Opinion
Civ. No. K-95-8.
August 17, 1995.
J. Joseph Curran, Jr., Attorney General of Maryland, Caroline E. Emerson, Assistant Attorney General of Maryland, Carmen M. Shepard, Assistant Attorney General of Maryland, and Evelyn O. Cannon, Assistant Attorney General of Maryland, for plaintiff.
Lynne A. Battaglia, United States Attorney, and Allen F. Loucks, Assistant United States Attorney for the District of Maryland; Sheila Lieber, and Elise S. Shore, United States Department of Justice, Civil Division, Federal Programs Branch; Frank Hunger, United States Department of Justice; and Gregory Burke, Office of the General Counsel, United States Department of Veterans Affairs, for defendants.
This case involves two federal statutes, the Randolph-Sheppard Vending Stand Act, 20 U.S.C. § 107-107f, and the Veterans' Canteen Service Act, 38 U.S.C. § 7801, each of which provides different benefits for different purposes. Plaintiff, Maryland State Department of Education, Division of Rehabilitation Services ("State"), initiated this suit under the Randolph-Sheppard Act against defendants, United States Department of Veterans Affairs ("DVA"), Jesse Brown, Secretary of the United States Department of Veterans Affairs ("Secretary"), John T. Farrar, Under-Secretary of the United States Department of Veterans Affairs, and Michael B. Phaup, Director of the Veterans Affairs Medical Center in Baltimore Maryland. Each of the defendants is either a federal government entity or an officer of such entity. Jurisdiction exists pursuant to 28 U.S.C. § 1331 and 1361.
The Division itself is referred to herein as "DORS."
The Randolph-Sheppard Act ("R-S Act") establishes a cooperative federal/state vocational rehabilitation program to promote economic opportunity and self-sufficiency for blind individuals through the operation of vending facilities on federal property. Under the Act, every building acquired, constructed, substantially altered or renovated by a federal agency after January 1, 1975 must include a satisfactory site for a blind vending facility. In 1987, the DVA began construction of the Veterans Affairs Medical Center ("VAMC") located at 10 North Greene Street, Baltimore, Maryland. DORS, the State licensing agency, charged with implementing the R-S Act in Maryland, was not given notice by the DVA of DVA's plan to construct the VAMC. DORS, after learning of the VAMC project, applied on December 2, 1991, to the DVA for a permit to operate a Randolph-Sheppard vending facility at the VAMC; the DVA denied that request on April 6, 1992. Under the R-S Act, if the state licensing agency (SLA) believes that a federal agency is in violation of the Act, the SLA may file a complaint with the Secretary of Education of the United States to convene a panel to arbitrate the dispute. The decision of that panel is binding on the parties.
DORS filed a complaint with the Secretary of Education on June 24, 1992 and requested that the dispute with the DVA be arbitrated. An arbitration panel held a hearing on July 19, 1993 and both parties presented evidence. The parties also submitted post-hearing briefs. Defendants argued that the separate duties, imposed on the DVA by the Veterans' Canteen Service Act ("VCS"), exempted the defendants from the requirements of the R-S Act. Furthermore, defendants argued that no space was available at the VAMC to provide a blind vending facility. Plaintiffs contended that the R-S Act was applicable to the DVA and must be enforced. On May 5, 1994, the arbitration panel issued a unanimous opinion that the R-S Act applied to the VAMC and that the VCS did not exempt the VAMC from the R-S Act's requirements. The panel ordered the parties to enter into negotiations to devise a solution to allow DORS and its licensed vendor to operate a vending facility at the VAMC. The arbitration panel's Order also provided, at page 8 of the May 5, 1994 opinion, that "[i]f no permit is agreed upon by June 1, 1994, then each party shall submit a proposed permit to this panel on or before June 15, 1994, and the proposed permit preferred by a majority of the arbitration panel shall become the final award of the panel." Despite the Order of the arbitration panel, the DVA did not enter into negotiations with DORS. DORS submitted to the panel on June 15, 1994, a proposed permit; the DVA did not submit a proposed permit. On October 15, 1994, the arbitration panel issued a final Order which required the DVA to "turn over the operation of the retail store at VAMC Baltimore . . . effective January 1, 1995." That retail store, specifically referred to in the arbitration panel's Order, is a store currently operated under the provisions of the VCS. The October 15, 1994 Order of the panel also included a requirement that the DVA turn over certain fixtures and equipment in addition to the retail store space. As of the date of the filing of the within opinion, the DVA has not complied with the arbitration panel's Order.
In its answer, defendants note that while they did not enter into negotiations, they did file a motion asking the arbitration panel to reconsider its decision. See Defendants' answer to first amended complaint at ¶ 22. The panel has not altered its Order.
See Plaintiff's first amended complaint at ¶ 25.
Plaintiff brought this action seeking, as its primary form of relief, an Order from this Court requiring the DVA to comply with the arbitration panel's award, namely that the retail store at the VAMC and the fixtures within the store be turned over to the State for the operation of a blind vendor space. In its initial complaint, the State sought its remedy via motions for a preliminary injunction and summary judgment. At the suggestion of this Court, the State amended its complaint, seeking on a secondary basis, as an alternative to such primary relief, i.e. the enforcement of the arbitration award, a secondary form of relief, i.e. that this Court require defendants to comply with the R-S Act. In seeking this secondary form of relief, the State set forth, inter alia, specific requirements with regard to size of space and location of space which the State contends are required by the R-S Act. Defendants moved to dismiss, or in the alternative, for summary judgment, arguing that under the R-S Act, only the Secretary has the authority to remedy any violation of the R-S Act.
See Plaintiff's First Amended Complaint for Declaratory and Injunctive Relief at page 8-9.
As discussed infra, several central questions of fact which remain before this Court relate to the issues of size and location of space — specifically what is the amount of space at the VAMC, and what is appropriate specific space within the VAMC, needed to comply with the R-S Act.
This Court, beginning in April, 1994, held a series of lengthy on-the-record and off-the-record telephone conferences and in-chambers conferences with counsel on both sides in an effort to resolve the within case in a mutually agreeable manner. In some respects, counsel were able to work together to resolve their differences. While the DVA initially argued that the R-S Act was inapplicable, and argued that the doctrine of laches prevented the plaintiff from bringing the within suit, the DVA dropped those positions, ceased to advocate them, and offered specific space at the VAMC to the plaintiff for a blind vending facility. When the State objected to that proposed space, the DVA offered alternative sites which were later embodied, as alternative spaces, in a final Order of the Secretary, dated June 1, 1995. Also, the State acknowledged that the arbitration panel exceeded its authority when it Ordered the DVA to turn over certain fixtures and equipment in addition to the retail store space.
In this Court's view, it is clear that the R-S Act is applicable.
However, in the end, settlement discussions were not successful. At the heart of the dispute lie factual disputes with regard to the amount of space and the location of space. In that regard, the State has rejected each and all of the sites proposed by the DVA and later embodied in the Secretary's June 1, 1995 Order. Instead, the State, while primarily seeking enforcement of the arbitration panel's Order, asked, on a secondary basis, that a conference room located on the second floor of the VAMC be designated as the blind vendor facility. The DVA has rejected that proposal.
I
Under § 706 of the Administrative Procedure Act ("APA"), the decision of a federal agency official such as the Secretary is reviewed under an arbitrary and/or capricious standard. However, because the record does not include any factual and/or legal development by the arbitration panel or by the Secretary with regard to the requirements of the R-S Act concerning size and/or location of space, this Court raised the possibility that this Court might hold an evidentiary hearing, under Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971) and its progeny in order to receive evidence concerning such matters. Under Overton Park "there may be independent judicial factfinding when issues that were not before the agency are raised in a proceeding to enforce nonadjudicatory agency action." Id. at 415, 91 S.Ct. at 823. Such a hearing was in fact once scheduled to take place in June, 1995. However, the State objected to such a procedure, stating that this Court should not hold a hearing, but rather, that the arbitration panel should hold the evidentiary hearing. Defendants did not seek or oppose any such hearing. While this Court believes that it possesses discretionary authority to hold a hearing under the standards of Overton Park — whether or not the State so agrees — this Court cancelled the hearing because of the State's position. However, this Court, in a Memorandum and Order dated June 19, 1995, provided to the State the opportunity to seek to have the case remanded to the arbitration panel. The State, however, also rejected that option. This Court, in a Memorandum and Order dated July 7, 1995, provided plaintiff with yet another option — to seek a remand to the Secretary so that the Secretary could make findings of fact and conclusions of law with a review available by this Court under § 706 of the APA after the Secretary so acted. If plaintiff desired such a remand, it was required to so request on or before July 21, 1995. Plaintiff has not so requested.
See Plaintiff's supplemental brief dated May 31, 1995.
See Plaintiff's Response to Court's June 19 Memorandum and Order dated June 28, 1995.
In the amended complaint, the State specifically requests that the space to be designated "consist of at least 700 square feet, including space for storage" and that the space "be directly accessible from a corridor used for pedestrian traffic so as to provide access by potential customers." First Amended Complaint at pages 8-9. It is undisputed that the spaces embodied in the Secretary's June 1, 1995 Order consist of less than 700 square feet. Additionally, it is also undisputed that the larger of the spaces offered to the State at the VAMC is not on a pedestrian corridor. What is disputed, however, and thus, what this Court cannot decide in the light of the current record, is whether the amount of space for a blind vendor facility should, in order to meet the requirements of the R-S Act and of applicable regulations under that statute, consist of at least 700 square feet and/or whether any such facility must be located on a main pedestrian corridor.
In challenging the Secretary's June 1, 1995 Order, the State poses various issues of relevant and material disputed fact. For example, the State refers to the DVA's contention that it cannot relocate the conference room without harming the medical and educational missions of the VAMC. Additionally, the State states that its decision to reject the proposed sites was "predominantly" due to size and/or location of space. In that regard, the State contends that because one of the areas of space, designated by the Secretary's June 1, 1995 Order, encompasses only 570 square feet and is located adjacent to the cafeteria, the designation of such space by the Secretary is not in compliance with the R-S Act. The State also argues that "square footage alone does not determine whether a proposed blind vending facility will be viable . . . Additional critical factors . . . includ[ing] location, . . . visibility, overall size and layout of the facility, . . . product line, . . . competition with other retail facilities . . . [effect the viability of a facility]." Further, the State asserts that, in other instances, there have been agreements between blind vendors and other vendors voluntarily to limit product lines to minimize head-to-head competition. Because the DVA, in this instance, has refused so to agree, the State argues that the location of space is that much more important. The DVA, however, contends that the R-S Act requires only a minimum amount of space of 250 square feet, see 34 C.F.R. § 395.1(q), and that the R-S Act is silent concerning location of space. Thus, in the view of the DVA, it has met the R-S Act's minimum requirements in the Secretary's alternative designations of space in his June 1, 1995 Order.
See Affidavit of Scott Dennis, Director of the Maryland Blind Vending Program at ¶ 8.
Id. at ¶¶ 5-6.
Id. at ¶ 3.
Id. at ¶ 7.
The Secretary's said Order simply describes the amount of space and location of space. It does not address any of the various items of factual and/or legal dispute discussed supra. In that context, this Court offered options to the parties so as to permit the development of an amplified factual record which would permit this Court, as the present record does not, to determine whether the Secretary has, in his June 1, 1995 Order, acted arbitrarily, or otherwise than in accordance with the R-S Act.
II
When this Court first conferred with counsel in April, 1995, as well as at numerous other times thereafter, this Court consistently expressed the view that the State would likely, in this Court's view, not succeed in connection with its primary quest to have this Court enforce the arbitration panel's award. Therefore, this Court encouraged plaintiff to seek alternative relief.
In its May 19, 1995 filing, the State moved for this Court to certify this case for immediate interlocutory appeal to the Fourth Circuit from this Court's expected decision with regard to the denial of the primary relief sought. This Court rejected that said request, and instead encouraged the State to seek alternative relief by one of the procedures discussed supra with an eye to achieving prompt designation of appropriate space at the VAMC for use by the blind vendors. The State, however, has decided not to avail itself of any of those options.
The R-S Act provides that it is the duty of the agency head to remedy any violation of the Act.
If the panel appointed pursuant to paragraph (2) finds that the acts or practices of any such department, agency, or instrumentality are in violation of this chapter, or any regulation issued thereunder, the head of any such department, agency, or instrumentality shall cause such acts or practices to be terminated promptly and shall take such other action as may be necessary to carry out the decision of the panel.20 U.S.C. § 107d-2(b)(2). The statute also provides that the arbitration panel will review the agency action and determine if that action violates the Act. However, under the statute, it is the role of the agency head, in this case the Secretary of Veterans Affairs, to remedy any violation of the Act.
It is in that context that this Court finds itself in agreement with Chief Judge Tjoflat's view that "[t]he subsection (b) panel . . . under the Act's express terms, has no remedial powers whatsoever. It may determine that certain of the federal entity's acts violate the Act, but the Act leaves responsibility for remedying the violation to the federal entity itself." Georgia Dep't of Human Resources v. Nash, 915 F.2d 1482, 1492 (11th Cir. 1990). See also United States v. Mississippi Vocational Rehabilitation for the Blind, 794 F. Supp. 1344, 1352 (S.D.Miss. 1992). In the within case, it is undisputed that the arbitration panel, in issuing its final decision, did fashion a specific remedy. Therefore, under Nash, the arbitration panel exceeded its authority.
The State argues that the R-S Act creates a priority over the Veterans' Canteen Service Act and that, on that basis, the arbitration panel's award should be enforced. In essence, the State seems to contend that Congress created two statutes designed to aid two distinct groups of people and that the R-S Act trumps the Veterans' legislation. As this Court concludes that the arbitration panel exceeded its authority in designating the remedy, this Court need not reach the question of whether one statute has priority, in whole or in part, over the other. The State, as is its right, has repeatedly disagreed with and objected to this Court's reliance on Nash, arguing that the R-S Act allows the arbitration panel to remedy the agency's violation. Plaintiff's view in that regard is once again rejected by this Court. There remains before this Court the question of whether this Court should grant plaintiff's secondary quest for relief, namely that this Court exercise its equity powers and order the Secretary to comply with the R-S Act and determine whether the Secretary's June 1, 1995 Order designating certain alternative spaces violates the R-S Act or any rules and/or regulations thereunder.
The State has pointed out in one or more filings that the State is not seeking, in connection with its secondary quest for relief from this Court, any review under the APA. The State has also stated, as this Court noted in paragraph (6) of its July 7, 1995 Memorandum and Order in this case, that the Secretary apparently cannot seek review of his own decision under the APA. Were this Court required to reach the APA issue, which — as discussed infra, it will not — this Court would find that the State has not established (a) that the Secretary has acted in an "arbitrary or capricious" manner or (b) that the Secretary's June 1, 1995 Order otherwise violates § 706 of the APA.
In that regard, the question arises as to whether, with an avenue of relief seemingly available to the State under the APA, this Court should exercise any of its equity powers. In this instance, this Court need not reach that question, nor whether this Court should presently act in a review capacity under the APA, because whether this Court proceeds under the APA or under its equity powers, this Court runs into the same problem, namely that there exist relevant and material issues of disputed fact concerning whether the Secretary's June 1, 1995 Order lacks a "rational basis" or that the Secretary's actions in issuing that Order were "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). Under the standards of the APA, it is the plaintiff's burden, under § 706, to show that agency action is not valid. When applying the arbitrary and capricious standard, this Court must consider whether the Secretary has "examine[d] the relevant data and articulate[d] a satisfactory explanation for its action including a `rational connection between the facts found and the choice made'" Motor Vehicle Manufacturers Ass'n v. State Farm Mutual Automobile Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 2867, 77 L.Ed.2d 443 (1983) ( quoting Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 246, 9 L.Ed.2d 207 (1962)). This Court seemingly should apply the same standards if it were to act under its equity powers to require the Secretary to comply with the R-S Act.
. That is so because the only basis for this Court to take action to require the Secretary to act otherwise than in accordance with his June 1, 1995, Order, would be that the Secretary has acted arbitrarily, capriciously or unlawfully. That is the same standard pursuant to which the Secretary's said Order could be successfully challenged by the State pursuant to § 706.
The existing record now before this Court discloses the DVA's offers of space during settlement discussions which were later embodied in the Secretary's June 1, 1995 Order. A review of that record does not disclose that the Secretary of the DVA failed to "conduct . . . a reasoned evaluation of the relevant information" or that the Secretary has "reached a decision that, although perhaps disputable, was . . . `arbitrary or capricious.'" Marsh v. Oregon Natural Resources Council, 490 U.S. 360, 385, 109 S.Ct. 1851, 1865, 104 L.Ed.2d 377 (1989). It may be, however, that the Secretary did, as the State contends, violate certain requirements of the R-S Act in entering its June 1, 1995 Order as, for example, in the selection of specific alternative locations and/or the size and/or location of the same. But, as of this date, in the context of the present record, the State has not so shown. Thus the State is not entitled to have this Court exercise its equity power to order the Secretary to do anything the Secretary has not done to date.
III
If the judgment entered in this case becomes final, the State will have available to it the options set forth in the Secretary's June 1, 1995 Order, but will have lost the opportunity to have this Court determine whether or not the Secretary acted arbitrarily, capriciously or unlawfully in issuing that Order. On its face, in this Court's view, that Order is entirely valid. The burden is on the State to show that the Secretary's Order is arbitrary, capricious, or unlawful. That the State cannot achieve under the existing record, and has declined the opportunity to have this Court, or the Secretary, or the arbitration panel conduct further proceedings in which further findings of fact and determinations of law could be forthcoming. That, in this Court's view, is regrettable, but it accords with the actions of the State in the proceedings in this case before this Court.
IV
For the reasons stated in the within opinion, plaintiff's quest for its primary form of relief, namely that this Court enforce the arbitration panel's order, will be denied in an Order of even date herewith, and plaintiff's quest that this Court, on a secondary basis, exercise its equity powers and direct the Secretary to comply with the R-S Act as specified by the State in the first amended complaint, will also be so denied. Accordingly, in that said Order, judgment will be entered for defendants.