [the federal
entity] are in violation of [the RSA or any implementing
regulation], the head of any such [entity] 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.
20 U.S.C. § 107d-2(b)(2).
Relying on the inclusion of this sentence in § 107d-2(b)(2) and not in § 107d-
2(b)(1), the Eleventh Circuit determined that “the [arbitration] panel’s remedial powers
vary under the two [types of arbitration].” Ga. Dep’t of Human Res., 915 F.2d at 1491
(emphasis added). It said that “[s]ection 107d–2 provides specific direction to the
arbitration panel regarding remedies in [SLA-versus-federal entity] cases but provides no
24
instruction at all regarding remedies in [vendor-versus-SLA] cases.” Id. The court
interpreted the sentence’s inclusion in § 107d-2(b)(2) as “limit[ing] the panel’s authority
to . . . determine that a violation is occurring and . . . identify[ing] the discrete acts that
are in violation.”
Id. at 1492. It thus determined that the RSA “does not authorize the
arbitration panel [hearing an SLA’s complaint against a federal entity] to order the
federal entity to take any remedial action” and instead “expressly places the obligation of
ending the violation on the federal entity itself.”
Id. And the court interpreted the
sentence’s exclusion in § 107d-2(b)(1) as imposing, “[i]n contrast to the[] express limits
on the arbitration panel’s power in [SLA-versus-federal entity] cases, . . . no such limits
on the panel in [vendor-versus-SLA] cases.”
Id.
The court summarized the differences in the panel’s remedial powers in the two
types of arbitrations:
Whatever the exact limits of a [vendor-versus-SLA] panel’s
remedial powers, its powers are qualitatively different from
those of a [SLA-versus-federal entity] panel. The Act gives
[vendor-versus-SLA] panels authority to impose remedies
directly on the state licensing agency. The [SLA-versus-
federal entity] panel, however, under the Act’s express terms,
has no remedial powers whatsoever. It may determine that
certain of the federal entity’s acts violate the Act, but the Act
leaves responsibility for remedying the violation to the
federal entity itself.
Id. “Although [the court did not need to] decide the scope of an arbitration panel’s
remedial powers [in a vendor-versus-SLC arbitration]” to resolve the case before it, it
“note[d] in passing that the Third Circuit has held that those panels’ remedial powers are
equivalent to the powers of an arbitration panel under the Federal Arbitration Act or the
25
Uniform Arbitration Act.” Id. (discussing Del. Dep’t of Health & Social
Servs., 772 F.2d
at 1136).
3) Wisconsin Department of Workforce Development—interpreting
the RSA’s arbitration provisions to effectuate congressional
intent
In Wisconsin Department of Workforce Development, the federal district court
reviewed an RSA arbitration decision granting an aggrieved blind vendor both retroactive
money damages and prospective relief. The court vacated the damages award on the
basis of sovereign immunity but upheld the injunctive relief. In doing so, it reasoned that
“the arbitration panel must have the authority to grant some relief to blind licensees in
order to give meaning to the arbitration provisions.” 667 F. Supp. 2d at 1015; see also
New Hampshire v. Ramsey,
366 F.3d 1, 18 (1st Cir. 2004) (“The effect of [an] argument
[that neither retrospective damages nor prospective equitable relief is available to blind
vendors] would be to render [the RSA’s grievance] procedures meaningless.”).
ii. Analysis
The Panel acted within its remedial power under the RSA in ordering ODRS to
appoint Mr. Altstatt as the Contract manager.11 Confronted with silence as to the
remedies available to aggrieved blind vendors in the RSA’s text, and implementing
11
In its supplemental brief, DOE said “the RSA authorizes arbitration panels to
issue all forms of prospective equitable relief.” Aplee. DOE Suppl. Br. at 6. We need
not decide whether DOE’s interpretation of the statute is entitled to deference because, as
we explain below, we agree with DOE even under de novo review. In any event, DOE
has not claimed any entitlement to deference. See Hydro Res., Inc. v. U.S. EPA, 608 F.3d
1131, 1146 (10th Cir. 2010) (en banc) (“[W]hen the agency doesn’t ask for deference to
its statutory interpretation, we need not resolve the issues regarding deference which
would be lurking in other circumstances.” (alterations and quotations omitted)).
26
regulations, we find instructive the interpretive approaches other courts have applied to
the statute.12 And ODRS has not offered—nor have we identified—a competing
approach to interpreting the RSA’s remedial provisions.
Each of the three approaches to interpreting the RSA in the cases discussed above
lends support to the conclusion that the RSA broadly authorizes arbitration panels to
fashion prospective remedies for aggrieved blind vendors.13 The first approach—
interpreting the RSA in light of established commercial arbitration principles at the time
Congress enacted the arbitration scheme in 1974—provides support because, under the
American Arbitration Association rules, an arbitrator could “grant any remedy or relief
which he deems just and equitable.” Martin Domke, The Law and Practice of
12
The sparse legislative history on this issue points to the result reached here. The
purpose of the RSA’s vendor-versus-SLA arbitration procedures is to provide aggrieved
vendors with an effective means to resolve their grievances against SLAs. See, e.g.,
S. Rep. No. 98-937, at 20 (1974) (“It is the expectation of the Committee [on Labor and
Public Welfare] that the arbitration and review procedures . . . will provide the means by
which aggrieved vendors . . . may obtain a final and satisfactory resolution of disputes.”
(emphasis added)). One of the “conditions [that] prompted the inclusion of these
[arbitration procedures] . . . [was that] blind vendors ha[d] considered previously
available legal procedures to be inadequate.” 121 Cong. Rec. 16,227 (1975) (speech on
RSA Amendments of 1974 inserted into the record by Rep. John Brademas).
13
We see no reason why such authority should not extend to the specific form of
relief at issue here—the order to appoint Mr. Altstatt to the Contract assignment. ODRS
contends that, under the RSA, “the Arbitration Panel had no authority to preempt [its]
rules concerning how to select managers for a particular facility” and that “[i]ts only
authority was to review and judge the selection process that had been conducted.” Aplt.
Br. at 34. We agree that the RSA delegates authority to SLAs to promulgate rules
governing their operation of the RSA Program, see 20 U.S.C. § 107b(5), including the
selection of blind vendors for particular vending assignments. But the RSA nowhere
prohibits an arbitration panel from remedying violations of such rules by ordering the
offending SLA to appoint the aggrieved blind vendor to the disputed assignment should it
find that, but for the violation, the vendor would have received the assignment.
27
Commercial Arbitration, § 30:01 (1968) (quotations omitted). The second approach—
interpreting the RSA by comparing its provisions pertaining to the two types of
arbitration proceedings—offers support because, although Congress included language
limiting the arbitration panel’s remedial power in SLA-versus-federal entity arbitrations,
20 U.S.C. § 107d-2(b)(2), no such language appears for vendor-versus-SLA arbitrations,
see id. § 107d-2(a). The third approach—interpreting the RSA to effectuate its
arbitration scheme—supplies support because, if arbitration panels lacked authority to
fashion injunctive relief, blind vendors would lack a complete remedy for their
grievances arising from SLAs’ operation of the RSA Program.14
Drawing on these various approaches to interpreting the RSA’s remedial
provisions, we conclude that the Panel acted within its remedial power in ordering ODRS
to appoint Mr. Altstatt as the Contract manager.15
14
Blind vendors ordinarily may not obtain compensatory relief for their grievances
because, as we explain below, SLAs enjoy sovereign immunity from damages awarded to
a blind vendor by an RSA arbitration panel.
15
ODRS primarily challenges the order to appoint Mr. Altstatt as exceeding the
scope of the Panel’s statutory authority. But ODRS also appears to bring a separate,
albeit cursory, challenge to the order as arbitrary and capricious.
As discussed above, the Panel properly found that Mr. Brown was ineligible for
the Contract assignment because of his tax delinquency. Mr. Altstatt received the next
highest total score of all the candidates and thus presumably should have received the
Contract assignment. App., Vol. 7 at 1231 (Mr. Altstatt received a total score of 300.75,
whereas the remaining two candidates received 239.25 and 266.75). ODRS appears to
contend, however, that the Panel’s consideration of the candidates’ total scores—
comprised of the scores from the original selection process supplemented with the scores
for the previously omitted factor, as later calculated by ODRS during the re-selection
process—was arbitrary and capricious given the Panel’s determination that the original
selection process was flawed. Aplt. Br. at 33. We disagree.
28
b. Award of damages to Mr. Altstatt
Under the APA, the reviewing court must “hold unlawful and set aside agency
action,” 5 U.S.C. § 706(2), that is “contrary to constitutional right, power, privilege, or
immunity,” id. § 706(2)(B). ODRS contends the Panel’s damages award violates its
sovereign immunity. We agree and hold the award should be vacated.
We begin with legal background on sovereign immunity’s application to agency
adjudications and standards governing waiver of sovereign immunity as to money
damages. We then proceed to analyze whether sovereign immunity bars the Panel’s
damages award. Guided by the Supreme Court’s decisions in Federal Maritime
Commission v. South Carolina State Ports Authority, 535 U.S. 743 (2002), and Sossamon
v. Texas,
563 U.S. 277 (2011), we conclude that it does.
i. Legal background
“Sovereign immunity is the privilege of the sovereign not to be sued without its
consent.” Va. Office for Prot. & Advocacy v. Stewart, 563 U.S. 247, 253 (2011). A
state’s sovereign immunity extends to its agencies and departments. Pennhurst State Sch.
& Hosp. v. Halderman,
465 U.S. 89, 100 (1984) (“It is clear, of course, that in the
Apart from Mr. Brown’s ineligibility, the Panel identified two other flaws in the
original selection process: (1) the omission of a required scoring factor, and (2) Mr.
Pride’s friendship with Mr. Brown. But neither flaw rendered the Panel’s consideration
of the original scores arbitrary or capricious because Mr. Altstatt had the next highest
score with or without the scores for the previously omitted factor and with or without the
scores given by Mr. Pride. See App., Vol. 7 at 1231 (subtracting the previously omitted
“Annual Evaluation Score[s]” from the total scores, Mr. Altstatt received 290.75,
whereas the remaining two candidates received 226.25 and 251.75; subtracting Mr.
Pride’s scores from the total scores, Mr. Altstatt received 246.75, whereas the remaining
two candidates received 183.25 and 206.75).
29
absence of consent a suit in which the State or one of its agencies or departments is
named as the defendant is proscribed by the Eleventh Amendment.” (emphasis added)).
The Eleventh Amendment, which constitutionalizes the doctrine of sovereign
immunity, 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 State.” U.S.
Const. amend. XI. The Supreme Court “has repeatedly held that the sovereign immunity
enjoyed by the States extends beyond the literal text of the Eleventh Amendment.” Fed.
Mar. Comm’n, 535 U.S. at 754.
We discuss (1) sovereign immunity’s application to agency adjudications and
(2) the standards governing waiver of sovereign immunity as to money damages.
1) Sovereign immunity’s application to agency adjudications:
Federal Maritime Commission
In Federal Maritime Commission, the Supreme Court addressed for the first time
whether a state’s sovereign immunity extends to federal agency adjudications of private
complaints against state agencies. In this instance, the Federal Maritime Commission
(the “FMC”) adjudicated a complaint filed by a private company against the South
Carolina State Ports Authority, which had denied the company permission to berth a
cruise ship at the state’s port facilities. Id. at 747. The Court “h[eld] that state sovereign
30
immunity bars the FMC from adjudicating complaints filed by a private party against a
nonconsenting State.” Id. at 760.16
In its analysis, the Court examined “whether [FMC adjudications] are the type of
proceedings from which the Framers would have thought the States possessed immunity
when they agreed to enter the Union.” Id. at 756. To answer this question, the Court first
considered general similarities between an agency adjudication before an Administrative
Law Judge (“ALJ”) and civil litigation before an Article III judge. It noted the
“similarities between the role of an ALJ and that of a trial judge”17 and “the numerous
16
The Court clarified that “[s]overeign immunity does not merely constitute a
defense to monetary liability or even to all types of liability” but rather “provides an
immunity from suit.” Fed. Mar. Comm’n, 535 U.S. at 766. It thus suggested that
sovereign immunity bars the FMC from adjudicating private complaints against state
entities “regardless of whether [the adjudication] is for monetary damages or some other
type of relief” and, indeed, even “if Congress had . . . precluded [the FMC] from
awarding [private parties] any relief.”
Id. at 765, 766.
17
The Court said:
“There can be little doubt that the role of the modern federal
hearing examiner or administrative law judge . . . is
‘functionally comparable’ to that of a judge. His powers are
often, if not generally, comparable to those of a trial judge:
He may issue subpoenas, rule on proffers of evidence,
regulate the course of the hearing, and make or recommend
decisions. More importantly, the process of agency
adjudication is currently structured so as to assure that the
hearing examiner exercises his independent judgment on the
evidence before him, free from pressures by the parties or
other officials within the agency.”
Fed. Mar. Comm’n, 535 U.S. at 756 (quoting Butz v. Economou,
438 U.S. 478, 513
(1978)).
31
common features shared by administrative adjudications and judicial proceedings.”18 Id.
at 756-57. The Court then considered specific similarities between FMC and Article III
proceedings, including: (1) “the FMC’s Rules governing pleadings are quite similar to
those found in the Federal Rules of Civil Procedure,”
id. at 757; (2) “discovery in FMC
adjudications largely mirrors discovery in federal civil litigation,”
id. at 758-59;
(3) “similar to that of an Article III judge,” the ALJ’s role in an FMC adjudication
includes arranging, giving notice, and managing the conduct of a hearing, granting
appropriate relief, and issuing a ruling that ordinarily becomes the agency’s final
decision,
id. at 759; and (4) the FMC’s own rules provide for application of the Federal
Rules of Civil Procedure and the Federal Rules of Evidence in many situations,
id. at 759
& n.10.
In light of the foregoing, the Court concluded that “the similarities between FMC
proceedings and civil litigation are overwhelming.” Id. at 759. It also clarified that
18
The Court said:
“[F]ederal administrative law requires that agency
adjudication contain many of the same safeguards as are
available in the judicial process. The proceedings are
adversary in nature. They are conducted before a trier of fact
insulated from political influence. A party is entitled to
present his case by oral or documentary evidence, and the
transcript of testimony and exhibits together with the
pleadings constitute the exclusive record for decision. The
parties are entitled to know the findings and conclusions on
all of the issues of fact, law, or discretion presented on the
record.”
Fed. Mar. Comm’n, 535 U.S. at 756-57 (quoting
Butz, 438 U.S. at 513 (alteration in Fed.
Mar. Comm’n)).
32
“[t]he preeminent purpose of state sovereign immunity is to accord States the dignity that
is consistent with their status as sovereign entities.” Id. at 760. “Given both this interest
in protecting States’ dignity and the strong similarities between FMC proceedings and
civil litigation,” the Court held that state sovereign immunity extends to formal FMC
adjudications before an ALJ.
Id. It said that “[t]he affront to a State’s dignity does not
lessen when an adjudication takes place in an administrative tribunal as opposed to an
Article III court.”
Id. It further suggested that “allowing a private party to haul a State in
front of such an administrative tribunal constitutes a greater insult . . . than requiring a
State to appear in an Article III court presided over by a judge with life tenure nominated
by the President . . . and confirmed by the . . . Senate.”
Id. at 760 n.11.
2) Waiver of sovereign immunity as to money damages: Sossamon
“A State . . . may choose to waive its [sovereign] immunity . . . at its pleasure.”
Sossamon, 563 U.S. at 284. The “test for determining whether a State has waived its
immunity . . . is a stringent one.”
Id. (quotations omitted). “A State’s consent to suit
must be unequivocally expressed.”
Id. (quotations omitted). “A state can express such
unequivocal intent by statute, constitutional provision, or through its actions, specifically,
its participation in a particular federal program.” Arbogast v. Kan. Dep’t of Labor,
789
F.3d 1174, 1182 (10th Cir. 2015) (emphasis added) (quotations omitted). When the
statute enacting a federal program unequivocally expresses Congress’s intent to condition
states’ participation on their consenting to suit, their participation then results in a waiver
of sovereign immunity. See
id. at 1182-83.
33
In Sossamon, the Supreme Court addressed the standards governing states’ waiver
of sovereign immunity as to money damages. Sossamon presented the question of
“whether the States, by accepting federal funds, consent to waive their sovereign
immunity to suits for money damages under the Religious Land Use and Institutionalized
Persons Act of 2000 (RLUIPA).” Id. at 280. To answer this question, the Court
examined RLUIPA, which “includes an express private cause of action . . . : ‘A person
may assert a violation . . . in a judicial proceeding and obtain appropriate relief against a
government.’”
Id. at 282 (emphasis added) (quoting 42 U.S.C. § 2000cc-2(a)).
Based on this language, the Court held that states do not waive sovereign
immunity by accepting federal funds under RLUIPA. Id. at 280, 285-88. It clarified that
the “waiver of sovereign immunity to other types of relief does not waive immunity to
damages.”
Id. at 285. With this principle in mind, it concluded that “RLUIPA’s
authorization of ‘appropriate relief against a government,’ § 2000cc–2(a), is not the
unequivocal expression of state consent that our precedents require [to effectuate a
waiver of sovereign immunity].”
Id. It reasoned that the term “‘[a]ppropriate relief’ is
open-ended and ambiguous about what types of relief it includes” and that “the word
‘appropriate’ is inherently context-dependent.”
Id. at 286. The Court said that “[t]he
context here—where the defendant is a sovereign—suggests, if anything, that monetary
damages are not suitable or proper.”
Id. (quotations omitted). And it further clarified
that, “where a statute is susceptible of multiple plausible interpretations, including one
preserving immunity, we will not consider a State to have waived its sovereign
immunity.”
Id. at 287.
34
ii. Analysis
ODRS’s assertion of sovereign immunity as to the Panel’s damages award
presents two questions of first impression before this court: (i) whether sovereign
immunity extends to RSA arbitrations of vendor complaints, and, if so, (ii) whether
ODRS’s participation in the RSA Program effectuates a waiver of sovereign immunity as
to damages. Guided by Federal Maritime Commission and Sossamon, we conclude that
sovereign immunity bars the Panel’s damages award because (i) sovereign immunity
extends to RSA arbitration proceedings, and (ii) ODRS’s participation in the RSA
Program does waive not its sovereign immunity from damages awards.19
1) Sovereign immunity extends to RSA arbitration proceedings
We first address whether sovereign immunity extends to arbitrations of vendor
complaints against SLAs under the RSA. Our analysis proceeds in two parts. First, we
examine the Supreme Court’s rationale for extending sovereign immunity to FMC
adjudications and conclude that it supports doing so in the RSA context as well. Second,
we discuss some notable differences between RSA arbitrations and FMC adjudications
and conclude that they do not materially distinguish the two types of proceedings for
purposes of state sovereign immunity.
19
ODRS has not asserted sovereign immunity from RSA arbitration proceedings
generally or from any other type of relief, apart from money damages and attorney fees.
As we explain below, the RSA does not authorize attorney fees in any event. We
therefore do not decide whether ODRS’s participation in the RSA Program, although not
a waiver of sovereign immunity as to damages, nevertheless waives sovereign immunity
from RSA arbitration proceedings generally or from other forms of relief.
35
a) Federal Maritime Commission’s rationale extends to the
RSA context
The Supreme Court based its holding in Federal Maritime Commission—that
sovereign immunity applies in the context of FMC adjudications—on the need “to accord
States the dignity that is consistent with their status as sovereign entities” and on “the
strong similarities between FMC proceedings and civil litigation.” 535 U.S. at 760. Both
bases support extending Federal Maritime Commission’s holding to the RSA context.
i) Need to accord dignity
As with FMC adjudications, RSA arbitrations of private complaints affront the
states’ dignity as sovereign entities. In Federal Maritime Commission, the Supreme
Court explained: “[I]f the Framers thought it an impermissible affront to a State’s dignity
to be required to answer the complaints of private parties in federal courts, we cannot
imagine that they would have found it acceptable to compel a State to do exactly the
same thing before the administrative tribunal of an agency, such as the FMC.” Id. The
RSA’s mandatory arbitration scheme likewise affronts states’ dignity because it
effectively “compel[s] a State to [answer private complaints] before the administrative
tribunal of an agency.”
Id. Under the RSA, SLAs such as ODRS must submit to final
and binding arbitration of blind vendors’ grievances against them by panels convened by
DOE. See 20 U.S.C. § 107d-1(a).
Furthermore, the Supreme Court suggested in Federal Maritime Commission that
“[o]ne, in fact, could argue that allowing a private party to haul a State in front of . . . an
administrative tribunal constitutes a greater insult to a State’s dignity than requiring a
State to appear in an Article III court presided over by a judge with life tenure nominated
36
by the President . . . and confirmed by the . . . Senate.” 535 U.S. at 760 n.11. Such an
argument appears to have equal, if not greater, force in an RSA arbitration before an
ad hoc panel.20
ii) Similarities to Article III proceedings
As with FMC adjudications, RSA arbitrations share in common with Article III
judicial proceedings many of the features noted by the Supreme Court as supporting the
20
Four justices and several commentators have criticized the Court’s dignity
rationale in Federal Maritime Commission as confusing or unworkable in application.
See Fed. Mar. Comm’n, 535 U.S. at 772 (Stevens, J., dissenting) (“The reasons why the
majority in [Chisholm v. Georgia, 2 U.S. (2 Dall.) 419 (1793)] concluded that the
‘dignity’ interests underlying the sovereign immunity of English Monarchs had not been
inherited by the original 13 States remain valid today. By extending the untethered
‘dignity’ rationale to the context of routine federal administrative proceedings, today’s
decision is . . . anachronistic.” (citation omitted));
id. at 786 (Breyer, J., dissenting) (“The
Court’s decision threatens to deny the Executive and Legislative Branches of
Government the structural flexibility that the Constitution permits and which modern
government demands. The Court derives from the abstract notion of state ‘dignity’ a
structural principle that limits the powers of both Congress and the President.”); see also,
e.g., Scott Dodson, Dignity: The New Frontier of State Sovereignty,
56 Okla. L. Rev.
777, 778 (2003) (“[T]he dignity rationale itself lacks substantial justification and is
untethered to any limiting principles save those locked inside the minds of five
Justices.”); Scott Fruehwald, The Supreme Court’s Confusing State Sovereign Immunity
Jurisprudence, 56 Drake L. Rev. 253, 301 (2008) (“How can the Court assert that a
state’s dignity is impacted by having to appear at an administrative hearing, as was true in
Federal Maritime Commission, but not in front of a federal bankruptcy court? This
inconsistency suggests that . . . dignity is not a proper consideration when evaluating
sovereignty.”); Gordon G. Young, Federal Maritime Commission v. South Carolina State
Ports Authority: Small Iceberg or Just the Tip?, 47 St. Louis U. L.J. 971, 997 (2003)
(“The Maritime majority opinion, perhaps more than any other in the immunity series,
unashamedly identified the difficult to quantify notion of state ‘dignity’ as the principal
value [of sovereign immunity].”).
Notwithstanding such criticisms, we are bound to apply Supreme Court precedent.
Because we discern no reason why RSA arbitrations would pose a lesser affront to a
state’s dignity than FMC adjudications, we conclude that the dignity rationale favors
extending sovereign immunity to the former.
37
application of sovereign immunity. For example, RSA arbitrations are “adversary in
nature.” Fed. Mar. Comm’n, 535 U.S. at 757 (quoting Butz v.
Economou, 438 U.S. at
514).21 Likewise, parties to RSA arbitrations are “entitled to present [their] case[s] by
oral or documentary evidence, and the transcript of testimony and exhibits together with
the pleadings constitute the exclusive record for decision.” Fed. Mar.
Comm’n, 535 U.S.
at 757 (quoting
Butz, 438 U.S. at 513); see RSA Arbitration Policies at 4-5 (“The parties
may . . . [p]resent relevant and material evidence on the issues in the arbitration.”);
id.
at 6 (“The transcripts of testimony, including transcripts of depositions introduced as
evidence, and any pleadings, motions, stipulations, exhibits, briefs, and rulings by the
panel . . . shall constitute the exclusive record for decision.”). And parties are “entitled to
know the findings and conclusions on all of the issues of fact, law, or discretion presented
on the record.” Fed. Mar.
Comm’n, 535 U.S. at 757 (quoting
Butz, 438 U.S. at 513); see
RSA Arbitration Policies at 6 (“The decision of the arbitration panel shall be in writing
and contain a statement of the rationale, including findings of fact and conclusions of
law, upon which it is based.”).
b) Differences do not materially distinguish RSA and FMC
proceedings for purposes of sovereign immunity
Our analysis thus far points to the extension of Federal Maritime Commission’s
holding to the RSA context. On the other hand, four notable characteristics distinguish
21
The parties to an arbitration of a blind vendors’ complaint are “the complainant
blind licensee and the State licensing agency.” RSA Arbitration Policies at 1. The
arbitration is party-driven, with the parties presenting evidence and making arguments in
support of their respective positions. See id. at 4-5.
38
RSA arbitrations from the FMC adjudications at issue in Federal Maritime Commission.
We first identify these differences and then explain why they do not compel us to reject
sovereign immunity in the RSA context.
i) Differences between RSA and FMC proceedings
(1) Decisionmaker—In contrast to FMC proceedings before ALJs, RSA
proceedings are not necessarily decided by a “federal officer,” Fed. Mar. Comm’n, 535
U.S. at 761. Under the RSA, DOE convenes ad hoc arbitration panels to hear and render
decision on vendor grievances against SLAs. 20 U.S.C. §§ 107d-1, 107d-2(a). These
panels are composed of three members:
(A) one individual designated by the State licensing
agency;
(B) one individual designated by the blind licensee; and
(C) one individual, not employed by the State licensing
agency or, where appropriate, its parent agency, who
shall serve as chairman, jointly designated by the
members appointed under subparagraphs (A) and (B).
If any party fails to designate a member under subparagraph
(1)(A), (B), or (C), the Secretary shall designate such member
on behalf of such party.
Id. § 107d-2(b)(1).
Additionally, unlike ALJs (and also Article III judges), who “may issue
subpoenas,” Fed. Mar. Comm’n, 535 U.S. at 756 (quoting
Butz, 438 U.S. at 513), RSA
arbitration panels “do[] not have the authority to compel by subpoena the production of
witnesses, papers, or other evidence.” RSA Arbitration Policies at 4.
39
(2) Agency’s Role in Screening Complaints—Unlike the FMC, which “does not
even have the discretion to refuse to adjudicate complaints brought by private parties,”
Fed. Mar. Comm’n, 535 U.S. at 764, DOE reviews vendor complaints and, under some
circumstances, dismisses them without arbitration:
After the complaint has been docketed it will be reviewed by
[DOE’s] Division for the Blind and Visually Impaired. . . .
(a) If the complaint alleges sufficient relevant and material
facts which, if proved, would entitle the blind licensee
to any of the relief sought and if any of the relief
sought is within the authority of the arbitration panel to
grant, . . . an ad hoc arbitration panel will be convened.
(b) If the complaint fails to allege sufficient relevant and
material facts which, if proved, would entitle the
blind licensee to any of the relief sought; or, if none of
the relief sought is within the authority of the
arbitration panel to grant, the blind licensee will be
so notified . . . and given an opportunity to amend the
complaint . . . .
(d) If . . . the amended complaint fails to allege sufficient
relevant and material facts or . . . none of the relief
sought is within the power of the arbitration panel to
grant, . . . the complaint is dismissed.
(e) If the complaint does not allege facts which indicate
dissatisfaction with all or part of the decision rendered
[by the SLA] as a result of a full evidentiary hearing,
or action taken as a result of a full evidentiary hearing,
. . . the complaint is dismissed.
(f) If . . . the complaint is specious or . . . has been filed
solely for the purpose of harassment, . . . the complaint
is dismissed.
RSA Arbitration Policies at 2-3.
40
(3) Default Judgments—Whereas “default judgment may be entered on behalf
of the plaintiff” in an FMC adjudication, should the defendant fail to respond to the
complaint, Fed. Mar. Comm’n, 535 U.S. at 757, “[t]he failure to file an answer [to an
RSA vendor complaint] will not . . . result in the default of the State licensing agency.”
RSA Arbitration Policies at 3. The applicable policies and procedures instead appear to
contemplate that the arbitration would proceed even in the absence of the SLA’s answer.
See
id. (“The issues for arbitration and the positions of the parties thereon may be
identified at the pre-arbitration conference.”).
(4) Formality of Procedures and Rules—The procedures and rules governing
the conduct of RSA arbitrations are generally more informal and ad hoc than those
governing FMC adjudications. For example, whereas “discovery in FMC adjudications
largely mirrors discovery in federal civil litigation,” Fed. Mar. Comm’n, 535 U.S. at 758,
discovery in RSA arbitrations proceeds only to the extent that, “[i]f the panel chairperson
determines that the interest of justice would be served, he may authorize the taking of
depositions,” RSA Arbitration Policies at 5. And whereas the Federal Rules of Evidence
generally apply in FMC adjudications, Fed. Mar.
Comm’n, 535 U.S. at 759 n.10,
“[t]echnical rules of evidence shall not apply to [RSA] arbitration[s], but rules or
principles designed to assure production of the most credible evidence available and to
subject testimony to test by cross-examination shall be applied by the panel chairperson,”
RSA Arbitration Policies at 5.
ii) Why differences do not compel rejection of
sovereign immunity in the RSA context
41
Despite the foregoing differences, and guided by Federal Maritime Commission,
we nevertheless conclude that RSA arbitrations are materially indistinguishable from
FMC adjudications for purposes of state sovereign immunity. We address each in turn:
(1) Decisionmaker—The differences between RSA arbitration panels and FMC
ALJs do not compel the conclusion that sovereign immunity extends only to the latter.
Although ad hoc panels—rather than ALJs—arbitrate vendor complaints under the
RSA, the role of the RSA panel—like that of the ALJ—is “‘functionally comparable’ to
that of a judge.” Fed. Mar. Comm’n, 535 U.S. at 756 (quoting
Butz, 438 U.S. at 513).
ALJs enjoy certain protections from political influence and thereby serve as “impartial
officer[s] designated to hear a case.”
Id. at 758 (citation omitted). RSA panels are
likewise “structured so as to assure that the[y] exercise[] [their] independent judgment on
the evidence.”
Id. at 756 (quoting
Butz, 438 U.S. at 513). Specifically, their composition
helps to assure impartiality—each party designates one panel member, and the third
member, who presides over the arbitration, is jointly selected by the two party-designated
members. See 20 U.S.C. § 107d-2(b)(1).
Additionally, RSA arbitration panels, like ALJs, have powers that “are often, if not
generally, comparable to those of a trial judge.” Fed. Mar. Comm’n, 535 U.S. at 756
(quoting
Butz, 438 U.S. at 513). For example, RSA panels “ha[ve] the authority to
arrange and give notice of hearing[s].”
Id. at 758 (quotations omitted); see RSA
Arbitration Policies at 3. They also regulate the conduct of the hearing and may
“prescribe the order in which evidence shall be presented; . . . administer oaths and
affirmations; examine witnesses; . . . rule upon offers of proof[,] . . . [and] fix[] the time
42
and manner of filing briefs.” Fed. Mar. Comm’n, 535 U.S. at 758-59 (quotations
omitted); see RSA Arbitration Policies at 4. And they “issue[] a decision that . . .
subsequently becomes the final decision of the [agency].” Fed. Mar.
Comm’n, 535 U.S.
at 759; see RSA Arbitration Policies at 4. Although RSA panels “do[] not have the
authority to compel by subpoena the production of witnesses, papers, or other evidence,”
RSA Arbitration Policies at 4, their powers on balance are “comparable to those of a trial
judge,” Fed. Mar.
Comm’n, 535 U.S. at 756 (quoting
Butz, 438 U.S. at 513).
(2) Agency’s Role in Screening Complaints—DOE’s authority to deny
arbitration under certain circumstances does not defeat Federal Maritime Commission’s
logical extension to the RSA context. DOE’s authority to dismiss complaints is limited
and does not “convert an [RSA arbitration] initiated and pursued by a private party into
one initiated by the Federal Government.” Id. at 764.22 DOE may dismiss a complaint
only upon effectively determining that it lacks any merit, see RSA Arbitration Policies
at 2-3, much as a federal district judge “may dismiss [a complaint] sua sponte when it is
patently obvious that the plaintiff could not prevail on the facts alleged, and allowing him
an opportunity to amend his complaint would be futile,” Hall v. Bellmon,
935 F.2d 1106,
1110 (10th Cir. 1991) (quotations omitted); see also Charles Alan Wright, Arthur R.
Miller et al., 5B Federal Practice & Procedure § 1357 (3d ed., April 2018 update)
22
The Supreme Court has said that, “[i]n ratifying the Constitution, the States
consented to suits brought . . . by the Federal Government. . . . Suits brought by the
United States itself require the exercise of political responsibility for each suit prosecuted
against a State, a control which is absent from a broad delegation to private persons to
sue nonconsenting States.” Alden v. Maine, 527 U.S. 706, 755-56 (1999).
43
(“[T]he district judge on his or her own initiative may note the inadequacy of the
complaint and dismiss it . . . as long as the procedure employed is fair to the parties.”).
In other words, “the only duty assumed by [DOE], and hence the United States, in
conjunction with a private complaint is to assess its merits in an impartial manner.” Fed.
Mar. Comm’n, 535 U.S. at 764. DOE lacks broad discretion to dismiss vendor
complaints based on policy or other considerations unrelated to the merits. “As a result,
the United States plainly does not exercise political responsibility for such complaints,
but instead has impermissibly effected a broad delegation to private persons to sue
nonconsenting States.”
Id. at 764 (alterations and quotations omitted).
(3) Default Judgments—DOE’s inability to enter default judgments against
SLAs is not at odds with our conclusion that sovereign immunity applies in the RSA
context. Notwithstanding this feature of RSA arbitrations, “[an SLA] seeking to contest
the merits of a complaint filed against it by a [blind vendor] must defend itself in front of
the [arbitration panel] or substantially compromise its ability to defend itself at all.” Fed.
Mar. Comm’n, 535 U.S. at 762. An SLA may decline to file an answer to a blind
vendor’s complaint without incurring a default judgment against it, and yet it would still
be hard-pressed to decline to participate in the arbitration proceeding in its entirety.23
Once an arbitration panel has rendered a decision, that decision is “final and
binding on the parties.” 20 U.S.C. § 107d-1(a). Although the SLA may seek judicial
23
As noted above, the applicable policies and procedures appear to contemplate
that an RSA arbitration of a blind vendor’s complaint would proceed whether or not the
SLA files an answer. See RSA Arbitration Policies at 3.
44
review, failure to participate in the arbitration proceeding would hamper its ability to
challenge the panel’s decision in federal court. The Supreme Court has previously
established “a general rule that courts should not topple over administrative decisions
unless the administrative body not only has erred but has erred against objection made at
the time appropriate under its practice.” United States v. L.A. Tucker Truck Lines, Inc.,
344 U.S. 33, 37 (1952). In Federal Maritime Commission, the Court, citing this general
rule, concluded that FMC adjudications are coercive in part because, “if a party fails to
appear before the FMC, it may not then argue the merits of its position in an appeal of the
[FMC’s]
determination.” 535 U.S. at 762.
To the extent the general rule against courts’ considering objections not made in
the agency proceeding also applies here, failure to appear before the RSA arbitration
panel would severely constrain an SLA’s ability to appeal the merits. And even if the
court were to consider the merits, the APA’s judicial review standards would, as a
practical matter, limit the scope of the appeal. See Council Tree Inv’rs, Inc. v. FCC,
739 F.3d 544, 555 (10th Cir. 2014) (“Although we review matters of law de novo, . . . the
standard of review is [otherwise] very deferential to the agency.[] A presumption of
validity attaches to the agency action and the burden of proof rests with the parties who
challenge such action.” (citations and quotations omitted)).24
24
One other related distinction between FMC and RSA proceedings bears noting
here. Unlike the FMC, which “may impose monetary penalties for each day of
noncompliance” with an FMC order, Fed. Mar. Comm’n, 535 U.S. at 763, the RSA does
not authorize DOE to impose sanctions on SLAs that refuse to comply with an arbitration
panel’s order. We nevertheless conclude that the RSA’s mandatory arbitration scheme as
a whole, like the FMC adjudication scheme, “makes it quite clear that, absent sovereign
45
(4) Formality of Procedures and Rules—The relative informality of RSA
arbitrations’ procedures and rules does not undermine Federal Maritime Commission’s
application to the RSA context. In that case, the Supreme Court said that its “review of
the FMC’s Rules of Practice and Procedure confirms that FMC administrative
proceedings bear a remarkably strong resemblance to civil litigation in federal courts.”
Fed. Mar. Comm’n, 535 U.S. at 757 (emphasis added). Although the rules and
procedures governing RSA arbitrations are less formal than in FMC adjudications, in
light of their general similarities and the other considerations discussed above, we
conclude that RSA and Article III proceedings are sufficiently similar to warrant
extending sovereign immunity to the former context.
****
In sum, as in Federal Maritime Commission, the “interest in protecting States’
dignity and the strong similarities between [RSA] proceedings and civil litigation”
compel us to conclude that state sovereign immunity bars RSA arbitration panels from
adjudicating complaints filed by a private party against a nonconsenting State. 535 U.S.
at 760. But see Premo v. Martin,
119 F.3d 764, 769 (9th Cir. 1997) (pre-Federal
Maritime Commission decision holding “that the Eleventh Amendment does not apply to
Randolph–Sheppard arbitration proceedings and thus does not limit the authority of
arbitration panels convened under the Act to award compensatory relief”); Tenn. Dep’t of
Human Servs. v. U.S. Dep’t of Educ.,
979 F.2d 1162 (6th Cir. 1992) (same). The
immunity, States would effectively be required to defend themselves against private
parties in front of the [arbitration panel].”
Id.
46
differences between RSA arbitrations and the FMC adjudications at issue in Federal
Maritime Commission do not persuade us to the contrary.
2) ODRS has not waived sovereign immunity as to money damages
Having determined that state sovereign immunity applies to RSA arbitrations, we
now address whether ODRS has nevertheless consented to suit for money damages by
participating in the RSA Program.
Guided by Sossamon, we conclude that the RSA is insufficiently explicit to render
state participation in the RSA Program a waiver of sovereign immunity from an RSA
arbitration panel award for damages.25 Like RLUIPA, which authorizes private parties to
sue states for “appropriate relief,” the RSA does not expressly enumerate the types of
remedies available to private parties aggrieved by a state. Compare 42 U.S.C. § 2000cc-
2(a) with 20 U.S.C. §§ 107d-1(a), 107d-2(a)-(b)(1). In Sossamon, the Supreme Court
held that states, by accepting federal funding under RLUIPA, do not waive sovereign
immunity as to damages because the term “appropriate relief” is too “open-ended and
ambiguous about what types of relief it includes.” 563 U.S. at 286. Here, the RSA does
not even use the words “appropriate relief.” It is silent as to what remedies aggrieved
vendors may obtain against SLAs and is therefore just as “open-ended and ambiguous” as
RLUIPA, if not more.
25
This case presents no opportunity to address the extent to which we may look
beyond the relevant statute to determine whether a state has waived sovereign immunity
by participating in a federal program. Here, neither the RSA’s implementing regulations
nor the RSA Arbitration Policies contain any mention of money damages, and the parties
have not provided us with any other material that sheds light on the terms of ODRS’s
participation in the RSA Program.
47
Under these circumstances, ODRS has not waived its sovereign immunity to a
damages award from an RSA arbitration panel. But see Del. Dep’t of Health & Soc.
Servs., 772 F.2d at 1138 (pre-Sossamon decision holding that a state waives sovereign
immunity when, “after full notice of the Act’s requirements, one of which [is] an
agreement to arbitration, it voluntarily ma[kes] application with [DOE] to participate in
the Randolph-Sheppard program” and that such a waiver extends to damages).
c. Award of attorney fees to Mr. Altstatt
Under the APA, the reviewing court must “hold unlawful and set aside agency
action,” 5 U.S.C. § 706(2), that is “in excess of statutory jurisdiction, authority, or
limitations,” id. § 706(2)(C). ODRS contends the Panel exceeded its remedial authority
under the RSA in awarding attorney fees to Mr. Altstatt. We agree and hold the award
should be vacated.
We begin with legal background on the “American Rule” regarding the recovery
of attorney fees in civil litigation and its application to administrative proceedings. We
then proceed to analyze whether the American Rule bars the Panel’s attorney fee award
and conclude that it does.
i. Legal background
“Our basic point of reference when considering the award of attorney’s fees is the
bedrock principle known as the American Rule: Each litigant pays his own attorney’s
fees, win or lose, unless a statute or contract provides otherwise.” Baker Botts L.L.P. v.
ASARCO LLC, 135 S. Ct. 2158, 2164 (2015) (quotations omitted); see also Alyeska
Pipeline Serv. Co. v. Wilderness Soc’y,
421 U.S. 240, 247 (1975). “The American Rule
48
has roots in our common law reaching back to at least the 18th century, and statutes
which invade the common law are to be read with a presumption favoring the retention of
long-established and familiar legal principles.” Baker Botts, 135 S. Ct. at 2164
(alterations, citations, and quotations omitted). Courts therefore “will not deviate from
the American Rule absent explicit statutory authority.”
Id. (quotations omitted).
“[The Supreme Court] ha[s] recognized departures from the American Rule only
in ‘specific and explicit provisions for the allowance of attorneys’ fees under selected
statutes.’” Id. (quoting Alyeska Pipeline, 421 U.S. at 260). “Although these [departures]
take various forms, they tend to authorize the award of ‘a reasonable attorney’s fee,’
‘fees,’ or ‘litigation costs,’ and usually refer to a ‘prevailing party’ in the context of an
adversarial ‘action.’”
Id. (citations and quotations omitted).
Although this court has not addressed the American Rule’s application to
administrative proceedings, the D.C. Circuit has held that it applies equally in that
context. See Unbelievable, Inc. v. NLRB, 118 F.3d 795, 806 (D.C. Cir. 1997) (“The
American Rule is deeply rooted in our history and in congressional policy. Therefore, we
may not lightly allow an administrative agency, any more than a court, to depart from the
Rule . . . .” (citation and quotations omitted)).
ii. Analysis
The Panel exceeded its remedial authority under the RSA in awarding attorney
fees to Mr. Altstatt. We agree with the D.C. Circuit that the American Rule applies in
administrative proceedings, and we see no reason to depart from it here. The RSA’s text
makes no mention of attorney fees, litigation costs, prevailing parties, or other related
49
terms. Indeed, the statute is wholly silent as to what relief an arbitration panel may grant
an aggrieved blind vendor, and it provides only that “the decision of such panel shall be
final and binding on the parties” and “subject to appeal and review as a final agency
action.” 20 U.S.C. §§ 107d-1(a), 107d-2(a).26 The RSA is thus insufficiently explicit to
authorize arbitration panels to award attorney fees to aggrieved blind vendors who prevail
in arbitration against their SLA.
III. CONCLUSION
The Panel complied with the APA when it determined that the ODRS violated the
RSA by awarding the Contract to Mr. Brown despite his tax delinquency. It acted within
its authority under the RSA and complied with the APA when it determined that Mr.
Altstatt should have received the Contract assignment and ordered that Mr. Altstatt
replace Mr. Brown as the Contract vendor.
The Panel violated state sovereign immunity when it awarded damages to Mr.
Altstatt and against ODRS, and it exceeded the scope of its remedial authority when it
awarded attorney fees to Mr. Altstatt and against ODRS.
We therefore affirm the district court’s decision upholding the Panel’s
determination that the ODRS violated the RSA by awarding the Contract to Mr. Brown
and its order to replace Mr. Brown with Mr. Altstatt as the Contract vendor. We reverse
26
DOE’s implementing regulations and the RSA Arbitration Policies likewise do
not enumerate what relief may be granted, and the parties have not provided us with any
other materials relevant to the American Rule’s application.
50
the district court’s judgment as to the Panel’s award of damages and attorney fees and
remand for further proceedings consistent with this opinion.
51
