STATE OF NORTH CAROLINA DIVISION OF SERVICES FOR THE BLIND V. UNITED STATES DEPARTMENT OF EDUCATION REHABILITATION SERVICES ADMINISTRATION
1:17-cv-01058
M.D.N.C.Aug 23, 2019Background
- NCDSB (State SLA) administers the Randolph‑Sheppard Act (RSA) Business Enterprises Program; blind vendor Lloyd Hooks competed for an I‑85 rest stop vending contract.
- An interview panel scored applicants; Hooks appealed through BEP procedures, lost in internal hearings, then filed an RSA complaint with the Department of Education which convened an arbitration panel.
- A divided arbitration panel found the SLA violated the regulation requiring a "give and take" interview, ordered deletion of discretionary interview points, reconstitution of the original panel to reinterview all eight applicants, and conditioned assignment of the site and compensatory damages on Hooks winning the reinterview; the panel also awarded attorney’s fees in a supplemental award.
- NCDSB sought judicial review under the Administrative Procedure Act (APA); Hooks sought confirmation of the arbitration awards.
- Magistrate Judge Auld recommended: affirm arbitration findings that (1) the SLA failed to conduct the required give‑and‑take interview, (2) an interviewer (Eller) relied on undisclosed information in awarding discretionary points, (3) deletion and re‑award of discretionary points and reinterviews; vacate arbitration insofar as it authorized compensatory damages and vacate the panel’s order requiring disclosure of certain financial records; affirm award of attorney’s fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can an RSA arbitration award compensatory damages against a State (Eleventh Amendment)? | Eleventh Amendment bars compensatory damages and fee awards against state SLA; sovereign immunity not waived by participation. | Participation as SLA waived sovereign immunity; arbitration traditionally permits compensatory awards. | RSA is ambiguous as to remedies; under Sossamon and related precedent, waiver must be unambiguous. The court recommended vacating the award insofar as it authorizes compensatory damages. |
| Are attorney’s fees barred by Eleventh Amendment in RSA arbitration? | Fees are barred like damages. | Fees are recoverable as ancillary to prospective equitable relief; Almond supports fee awards in RSA context. | Fees ancillary to equitable relief are permissible under Supreme Court precedent (Hutto) and Fourth Circuit precedent (Almond); the fee award was affirmed. |
| Did the SLA violate the state regulation by not conducting a "give and take" interview and by allowing undisclosed considerations to inform discretionary points? | SLA contends regulation permits single face‑to‑face event where oral exam and interview are effectively the same; deference to SLA practice. | Hooks: regulation unambiguously requires two parts — a 10‑question oral exam and a separate give‑and‑take interview; undisclosed considerations cannot be used for discretionary points. | Regulation unambiguously requires separate oral exam and give‑and‑take interview; record shows no give‑and‑take occurred and Eller considered undisclosed information; arbitration findings were affirmed. |
| Did the arbitration panel properly order disclosure of facility financial data over confidentiality rules? | SLA resists disclosure as inconsistent with confidentiality rules and argues the panel exceeded authority regarding DOE and administrative provisions. | Hooks: 20 U.S.C. §107b‑1(1) requires SLAs to provide access to relevant financial data; confidentiality regs conflict with statute. | The panel’s reasoning was not clearly established; distinctions between "operation" and "administration" of the program and sovereign immunity issues counsel against enforcing the panel’s order to set aside confidentiality regulations; that portion was vacated. |
Key Cases Cited
- Delaware Dep’t of Health & Servs. v. United States Dep’t of Educ., 772 F.2d 1123 (3d Cir.) (RSA arbitration panels may award compensatory damages and states waived immunity by agreeing to arbitration)
- Tyler v. United States Dep’t of Educ., 904 F.3d 1167 (10th Cir.) (RSA is ambiguous as to monetary remedies; state did not waive Eleventh Amendment immunity for damages)
- Sauer v. United States Dep’t of Educ., 668 F.3d 644 (9th Cir.) (recognizing authority of RSA panels to award compensatory relief in prior precedent)
- Tennessee Dep’t of Human Servs. v. United States Dep’t of Educ., 979 F.2d 1162 (6th Cir.) (RSA arbitration panels may award retroactive damages but enforcement in federal court implicates Eleventh Amendment)
- Almond v. Boyles, 792 F.2d 451 (4th Cir.) (upholding award of attorneys’ fees ancillary to equitable relief in RSA challenge)
- Sossamon v. Texas, 563 U.S. 277 (2011) (waiver of sovereign immunity must be unequivocal; waivers strictly construed)
- Hutto v. Finney, 437 U.S. 678 (1978) (attorney’s fees ancillary to prospective equitable relief are not barred by Eleventh Amendment)
- Kisor v. Wilkie, 139 S. Ct. 2400 (2019) (deference to agency interpretations is appropriate only if regulation is genuinely ambiguous and the agency's position is authoritative)