475 F.Supp.3d 1
D.D.C.2020Background
- Plaintiffs Alphapointe and IFB Solutions are AbilityOne-qualified nonprofits that supply goods/services (e.g., pharmaceutical bottles, switchboard services, eyeglasses) to the VA under the JWOD/AbilityOne procurement preference.
- The VBA contains a mandatory "Rule of Two" (38 U.S.C. § 8127) requiring the VA to award contracts to veteran-owned small businesses when two or more such firms are expected to bid and a fair price is likely; exceptions permit noncompetitive awards below certain dollar thresholds.
- After the Federal Circuit decided PDS Consultants (holding the VBA controls over JWOD when the Rule of Two applies), the VA issued a 2019 Class Deviation directing contracting officers to apply the VA Rule of Two before awarding contracts to AbilityOne nonprofits and to treat AbilityOne as the fallback if no veteran-owned award is made.
- The VA then declined to extend several AbilityOne incumbents’ contracts and shifted some work toward veteran-owned firms; Plaintiffs sued under the APA asserting (1) the 2019 Class Deviation is arbitrary and contrary to law (Count I) and (2) the VA promulgated it without required notice-and-comment rulemaking (Count II). PDS Consultants (the veteran-owned firm) intervened.
- The district court previously denied a TRO/PI. On motions to dismiss, the court concluded it lacks jurisdiction over Count I (Tucker Act/Court of Federal Claims) and therefore transferred Count I to the Court of Federal Claims; the court retained jurisdiction over Count II but dismissed Count II on the merits, holding the 2019 Class Deviation was exempt from APA notice-and-comment under 5 U.S.C. § 553(a)(2) (the proprietary rules exception).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Count I (arbitrary-and-capricious challenge to the 2019 Class Deviation) is within the district court's jurisdiction or subject to exclusive Tucker Act jurisdiction in the Court of Federal Claims | Count I challenges the validity of the Class Deviation as a general rule and thus is properly brought in district court under the APA | The claim in substance contests procurement decisions/ statutory violations "in connection with a procurement," so Tucker Act vests exclusive jurisdiction in the Court of Federal Claims | Court held Count I falls within Tucker Act scope and transferred it to the Court of Federal Claims (no district-court adjudication on the merits) |
| Whether the 2019 Class Deviation had to be promulgated through APA notice-and-comment rulemaking (Count II) | The VA changed substantive policy affecting AbilityOne contractors and thus had to follow § 553 notice-and-comment | The deviation relates to VA proprietary contracting operations and is exempt from notice-and-comment under § 553(a)(2) (proprietary rules exception) | Court held the deviation falls within the proprietary rules exception and dismissed Count II for failure to state a claim |
| Whether the court could resolve Count II on a Rule 12(b)(6) motion absent the administrative record | Plaintiffs argued the agency record is needed before dismissal | Defendants argued the statutory/legal issue (whether § 553 applies) can be resolved without the record; district court later received the administrative record and allowed surreply | Court accepted that the § 553 legal question could be resolved without calling the full record and considered the submitted record; dismissal under Rule 12(b)(6) was appropriate |
| Whether earlier district-court reliance on Southfork controlled jurisdictional analysis | Plaintiffs relied on Southfork to argue district-court APA jurisdiction | Defendants argued Southfork is not a binding jurisdictional rule; Tucker Act/ RAMCOR and Federal Circuit precedent govern | Court concluded Southfork’s statement was dicta and reaffirmed broader Federal Circuit parsing of Tucker Act jurisdiction, favoring transfer to Claims Court |
Key Cases Cited
- PDS Consultants, Inc. v. United States, 907 F.3d 1345 (Fed. Cir. 2018) (interpreting interaction of JWOD/AbilityOne and the VBA Rule of Two)
- Kingdomware Tech., Inc. v. United States, 136 S. Ct. 1969 (2016) (holding VA's statutory contracting duty under § 8127 is mandatory)
- RAMCOR Servs. Group, Inc. v. United States, 185 F.3d 1286 (Fed. Cir. 1999) (broad reading of Tucker Act jurisdiction for claims "in connection with" procurements)
- Southfork Sys., Inc. v. United States, 141 F.3d 1124 (Fed. Cir. 1998) (discussed as non-binding dicta on district-court APA jurisdiction)
- Nat'l Wildlife Fed'n v. Snow, 561 F.2d 227 (D.C. Cir. 1977) (discussing scope of § 553(a)(2) proprietary rules exception)
- Am. Bankers Ass'n v. Nat'l Credit Union Admin., 271 F.3d 262 (D.C. Cir. 2001) (explaining when an APA statutory-compatibility challenge can be resolved without the administrative record)