354 F. Supp. 3d 690 | E.D. Va. | 2018
This matter comes before the Court on Georgia Vocational Rehabilitation Agency Business Enterprise Program ("GA-SLA") and Michael C. Lee's ("Mr. Lee") (collectively "Plaintiffs' ") Motion for Temporary Restraining Order (the "Motion"). Doc. 2. A hearing in this matter was held on Tuesday, December 4, 2018 at 11:00 a.m. For the reasons stated below, the Court GRANTED Plaintiffs' Motion.
I. BACKGROUND
A. Factual Allegations
Plaintiffs
The contract was to be awarded by contracting officer, Rhoda C. Harrison-Spence (the "Contracting Officer"), who is Mission and Installation Contract Command at Fort Eustis, VA. Id. GA-LSA submitted a proposal on behalf of Mr. Lee in response to the Solicitation. Compl. ¶¶ 24. On August 17, 2018, the Contracting Officer rejected the GA-LSA's proposal because their "price was determined to be unreasonably high." Compl. ¶ 25
*693On November 26, 2018, Plaintiffs filed a complaint for arbitration with the Secretary of Education. Doc. 1-3 ("Compl. Ex. C."). Plaintiffs claim that the Contracting Officer violated the RSA by failing to consult with the Secretary of Education before denying Plaintiffs' proposal, Compl. ¶ 28, which failure is governed in the improper computation of the competitive range of bids.
B. Procedural History
On August 17, 2018, the Government rejected Plaintiffs' proposal. On August 22, 2018, Plaintiffs filed a protest with the Government Accountability Office ("GAO") challenging their exclusion, which triggered a stay preventing the Government from awarding the contract to someone else. Doc. 12-1 ("Spence Decl.") ¶ 9. On November 23, 2018, the GAO dismissed Plaintiffs' protest. Id. On November 26, 2018, Plaintiffs filed a complaint for arbitration with the Secretary of Education and filed a complaint for Temporary Restraining Order and Preliminary Injunction with this Court. Compl.
On November 27, 2018, Plaintiffs filed their Motion for Temporary Restraining Order. Doc. 2. The Government appeared in the matter and filed a Notice on November 29, 2018. Docs. 6, 7. On November 30, 2018, this Court entered an Order requiring the Government to file its response on or before 12:00 p.m. on December 3, 2018, and on December 3, 2018 the Government promptly filed its response. This matter was heard on December 4, 2018 at 11:00 a.m.
II. LEGAL STANDARD
Under Rule 65 of the Federal Rules of Civil Procedure, the court may issue a preliminary injunction after notice has been provided to an adverse party. Fed. R. Civ. P. 65. "The standard for granting either a TRO or a preliminary injunction is the same." Sarsour v. Trump,
Accordingly, for the Court to grant a motion for a temporary restraining order the moving party must demonstrate "that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." Id (citing Winter v. Natural Res. Def. Council, Inc.,
III. ANALYSIS
A. Summary of Argument
Plaintiffs move this Court to enter an Order temporarily restraining the Government from:
(a) moving forward with the procurement process with respect to the subject Solicitation, including but not limited to *694making award of a contract to an offeror other than the GA-SLA, entering into such a contract, or initiating performance under such contract until
(i) a hearing has been held on a preliminary injunction and the Court's orders with respect thereto have been issued,
(ii) an arbitration pursuant to the Randolph-Sheppard Act ("R-S Act") has been conducted and the R-S Act arbitration panel has issued a decision with respect to the GA-SLA's Complaint for Arbitration alleging the Army's violation of the R-S Act arbitration decision, and
(iii) the Court has had the opportunity to review said decision as a final agency action in accordance with the Administrative Procedure Act,5 U.S.C. §§ 701 et seq. and issued orders with respect thereto; and
(b) awarding a contract to an offeror other than GA-SLA until (i) a hearing on preliminary injunction and the Court's orders with respect thereto as to whether the Army has fully complied with Army Regulation 210-25, subparagraph 6.b.(1)(c), particularly as regards the requirement for the Army's requesting, receiving, and complying with the approval or agreement of the Secretary of Education pursuant to AR 210-25 pertaining to the subject Solicitation.
Doc. 3 at 1-2. This matter arises under the RSA, which provides, in relevant part:
In authorizing the operation of vending facilities on Federal property, priority shall be given to blind persons licensed by a State agency ... [and] [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. A determination made by the Secretary pursuant to this provision shall be binding on any department, agency, or instrumentality of the United States affected by such determination. The Secretary shall publish such determination, along with supporting documentation, in the Federal Register.
Plaintiffs argue that when the Contracting Officer denied their proposal "without seeking and obtaining a determination by the Secretary as to reasonableness of cost" the Government "usurped the Secretary's sole authority to determine price reasonableness." Doc. 3 at 5. Plaintiffs also argue that the Government applied the wrong standard in assessing the reasonableness of cost by not consulting the Secretary of Education.
Whenever any State licensing agency determines that any department, agency, or instrumentality of the United States that has control of the maintenance, operation, and protection of Federal property is failing to comply with the provisions of this chapter or any regulations issued thereunder (including a limitation on the placement or operation of a vending facility as described in section 107(b) of this title and the Secretary's determination thereon) such licensing agency may file a complaint with the Secretary who shall convene a panel to arbitrate the dispute pursuant to section 107d-2 of this title, and the decision of such panel shall be final and binding on the parties except as otherwise provided in this chapter.
20 U.S.C. § 107d-1. Once the Secretary receives any such complaint, the Secretary "shall convene an ad hoc arbitration panel *695... give notice, conduct a hearing, and render its decision which shall be subject to appeal and review as a final agency action for purposes of [the APA]" 20 U.S.C. § 107d-2. If the panel finds that an act or practice of an agency or department violates the RSA, then the head of that department is instructed to terminate the act or practice and take "such other action as may be necessary to carry out the decision of the panel."
B. The Court's Jurisdiction and Authority to Grant Relief Under Rule 65 of Federal Rules of Civil Procedure
Before reaching the merits of Plaintiff's argument, Defendant alleges: 1) that the Court lacks jurisdiction to act in the dispute; and 2) that relief under Rule 65 of the Federal Rules of Civil Procedure is improper.
Defendant questions whether Plaintiffs' allegations are sufficient to establish this Court's jurisdiction to issue a TRO. Doc. 12 at 9, n.7 (citing Di Biase v. SPX Corp.,
Neither party cites binding case law from the Fourth Circuit addressing whether the Court has jurisdiction to enter a preliminary injunction in a matter arising under the RSA that is pending arbitration. However, Plaintiff cites case law from courts within the Fifth, Sixth, Tenth and Ninth Circuits where courts have determined that a court may exercise its jurisdiction to grant injunctive relief to a plaintiff pending review of an arbitration panel. See Doc. 3 (citing Commonwealth of Kentucky, Education and Workforce Development Cabinet, Office for the Blind v. United States ex rel. Hagel,
In Kentucky, a plaintiff filed a motion and complaint for temporary restraining order and preliminary injunction to prohibit the government from awarding a contract while the parties completed arbitration under 20 U.S.C. 1073 -1 of the RSA. Kentucky,
Plaintiffs contend that "[i]f the Army wrongfully deprives [Plaintiffs] of its rights [to] a meaningful arbitration with the Army concerning alleged violation of the R-S Act by awarding a contract to another offeror before an arbitration decision, [Plaintiffs] will have no adequate remedy at law even if [Plaintiffs] prevail[ ] in the arbitration." Doc. 3 at 10 (citing United International Investigative Services, Inc. v. United States,
Defendant also argues that Plaintiffs cannot request relief under Rule 65 of the Federal Rules of Civil Procedure because "their Complaint contains no independent claim for relief." Doc. 12 at 10. Defendant contends that Plaintiff cannot plead a claim for relief under the Administrative Procedure Act ("APA") because they lack standing to bring a claim under the APA as the panel has not yet provided an arbitration decision for them to review. Doc. 12 at 10 (citing Compl. ¶ 79d (Plaintiffs "pray for ... relief" including "[t]hat this Court maintain jurisdiction over the injunction pending a decision in the R-S Act arbitration in order to review such decision as a 'final agency action' pursuant to the [APA] and to consider applications by the parties based upon such arbitration decision.").
The Court finds that the case law cited by Plaintiffs is persuasive, and that it may exercise its jurisdiction to issue a temporary restraining order or preliminary injunction in this matter. The Government's arguments that the Court has no jurisdiction *697are unavailing as postponing the Court's decision for one year or more
C. Merits of Injunctive Relief
i. Likelihood of Success on the Merits
To show that their substantive claim-that the Government violated the R-S Act by not referring the issue of price reasonableness of [their] proposal to the Secretary of Education for her binding determination-is likely to succeed on the merits, Plaintiffs point to the merits of two decisions of R-S Act arbitration panels. Doc. 3 at 12 (citing Kansas v. United States,
In the Colorado Arbitration, the State Licensing Agency was eliminated from the competitive range because of price, and the Air Force did not consult with the Secretary of Education at any time about the issue of price reasonableness. The arbitration panel found that "the Air Force Violated
Defendant urges the Court not to follow the guidance provided by Plaintiff in the two RSA arbitration panel rulings as these rulings are "not binding precedent on other arbitration panels, let alone federal courts." Doc. 12 at 20. Defendant argues that Plaintiff would also fail on the merits of its claim because Plaintiff has not shown a clear likelihood of success as the statute relied on by Plaintiffs does not require the relief they are requesting in arbitration. Doc. 12 at 15. Defendant also attacks Plaintiff's argument that Defendant was required to "refer the issue of whether Plaintiff's bid was reasonable to the Secretary of Education rather than excluding Plaintiffs' bid after the Army determined the bid was not competitive." Doc. 12 at 16. Defendant cites sections (a) and (b) of 34 C.F.R. 395.33, which state:
(a) Priority in the operation of cafeterias by blind vendors on Federal property shall be afforded when the Secretary determines, on an individual basis, and after consultation with the appropriate property managing department, agency, or instrumentality, that such operation can be provided at a reasonable cost, with food of a high quality *698comparable to that currently provided employees, whether by contract or otherwise. Such operation shall be expected to provide maximum employment opportunities to blind vendors to the greatest extent possible.
(b) In order to establish the ability of blind vendors to operate a cafeteria in such a manner as to provide food service at comparable cost and of comparable high quality as that available from other providers of cafeteria services, the appropriate State licensing agency shall be invited to respond to solicitations for offers when a cafeteria contract is contemplated by the appropriate property managing department, agency, or instrumentality. Such solicitations for offers shall establish criteria under which all responses will be judged. Such criteria may include sanitation practices, personnel, staffing, menu pricing and portion sizes, menu variety, budget and accounting practices. If the proposal received from the State licensing agency is judged to be within a competitive range and has been ranked among those proposals which have a reasonable chance of being selected for final award, the property managing department, agency, or instrumentality shall consult with the Secretary as required under paragraph (a) of this section. If the State licensing agency is dissatisfied with an action taken relative to its proposal, it may file a complaint with the Secretary under the provisions of § 395.37.
As noted in the CFR, the Government was only required to consult the Secretary after a determination that the bid was "judged to be within a competitive range." Id (citing N. Carolina Div. of Servs. For Blind v. United States,
AR 210-25 contains similar language. Doc. 12 at 18 (citing AR 210-25 6b(1)(a) ("If the [SLA] submits a proposal and it is not within the competing range established by the contracting officer, award may be made to another offeror following normal procurement procedures ...").
At the hearing, the Government argued that its determination of the competitive range was consistent with the Federal Acquisition Regulation ("FAR") which describes the process by which the Government is to determine the competitive range. See
The FAR also provides instructions for how the Government is required to determine cost or price evaluation, see
In section 15.306(c), the FAR provides: "[i]f the contracting officer, after complying with paragraph (d)(3) of this section, decides that an offeror's proposal should no longer be included in the competitive range, the proposal shall be eliminated from consideration for award."
At a minimum, the contracting officer must, subject to paragraphs (d)(5) and (e) of this section and 15.307(a), indicate to, or discuss with, each offeror still being considered for award, deficiencies, significant weaknesses, and adverse past performance information to which the offeror has not yet had an opportunity to respond. The contracting officer also is encouraged to discuss other aspects of the offeror's proposal that could, in the opinion of the contracting officer, be altered or explained to enhance materially the proposal's potential for award. However, the contracting officer is not required to discuss every area where the proposal could be improved. The scope and extent of discussions are a matter of contracting officer judgment.
Based on the evidence currently before the Court it appears that the Government did not appropriately compute the competitive range in at least two respects: 1) it does not appear that the Government selected "an evaluation team" as required, and 2) it does not appear that the Government conferred with the bidder before determining that its bids were not competitive. It also appears that the total bid is potentially meaningless. Under the Government's indefinite delivery-indefinite quality ("IDIQ") contract, Plaintiffs are paid monthly based on the number of meals served. The contract price is not paid based on the bid itself and by necessity varies with the number of meals served and the locations at which they are served. The Government gives as its reasoning for not exercising the third-year option on Plaintiffs' contract on the fact that the projected monthly cost would exceed the total bid over the full thirty-five-month period. Again, based on the evidence obtained by the Court, this situation appears to arise from the Government's failure to project accurately the number of meals served and the number of locations. At this point it further appears from the evidence, at least as to the number of meals to be served, that it is again underestimated.
Accordingly, it does not appear to the Court that the competitive range as to the overall price has been accurately projected, thus making the Government's determination procedurally deficient as well as substantively questionable. The importance of the requirement that the Contracting Officer meet with the Plaintiffs is made clear by Mr. Lee's testimony that based upon current information, the number of meals, and potentially the number of locations, may have been substantially understated in the Government's projections. The Government argues that it will potentially cost the Government a significantly extra monthly cost based upon Plaintiff's existing contract as opposed to the lower bid of the proposed new contract. In weighing the evidence on this issue, the Court should consider the prospective meal costs under the existing contract, the proposal Plaintiff's proposal for a new contract, as well as under the bid which the Government proposes to accept *700effective January 1, 2019. Accordingly, the Court DIRECTS Plaintiffs and Defendant to furnish that information as to Plaintiffs' current contract as well as its bid for the new contract by Tuesday, December 11, 2018. The Government is expected to furnish the contract for the bid which it proposes to accept. Due to the confidentiality of this information, the Court ORDERS that it be furnished under seal, or if for any reason it is not furnished under seal, it will not be treated as a public document, but will be returned to the Government.
ii. Irreparable Harm
Plaintiffs contend that they will suffer irreparable harm if the Court does not grant a temporary restraining order, and ultimately a preliminary injunction, as they may not recover damages for loss of profits even if they prevail in arbitration, and that such loss of profit is sufficient to establish irreparable harm. Doc. 3 at 15 (citing Hospital Klean of Texas, Inc. v. United States,
Defendant contends that Plaintiffs' "dissatisfaction with the remedies Congress chose to provide ... does not make those remedies inadequate or amount to irreparable harm." Doc. 12 at 22 (citing Randolph-Sheppard Vendors of Am. v. Weinberger,
Defendants candidly admitted at the hearing that, while the right of first refusal applies for qualified employees, it does not *701apply to the forty-five managers that Mr. Lee currently employs or to Mr. Lee himself. Further, if the new vendor decides to reduce the work force, the right of first refusal may not be extended to all qualified employees.
Based on the evidence presented before the Court, it appears that Plaintiff will likely suffer irreparable harm.
iii. Balance of Equities and Public Interest
Plaintiffs argue that the balance of equities tips in their favor. In support of their argument, they proffer that they are "prepared to continue performing the existing food service contract at Ft. Benning" and that "granting injunctive relief will not cause any interruption in food services being provided to the Army." Doc. 3 at 17 (citing Hawaii at *8-9 ; Kansas,
Defendant contends that the balance of equities requires a heightened review that is "even more searching" than the usual determination of whether an injunction will "preserve the status quo" because Plaintiffs' relief is "mandatory in nature" in that it would require the Government to remain bound to a contract beyond its expiration date. Doc. 12 at 26-27; see also Doc. 12 at 28 (citing Omega World Travel, Inc. v. Trans World Airlines,
The Government also argues that the interests of prospective new vendor, service-disabled veteran owned business, should be considered as they won the competitive solicitation and any delay harms them.
While the Government points to its financial interests, the balance of equities and public interest in granting a temporary restraining order weigh in favor of Plaintiffs as Plaintiffs will suffer the loss of major funds for programs that train blind vendors and will potentially cause the termination of employees, including those at the management level.
IV. CONCLUSION
The Court FINDS that the evidence presently before the Court supports a likelihood that Plaintiffs will succeed on the merits, that Plaintiffs will suffer irreparable *702harm, and that the balance of equities and public interests weigh in favor of granting Plaintiffs' Temporary Restraining Order. Accordingly, the Court GRANTS Plaintiffs' Motion for Temporary Restraining Order, Doc. 2, and ENJOINS Defendant from awarding a new contract to replace Plaintiffs' existing contract until after December 14, 2018, at which time the Court will conduct a full hearing on Plaintiffs' Complaint for Preliminary Injunction.
The Court ORDERS Plaintiffs to post a nominal $ 1,000 cash bond pending the Court's hearing on Plaintiffs' Complaint for Preliminary Injunction.
The Clerk is REQUESTED to send a copy of this Order to all counsel of record.
It is so ORDERED.
At the hearing, the Government raised an issue regarding Plaintiff Lee's standing, however this is a moot point. The Government concedes that the GA-SLA has standing, and any damage to Mr. Lee would inevitably damage the GA-SLA.
The Army's determination that GA-SLA's bid was too high was based on a competitive range allegedly established under the Federal Acquisition Regulation ("FAR"). The competitive range is discussed in greater detail below.
The Government candidly admitted that it would probably take at least one year to complete arbitration.