NOEL TYLER, as interim director of the Oklahoma Department of Rehabilitation Services, Plaintiff Counter Defendant -Appellant,
UNITED STATES DEPARTMENT OF EDUCATION REHABILITATION SERVICES ADMINISTRATION, Defendant-Appellee, and DAVID ALTSTATT, SR., Intervenor Defendant Counterclaimant - Appellee.
from the United States District Court for the Western
District of Oklahoma D.C. No. 5:16-CV-00137-W
A. Nolan, Winstead PC, Austin, Texas (Richard Olderbak,
Oklahoma Office of Attorney General, Department of
Rehabilitation Services, Oklahoma City, Oklahoma, with him on
the briefs), for Plaintiff-Appellant.
Sewell, Assistant United States Attorney, Oklahoma City,
Oklahoma (Robert J. Troester, Acting United States Attorney,
Chad A. Readler, Acting Assistant Attorney General, Mark B.
Stern and Laura E. Myron, Attorneys, Appellate Staff, United
States Department of Justice, Washington, D.C., with her on
the briefs), for Defendant-Appellee.
R. Donelson, (Anh Kim Tran with him on the briefs), Fellers,
Snider, Blankenship, Bailey & Tippens, P.C., Oklahoma
City, Oklahoma, for Intervenor Defendant
MATHESON, McHUGH, and EID, Circuit Judges.
MATHESON, CIRCUIT JUDGE.
Oklahoma Department of Rehabilitation Services
("ODRS") appeals from the district court's
affirmance of an arbitration decision rendered under the
Randolph-Sheppard Act (the "RSA"), 20 U.S.C.
§§ 107 et seq. The statute authorizes
designated state agencies such as ODRS to license and assign
blind vendors to operate vending facilities on federal
property. It establishes an arbitration scheme to resolve
disputes arising from this program.
accordance with the statute, the Department of Education
("DOE") convened an arbitration panel (the
"Panel") to hear the grievances of David Altstatt,
a blind vendor, challenging ODRS's selection of another
blind vendor, Robert Brown, for a particular vending
assignment. Both Mr. Altstatt and Mr. Brown had applied for
the assignment. The Panel found for Mr. Altstatt and ordered
ODRS to remove Mr. Brown from the disputed assignment,
appoint Mr. Altstatt in Mr. Brown's place, and pay
damages and attorney fees to Mr. Altstatt.
brought suit in district court against DOE, seeking to vacate
the Panel's decision, which the Randolph-Sheppard Act
subjects to judicial review as a final agency action under
the Administrative Procedure Act (the "APA"), 5
U.S.C. §§ 551 et seq. Mr. Altstatt
intervened as a defendant and counterclaimant, requesting
that the court affirm the arbitration decision. DOE
participated in the litigation only to the extent of filing
the administrative record of the Panel proceedings. The
district court entered judgment in favor of Mr. Altstatt and
ordered ODRS to comply with the Panel's decision. ODRS
jurisdiction under 28 U.S.C. § 1291, we affirm the
district court's decision as to the Panel's award of
injunctive relief in the form of Mr. Brown's removal and
Mr. Altstatt's appointment to the disputed assignment,
but we reverse as to the Panel's award of damages and
section provides background on: (A) the RSA, (B) Mr.
Altstatt's grievances against ODRS, (C) the Panel's
decision in favor of Mr. Altstatt, and (D) the federal
district court proceedings.
The Randolph-Sheppard Act
RSA, 20 U.S.C. §§ 107 et seq., enacted in
1936 and amended in 1954 and 1974, established a federal
program (the "RSA Program") to enhance blind
individuals' economic opportunities by granting them
priority to operate vending facilities on federal property.
States participate in the RSA Program through state licensing
agencies ("SLAs") designated by the DOE, which
administers the RSA. Id. §§ 107a(a),
107(b). SLAs promulgate and implement policies and standards,
which DOE must approve, governing the licensure and selection
of blind vendors to operate vending facilities on federal
property. 34 C.F.R. § 395.4; see also id.
amended in 1974, the RSA establishes a two-tiered scheme for
resolving blind vendors' grievances arising from
SLAs' operation of the RSA program. First, SLAs must hear
and render a decision on a blind vendor's grievance. 20
U.S.C. § 107d-1(a). Second, a vendor who is dissatisfied
with the SLA's decision may then request arbitration by a
panel convened by DOE. Id. RSA arbitration decisions
are subject to judicial review in federal court as final
agency actions under the APA. Id. § 107d-2.
Mr. Altstatt's Grievances against ODRS
Oklahoma's designated licensing agency, issues licenses
to blind vendors and assigns them to manage vending contracts
with the federal government. See Okla. Admin. Code
§ 612:25-4-1(a). In late 2012, ODRS initiated a
selection process for a licensed blind vendor to assume the
management of the Fort Sill vending contract (the
"Contract") with the Army. It solicited
applications through a position announcement (the
"Announcement"), which enumerated "eligibility
criteria specific to this announcement." App., Vol. 7 at
1135, 1139. To be eligible, the applicant must not "have
had any delinquency on taxes for the past 3 years."
Id. at 1139. In accordance with its regulations,
Okla. Admin. Code §§ 612:25-4-57, 612:25-4-59, ODRS
convened a selection committee (the "Committee") to
interview the candidates, evaluate their applications, and
make a recommendation for the Contract assignment. The
Committee recommended Mr. Brown over the other candidates,
which included Mr. Altstatt. ODRS accepted the
Committee's recommendation and selected Mr. Brown to
manage the Contract.
Mr. Brown's selection, Mr. Altstatt filed a grievance
with ODRS, complaining about the Committee's selection
procedures. He argued that Mr. Brown's selection was null
and void because the Committee had not considered a required
scoring factor under ODRS's regulations. ODRS, after a
full evidentiary hearing, ordered the Committee to reconvene
within 30 days to consider the previously omitted factor. In
the meantime, ODRS appointed Mr. Brown as the interim
Contract manager so that he could begin preparations to
operate Fort Sill's vending facility. ODRS also assigned
each candidate a score for the previously omitted factor
based on the available data and provided this information to
the Committee. The reconvened Committee considered the
additional scores and again recommended Mr. Brown for the
Contract assignment. ODRS again accepted the Committee's
ODRS's interim appointment of Mr. Brown and again after
ODRS's permanent re-selection of Mr. Brown, Mr. Altstatt
filed grievances with ODRS to challenge these actions. He
complained, among other things, that (1) ODRS's
re-selection process was "infirm," App., Vol. 7 at
1227, (2) one of the Committee members-Charles Pride-was
biased, and (3) Mr. Brown was ineligible for the Contract
assignment because he was delinquent on his taxes. Mr.
Altstatt also filed a complaint with DOE to request
arbitration of his grievances against ODRS.
granted Mr. Altstatt a second full evidentiary hearing. After
the hearing, it affirmed Mr. Brown's interim and
permanent appointments, concluding that they "complied
with the applicable regulations and due process." App.,
Vol. 4 at 718-19. Dissatisfied with ODRS's decision, Mr.
Altstatt filed a second complaint with DOE requesting
arbitration of his grievances.
The Panel's Decision
2014, DOE notified the parties that it was consolidating Mr.
Altstatt's requests for arbitration and
"authoriz[ing] the convening of [the Panel] to hear and
render a decision on the issues raised in the two
complaints." App., Vol. 5 at 766, 768. DOE stated that
"[t]he central issue is whether [ODRS]'s process for
selecting a blind vendor for the Ft. Sill food service
contract violated the Randolph-Sheppard Act,
implementing regulations and state rules and
second complaint to DOE, Mr. Altstatt had specified that he
sought the following relief: "that the selection process
for the putative winner, Robert Brown, be declared invalid
and that Altstatt be awarded the current Contract and profits
which he would have received during the period of time in
which he would have been operating the Contract from
ODRS." App., Vol. 4 at 715. DOE's notices to the
parties incorporated this language by reference: "A
complete statement of . . . the relief sought is contained in
this complaint for arbitration." App., Vol. 5 at 765,
767. The notices did not advise the parties of any
limitations on the types of relief the Panel could award.
January 2016, after a hearing in November at which
"[c]ounsel for the parties presented opening statements
and then called witnesses to give sworn testimony," the
Panel rendered a decision in favor of Mr. Altstatt. App.,
Vol. 4 at 635, 643. As relevant to this appeal, the Panel
concluded that ODRS's re-selection of Mr. Brown for the
Contract assignment was invalid because (1)
"[ODRS's] utiliz[ation] of the same . . . Committee
again after it had violated its own rules deprived Altstatt
of due process and was fundamentally unfair," (2)
"one of the committee members (Pride) was personal
friends with Brown and was known to socialize with him,"
and (3) "Brown was not eligible [for the Contract
assignment] by the clear meaning of the words set forth in
the [Announcement]" for having been delinquent in his
taxes in the relevant time period. Id. at 641-42.
The Panel ordered that ODRS remove Mr. Brown from the
Contract assignment, appoint Mr. Altstatt in Mr. Brown's
place, and pay damages and attorney fees to Mr. Altstatt.
Federal District Court Proceedings
sued DOE in the U.S. District Court for the Western District
of Oklahoma, seeking judicial review of the Panel's
decision. Mr. Altstatt intervened as a defendant and
counterclaimant, requesting that the court affirm the
arbitration decision. After filing the administrative record
of the Panel proceedings, DOE obtained the parties'
stipulation that it "is a nominal defendant in terms of
the rights, claims and remedies sought to be reviewed [in the
case]." Dist. Ct. Doc. 21 at 4. The court accepted the
parties' stipulation and designated DOE a nominal
defendant, such that it "[was] not required to
participate in any substantive proceedings . . . unless
[specifically] directed to do so." Id. at
any discovery, the court ordered ODRS and Mr. Altstatt to
submit briefs on all of the issues. In its brief, ODRS
attacked, as arbitrary or capricious and unsupported by
substantial evidence, the Panel's following bases for
concluding that its permanent selection of Mr. Brown for the
Contract assignment was contrary to the RSA: (1) the
re-selection process was infirm, (2) Mr. Pride and Mr. Brown
were friends at the relevant time, and (3) Mr. Brown was
ineligible for the Contract Assignment because of his tax
delinquency. ODRS also challenged each type of relief granted
by the Panel: (1) the removal of Mr. Brown from the Contract
assignment as violating Mr. Brown's due process, (2) the
appointment of Mr. Altstatt to the Contract assignment as
exceeding the scope of the Panel's remedial authority
under the RSA and alternatively as arbitrary or capricious,
(3) the damages award as barred by sovereign immunity, and
(4) the attorney fee award as exceeding the scope of the
Panel's remedial authority under the RSA and
alternatively as barred by sovereign immunity.
receiving briefs from ODRS and Mr. Altstatt on these issues,
the district court upheld the Panel's decision in favor
of Mr. Altstatt and all relief granted. The court rejected on
the merits all but one of ODRS's claims-the due process
challenge to the Panel's order to remove Mr. Brown from
the Contract assignment. The court determined that ODRS
lacked standing to assert the rights of Mr. Brown, a
non-party to the litigation, through this claim. The court
later entered final judgment, in which it affirmed the
"Findings of Fact and Conclusions of Law set forth in
the [Panel's decision] . . . in favor of [Mr.]
Altstatt." App., Vol. 8 at 1384. It further ordered ODRS
to remove Mr. Brown as the Contract manager, replace him with
Mr. Altstatt, and pay damages and attorney fees to Mr.
Altstatt as provided for in the Panel's decision.
appealed from the district court's affirmance of the
Panel's decision, reasserting all of the arguments it
presented below. After oral argument, we ordered the parties,
including DOE, to submit supplemental briefs on issues
pertaining to sovereign immunity and the scope of the
Panel's remedial power under the RSA. DOE attached to its
supplemental brief a document titled "Revised Interim
Policies and Procedures for Convening and Conducting an
Arbitration Pursuant to Sections 5(a) and 6 of the
Randolph-Sheppard Act as Amended" ("RSA Arbitration
Policies"). This document, which the Commissioner of
DOE's Rehabilitation Services Administration approved in
1978, establishes the policies and procedures governing the
arbitration of blind vendors' grievances against SLAs
under the RSA.
begin with our standard of review. We then turn to ODRS's
various challenges to the Panel's decision, providing
additional background as needed.
Standard of Review
review de novo a district court's decision in an APA
case." Biodiversity Conservation All. v.
Jiron, 762 F.3d 1036, 1059 (10th Cir. 2014).
Accordingly, we apply the standards for reviewing final
agency actions set forth in the APA:
To the extent necessary to decision and when presented, the
reviewing court shall decide all relevant questions of
law, interpret constitutional and statutory
provisions, and determine the meaning or applicability
of the terms of an agency action. The reviewing court shall-
. . .
(2) hold unlawful and set aside agency action, findings, and
conclusions found to be-
(A) arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law;
(B) contrary to constitutional right, power,
privilege, or immunity;
(C) in excess of statutory jurisdiction,
authority, or limitations, or short of statutory
(D) without observance of procedure required by law; [or]
(E) unsupported by substantial evidence in a case .
. . reviewed on the record of an agency hearing provided by
statute . . . .
5 U.S.C. § 706 (emphases added).
ODRS's Challenges under the APA
raises various APA challenges to (1) the Panel's
conclusion that ODRS's permanent selection of Mr. Brown
for the Contract assignment violated the RSA, and (2)
specific types of relief awarded to Mr. Altstatt, whom the
Panel determined should have received the Contract assignment
instead of Mr. Brown. We affirm the district court's
decision as to the Panel's order to remove Mr. Brown from
the Contract assignment and replace him with Mr. Altstatt,
but we reverse as to the Panel's award of damages and
first review the Panel's conclusion that Mr. Brown's
selection violated the RSA. ODRS attacks as arbitrary or
capricious or as unsupported by substantial evidence the
Panel's reasons for this conclusion: infirmity in
ODRS's re-selection process, the friendship between Mr.
Brown and Mr. Pride, and Mr. Brown's ineligibility. We
need only consider ODRS's arguments regarding the
Panel's third reason-Mr. Brown's ineligibility for
the Contract assignment due to tax issues. Based on our
review of the record, we conclude that the Panel's
finding of ineligibility was not arbitrary or capricious or
unsupported by substantial evidence. Because this reason
alone supports the Panel's conclusion that Mr.
Brown's selection violated the RSA, we do not consider
ODRS's arguments regarding the Panel's remaining
turn to the Panel's remedies awarded to Mr. Altstatt.
ODRS challenges: (a) Mr. Altstatt's appointment to the
Contract assignment as exceeding the scope of the Panel's
remedial authority under the RSA and as arbitrary or
capricious; (b) the damages award as violating sovereign
immunity; and (c) the attorney fee award as exceeding the
scope of the Panel's remedial authority and as violating
sovereign immunity. We conclude that (a) the Panel had
statutory authority to order Mr. Altstatt's appointment
to the Contract; (b) ODRS is entitled to sovereign immunity
from the damages award; and (c) the Panel exceeded its
statutory authority in awarding Mr. Altstatt attorney
The Panel's Conclusion that ODRS Violated the
the APA, the reviewing court must "hold unlawful and set
aside agency action," 5 U.S.C. § 706(2), that is
"arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law," id
§ 706(2)(A), or "unsupported by substantial
evidence," id. § 706(2)(E). ODRS contends
the Panel's finding that Mr. Brown was ineligible for the
Contract assignment due to tax issues "is not supported
by substantial evidence and is arbitrary." Aplt. Br. at
40. We disagree.
summarize the evidence before the Panel relating to the tax
eligibility requirement for the Contract assignment and Mr.
Brown's tax issues; (b) provide legal background on the
federal contracting regulations ODRS relies on to challenge
the Panel's finding that Mr. Brown was tax delinquent and
therefore ineligible for the Contract assignment; and (c)
analyze the Panel's finding in light of the
administrative record and conclude that the finding was
neither unsupported by substantial evidence, nor was it
arbitrary or capricious.
Relevant evidence in the administrative record
summarize the evidence relating to (i) the Contract
assignment's tax eligibility requirement and (ii) Mr.
Brown's tax issues in the period leading up to ODRS's
The tax eligibility requirement
Announcement for the Contract assignment enumerated several
"eligibility criteria," including that applicants
must not "have had any delinquency on taxes for the past
3 years." App., Vol. 7 at 1139.
administrative record contains the affidavit of Michael
Jones, who served as ODRS's Division Administrator from
July 2011 to April 2013. App., Vol. 7 at 1124-25. In his
affidavit, Mr. Jones stated that he "wrote the applicant
requirements for the [Announcement]." Id. at
1124. He stated that "[o]ne of these requirements was
that the successful applicant could not have any tax
delinquencies" and that he had "included the tax
delinquency provision . . . based on requirements found in
the Defense Finance Acquisition Regulations, or
'DFARS' that govern all federal contracts."
Id. at 1124, 1125. He also stated that, "if
[this requirement] was not met, [it] would be grounds for the
federal contracting officer administering [the Contract] to
'debar' or deem the selected manager disqualified
from continuing to work at the facility." Id.
arbitration hearing, ODRS called Mike Hamrick, its Operations
Coordinator for the RSA Program, to testify. He testified
that the tax eligibility requirement is not in ODRS's
rules and regulations but instead "comes from the
DFARS." App., Vol. 6 at 1049. He also testified that
ODRS had not undertaken to check whether the candidates for
the Contract assignment satisfied the tax eligibility
requirement, "since it w[as] the Army's [rather than
ODRS's own] requirement." Id. at 1050.
Mr. Brown's tax issues
administrative record contains notices of two federal tax
liens filed against Mr. Brown's property within the three
years preceding the application due date for the Contract
assignment, December 21, 2012. App., Vol. 7 at 1141-42. In
both notices, the Internal Revenue Service (the
"IRS") stated that "taxes . . . have been
assessed against [Mr. Brown and his wife]" and that the
United States "ha[s] made a demand for payment of this
liability, but it remains unpaid." Id. In the
first notice, prepared on February 18, 2011, the IRS assessed
an unpaid balance of $15, 117.95 from tax years 2008 and
2009. In the second notice, prepared on November 1, 2012, the
IRS assessed an unpaid balance of $6, 481.96 from tax year
2010. In both notices, the IRS also stated that "there
is a lien in favor of the United States on all property and
rights to property belonging to [Mr. Brown and his wife] for
the amount of these taxes." Id.
administrative record also contains Mr. Brown's sworn
affidavit, in which he states that he had entered into an
installment payment plan for his unpaid taxes with the IRS
before ODRS selected him for the Contract assignment:
At the time that I received the invitation to apply [for the
Contract assignment] I was concluding negotiation of a
payment plan with the U.S. Internal Revenue Service for
certain personal income taxes that had not been properly
filed on my behalf in prior years. I did enter into an agreed
payment plan before the [ODRS] selection process had
concluded. My monthly payments at an agreed amount began in
February, 2013. To the extent that the IRS has filed any
liens relating to taxes owed by me, those claimed taxes due
are covered by the repayment plan and I have been assured
that the IRS will not attempt any collection or treat me as a
delinquent taxpayer while I am making the agreed payments
according to the agreed payment plan.
Id. at 1126.
affidavit, Mr. Brown also stated that he had "discussed
the above matter with Division Manager Mike Jones before
applying for the selection process" and that Mr. Jones
had "referred to particular U.S. Army regulations for
contracting (DFARS) as the reason for including in the
[Announcement] a section stating that the successful
applicant would need to be clear of any tax
delinquency." Id. at 1127. Mr. Brown stated
that Mr. Jones had "advised [him] that DFARS itself
contained a provision saying that taxes covered by an agreed
repayment plan do not constitute a delinquency, and that
[ODRS] would not consider [his] tax matter covered by a
payment plan to be a delinquency." Id.
Jones's affidavit corroborated Mr. Brown's affidavit.
In his affidavit, Mr. Jones stated: "Prior to submitting
his application for the [Contract assignment], Robert Brown
advised me that he had learned that he had some unpaid
federal taxes but that he had previously entered into a
payment plan to satisfy his tax obligations and was making
his payments as agreed." Id. at 1125. Mr. Jones
also stated: "Applying both the DFARS standards and
common sense, I determined that the payment plan being in
place and not being breached meant that Mr. Brown did not
have a tax 'delinquency' that would disqualify him
from the selection process or from performing [the Contract]
if selected, and I advised him of that position."
Brown also testified at the arbitration hearing regarding
unpaid taxes and his installment plan with the IRS. He
elaborated on the plan's terms: "I was to pay back a
set amount monthly, and then if there were ever any issues
where I might  be late, then they needed me to make sure I
contacted them so that I would continue to be considered in
good standing." App., Vol. 6 at 1031.
Federal Acquisition Regulations System ("FARS") is
a set of regulations jointly promulgated by the Department of
Defense, the General Services Administration, and the
National Aeronautics and Space Administration to establish
"uniform policies and procedures for acquisition by all
executive agencies." 48 C.F.R. §§ 1.101,
1.103. Under the regulations, "[a]cquisition means the
acquiring by contract with appropriated funds of supplies or
services . . . by and for the use of the Federal Government
through purchase or lease . . . ." Id. §
FARS, a federal contractor may be debarred "based upon a
preponderance of the evidence" for, among other things,
"[d]elinquent Federal taxes in an amount that exceeds
$3, 500." Id. §
9.406-2(b)(1)(v). FARS provides that:
(A) Federal taxes are considered delinquent for purposes of
this provision if both of the ...