Bayaud Enterprises, Inc. et al v. US Department of Veterans Affairs et al

Filing 43

OPINION AND ORDER denying 40 Emergency Motion for Temporary Restraining Order by Judge Marcia S. Krieger on 6/10/19.(dkals, )

IN THE UNITED STATES DISTRICT COURT
DISTRICT OF COLORADO
SENIOR JUDGE MARCIA S. KRIEGER
Civil Action No. 17-cv-01903-MSK-KLM
BAYAUD ENTERPRISES, INC., and
SOURCEAMERICA,
Plaintiffs,
v.
U.S. DEPARTMENT OF VETERAN’S AFFAIRS,
UNITED STATES OF AMERICA, and
ROBERT WILKIE,
Defendants.
______________________________________________________________________________
OPINION AND ORDER DENYING MOTION FOR TEMPORARY RESTRAINING
ORDER
______________________________________________________________________________
THIS MATTER comes before the Court pursuant to the Plaintiffs’ Emergency Motion
for Temporary Restraining Order (# 40).
FACTS
Although this case involves complex questions of statutory analysis, the operative facts,
as set forth in the Amended Complaint (# 39), are straightforward. Two federal statutes, the
Javits-Wagner-O’Day Act (“JWOD”), 41 U.S.C. 46 et seq., and the Veteran’s Benefits, Health
Care, and Information Technology Act (“VBA”), 38 U.S.C § 8101 et seq., are arguably
applicable and sometimes come into conflict.
JWOD seeks to create employment opportunities for the blind and severely disabled, and
does so by requiring federal agencies seeking to purchase goods and services to make such
purchases, whenever possible, from eligible non-profit agencies employing such persons. 41

U.S.C. § 8503-04. JWOD is implemented through a statutorily-created agency (“AbilityOne”)
that maintains a “procurement list.” The procurement list identifies products and services made
available by eligible employers that meet the requisite statutory criteria. JWOD requires that
federal agencies intending to purchase goods or services found on a procurement list obtain them
from the JWOD-eligible business(es).
The VBA seeks to promote veteran-owned businesses, and does so by requiring the
Veteran’s Administration (“VA”) to purchase goods and services from such businesses in certain
circumstances. 38 U.S.C. § 8127. Needless to say, in circumstances where the VA seeks to
purchase goods and services where there is both a supplier on the AbilityOne procurement list
and veteran-owned businesses seeking to supply the products, the statutes appear to give
conflicting instructions as to which supplier must be given the contract.
The VA has taken various steps and implemented various guidelines and instructions that
seek to resolve that the conflict. In 2017, the VA announced a policy (“the 2017 Class
Deviation”) that attempted to resolve the conflict by prioritizing purchases from JWOD-eligible
entities, but only with regard to products and services that had been listed on a procurement list
as of January 7, 2010 or earlier; any products or services the VA that were not on that 2010 list
would be purchased pursuant to the VBA’s veteran preferences.
Several JWOD-affiliated entities, including the Plaintiffs herein, commenced litigation in
various fora challenging the 2017 Class Deviation. Bayaud Enterprises, one of the Plaintiffs
here, is an entity that employs blind and severely disabled individuals in fulfilling several
contracts with the VA, providing medical transportation services, mailroom operations, and
switchboard services. SourceAmerica, the other named Plaintiff here, is an agency that

represents the interests of JWOD-eligible employers generally, and sues here in a representative
capacity.
Although Bayaud alleges that the services it provides have been listed on the
procurement lists since at least 2007, it contends that the VA informed it that, due to the 2017
Class Deviation, the VA would be considering whether veteran-owned businesses were
providing the same services when it came time to renew Bayaud’s contracts. As a consequence,
the Plaintiffs commenced this action (# 1), alleging that the 2017 Class Deviation was
impermissible in various respects, including that it violated the requirements of JWOD and that it
was promulgated without adequate notice-and-comment procedures in violation of the
Administrative Procedures Act and the Constitution’s guarantee of Due Process protections.
In the interim, other legal challenges to the 2017 Class Deviation were percolating
through other federal courts. Most notably, a veteran-owned supplier of eyewear challenged
both the pre- and post-2010 listings of various eyecare products and services on the JWODfavored procurement list and sought an injunction requiring the VA to apply the VBA’s
preferences for veteran businesses to its purchases of eyewear products. The Court of Federal
Claims agreed with the supplier and enjoined the VA to apply the VBA’s provisions to any
future contracts for the purchase of eyewear. The U.S. appealed the matter to the Federal
Circuit, and in anticipation that the Federal Circuit’s ruling on the question would prove
dispositive, this Court stayed proceedings in this case pending the outcome of that appeal.
In October 2018, the Federal Circuit affirmed the Court of Claims. PDS Consultants,
Inc. v. U.S., 907 F.3d 1345 (Fed. Cir. 2018). Although the Federal Circuit’s PDS opinion is
central to this case, only a brief summary is needed here. The court rejected the government’s
argument that JWOD applied to all contracting decisions, but determined that the VBA applied

only to competitive decisions – i.e. that the VBA’s preferences only came into play after a
contemplated contract had already passed through the JWOD’s mandatory contracting filter, and
was then to be competitively-bid. Instead, the Federal Circuit held that the VBA applied to “all
contracting determinations.” 907 F.3d at 1358. The court applied the canon of statutory
construction that a more specific statute (the VBA being applied only to VA contracting
decisions, and only where sufficient numbers of veteran-owned businesses compete) takes
precedence over a more general one (JWOD applying to all federal contracting decisions). 907
F.3d at 1359. It also noted that Congress had included an exclusion for JWOD-eligible contracts
in prior legislation, but had not included such language in the VBA. Id. Finally, the court
concluded that, where two statutes conflict, the later-enacted statute – here, the VBA -- should be
given controlling effect. Id. Thus, the Federal Circuit ruled that “where a product or service is
on the [procurement] list and ordinarily would result in the contract being awarded to a nonprofit
qualified under the JWOD, the VBA unambiguously demands that priority be given to veteranowned small businesses. . . We find that, by passing the VBA, Congress increased employment
opportunities for veteran-owned businesses in a narrow category of circumstances, while leaving
intact significant mechanisms to protect such opportunities for the disabled.” Id. at 1360.
Almost immediately upon issuance of the Federal Circuit’s Mandate in PDS, the VA
issued additional purchasing guidance to its employees and suppliers (“the 2019 Class
Deviation”). The 2019 Class Deviation, adopting the language from PDS quoted above,
concluded that the VBA takes priority over JWOD in all VA contracting decisions. Thus, it
directs that VA contracting officers first apply the provisions of the VBA, giving preference to
any eligible veteran-owned business, and to proceed to award contracts to entities on the
AbilityOne procurement list only if no such eligible veteran-owned business bids. The Plaintiffs

here then filed an Amended Complaint (# 39), alleging that the 2019 Class Deviation violates the
APA, the Due Process clause, and the Rehabilitation Act.
The Plaintiffs have also moved (# 40) for a Temporary Restraining Order enjoining the
VA from implementing the 2019 Class Deviation and requiring it to award contracts consistent
with JWOD pending the outcome of this case. They argue that this Court should conclude that
PDS was wrongly-decided, that JWOD’s provisions should be deemed to preempt the VBA’s
where the statutes conflict, and that allowing the VA to reassign the contracts Bayaud (and, more
generally, those of SourceAmerica’s members) currently holds would result in many otherwise
marginally-employable disabled individuals losing the ability to work and support themselves.
ANALYSIS
Fed. R. Civ. P. 65(b)(1) provides certain threshold requirements that must be satisfied for
a party to obtain provisional relief on an ex parte basis: (i) the movant must establish the
pertinent facts demonstrating imminent and irreparable harm by means of an affidavit or verified
complaint; and (ii) the movant’s counsel must certify, in writing, the efforts made to give notice
to the opposing side and the reasons why such notice should not be required. Moreover, the
movant must also establish the traditional factors for obtaining injunctive relief, namely: (i) that
the movant will suffer immediate and irreparable harm if an injunction does not issue; (ii) that
the movant is likely to succeed on the merits of its claim(s); (iii) that the balance of equities
favors the movant; and (iv) that the requested injunction is not adverse to the public interest. See
Taxsalelists.com, LLC v. Rainer, 2009 WL 4884273 (D.Colo. Dec. 11, 2009 ) (unpublished);
Kansas Judicial Watch v. Stout, 653 F.3d 1230, 1233 n. 2 (10th Cir. 2011).
The Court begins by noting that, contrary to Fed. R. Civ. P. 65(b)(1)(B), the Plaintiffs’
counsel has not certified in writing the efforts made to give notice of this motion to the

Defendants, nor the reasons why such notice should not be required. Indeed, Docket # 41
suggests that the Plaintiffs’ motion took the Defendants entirely by surprise. The failure to
comply with Rule 65(b)(1)(B) is, itself, a basis to deny the Plaintiffs’ motion.
Turning to the requirements of Rule 65(b)(1)(A) – the need for affidavits or a verified
complaint establishing the requisite facts, the Plaintiffs have tendered an affidavit1 from
Bayaud’s Executive Director, David Henninger.2 Mr. Henninger’s affidavit states that one of
Bayaud’s contracts with the VA – for medical transportation services, for which Bayaud employs
17 disabled workers -- is due to expire on June 24, 2019.3 (Bayaud’s two other contracts with
the VA expire in September 2019 and March 2020. A total of 42 disabled Bayaud employees
are involved with these contracts.) However, it is not clear from Mr. Henninger’s affidavit as to

Both the Plaintiffs’ Amended Complaint (# 39) and motion (# 40) fail to comply with the
Court’s requirements for electronically-filed documents. In both instances, the Plaintiffs’
substantive filings of approximately 40 pages are followed immediately by nearly 100 pages of
exhibits, all in a single docket entry. The Court’s electronic filing procedures require exhibits to
be filed as attachments, separately from the main document. See generally D.C. L. Civ. R. 5.1(a)
and ECF Civil Procedures v. 6.1, § 4.8(c). The Plaintiffs are advised that future violations of the
electronic filings procedures will result in the offending documents being stricken.
1

The Plaintiffs also tender the affidavit of Vincent Loose, President of SourceAmerica.
Mr. Loose states that there are 63 VA contracts issued nationwide to JWOD-eligible businesses
that are likely to be terminated by October 1, 2019 as a result of the 2019 Class Deviation, likely
displacing as many as 600 disabled employees. The Court is prepared to accept these facts from
Mr. Loose as being within Mr. Loose’s personal knowledge in his capacity as an officer of
SourceAmerica. But Mr. Loose goes on to recite facts about certain specific entities that have
allegedly been contacted by the VA and told that their existing contracts will be awarded to other
entities as a result of the 2019 Class Deviation. Mr. Loose and SourceAmerica do not appear to
be recipients on the e-mails that Mr. Loose refers to, nor is it clear how Mr. Loose purportedly
obtained his personal knowledge of the facts relating to these particular businesses. It appears,
then, that these portions of Mr. Loose’s affidavit are inadmissible hearsay.
2

Mr. Henninger’s affidavit states that the contract has “option periods” that allow it to be
renewed through 2023. He does not explain how such options work – that is, whether it is the
VA or Bayaud (or perhaps both) that decide whether to continue the contract. The Court will
assume that the VA has the ability to decline to exercise the option and allow the contract to
expire as of June 24, 2019.

3

what will occur upon expiration of the contracts. Mr. Henninger states that “Bayaud expects”
that the VA “will re-compete” the contracts under the VBA at the end of their current terms, and
states that Bayaud “will be unable to compete” for those contracts, but notably, neither Mr.
Henninger’s affidavit nor any other evidence in the record indicates that there are indeed veteranowned businesses that would be eligible to compete for those contracts under the VBA. Even
under the 2019 Class Deviation, the VBA appears to exist only as a filter, and that any contracts
that are not awarded to eligible veteran-owned businesses would then pass through additional
layers of requirements, including the requirement that they then be awarded pursuant to JWOD.
The Court finds that these facts fail to demonstrate that the Plaintiffs will imminently
suffer an irreparable injury if ex parte injunctive relief is not granted. First, the Court notes that
an entity like Bayaud will largely suffer only monetary losses if the contracts are eventually rebid to other suppliers under the 2019 Class Deviation. Purely monetary losses do not suffice as
irreparable injuries for purposes of granting injunctive relief. The Plaintiffs argue that the loss of
the contracts will irreparably affect the employment prospects of the disabled workers that make
up their workforce, citing to various cases in which individuals were able to obtain injunctive
relief based on the threat of irreparable harm to their own employment prospects. Citing Enyart
v. Natl. Conf. of Bar Examiners, 630 F.3d 1153, 1165-67 (9th Cir. 2014) (failure to accommodate
putative bar exam taker’s disability) and Arizona Dream Act Coalition v. Brewer, 757 F.3d 1053,
1068 (9th Cir. 2014) (failure to issue driver’s licenses to working-age immigrants). But it is not
clear that Bayaud has standing to seek injunctive relief to vindicate an injury – loss of career
prospects – for its employees as compared to Bayaud itself. See generally Colorado Outfitters
Assn. v. Hickenlooper, 823 F.3d 537, 550 (10th Cir. 2016) (associational standing requires party
asserting it to show that the individuals it represents “would otherwise have standing to sue in

their own right”). The same is true for SourceAmerica: it serves as a representative of JWODeligible employers, not as a representative of the employees themselves.4 Moreover, as noted
above, the record contains only speculative assertions that, if the VBA’s contracting preferences
were elevated above JWOD’s, the particular Bayaud contracts in question would be awarded to
different recipients. Absent evidence that there are sufficient eligible veteran-owned businesses
prepared to bid on the medical transportation contract in or about June 2019, the Plaintiffs’
concerns that they will be displaced by operation of the VBA is largely speculative. Thus, the
Court cannot say that the Plaintiffs have shown the likelihood of imminent, irreparable injury.
Moreover, the Court finds that the Plaintiffs have not shown a likelihood of success on
the merits. The Federal Circuit’s decision in PDS seems to conclusively resolve the friction
between the VBA and JWOD, albeit to the Plaintiffs’ detriment. To overcome that difficulty, the
Plaintiffs argue to this Court that PDS “is wrong” and that this Court “should disregard it.”
Although the decisions of the Federal Circuit do not necessarily bind this Court, the PDS
decision is powerfully persuasive, particularly in contrast to the circumstances present here. The
Federal Circuit had the benefit of a fully-developed record and lower court decision, a threejudge panel having ample opportunity to research and ponder the issues, and no less than six
different amicus entities (including SourceAmerica) contributing their own distinct perspectives
on the questions. Here, on the other hand, the Plaintiffs seek injunctive relief on an ex parte
basis, theoretically depriving the Court of even the opportunity to hear the Defendants’ position
in opposition, and request that the Court issue such a ruling on an emergency basis.

SourceAmerica argues that it has its own standing in this case because it receives its
funding from its member entities based on the value of federal contracts they receive. But again,
this argument indicates that SourceAmerica’s own injury is merely monetary in nature.
4

This Court is loathe to conclude that its own rushed, one-sided assessment of the issue
will inherently lead to a more “correct” result than did the Federal Circuit’s deliberate and
informed consideration. And in any event, although the Federal Circuit’s analysis might
legitimately be criticized in various respects, this Court cannot say that its reasoning is palpably
incorrect. Congress has created a series of contracting preferences that are rife with internal
conflict, and this Court cannot say, based on the brief amount of time that it has been given to
consider the question, that the Federal Circuit hacked too aggressively when attempting to find a
path through that thicket. Whether the rationale of PDS will ultimately stand the test of time
(potentially even in this case) is a matter that this Court will not speculate upon; it is enough to
note that the decision is not so plainly incorrect that this Court would conclude on an expedited
basis that the Plaintiffs have shown a likelihood of succeeding on their contention that it was
wrongly-decided.
Similarly, the Court declines to find at this point in time that the Plaintiffs’ APA
challenge against the 2019 Class Deviation is likely to succeed. Assuming (without necessarily
finding) that the 2019 Class Deviation was subject to notice-and-comment provisions, it appears
that the VA concluded that the 2019 Class Deviation was required by the Federal Circuit’s
decision in PDS. The Federal Circuit affirmed the Court of Claims’ decision, which enjoined the
VA from automatically entering into contracts with the JWOD-eligible supplier, even with
regard to products and services that had been listed on pre-2010 procurement lists. 907 F.3d at
1353-54 (“the Claims Court . . . ruled that the VA is required to [apply the VBA procedures] for
all procurements that post-date 2006, when the VBA was passed, and not just for those items
added to the [procurement] list after January 7, 2010”). As such, it does not appear that the VA
had the discretion after PDS to take any action other than that embodied by the 2019 Class

Deviation. In such circumstances, the APA’s “good cause” exception to the notice-and-comment
requirement might apply. See 5 U.S.C. § 553(b)(B). The 2019 Class Deviation notes that it “is
needed to reflect language consistent with the Federal Circuit’s decision in PDS” and that it
understood this ruling to be “binding.” Again, it may be that, in the fullness of time, the
Plaintiffs’ notice-and-comment arguments might be shown to be meritorious. But this Court is
not prepared to find, on an emergency basis, that the record so clearly favors the Plaintiffs that ex
parte injunctive relief should necessarily follow.
For purposes of efficiency, and because the VA is a federal agency, this Court will
collapse the remaining two elements, the balance of equities and harm to the public interest, into
a single analysis. To the Plaintiffs’ credit, JWOD reflects a long-standing public policy
encouraging the employment of vulnerable citizens and any impairment to the statutory
contracting preferences created by JWOD runs the significant risk that these vulnerable
employees will lose their jobs and the dignity of self-sufficiency that accompanies such jobs. At
the same time, the VBA reflects another, equally-strong public policy encouraging the support of
military veterans and their business ventures, that, Congress has determined, has not been
fulfilled by prior contracting decisions by the VA. At bottom, the shift of a contract from a
JWOD-eligible supplier to a VBA-eligible one seems to be a zero-sum change. Each job lost
from the JWOD-eligible entity is, at least in theory, replaced with a job created by the VBAeligible entity.5 And although the Court recognizes the relative paucity of job opportunities for
severely-disabled individuals, enjoining the VA to give priority to JWOD-eligible suppliers

The record reflects that some VBA-eligible suppliers have given non-binding promises to
attempt to hire disabled employees displaced from JWOD-eligible suppliers. Although the
Plaintiffs are skeptical of such promises, it remains unclear precisely how much actual
employment disruption might result from the change compelled by PDS.
5

would cause harm to the unknown putative employees of the VBA-eligible suppliers who
themselves lose out on employment opportunities. As such, the balance of the equities is largely
left in equipoise. But the public interest would be most harmed by a court like this one adding
to the uncertainty by entering an injunction that contravenes the Federal Circuit’s, whipsawing
the VA into attempting to comply with two conflicting directives issued by two different courts.
Ultimately, the decision as to how to allocate the federal government’s considerable contracting
power for the maximum benefit to all citizens is one that calls for careful calibration by
Congress. Put differently, if Congress is dissatisfied with the consequences of the PDS decision,
it can choose to clarify the matter legislatively.
Accordingly, this Court finds that the Plaintiffs have not carried their burden of
demonstrating their entitlement to an ex parte Temporary Restraining Order under Rule 65(b).
Ordinarily, upon denying a request for ex parte injunctive relief, the Court would nevertheless
set the matter down for a hearing to determine whether a preliminary injunction hearing, on
notice to the opponent, would be appropriate. But here, the Court notes that the injunctive relief
the Plaintiffs request here is the entirety of the relief that they could achieve if they succeeded on
the merits. See Docket # 40 at 16 (Plaintiffs conceding that they “cannot even seek monetary
relief for the types of claims asserted here” and noting that the APA “provide[s] for declaratory
and injunctive relief only”). In such circumstances, the provisions of Rule 65(a)(2) come into
play. That rule provides that “the court may advance the trial on the merits and consolidate it
with the hearing” on the request for preliminary relief. See Holly Sugar Corp. v. Goshen County
Co-Op. Beet Growers’ Assn., 725 F.2d 564, 568 (10th Cir. 1984). The Court here intends to
proceed in that fashion: it will defer the setting of any preliminary injunction hearing and direct
the parties to the Magistrate Judge to set an expedited schedule for any discovery and other

necessary pre-trial proceedings or, as appropriate, for the compilation and submission of the
administrative record and the filing of appellate-style briefs on the merits.
CONCLUSION
For the foregoing reasons, the Plaintiffs’ Emergency Motion for Temporary Restraining
Order (# 40) is DENIED.
Dated this 10th day of June, 2019.
BY THE COURT:

Marcia S. Krieger
Senior United States District Judge