COMMONWEALTH OF KENTUCKY, EDUCATION CABINET, DEPARTMENT FOR THE BLIND, v. UNITED STATES
05-5010
United States Court of Appeals for the Federal Circuit
September 21, 2005
Before SCHALL, Circuit Judge, ARCHER, Senior Circuit Judge, and BRYSON, Circuit Judge.
Appealed from: United States Court of Federal Claims, Judge Lawrence J. Block
James W. Poirier, Trial Attorney, Commercial Litigation Branch, Civil Division, of Washington, DC, argued for defendant-appellee. With him on the brief were Peter D. Keisler, Assistant Attorney General, David M. Cohen, Director and Bryant G. Snee, Assistant Director.
BRYSON, Circuit Judge.
In October 2003, the Department of the Army issued a solicitation for bids on a contract to provide services for a military cafeteria at Fort Campbell, Kentucky. The solicitation indicated that the contract was subject to the Randolph-Sheppard Act,
The Kentucky Department for the Blind (“KDB”), a state licensing agency under the RSA, submitted a bid on the contract. The Army classified KDB’s past performance as “Very Good,” the same rating that most of the other bidders received. The Army also classified the cost of KDB’s bid as “Satisfactory.” However, three other companies’ bids contained a lower price than KDB’s bid. The contracting officer subsequently determined that only the three lowest prices fell within the “competitive range.” Because KDB’s bid was not one of the three lowest, it was deemed to be outside the competitive range. KDB’s bid therefore did not receive preferential treatment, and KDB was not awarded the contract.
After the contract was awarded, KDB requested a debriefing on the bidding process. From the debriefing, KDB learned that it was placed outside the competitive
On the government’s motion, the trial court dismissed KDB’s complaint for lack of jurisdiction. Kentucky v. United States, 62 Fed. Cl. 445 (2004). Because KDB’s complaint had a “reasonable nexus” to the RSA, the court held that KDB was required to exhaust its administrative remedies under the Act by asking the Secretary of Education to convene an arbitration panel to resolve the dispute. KDB appeals that dismissal, arguing that its complaint did not raise a claim under the RSA and thus arbitration is inappropriate and unavailable. In addition, KDB argues that even if its claims fall within the scope of the RSA, arbitration is not mandatory under the RSA, but is an optional procedure that state licensing agencies can invoke as an alternative to other judicial and administrative remedies.
I
The RSA contains two provisions for arbitration of disputes arising under the Act. Section 107d-1(a) provides that any vendor who is dissatisfied with “any action arising from the operation or administration of the vending facility program . . . may file a complaint with the Secretary who shall convene a panel to arbitrate the dispute” after first complaining to the state licensing agency.
Section 107d-1(b) clearly limits the types of grievances that are subject to the RSA arbitration scheme. Only when the state licensing agency determines that the federal agency is “failing to comply with the provisions of this chapter or any regulations issued thereunder” is arbitration allowable. See
described in . . . this title.” Section 107d-2 further emphasizes that the arbitration panel may act only if it “finds that the acts or practices of any [federal agency] are in violation of this chapter, or any regulation issued thereunder.”
The legislative history of the RSA bears out that interpretation of the statute. Although the RSA was originally enacted in 1936, see Act of June 20, 1936, ch. 638, 49 Stat. 1559, the arbitration provisions were not incorporated into the RSA until 1974, see Randolph-Sheppard Act Amendments of 1974, Pub. L. No. 93-516, Title II, § 206, 88 Stat. 1617, 1626. Congress added the arbitration provisions because it determined that “State agencies are still without recourse from decisions of Federal agencies regarding blind vendor facilities on property they control.” S. Rep. No. 93-937, at 20 (1974). In other words, prior to the amendment blind vendors and state licensing agencies had no neutral forum in which to press claims of violations of the RSA that did not involve violations of contract rights or federal procurement provisions. See Wilson v. Watson, 309 F. Supp. 263, 271 (D. Kan. 1968), aff‘d, 422 F.2d 866 (10th Cir. 1970). The arbitration provisions closed that gap, providing a “means by which aggrieved vendors and State agencies may obtain a final and satisfactory resolution of disputes” under the RSA. S. Rep. No. 93-937, at 20.
Apart from the purpose and history of the arbitration provision, it would be odd to interpret the statute to direct vendors and state licensing agencies into RSA arbitration even if their complaints had nothing to do with a federal agency’s violation of the RSA. The arbitration system is administered by the Department of Education, which has expertise in the RSA, but no special expertise in general matters of federal procurement law. For claims relating to procurement disputes not based on the RSA and its regulations, there would be no reason to bypass conventional bid protest and federal
Decisions from other circuits support the conclusion that the statutory arbitration remedy applies only if the state licensing agency claims a violation of the RSA. In Maryland State Department of Education v. U.S. Department of Veteran Affairs, 98 F.3d 165 (4th Cir. 1996), the Fourth Circuit construed the RSA’s arbitration provisions in a case in which the Department of Veteran Affairs refused to comply with the decision of a RSA arbitration panel. The Fourth Circuit noted that “the plain language of § 107d-2(b)(2) limits the authority of an arbitration panel convened under § 107d-1(b) to a determination of whether the acts of the federal entity ‘are in violation’ of the substantive provisions of the Act.” Id. at 169. In fact, the court held that determining if there was a violation of the RSA was the sole responsibility of the arbitration panel. Id.; see also Minn. Dep’t of Econ. Sec. v. Riley, 107 F.3d 648, 650 (8th Cir. 1997) (The RSA arbitration panel “decided competing VCS vending machines at the VA Medical Center would violate the Act. The Panel did exactly what the statute authorizes.”). In sum, it is clear that only claims that allege a violation of the RSA fall within the scope of RSA-prescribed arbitration.
Although we construe the RSA’s arbitration provisions more narrowly than the trial court, KDB’s complaint alleges a violation of the RSA even under our narrower interpretation. KDB’s complaint hinges on the contracting officer’s exclusion of KDB’s bid from the solicitation’s “competitive range.” KDB’s first amended complaint alleges that the contracting officer “abused her discretion and eliminated the KDB, knowing that if the KDB was included in the competitive range, the KDB was required to receive the
II
KDB contends that even if its claims fall under the RSA, the RSA’s arbitration scheme is not mandatory. KDB points to the language of section 107d-1, which states that a “licensing agency may file a complaint with the Secretary who shall convene a panel to arbitrate the dispute.”
KDB’s argument is not without some force. The Supreme Court has noted that “the word ‘may,’ when used in a statute, usually implies some degree of discretion.” United States v. Rodgers, 461 U.S. 677, 706 (1983); see also McBryde v. United States, 299 F.3d 1357, 1362 (Fed. Cir. 2002).
As we noted above, Congress enacted the arbitration provisions to provide state licensing agencies and blind vendors a neutral forum in which to bring allegations that federal agencies had violated the RSA. Congress intended that arbitration would be “the means by which aggrieved vendors and State agencies may obtain a final and satisfactory resolution of disputes.” S. Rep. No. 93-937, at 20. The RSA sets out in detail how arbitration panels will be chosen, the rules that will govern the arbitration, and who shall bear the costs of the arbitration. See
It is especially noteworthy that Congress stated that the decision of the arbitration panel would be the “final and binding” resolution of the state licensing agency’s complaint and that the arbitration decision would be reviewable by a court as final agency action. Congress provided that arbitration decisions would be reviewed under the standards set forth in the Administrative Procedure Act, i.e., that a court would set aside the arbitration decision only if it was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”
Other circuits have agreed that the arbitration of RSA complaints is mandatory. In Fillinger v. Cleveland Society for the Blind, 587 F.2d 336 (6th Cir. 1978), the Sixth Circuit held that before blind vendors could bring a district court action under the RSA against the state licensing agency, the vendors had to exhaust their administrative
Only one court appears to have found that the RSA’s arbitration scheme is permissive. In Texas State Commission for the Blind v. United States, 6 Cl. Ct. 730, 735 n.12 (1984), the Claims Court commented that arbitration was permissive under the RSA. In that case, however, the parties had already arbitrated the dispute. Id. at 736. The court’s statement that the parties were not required to arbitrate was therefore dictum. Moreover, that decision is not binding on us, and we find the reasoning of the Sixth and D.C. Circuits more persuasive. Accordingly, we hold that for claims brought under the RSA, arbitration is mandatory. Because KDB did not exhaust that mandatory
Each party shall bear its own costs for this appeal.
AFFIRMED.