KWV, INC., Plaintiff, v. UNITED STATES, Defendant.
No. 12-882C
United States Court of Federal Claims.
January 25, 2013
Filed Under Seal: January 18, 2013
For example, the Government has introduced evidence that various oil companies, including but not limited to the Plaintiffs (or their predecessors-in-interest) in this action, successfully disposed of acid waste by means other than dumping—such as reprocessing or burning—throughout the course of the war. JA 512-14 (Stips. 500-12). However, the facts in the record do not necessarily allow the Court to extrapolate the extent to which the Oil Companies had, as an overall matter, access to reprocessing facilities, nor about their ability to safely (if not cleanly) burn any remaining acid waste that could not be reprocessed. Conversely, the Oil Companies point to a few instances in which certain Plaintiffs sought federal permission to build additional acid reprocessing facilities, but were denied or frustrated in these plans. JA 452-53, 456-57, 461-67, 635. Similarly, were it to resolve the question of what portion of the Oil Companies’ CERCLA costs were incurred “by reason of” their avgas production, the Court would desire additional information about these events, the proposed capacities of the never-built facilities, and their likelihood of completion within a time frame relevant to the use of the McColl site.
In any event, the Court reiterates that resolution of these questions (among other similar ones) is not, in the end, necessary to its disposition of this matter. To the contrary, the Court has found three other, independent bases for dismissing the Oil Companies’ claims as a matter of law and entering judgment in favor of the Government. Consequently, the Court need not further address or require the evidentiary proceedings that would be necessary to resolve the “by reason of” factual issue.
Conclusion
Based upon the foregoing, the Court DENIES the Oil Companies’ motion for summary judgment, and GRANTS the Government‘s cross-motion for summary judgment. The Clerk of Court is directed to enter judgment in favor of the Government. No costs.
IT IS SO ORDERED.
Alexis J. Echols, United States Department of Justice, Washington, D.C., for defendant. With her on the briefs were Stuart F. Delery, Principal Deputy Assistant Attorney General, Jeanne E. Davidson, Director, and Kenneth M. Dintzer, Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C. Of counsel were Dennis Foley, Counselor to the Assistant General Counsel, and Aleia Barlow, General Attorney, Office of the General Counsel, United States Department of Veterans Affairs.
Pre-award bid protest; motion for preliminary injunction; disparate intra-agency decisions regarding the level of control exercised by a veteran owning a small business; evidence of “control” within the meaning of
OPINION AND ORDER1
LETTOW, Judge.
Pending before the court is plaintiff‘s motion for a preliminary injunction in this pre-award bid protest. On February 7, 2012, plaintiff, KWV, Inc. (“KWV“), had obtained a determination from the Department of Veterans Affairs’ (“VA‘s“) Center for Veterans Enterprise (“CVE“) that it was a qualified veteran-owned small business (“VOSB“) concern eligible to participate in VA‘s Veterans First Contracting Program, which accords priority to VOSBs and service-disabled veteran-owned small businesses (“SDVOSBs“) for contracting opportunities. Nonetheless, after KWV had ostensibly won an award of a contract as a VOSB, an agency protest by a losing bidder resulted in a decision by VA‘s Office of Small and Disadvantaged Business Utilization (“OSDBU“) that KWV “d[id] not
FACTS3
KWV is a close corporation under
Mr. Maron served in the Korean War from 1952 to 1954, at which time he was honorably discharged. Compl. ¶ 13. Following his discharge, he worked as a carpenter and estimator at various construction companies, and in 1977 he and his wife founded Maron Construction Incorporated. AR 513; Compl. ¶ 14.5 Mr. Maron led that firm‘s operations until he retired and his children took over management. AR 162. On October 31, 2008, however, he incorporated KWV, a new company, to operate as a VOSB. Compl. ¶¶ 16-17. At that time, the Veterans First Contracting Program functioned on a self-certification basis, and KWV won and performed two or three projects as a self-certifying concern. AR 508-09, 540. A verification program was established by VA in 2010, and on January 14, 2011, KWV applied for inclusion in the VA VetBiz Vendor Information Pages (“VIP“) Verification Program as a VOSB. Compl. ¶ 19. KWV‘s application was initially denied on September 22, 2011, because KWV‘s incorporation documents indi-
After its verification as a VOSB, KWV proceeded to bid on contractual opportunities provided by VA for the Boston Health Care System (“BHS“). Compl. ¶¶ 1, 45. As a self-certifying entity, KWV had previously secured Contract Nos. VA241-C-1312 and VA523-C07071, both related to the West Roxbury VA Medical Center, see AR 508-09, which qualified it to bid on posted solicitations under the BHS project in 2012. KWV was subsequently awarded Task Order No. VA241-12-J-1036 (part of Solicitation No. VA-241-12-R-0563) on July 11, 2012. Compl. Ex. 4 (Award Letter from Athena Jackson to Thomas Maron (July 11, 2012)).
On August 4, 2012, Alares, LLC (“Alares“), a disappointed bidder, filed a formal protest with VA, alleging that Mr. Maron did not in fact control KWV. AR 518. This protest posited that Mr. Maron‘s two non-veteran sons, David and Thomas Maron, were the true controlling owners of KWV, evidenced in part by the fact that Mr. Maron resides in Florida for a substantial part of the year. AR 519.
OSDBU initiated an investigation into KWV‘s qualifications as a VOSB. KWV submitted a response explaining its operating posture, accompanied by Mr. Maron‘s tax statements, a Rhode Island condominium deed and recent utility bills in his name, KWV‘s By-Laws and Operating Agreement, a copy of the original VA verification letter, and photographs of KWV‘s headquarters’ location. AR 538-66. KWV averred that Mr. Maron indeed resided in Florida but that he spent just short of one-half of each year at his home in Rhode Island. AR 540. KWV‘s response detailed the methods by which Mr. Maron managed KWV on a day-to-day basis during the times he was in Florida, using telephone, e-mail, and other electronic means. Id. OSDBU did not conduct a site visit during this investigation, and did not conduct any interviews with Mr. Maron or other KWV employees. Compl. ¶ 53. On October 24, 2012, OSDBU sustained the protest and disqualified KWV from participation in the Veterans First Contracting Program. AR 568-71. The decision was framed in terms of whether KWV qualified as a valid SDVOSB, a designation which was neither claimed by KWV nor contested by Alares. AR 568.7
OSDBU found that Mr. Maron satisfied the majority ownership requirements to be a SDVOSB, but it concluded that Mr. Maron did not have enough control over the day-to-day management of KWV because of his Florida residency. AR 569-71. As a result of the revocation of its VOSB eligibility, KWV‘s awarded contract was terminated, and its pending and future proposals for other VOSB projects (including five under the BHS Multiple Award Task Order Contract No. VA241-C-1312) were disqualified. See AR 571 (“[KWV] cannot submit another offer as a VOSB or SDVOSB on a future VOSB or SDVOSB procurement under [
On December 14, 2012, KWV filed a pre-award bid protest action in this court, alleging that OSDBU‘s determination was unreasonable and contrary to law, and seeking
JURISDICTION
Under the Tucker Act as amended by the Administrative Dispute Resolution Act,
[T]he United States Court of Federal Claims ... shall have jurisdiction to render judgment on an action by an interested party objecting to a solicitation by a Federal agency for bids or proposals for a proposed contract or to a proposed award or the award of a contract or any alleged violation of statute or regulation in connection with a procurement or a proposed procurement.... [T]he United States Court of Federal Claims ... shall have jurisdiction to entertain such an action without regard to whether suit is instituted before or after the contract is awarded.
KWV alleges that VA contravened its regulations governing VOSB eligibility through an unreasonable and inconsistent application of
DISCUSSION
A. Statutory and Regulatory Framework
The statutory predicate for the Veterans First Contracting Program is the Veterans Benefits Act, which provides in pertinent part that “[i]n procuring goods and services pursuant to a contracting preference under this title or any other provision of law,” VA “shall give priority to a small business con-
For some time, VOSB and SDVOSB entities certified themselves and self-registered in the VIP vendor database. Statutory amendments now set out at
The standards for initial certification and eligibility reevaluation are congruent respecting ownership and control because, as noted supra, Part 819 incorporates by reference Part 74 for guidance on “ownership and control issues.” Part 74 addresses ownership and control in great detail, couching the eligibility criteria in terms of what CVE considers to be qualifying. See
Part 74 also provides procedures for CVE to consider cancellation of VOSB status. Cancellation proceedings may be triggered by CVE “[w]hen CVE believes that a participant‘s verified status should be cancelled prior to expiration of its eligibility term.”
The agency bid-protest procedures in the VAAR are more cryptic but comparable. Protests relating to VOSBs or SDVOSBs “must be in writing and state specific grounds for the protest.”
(3) If the Executive Director sustains a service-disabled veteran-owned or veteran-owned small business status protest and the contract has already been awarded, then the contracting officer cannot count the award as an award to a VOSB or SDVOSB and the concern cannot submit another offer as a VOSB or SDVOSB on a future VOSB or SDVOSB procurement under this part, as applicable, unless it demonstrates to VA that it has overcome the reasons for the determination of ineligibility.
In this case, the divergent results produced by CVE and OSDBU cannot be attributed to the application of a disparate standard or to any procedural distinction.
B. Standards for Preliminary Injunction
The court must consider four factors when contemplating whether to grant a preliminary injunction: (1) likelihood of plaintiff‘s success on the merits, (2) irreparable harm to plaintiff if an injunction is not granted, (3) the balance of hardships, and (4) the public interest. Sciele Pharma Inc. v. Lupin Ltd., 684 F.3d 1253, 1259 (Fed. Cir. 2012); see also Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). Plaintiff must establish the existence of a reasonable likelihood of success on the merits and irreparable harm in the absence of an injunction, while the last two factors are not required but are weighed in the balance. See Altana Pharma AG v. Teva Pharm. USA, Inc., 566 F.3d 999, 1005 (Fed. Cir. 2009) (“Although the factors are not applied mechanically, a movant must establish the existence of both of the first two factors to be entitled to a preliminary injunction.“). A preliminary injunction is “an extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries the burden of persuasion.” Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (quoting 11A Charles Alan Wright et al., Federal Practice and Procedure § 2948, at 129-30 (2d ed. 1995)) (emphasis in the original).
1. Likelihood of success on the merits.
Plaintiff must demonstrate that it is more likely than not to succeed on the merits of its claim to qualify for a preliminary injunction. See Revision Military, Inc. v. Balboa Mfg. Co., 700 F.3d 524, 526 (Fed. Cir. 2012) (holding that for matters unique to the Federal Circuit, a preliminary injunction with the effect of altering the status quo must meet the standard of “more likely than not,” not a “clear or substantial likelihood” standard as required by certain other circuits in particular types of cases).
On the merits, KWV will have to prove that the government‘s decision was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.
In comparison, the OSDBU investigation appears to have been cursory. No site visit was conducted by OSDBU. See Hr‘g Tr. 10:2-10; 11:19-12:1 (Dec. 20, 2012). No interviews were conducted by OSDBU. Id. OSDBU afforded Mr. Maron an opportunity to respond to the protest but did not follow up with any questions or concerns it may have had. Much of the OSDBU decision is taken up by a word-for-word recitation of regulations found in Parts 819 and 74. AR 568-71. The findings themselves give few clues as to how OSDBU reached its decision, stating merely that “[b]ecause construction requires the direct supervision of the work to be performed, the location of the [veteran] is considered in determining whether the [veteran] controls an applicant construction company.” AR 570 (emphasis added). This statement is followed by a citation to a decision by the Small Business Administration‘s (“SBA‘s“) Office of Hearings and Appeals (“OHA“) and a summary of Alares’ bid protest allegations. Id. As will be discussed, the cited decision by SBA supports KWV‘s position, not that of OSDBU, and the protestor‘s allegations turn on tenuous inferences. Importantly, OSDBU never even purports to determine Mr. Maron‘s actual level of involvement in the control of KWV.
By contrast, CVE‘s detailed investigation focused on the extent and effectiveness of Mr. Maron‘s personal activities in relation to his control of KWV. Nevertheless, the government urges that the OSDBU decision should control because OSDBU knew Mr. Maron resides in Florida for just over half the year. Hr‘g Tr. 21:10–17 (Dec. 20, 2012). That fact, plus the general statement that “[t]he nature of construction requires on-site supervision and direct human contact to adequately complete projects,” constitutes the sum of OSDBU‘s rationale. AR 570.
The SBA decision, In the Matter of First Capital Interiors, Inc., SBA No. VET-112, 2007 WL 2438401 (2007) (”First Capital“), is instructive for what it decides as well as for what it does not decide. The decision concludes that a service-disabled veteran did not control the applicant construction firm. The veteran resided in Visalia, California, while the construction company was based in Chillicothe, Ohio. 2007 WL 2438401, at *1. OSDBU considered that the First Capital ruling was made simply “because [the veteran] lived thousands of miles from the [company‘s] headquarters.” AR 570. In actuality, SBA explicitly rejected the proposition that distance alone could determine control. First Capital, 2007 WL 2438401, at *7 (“[N]either OHA nor SBA maintains a concern cannot manage a job that is 2000 miles away from its headquarters.” (emphasis added)). Rather, SBA took into account additional factors that included the veteran‘s seemingly full-time residence three time zones away from the company‘s situs, the lack of a long-distance management infra-
Mr. Maron, unlike the veteran in First Capital, physically is present in Rhode Island, where KWV is based, for nearly half the year and spends the remainder of his time in Florida, both of which are in the same time zone. AR 540. While in Florida, Mr. Maron employs various electronic means to keep track of the day-to-day business of KWV. Id.; Pl.‘s Mem. at 16.12 KWV typically only performs one job at a time, with most of the work being performed when Mr. Maron is in Rhode Island. Id. Additionally, during periods he spends in Florida, Mr. Maron nonetheless travels to Rhode Island for “any meeting in which anything of importance is discussed.” AR 540. He has ample management experience in construction, as his work history shows. See AR 434. Mr. Maron currently maintains no other jobs or positions, allowing him to focus solely on KWV. See AR 434, 541. There is nothing in the record to suggest credibly that Mr. Maron could not meet the requirements of the control standard found in Part 74 and incorporated into Part 819, and the government has manifestly failed to articulate any other rationale for denying KWV VOSB status. OSDBU neither “provided a coherent and reasonable explanation of its exercise of discretion, Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324, 1333 (Fed. Cir. 2001), nor articulated a ‘rational connection between the facts found and the choice made.‘” Motor Vehicle Mfrs. Ass‘n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).
Based on the foregoing analysis, the court finds that plaintiff is more likely than not to succeed in proving that the government‘s actions were arbitrary and capricious or not in accordance with law.
2. Irreparable harm.
KWV contends that it will suffer irreparable harm by way of lost profits if it is not granted injunctive relief. Pl.‘s Mem. at 20-21. It has already suffered the loss of a contract worth more than one-and-one-half million dollars, which it had previously been awarded. Id. at 21.13 More drastically, KWV represents that the loss of future work as a VOSB is likely to result in its ultimate demise as a viable concern. Id. Removal from the VOSB list prevents it from bidding on any future VOSB set-aside contracts. KWV represents its understanding that re-verification as a VOSB takes between six months to one year, during which time it will lose substantial business and income. Id. The injunctive relief contemplated here (setting aside OSDBU‘s removal of KWV from the VIP database) would circumvent this type of harm because if it prevails, KWV would once again be eligible to compete for and to receive VOSB set-aside contracts.
If KWV succeeds in this suit, as the court finds to be likely, the available remedy would not encompass recoupment of lost profits, making lost profits an irreparable harm. See Hospital Klean of Tex., Inc. v. United States, 65 Fed. Cl. 618, 624 (2005) (“[A] disappointed bidder cannot recover lost profits.... Such loss of profit, stemming from a lost opportunity to compete for a contract on a level playing field has been found sufficient to constitute irreparable harm.“). In short, KWV will suffer irreparable harm if injunctive relief does not issue.
3. Balance of hardships.
The government has argued that setting aside OSDBU‘s removal of KWV
Given the severity of the irreparable harm KWV will suffer in the absence of relief and its likelihood of success on the merits of its claim, the court finds that the balance of hardships weighs in favor of granting a preliminary injunction.
4. Public interest.
The public has a strong interest in preserving the integrity of the procurement process. Bona Fide Conglomerate, Inc. v. United States, 96 Fed. Cl. 233, 242-43 (2010); SAI Indus. Corp. v. United States, 60 Fed. Cl. 731, 747 (2004). By ensuring that plaintiff has an opportunity to compete fairly in VOSB set-aside procurements, this public interest will be served.
CONCLUSION
For the foregoing reasons, KWV‘s motion for a preliminary injunction is GRANTED.
OSDBU‘s decision dated October 24, 2012, rendering KWV ineligible for awards of contracts as a VOSB, is set aside. VA shall restore KWV to its roster of approved VOSB entities. KWV‘s verified eligibility to participate in VA‘s Veterans First Contracting Program shall be extended by 72 days, to April 22, 2013, to take account of the days it was wrongfully removed from eligibility.
With the agreement of the parties, the court has adopted an accelerated schedule for consideration of the merits of this protest. This grant of preliminary relief should remain in effect for a relatively brief time, expected to be no more than several months, until the court resolves KWV‘s claim for permanent relief and the government‘s opposition to that claim. Because this preliminary relief has been structured to avoid the harms that the government indicated might arise with delays in VA‘s procurement activities,14 KWV is not required to provide security in any amount.
It is so ORDERED.
Charles F. Lettow
Judge