T.S. Ellis, III, United States District Judge.
Plaintiffs SourceAmerica and Lakeview Center, Inc., nonprofits that seek to enhance economic opportunities for the blind, request judicial review of the decision of an arbitration panel, convened by the Secretary of Education, that concluded the Department of the Army ("Army") violated the Randolph-Sheppard Act when the Army sought to award to plaintiffs a contract for services in Army dining facilities rather than to intervenor, the Kansas Department for Children and Families, a state agency that also seeks to enhance economic opportunities for the blind. This is a somewhat curious situation—it is, in essence, a dispute between organizations, both of which seek to advance the economic interests of the blind, as to which is entitled to a preference in the Army's contracting decision. And this curious situation is further compounded by the involved factual, legal, and procedural history of this case.
At issues now are the parties' cross-motions for summary judgment. The motions have been fully briefed and argued and are now ripe for disposition.
Just as this case involves multiple organizations that seek to enhance economic opportunities available to the blind, it also involves multiple statutes that provide a preference for the blind in federal contracting decisions. In particular, the Randolph-Sheppard Act ("RSA"), 20 U.S.C. §§ 107-107f, and the Javits-Wagner-O'Day Act ("JWOD"), 41 U.S.C. §§ 8501-8506, both create a preference for the blind in federal contracting decisions, although they differ in important respects. A basic understanding of both statutes is necessary to understand the factual and procedural history of this case and the current dispute.
The RSA also tasks the Secretary with reviewing federal departments', agencies', and instrumentalities' decisions to limit the placement or operation of vending facilities. § 107(b). Specifically, the RSA requires that "[a]ny limitation on the placement or operation of a vending facility based on a finding that such placement or operation would adversely affect the interests of the United States shall be fully justified in writing to the Secretary, who shall determine whether such limitation is justified." Id. This provision is referred to infra as the "RSA Review Requirement."
Anticipating that conflicts might arise between state licensing agencies and the federal departments, agencies, and instrumentalities from which state licensing agencies seek permits and contracts, Congress provided for a process for the arbitration of such disputes. Specifically, the RSA provides that state licensing agencies may compel the Secretary to convene an arbitration panel when they conclude that a federal department, agency, or instrumentality is violating the RSA or its regulations.
Similar to the RSA, the JWOD aims to "increase employment and training opportunities for persons who are blind or have other severe disabilities." 41 C.F.R. § 51-1.1(a). And, similar to the RSA, the JWOD effectuates this aim by creating a preference that benefits blind persons in federal contracting. Unlike the RSA, however, the JWOD is not limited in scope to permits or contracts for the operation of vending facilities
A final statute, the John Warner National Defense Authorization Act for Fiscal Year 2007 ("JWNDA"), Pub. L. No. 109-364, merits brief mention before the factual and procedural history of this dispute is recounted. The JWNDA, as relevant here, provides that the RSA and the JWOD are inapplicable in certain circumstances. This provision is referred to infra is the "JWNDA No-Poaching Provision." Specifically, the provision provides that the RSA "does not apply to full food services, mess attendant services, or services supporting the operation of a military dining facility that, as of the date of the enactment of this Act, were services on the procurement list established under" the JWOD. Id. at § 856(a)(1). The JWNDA No-Poaching Provision further provides that the JWOD "does not apply at the prime contract level to any contract entered into by the Department of Defense as of the date of the enactment of this Act with a State licensing agency under the [RSA] for the operation of a military dining facility." Id. at § 856(a)(2).
The parties to this action are involved with these statutory schemes to varying degrees. Plaintiff SourceAmerica is a creature of one of these schemes. Specifically, SourceAmerica is a JWOD central nonprofit agency. SourceAmerica works closely with plaintiff Lakeview Center, Inc. ("Lakeview"), a nonprofit agency that was designated by the Commission as the mandatory source of supply of certain services on the JWOD's procurement list. Intervenor, the Kansas Department for Children and Families ("Kansas"), is intimately familiar with the other primary statutory scheme in this case, the RSA, because of its status as an RSA state licensing agency. Defendant the Department of Education ("DOE"), through its Secretary, Betsy Devos, is charged with administering the RSA. The DOE, through its Secretary, convened the arbitration at issue here between the Army and Kansas.
With the statutory schemes outlined and the principal players identified, it is appropriate next to outline the pertinent factual and procedural history of this case.
In 2006, the Army awarded Kansas a FFS contract pursuant to the RSA. As required by the RSA, Kansas awarded the contract to a blind vendor. In 2011, the Army awarded Kansas a follow-on contract for the provision of FFS that was scheduled to expire in August 2015.
The Army subsequently determined that it no longer needed a FFS contract because Army soldiers formerly deployed in Iraq and Afghanistan could perform most of the duties, including cooking, at the Fort Riley dining facilities. However, because Army regulations prohibited soldiers from performing DFA services, the Army was required to contract out these services. Thus, the Army decided that it would procure a new contract, effective upon the conclusion of Kansas's contract, that covered only DFA services. Specifically, this new DFA contract would be for "janitorial and custodial duties within dining facilities [and] [i]include[ ] ... cleaning, sweeping, mopping, scrubbing, trash removal, dishwashing, waxing, stripping, buffing, window washing, pot and pan cleaning and other sanitation related functions." Draft of Solicitation, Offer, and Award for DFA Services 7 (July 20, 2015), at Admin. R. 1002. Believing that a contract covering only DFA services did not constitute the operation of vending facilities, the Army concluded that the new contract would not be subject to the RSA's preference for blind vendors in the operation of vending facilities. Accordingly, the Army instead sought to procure a contract pursuant to the JWOD. To that end, the Commission proposed adding the Fort Riley DFA services to the JWOD's procurement list through publication in the Federal Register in July 2015. The Commission ultimately added the DFA services to the procurement list and formally designated Lakeview as the mandatory source of supply, effective February 2016. SourceAmerica facilitated the process.
In March 2015, the Army informed Kansas that, following the conclusion of Kansas's contract, the Army would purchase only DFA services through a new contract not subject to the RSA. Dissatisfied with this turn of events and convinced that the new DFA contract was subject to the RSA, Kansas, in May 2015, filed a request with the Secretary for arbitration with the Army. As required by the RSA, the Secretary,
Plaintiffs also sought to intervene in the arbitration between Kansas and the Army based on plaintiffs' interest in the DFA contract at issue in the arbitration. To this end, plaintiffs sent two letters to the DOE requesting to intervene in the arbitration, dated April 8, 2016 and August 31, 2016. Plaintiffs did not receive a response to either letter.
In advance of the arbitration, the Army submitted an amended witness list that represented that it intended to call witnesses employed by plaintiffs and the Commission to support its position that the RSA does not apply to contracts for DFA services at military dining facilities. Specifically, the Army represented that it intended to call: (i) Barry Lineback, Director of Business Operations at the Commission; (ii) Joe Diaz, Vice President of Operations at SourceAmerica; and (iii) Gary Murphy, Representative at Lakeview.
The arbitration hearing was held on January 10, 2017. Plaintiffs attended the hearing and sought to be heard through counsel, but the panel denied this request. The panel also refused to hear testimony proffered by the Army from three witnesses employed by plaintiffs and the Commission—the three witnesses the Army had previously informed the panel that it intended to call.
Following the hearing, the Army filed a request for a new hearing, citing fundamental unfairness in the proceeding and concerns about the panel's lack of impartiality. First, the Army argued that the panel chair improperly excluded relevant testimony from the three witnesses employed by plaintiffs and the Commission. Specifically, the Army argued that the exclusion of the witnesses was improper because
Second, the Army argued that the panel chair acted inappropriately in riding to the airport with Kansas's counsel after requesting permission from the Army's counsel "to ride to the airport with your enemy" in the presence of the public and witnesses. Dep't of the Army's Post-Arbitration Br. & Request for New Hearing 9 (Feb. 17, 2017), at Admin. R. 1590. Third, the Army argued that "the Panel Chair and [Kansas's] Counsel made it known... that they both had flights" at the beginning of the hearing and repeatedly referenced these flights, thereby inappropriately "set[ting] the tone ... that their schedules were more important than obtaining evidence." Id. Finally, the Army questioned the panel's lack of impartiality because one of the panel members had represented a client and obtained a favorable outcome in an arbitration proceeding presided over by the panel chair at the same time that the two sat on an arbitration panel together in a separate proceeding.
The arbitration panel issued its decision on May 9, 2017. The two-member majority denied the Army's request for a new hearing and held (i) that the Fort Riley DFA contract was subject to the RSA's preference; (ii) that the Army violated the RSA when it failed to apply the RSA's preference to the Fort Riley DFA contract; (iii) that the Army violated the RSA Review Requirement when, without consulting the Secretary, it included services formerly performed by an RSA vendor in a new contract that would not be performed by an RSA vendor; and (iv) that the Army violated the JWNDA No-Poaching Provision when it worked with the Commission to place services formerly performed by an RSA vendor on the JWOD's procurement list.
General Carey, the panel's third member, dissented. He concluded that the RSA's preference did not apply to the Fort Riley DFA contract and that he would have granted the Army's request for a new hearing owing to concerns about the fairness of the proceeding. Following the panel's decision, the preliminary injunction issued by the district court in Kansas was dissolved, and the lawsuit was voluntarily dismissed by the parties in February 2018. Kansas Dep't for Children & Families v. United States, 2018 WL 1087848, at *1 (D. Kan. Feb. 21, 2018).
Following the issuance of the arbitration panel's decision, SourceAmerica and Lakeview initiated this action against defendants the DOE and its Secretary, Betsy DeVos; the Army and its Acting Secretary, Ryan D. McCarthy; and the Department of Defense ("DOD") and its Acting Secretary, Patrick M. Shanahan
Plaintiffs argue that the arbitration decision is contrary to the RSA and the JWOD, in violation of the APA; that the arbitration panel engaged in improper ex parte communications in violation of the APA; that the arbitration panel violated 5 U.S.C. § 555(b) of the APA by refusing to
Defendants respond that only a state licensing agency may seek judicial review of an arbitration panel decision, and thus argue that plaintiffs cannot seek judicial review here. With respect to the merits, however, defendants agree with plaintiffs that the Army did not violate the RSA and thus contend that the arbitration decision was incorrect in this respect. But defendants argue that plaintiffs' remaining challenges to the arbitration decision should be rejected. Specifically, defendants argue that the panel's alleged ex parte communications should not be addressed because they are outside the scope of the complaint; that although the panel erred when it refused to allow plaintiffs to participate in the arbitration pursuant to 5 U.S.C. § 555(b), the error was harmless; and that plaintiffs' Fifth Amendment rights were not violated. Finally, defendants argue that the equitable relief plaintiffs request is inappropriate and that the proper remedy is remand to the arbitration panel.
Finally, intervenor argues that the arbitration decision was correct and is not contrary to either the RSA or the JWOD. Intervenor also argues that the panel did not violate 5 U.S.C. § 555(b) because plaintiffs lacked standing to intervene in the arbitration proceeding. Finally, intervenor argues that plaintiffs' Fifth Amendment rights were not violated.
Summary judgment is appropriate under Rule 56, Fed. R. Civ. P., where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." A genuine factual dispute exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Summary judgment is especially appropriate in APA actions, as they do not ordinarily involve fact-finding because "the focal point for judicial review [under the APA] should be the administrative record already in existence." Camp v. Pitts, 411 U.S. 138, 142, 93 S.Ct. 1241, 36 L.Ed.2d 106 (1973) (per curiam). It is clear the material facts supporting summary judgment are undisputed and require that the parties' cross-motions for summary judgment be granted in part and denied in part.
The RSA makes clear that an RSA arbitration decision is "subject to appeal and review as final agency action." 20 U.S.C. § 107d-2(a). And the RSA also acknowledges that the APA provides the standards for this review. In this respect, the APA provides that courts must "hold unlawful and set aside agency action, findings, and conclusions" that are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" or are "in excess of statutory justification, authority, or limitations, or short of statutory right." 5 U.S.C. § 706(2)(A), (C).
Judicial review of an RSA arbitration panel's decision is conducted de novo. Sauer v. Dep't of Educ., 668 F.3d 644, 650 (9th Cir. 2012). The arbitration decision must be set aside if it is "not in accordance with law." 5 U.S.C. § 706(2)(A); Sauer, 668 F.3d at 650. Importantly, the arbitration panel's interpretation
Section 702 of the APA provides that "[a] person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof." 5 U.S.C. § 702. The Supreme Court has interpreted this provision as authorizing those who are injured by agency action to seek judicial review of that action where "the interest sought to be protected by the complainant is arguably within the zone of interests to be protected or regulated by the statute or constitutional guarantee in question." Ass'n of Data Processing Serv. Org., Inc. v. Camp, 397 U.S. 150, 153, 90 S.Ct. 827, 25 L.Ed.2d 184 (1990). Defendants argue that plaintiffs cannot satisfy this zone of interests test and thus lack prudential standing to challenge the arbitration decision. Defendants' argument fails because plaintiffs' interests are at least "arguably within the zone of interests ... protected or regulated by the statute." Id.
Defendants contend that the arbitration provisions of the RSA are the proper focus of the zone of interests analysis in this case. This contention is incorrect; the Supreme Court has explained that "[w]hether a plaintiff's interest is `arguably... protected ... by the statute' within the meaning of the zone of interests test is to be determined ... by reference to the particular provision of law upon which plaintiff relies." Bennett v. Spear, 520 U.S. 154, 175-76, 117 S.Ct. 1154, 137 L.Ed.2d 281 (1997). As such, "the plaintiff must establish that the injury he complains of ... falls within the `zone of interests' sought to be protected by the statutory provision whose violation forms the legal basis for his complaint" Lujan v. Nat'l Wildlife Fed., 497 U.S. 871, 883, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990). Here, plaintiffs rely upon the RSA's procurement provisions, which create a preference for blind vendors in "the operation of vending facilities." 20 U.S.C. § 107(b). Plaintiffs complain that defendants' violation of these provisions—namely, the erroneous panel finding that the RSA's procurement provisions apply to the Fort Riley DFA services—has injured plaintiffs' economic interests and interest in providing opportunity and autonomy to the blind and severely disabled. Therefore, it is these procurement provisions that
Importantly, the Supreme Court has explained that the zone of interests "test is not meant to be especially demanding;... there need be no indication of congressional purpose to benefit the would-be plaintiff." Clarke v. Securities Indus. Ass'n, 479 U.S. 388, 400, 107 S.Ct. 750, 93 L.Ed.2d 757 (1987) (footnote and citation omitted). Furthermore, "[t]he test forecloses suit only when a plaintiff's `interests are so marginally related to or inconsistent with the purposes implicit in the statute that it cannot reasonably be assumed that Congress intended to permit the suit.'" Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians v. Patchak, 567 U.S. 209, 225, 132 S.Ct. 2199, 183 L.Ed.2d 211 (2012). That is not the case here; indeed, plaintiffs' interests are clearly within the zone of interests protected or regulated by the statute.
In enacting the RSA's procurement provisions, Congress explained that it intended to "provid[e] blind persons with remunerative employment, enlarge[e] the economic opportunities of the blind, and stimulat[e] the blind to greater efforts in striving to make themselves self-supporting." 20 U.S.C. § 107(a).
Defendants next argue that judicial review is unavailable because the RSA precludes judicial review here. To be sure, the APA provides that judicial review is unavailable where "statutes preclude judicial review." 5 U.S.C. § 701(a)(1). To determine "[w]hether and to what extent a particular statute precludes judicial review[,]" courts look to the statute's "express language ... [and] the structure of the statutory scheme, its objectives, its legislative history, and the nature of the administrative action involved." Block v. Cmty. Nutrition Inst., 467 U.S. 340, 345, 104 S.Ct. 2450, 81 L.Ed.2d 270 (1984). Defendants have failed to establish that these sources indicate that the RSA precludes judicial review here.
Defendants argue that the RSA permits only state licensing agencies to seek judicial review of arbitration decisions and thus precludes judicial review by plaintiffs. Specifically, defendants contend that because the RSA provides for only state licensing agencies to seek arbitration with federal departments, only state licensing agencies may seek judicial review of those arbitrations. See 20 U.S.C. § 107d-1(b). Defendants rely on Block v. Community Nutrition Institute, 467 U.S. 340, 104 S.Ct. 2450, 81 L.Ed.2d 270 (1984), to support
In Block, the Supreme Court considered whether consumers could seek judicial review of "milk market orders setting the minimum prices that handlers (those who process dairy products) must pay to producers (dairy farmers) for their milk products." Block, 467 U.S. at 341-42, 104 S.Ct. 2450. Under the operative statute, handlers could seek administrative review of market orders and, after obtaining such review, handlers could then seek judicial review. Id. at 346, 104 S.Ct. 2450. The Supreme Court concluded that consumers could not seek judicial review of market orders because "[t]he restriction of the administrative remedy to handlers strongly suggests that Congress intended a similar restriction of judicial review of market orders." Id. at 347, 104 S.Ct. 2450.
Defendants argue that plaintiffs here, like the consumers in Block, cannot obtain judicial review. This argument has some force but is ultimately unpersuasive. Block is distinguishable because that case involved a complex regulatory scheme that included handlers and producers but excluded consumers.
Finally, defendants argue that Lakeview may not seek judicial review of the arbitration decision because the APA provides judicial review only where "there is no other adequate remedy in a court," 5 U.S.C. § 704, and an adequate alternative remedy exists in the form of a bid protest action under the Administrative Dispute Resolution Act, 28 U.S.C. § 1491(b).
A bid protest action is available to "an interested party objecting to a solicitation by a Federal agency for bids or proposals for a proposed contract or to a proposed award or the award of a contract or any alleged violation of statute or regulation in connection with a procurement or a proposed procurement." 28 U.S.C. § 1491(b).
Defendants contend that a bid protest action constitutes an adequate remedy for Lakeview in this case and thus precludes Lakeview from seeking judicial review of the arbitration decision pursuant to the APA. Although defendants argue that a bid protest is an adequate remedy, they admit that "this suit, as framed in plaintiffs' present complaint, most likely would not fall within the bid protest jurisdiction of the Court of Federal Claims." Defs.' Reply 5 (emphasis in original). Indeed, defendants argue only that "[i]f the Army were to move forward with a procurement harming Lakeview's interests, Lakeview would have an adequate remedy in the form of a bid protest action." Defs.' Mem. 19 (emphasis added). This falls far short of an adequate remedy, as Lakeview has allegedly already suffered harm that may not be the subject of a bid protest action.
With respect to the merits, plaintiffs and defendants argue that the arbitration panel erroneously concluded that the Fort Riley DFA contract is subject to the RSA's preference. Intervenor responds that the arbitration panel correctly reached this conclusion. The APA requires that agency findings be set aside if they are "not in accordance with law." 5 U.S.C. § 706(2)(A); Sauer, 668 F.3d at 650. Plaintiffs and defendants are correct that the panel erred in concluding that the RSA's preference applies to the Fort Riley DFA contract. Accordingly, the finding must be set aside.
The RSA's preference applies to "the operation of vending facilities on Federal property." 20 U.S.C. § 107(b).
The plain language of the RSA makes clear that its preference applies only where the vendor exercises control or management over the functioning of the vending facility as a whole and thus does not apply to the Fort Riley DFA contract. In particular, the RSA's preference applies only to "the operation of vending facilities on Federal property." 20 U.S.C. § 107(b) (emphasis added). "Operation" requires control or management of the vending facilities. One cannot be said to operate something unless one is in some sense in charge; operation requires more than mere performance of assigned tasks. And, crucially, the RSA's preference applies to "the operation of vending facilities,"
The meaning of "operate" in other parts of the RSA supports this conclusion.
Finally, the regulations issued pursuant to the RSA support this interpretation because they imply that the blind vendor's operation of the vending facility must involve control or management over food—a requirement consistent with application of the RSA's preference only where vendors will exercise control or management over the functioning of the vending facility as a whole, not merely perform discrete tasks in support of the facility's functioning.
The arbitration panel erroneously concluded that the RSA's preference applies to the Fort Riley DFA contract because it had an unduly broad view of the scope of the preference. Specifically, the panel majority concluded that the RSA's
Intervenor argues that a letter from the Secretary to a member of Congress supports its position and compels the conclusion that the RSA's preference applies to the Fort Riley DFA contract.
Intervenor correctly notes that the Fourth Circuit has held that when both the RSA and the JWOD "appear to apply," the RSA must control because it is the more specific statute. NISH v. Cohen, 247 F.3d 197, 204-05 (4th Cir. 2001). However, that instruction is inapplicable here. The RSA does not "appear to apply" to the Fort Riley DFA contract. To the contrary, it is clear that the RSA's preference does not apply to the Fort Riley DFA contract. The contract is for sanitation and janitorial services. Such services are ancillary and support the operation of a vending facility; they do not constitute the operation of a vending facility, as is required for the RSA's preference to apply. Accordingly, the arbitration panel erroneously concluded that the Fort Riley DFA contract is subject to the RSA's preference, and the APA requires that this agency action be set aside because it is "not in accordance with law." 5 U.S.C. § 706(2)(A); Sauer, 668 F.3d at 650.
Plaintiffs and defendants argue that the arbitration decision was also contrary to the RSA because the panel erroneously concluded that the Army violated the RSA Review Requirement. This argument fails. Although the RSA's preference does not apply to the Fort Riley DFA contract, the RSA Review Requirement obligated the Army to justify its decision to terminate the operation of vending facilities at Fort Riley by vendors to the Secretary in writing. See 20 U.S.C. § 107(b). The arbitration panel correctly concluded that the Army failed to comply with this requirement.
The RSA Review Requirement directs that "[a]ny limitation on the placement or operation of a vending facility based on a finding that such placement or operation would adversely affect the interests of the United States shall be fully justified in writing to the Secretary, who shall determine whether such limitation is justified." Id. Plaintiffs and defendants argue that the Army's decision to no longer procure a contract for the operation of its vending facilities at Fort Riley did not trigger this provision because it does not constitute a "limitation on the ... operation of a vending facility."
Plaintiffs and defendants next argue that the arbitration panel erroneously concluded that the Army violated the JWNDA No-Poaching Provision when it worked with the Commission to place services formerly performed by an RSA vendor on the JWOD's procurement list. Intervenor disagrees. Because plaintiffs and defendants are correct that the arbitration panel incorrectly found that the Army violated the JWNDA No-Poaching Provision, that finding must be set aside as "not in accordance with law." 5 U.S.C. § 706(2)(A).
The JWNDA No-Poaching Provision provides, as relevant here, that the RSA "does not apply to full food services, mess attendant services, or services supporting the operation of a military dining facility that, as of the date of the enactment of this Act, were services on the procurement list established under" the JWOD. Pub. L. No. 109-364, § 856(a)(1). It seems the arbitration panel concluded the JWNDA No-Poaching Provision's instruction that the RSA "does not apply to ... services supporting the operation of a military dining facility that, as of the date of the [JWNDA's] enactment ..., were services on the [JWOD's] procurement list" implies that the RSA applies to all other services supporting the operation of a military dining facility. Id. This conclusion is flawed because the JWNDA No-Poaching Provision did not expand the reach of the RSA and it is of limited value in interpreting the RSA's preference.
The JWNDA No-Poaching Provision did not expand the reach of the RSA. Rather, the provision curtailed the reach of the RSA and the JWOD in an attempt to avoid conflicts between them. The provision specifies that the RSA does not apply in particular circumstances. Indeed, the JWNDA No-Poaching Provision is titled "INAPPLICABILITY OF CERTAIN LAWS." Id. at § 856(a). It thus cannot
Nor does the JWNDA No-Poaching Provision shed much light on the meaning of the RSA. "[S]ubsequent legislative history is a hazardous basis for inferring the intent of an earlier Congress." United States v. Texas, 507 U.S. 529, 535 n.4, 113 S.Ct. 1631, 123 L.Ed.2d 245 (1993) (internal quotation marks and citation omitted). And, even if such intent could be inferred, the provision does not imply what that the panel seems to think it does. In particular, the JWNDA's instruction that the RSA "does not apply to ... services supporting the operation of a military dining facility that... were services on the [JWOD's] procurement list" at the time of the JWNDA's enactment does not imply that the RSA applies to all other services supporting the operation of a military dining facility. Pub. L. No. 109-364, § 856(a)(1). A contrary conclusion would fly in the face of the RSA's text, which expressly stipulates that the RSA's preference applies to "the operation of vending facilities." 20 U.S.C. § 107(b). Moreover, the second part of the JWNDA No-Poaching Provision confirms this view. Specifically, the provision further provides that the JWOD "does not apply at the prime contract level to any contract entered into by the [DOD] as of the date of the enactment of this Act with a State licensing agency under the [RSA] for the operation of a military dining facility." Pub. L. No. 109-364, § 856(a)(2). Surely neither the panel nor intervenor would argue that this implies that all contracts for the operation of a military dining facility other than those in effect under the RSA at the time of the JWNDA's enactment are subject to the JWOD. The ridiculousness of this conclusion—ridiculous because the RSA expressly applies in such circumstances—underscores that the other part of the JWNDA No-Poaching Provision too lacks the implication the arbitration panel apparently believed it contained. Rather, the JWNDA No-Poaching Provision does exactly what it says; it clarifies that services supporting the operation of military dining facilities that were on the JWOD's procurement list when the JWNDA was enacted are not subject to the RSA. It does not include or invite the inference that all such services not on the JWOD's procurement list at the time are covered by the RSA.
Because the JWNDA neither expanded the scope of the RSA's preference nor revealed the proper interpretation of the RSA, the arbitration panel erred when it found that the Army violated the JWNDA No-Poaching Provision when it worked with the Commission to put the Fort Riley DFA services on the procurement list. Accordingly, that finding must be set aside as "not in accordance with law." 5 U.S.C. § 706(2)(A).
Plaintiffs argue that the arbitration decision must also be set aside as "not in accordance with law" because it violates the JWOD. Id. Specifically, plaintiffs argue that the JWOD requires that the Fort Riley DFA services be obtained pursuant to that Act because the services were on the JWOD's procurement list. Plaintiffs contend that the panel violated this requirement when it found that the Fort Riley DFA contract was subject to the RSA's preference. Defendants respond that there is no basis for ruling on the applicability of the JWOD in this action for judicial review of the RSA arbitration decision. Defendants are correct.
There is no basis for ruling on the applicability of the JWOD to the Fort Riley DFA contract because the JWOD, and its applicability to the Fort Riley DFA contract,
This is especially so because the conclusion reached here—namely, that the Fort Riley DFA contract is not subject to the RSA's preference—cures the alleged JWOD violation. Plaintiffs allege that the arbitration panel violated the JWOD when it concluded the Fort Riley DFA contract was subject to the RSA's preference despite the inclusion of the Fort Riley DFA services on the JWOD's procurement list. The panel's finding that the Fort Riley DFA contract is subject to the RSA's preference is erroneous and must be set aside. As such, the alleged JWOD violation is cured, and it is unnecessary to consider the applicability of the JWOD to the Fort Riley DFA contract.
Plaintiffs next argue that the arbitration decision must be set aside because intervenor engaged in ex parte communications with the panel during the arbitration proceeding in violation of § 557 of the APA. See 5 U.S.C. § 557(d)(1). However, this claim may not be addressed because it is not properly raised in plaintiffs' Complaint.
Plaintiffs next argue that the arbitration panel violated § 555(b) of the APA by preventing plaintiffs from participating in the arbitration proceeding. See 5 U.S.C. § 555(b). Section 555(b) of the APA provides that "[s]o far as the orderly conduct of public business permits, an interested person may appear before an agency or its responsible employees for the presentation, adjustment, or determination of an issue, request or controversy in a proceeding." Id. Intervenor argues that the panel did not violate this provision because plaintiffs lacked standing to intervene in the RSA arbitration. This argument fails because plaintiffs were clearly "interested persons" within the meaning of § 555(b). Defendants admit that the panel violated § 555(b) by refusing to allow plaintiffs to participate in the arbitration proceeding but argue this error was harmless. It was not.
Intervenor argues that plaintiffs lacked standing to intervene in the RSA arbitration because the panel was limited to determining the applicability of the RSA to the Fort Riley DFA contract and could not rule on the applicability of the JWOD. Although intervenor is correct that the arbitration panel's authority was limited in this way, plaintiffs were nonetheless "interested person[s]" with respect to the arbitration proceeding and thus entitled to appear before the panel "[s]o far as the orderly conduct of public business permit[ted]." Id. Lakeview was placed on the procurement list as the mandatory source of supply for the Fort Riley DFA services, and a determination by the arbitration panel that the Fort Riley DFA services must be procured pursuant to the RSA would jeopardize the value of that placement. The arbitration proceeding thus had the potential to—and, ultimately, did—deprive Lakeview of a contract that it expected to receive. As such, plaintiffs were "interested person[s]" with respect to the RSA arbitration, and § 555(b) granted them a right to appear before the panel "[s]o far as the orderly conduct of public business permit[ted]." Id.
Defendants, although admitting that the arbitration panel erred by failing to allow plaintiffs to appear before the panel pursuant to § 555(b), argue that the error was harmless. This argument also fails. To be sure, "[a]dministrative adjudications are subject to the same harmless error rule that generally applies to civil cases." Sea "B" Mining Co. v. Addison, 831 F.3d 244, 253 (4th Cir. 2016). As such, "[r]eversal on account of error is not automatic but requires a showing of prejudice." Id. Determining whether an error was prejudicial requires consideration of "the facts and circumstances of the particular case." Id. at 254. Factors include "the likelihood that the result might have been different, as well as how the error might impact the public perception of such proceedings." Id. at 254 (internal quotation marks and citation omitted). Defendants argue the error here was harmless because plaintiffs could not have changed the outcome of the proceeding, as plaintiffs would have made the same legal arguments about the application of the RSA and the JWOD that the Army made. This argument is unpersuasive because—as the Army itself has admitted—the Army was not permitted to introduce evidence about the application of the RSA and JWOD that it considered material, and plaintiffs may
The prejudicial nature of the error is further evidenced by its likely impact on public perception of the arbitration. The Fourth Circuit has instructed that "how the error might impact the public perception of [the] proceedings" should be considered when assessing whether an error is prejudicial. Sea "B" Mining Co., 831 F.3d at 254. The error here likely negatively impacted public perception of the arbitration. The panel refused to allow plaintiffs to participate even though the arbitration had the potential to eliminate Lakeview's chances of receiving a contract for services for which it had been designated as the mandatory source of supply. This created a perception of unfairness that was magnified by the panel's refusal to allow one of Lakeview's employees to testify for the Army despite the panel's pre-arbitration determination that the witness was essential to the Army's defense and thus the DOE should pay his travel costs. The panel's error was thus likely to have a negative impact on public perception of the arbitration, including the proceeding's fairness. For these reasons, the harmless error rule—which the Fourth Circuit has explained "is not ... a particularly onerous requirement"—is clearly satisfied here. Id. at 253 (internal quotation marks and citation omitted). As such, defendants' argument to the contrary must be rejected. The arbitration panel violated § 555(b) when it refused to allow plaintiffs to participate in the proceeding without articulating why "the orderly conduct of public business [did not] permit[ ]" their participation. 5 U.S.C. § 555(b).
Finally, plaintiffs argue that defendants violated the Fifth Amendment by adjudicating plaintiffs' protected property interests during the arbitration without procedural protections. However, this constitutional claim need not be addressed here given the "duty [of courts] to avoid deciding constitutional questions presented unless essential to proper disposition of a case." Harmon v. Brucker, 355 U.S. 579, 581, 78 S.Ct. 433, 2 L.Ed.2d 503 (1958). Plaintiffs' constitutional claim has the same premise as plaintiffs' § 555(b) claim—namely, the panel's refusal to allow plaintiffs to participate in the arbitration. Plaintiffs have successfully established that § 555(b) was violated, and this violation precludes the necessity of addressing plaintiffs' constitutional claim to the same effect.
The final issue remaining is the proper remedy. Plaintiffs request vacation of the arbitration decision, issuance of a declaratory judgment finding that the Fort Riley DFA services are beyond the scope of the RSA and covered instead by the JWOD, and a permanent injunction preventing defendants from implementing or enforcing the arbitration decision. Defendants contend that the proper remedy is a finding that the arbitration panel erred
The arbitration panel's decision must be vacated in part and affirmed in part, consistent with the above findings. In particular, the panel's finding that the Fort Riley DFA contract was subject to the RSA's preference must be vacated because, as explained supra, that ruling is not in accordance with law. Therefore, the panel's finding that the Army violated the RSA when it failed to apply that preference must also be vacated as not in accordance with law. Similarly, the panel's finding that the Army violated the JWNDA No-Poaching Provision when it worked with the Commission to place services formerly performed by an RSA vendor on the JWOD's procurement list must be vacated as not in accordance with law because the Army's actions did not violate the JWNDA No-Poaching Provision. However, the panel's finding that the Army violated the RSA Review Requirement must be upheld because the Army did indeed violate the RSA Review Requirement. Further relief beyond these findings is inappropriate.
Equitable relief is inappropriate because plaintiffs have not shown any real or immediate threat that they will be wronged again. Equitable relief is proper only where there is "a showing of irreparable injury, a requirement that cannot be met where there is no showing of any real or immediate threat that the plaintiff[s] will be wronged again." City of Los Angeles v. Lyons, 461 U.S. 95, 111, 103 S.Ct. 1660, 75 L.Ed.2d 675 (1983). Plaintiffs have not established such a "real or immediate threat that [they] will be wronged again." Id. Indeed, there is every reason to believe that plaintiffs will not be wronged again. The Army initially took the position that the RSA's preference did not apply to the Fort Riley DFA contract and vigorously defended that position during the arbitration. Although the Army complied with the arbitration panel's finding that the RSA's preference applies to the contract, the Army has consistently maintained throughout this litigation that the panel's finding was incorrect. As such, there is no reason to believe that the Army will respond to vacation of the arbitration panel's decision by continuing to apply the RSA's preference to the Fort Riley DFA contract. Accordingly, plaintiffs have failed to establish that they face a real and immediate threat of future harm, and equitable relief is thus inappropriate.
Remand, although often appropriate when an agency committed an error of law, is not appropriate here. Remand is the proper remedy when an agency has been vested with discretion and judicial review leaves open issues that the agency may resolve using that discretion on remand. See N.L.R.B. v. Food Store Emp. Union, Local 347, 417 U.S. 1, 10, 94 S.Ct. 2074, 40 L.Ed.2d 612 (1974) ("[W]hen a reviewing court concludes that an agency invested with broad discretion to fashion remedies has apparently abused that discretion ..., remand to the agency for reconsideration ... is ordinarily the reviewing court's proper course."). The arbitration panel has been vested with no such discretion here. Indeed, the arbitration panel has the authority to determine only whether the RSA or its regulations have been violated. 20 U.S.C. § 107d-2(b)(2);
Accordingly, and for the reasons discussed above, plaintiffs' Motion for Summary Judgment must be granted in part and denied in part; defendants' Motion for Summary Judgment must be granted in part and denied in part; and intervenor's Motion for Summary Judgment must be granted in part and denied in part. The arbitration findings that (i) the Fort Riley DFA contract is subject to the RSA's preference, (ii) the Army violated the RSA when it failed to apply the RSA's preference to the Fort Riley DFA contract, and (iii) the Army violated the JWNDA No-Poaching Provision must be vacated. The arbitration finding that Army violated the RSA Review Requirement must be affirmed. The Army is free to procure a contract for the Fort Riley DFA services consistent with this Opinion.
An appropriate Order will issue.