368 F. Supp. 3d 974
E.D. Va.2019Background
- Fort Riley (Army) converted its dining-contracting approach: after a 2011 FFS (full food services) RSA contract with Kansas (a state RSA licensing agency) the Army planned a successor contract limited to DFA (dining facility attendant) janitorial/sanitation services and treated it as subject to the JWOD procurement process; SourceAmerica (JWOD central nonprofit) and Lakeview (designated JWOD vendor) pursued JWOD placement.
- Kansas sought RSA arbitration (Secretary of Education convened a three-member panel) arguing the DFA contract remained subject to the Randolph-Sheppard Act (RSA) preference for blind vendors; arbitration panel (majority) sided with Kansas on RSA applicability, found multiple RSA violations, and concluded the Army violated a JWNDA no‑poaching provision.
- SourceAmerica and Lakeview (plaintiffs) sued to vacate parts of the arbitration decision, claiming the RSA does not cover DFA contracts, raising APA and APA‑procedure (5 U.S.C. § 555(b)) claims, and seeking injunctive/declaratory relief; defendants (DOE, Army, DOD) and intervenor Kansas cross‑moved for summary judgment.
- The district court reviewed the arbitration decision de novo under the APA (arbitration decisions are final agency action under RSA) and resolved standing, reviewability, statutory interpretation (RSA, JWOD, JWNDA), and procedural‑due‑process/APA‑procedure claims on summary judgment using the administrative record.
- Court held: (1) the RSA preference does not apply to the Fort Riley DFA contract (vacating that part of the arbitration award); (2) the Army violated the RSA’s written‑justification "RSA Review Requirement" (affirming that finding); (3) the arbitration finding that the Army violated the JWNDA no‑poaching provision was vacated; and (4) the arbitration panel violated 5 U.S.C. § 555(b) by denying plaintiffs an opportunity to appear, and that error was not harmless.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing / zone of interests to seek APA review | SourceAmerica/Lakeview: their economic interests in JWOD placements are within RSA's zone of interests | Defendants: RSA arbitration scheme limits review to state licensing agencies; plaintiffs lack prudential standing | Held: Plaintiffs meet the zone‑of‑interests test and may seek APA review; RSA does not preclude their review |
| Whether RSA preference applies to DFA contract | Plaintiffs: DFA contract is janitorial/support only, not "operation" of vending facilities; thus RSA does not apply | Kansas/Panel: tasks integral to cafeteria operation make RSA applicable; panel relied on DOE reg. language | Held: RSA applies only where vendor operates/controls the vending facility as a whole; DFA (janitorial) is ancillary and RSA does not apply (panel's applicability finding vacated) |
| Whether Army violated RSA Review Requirement (written justification) | Plaintiffs: RSA review covers Army’s discontinuation of vendor operation and Army failed to justify in writing | Defendants: requirement applies only to limits on location/manner, not to ceasing vendor operation | Held: Removing vendor entirely is a "limitation" triggering the RSA Review Requirement; Army violated it (panel finding affirmed) |
| Whether Army violated JWNDA no‑poaching provision by working with Commission to list DFA under JWOD | Plaintiffs: JWOD governs because services were placed on procurement list; panel erred to the extent it disregarded JWOD | Defendants/Kansas: JWNDA carve‑outs described limited inapplicability; no violation occurred | Held: Panel erred to the extent it found a JWNDA violation; that finding vacated because JWNDA did not expand RSA coverage and does not support panel's conclusion |
| Procedural participation (5 U.S.C. § 555(b)) | Plaintiffs: were "interested persons" and should have been allowed to appear; exclusion prejudiced outcome | Intervenor/Defendants: plaintiffs lacked standing in arbitration; any error was harmless | Held: Plaintiffs were interested persons; panel violated § 555(b); error was prejudicial and not harmless (vacatur of relevant portions appropriate) |
Key Cases Cited
- Sauer v. Dep't of Educ., 668 F.3d 644 (9th Cir. 2012) (RSA arbitration interpretations are not entitled to Chevron deference; review is de novo)
- Md. Dep't of Educ. v. Dep't of Veterans Affairs, 98 F.3d 165 (4th Cir. 1996) (RSA arbitration panel authority limited to determining RSA violations)
- Block v. Cmty. Nutrition Inst., 467 U.S. 340 (1984) (statutory scheme may impliedly preclude review when Congress restricts standing/participation in complex regulatory frameworks)
- N.L.R.B. v. Food Store Emp. Union, Local 347, 417 U.S. 1 (1974) (remand is appropriate where agency discretion remains to fashion remedies)
- Clarke v. Sec. Indus. Ass'n, 479 U.S. 388 (1987) (zone-of-interests test for APA standing is not especially demanding)
- Sea "B" Mining Co. v. Addison, 831 F.3d 244 (4th Cir. 2016) (harmless error standard in administrative adjudication; prejudice and public perception factors)