State of Hawaii, Department of Human Services, Division of Vocational Rehabilitation, Hoopono-Services for the Blind

Filing 107

ORDER: GRANTING IN PART AND DENYING IN PART PLAINTIFF'S APPEAL; AFFIRMING IN PART AND REVERSING IN PART THE ARBITRATION PANEL'S JULY 24, 20217 DECISION; AND REMANDING THE CASE TO THE ARBITRATION PANEL re 1 , 101 - Signed by JUDGE LESL IE E. KOBAYASHI on 5/27/2021. For the foregoing reasons, Hoopono's appeal from the arbitration panel's July 24, 2017 Decision, filed August 28, 2017, is HEREBY GRANTED IN PART AND DENIED IN PART, and the Decisi on is HEREBY AFFIRMED IN PART AND VACATED IN PART. The Appeal is GRANTED, insofar as: the arbitration panel's Decision is VACATED as to the panel's ruling that the Army was not required to comply with the § 107(b) review requirement in this case; judgment in the instant Appeal will be entered in favor of Ho'opono; and the case is REMANDED to the arbitration panel to enter a decision consistent with this Order. The Appeal is DENIED in all other respects. There being no remaining issues in the instant Appeal, the Clerk's Office is DIRECTED to enter judgment in favor of Ho'opono, pursuant to this Order, and to close the case immediately. (emt, )

UNITED STATES DISTRICT COURT
DISTRICT OF HAWAII
STATE OF HAWAII, DEPARTMENT OF
HUMAN SERVICES, DIVISION OF
VOCATIONAL REHABILITATION,
HOOPONO-SERVICES FOR THE BLIND,

CIV. NO. 17-00430 LEK-RT

Plaintiff,
vs.
UNITED STATES DEPARTMENT OF
EDUCATION, REHABILITATION
SERVICES ADMINISTRATION,
Defendant.
ORDER: GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S APPEAL; AFFIRMING IN PART AND REVERSING
IN PART THE ARBITRATION PANEL’S JULY 24, 2017 DECISION;
AND REMANDING THE CASE TO THE ARBITRATION PANEL
On August 28, 2017, Plaintiff State of Hawai`i,
Department of Human Services, Division of Vocational
Rehabilitation, Ho`opono - Services for the Blind (“Ho`opono”),
filed the instant appeal of a July 24, 2017 Arbitration Decision
(“Appeal” and “Decision”).

[Plaintiff’s Complaint and Appeal

Brief (“Complaint”), filed 8/28/17 (dkt. no. 1).]

Ho`opono

filed its Opening Brief; Motion for Judgment on the
Administrative Record and Motion to Vacate Arbitration Decision
(“Opening Brief”) on January 14, 2021.

[Dkt. no. 101.]

Defendant United States Department of Education, Rehabilitation
Services Administration (“Defendant”) filed its Answering Brief

on February 24, 2021, and Ho`opono filed its Reply Brief in
Support of Motion for Judgment on the Administrative Record and
Motion to Vacate Arbitration Decision (“Reply Brief”) on
March 19, 2021.

[Dkt. nos. 104, 105.]

The Court finds the

Appeal suitable for disposition without a hearing pursuant to
Rule LR7.1(c) of the Local Rules of Practice for the United
States District Court for the District of Hawaii (“Local
Rules”).

For the reasons set forth below, Hoopono’s Appeal is

granted in part and denied in part, and the arbitration panel’s
Decision is affirmed in part and vacated in part.

The case is

remanded to the arbitration panel to issue a decision consistent
with this Order.
BACKGROUND
Ho`opono brings this Appeal pursuant to the Randolph–
Sheppard Act, 20 U.S.C. § 107, et seq. (“the Act” or “RSA”).
[Complaint at pg. 1.]

The RSA “establishes a cooperative

program between the federal government and the states to assist
blind persons who wish to operate vending facilities on federal
property.”

Sauer v. U.S. Dep’t of Educ., 668 F.3d 644, 645 (9th

Cir. 2012) (citing 20 U.S.C. § 107).

Defendant administers the

RSA with the help of agencies, designated by the Secretary of
Education (“the Secretary”), in the states that choose to
participate in the RSA program (“state licensing agencies” or
“SLAs”).

Id. at 645-46 (citing 20 U.S.C. §§ 107(b), 107a(a),
2

107b).

An SLA “issue[s] licenses to blind persons that make

them eligible to operate vending facilities on federal
properties within that state.”

Id. (citing § 107a(b)).

Section 107(b) states, inter alia: “Any limitation on the . . .
operation of a vending facility based on a finding that such
. . . 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.”
I.

Relevant Facts
The relevant facts in this case are largely

undisputed.

Ho`opono is the SLA for the State of Hawai`i.

[Administrative Record (“AR”), filed 9/6/18 (dkt. no. 69), at
CAR001129 (Decision at 2).1]

From 2005 to 2016, the United

States Department of the Army (“Army”) had a contract, which was
extended a number of times, with Ho`opono (collectively, “the
Contract”) to perform the full operation of four
cafeteria/dining facilities at the Schofield Barracks and
Wheeler Army Airfield (collectively, “Schofield”).

The Contract

required the performance of both Full Food Service (“FFS”)

The AR is docket numbers 61 through 70, all of which were
filed on September 6, 2018. The Decision is also available as
part of Exhibit A to the Complaint. [Dkt. no. 1-1 at PageID
#: 22-75.]
1

3

duties and Dining Facility Attendant (“DFA”) duties.

James

Theodore Chinn, Jr. (“Chinn”) was the licensed blind vendor who
Ho`opono assigned to the contract.

[Id. at CAR001129-30

(Decision at 2-3); Order Denying Plaintiff’s Second Motion for
Temporary Restraining Order, filed 10/20/17 (dkt. no. 27)
(“10/20/17 Order”), at 2-3.2]
During the period of the Contract, FFS and DFA duties
were required for the Schofield facilities because the Army
service members who ordinary would perform the FFS duties were
often stationed overseas.

After the major combat operations in

Iraq and Afghanistan ended, the service members were available
at their home station on a more reliable basis.

Because Army

cooks were available, the Army no longer needed a contractor to
perform FFS services.

The Army still required DFA services,

including janitorial duties, because Army Regulations prohibit
Army cooks from performing those duties.

Thus, when the Army

sought bids for the Schofield dining facilities contract
covering the years 2016 to 2022 (“2016-22 Contract”), the
contract was limited to DFA services only.

[AR (dkt. no. 69) at

CAR001130 (Decision at 3).]
Ho`opono points out that the Army initially indicated
that, in spite of the reduction in the services called for, the

2

The 10/20/17 Order is also available at 2017 WL 6997137.
4

Army intended to apply the RSA’s priority in the 2016-22
Contract solicitation process.

[AR (dkt. no. 62-4) at CAR000139

(letter dated 12/22/15 to Ho`opono from Sandra E. Kim,
Contracting Officer/Chief, Army Contract Operations Division
(“12/22/15 Letter”)).]

The Army stated:

The Government intends to solicit and compete the
follow-on contract as a 100% Small Business setaside notifying potential offerors of the
Randolph Sheppard “priority”. This “priority”
will result in award to your organization unless
your organization’s offer exceeds the low offeror
by more than five percent of that offer or one
million dollars, whichever is less.
[Id.]

On February 2, 2016, Solicitation No. W912CN-16-R-0005

was issued, seeking bids for the 2016-22 Contract (“2016-22
Solicitation”), and it provided for the RSA’s priority.
(dkt. no. 69) at CAR001130 & n.4 (Decision at 3 & n.4).]

[AR
The

services to be provided under the 2016-22 Contract
include[d], but [we]re not limited to, the
following: cleaning dining facilities, cleaning
restrooms, included in these duties are sweeping,
mopping, scrubbing, trash removal, dishwashing,
waxing, stripping, buffing, window washing,
equipment and utensils and other sanitation
related functions in the dining facilities listed
within the [Performance Work Statement (“PWS”)],
and may be required before, during, and after
normal dining facility operating hours.
[AR (dkt. no. 66-13) at CAR000901 (PWS for the 2016-22
Solicitation), § 2.1.2.]
The RSA’s priority was removed in an amendment to the
2016-22 Solicitation (“Amendment 4”), which was issued pursuant
5

to a directive from the Army Contracting Command, based on Army
policy interpreting the RSA as inapplicable to DFA contracts.
After Amendment 4, the contracting method for the 2016-22
Solicitation became solely a 100% small business set-aside,
which rendered Ho`opono ineligible to bid because it is not a
small business.
at 3 & n.4).]

[AR (dkt. no. 69) at CAR001130 & n.4 (Decision

The Army neither notified, consulted with, nor

sought permission from the United States Department of Education
before it issued Amendment 4 and removed the RSA’s priority from
the 2016-22 Solicitation process.

[AR (dkt. no. 62-2) at

CAR000136 (Stipulation of Fact, dated 2/9/17).]

Ho`opono

objected to the removal of the RSA’s priority, and the parties
agreed to arbitrate the issue.

[AR (dkt. no. 69-1) at CAR001130

(Decision at 3).]
II.

Arbitration
An arbitration hearing was held on February 9, 2017,

at Hoopono’s office in Honolulu.

[AR (dkt. no. 61-10)

(Transcript of Proceedings (“Arb. Trans.”)).]

The respondent at

the arbitration was the United States Department of the Army,
Schofield Barracks, and Major Michael Pond appeared on its
behalf.

[Id. at CAR 000024-25 (Arb. Trans. at 1-2).]

Ho`opono

called two witnesses - Chinn and Lea Dias, Hoopono’s Branch
Administrator.

[Id. at CAR000036-84 (Arb. Trans. at 13-61).]

Major Pond did not present any witnesses, but the arbitration
6

panel asked him whether he knew why the RSA’s priority was
removed from the 2016-22 Solicitation.
Trans. at 62).]

[Id. at CAR000085 (Arb.

He stated:

My understanding is that initially, when a
contracting office is planning an acquisition,
they have any number of policies and provisions
of the Federal Acquisition Regulation and the
Defense supplements, and the Army supplements.
They kind of do a check to ensure that the -- the
acquisition is going to be aligned with those
various authorities.
[Id. at CAR000086 (Arb. Trans. at 63).]

Major Pond explained

that: the Hawai`i contracting office initially determined that
the RSA’s priority would be extended to Hoopono’s blind vendor
who was operating the facilities at the time; Ms. Kim therefore
issued the 12/22/15 Letter to Ho`opono; and, after higher
officials consulted with Army headquarters, it was determined
that the priority did not apply because the 2016-22 Contract was
limited to DFA duties.
65).]

[Id. at CAR000086-88 (Arb. Trans. at 63-

Major Pond stated:
It’s just a question of do we need it or
not. And that’s based on things like you know,
the end of major combat operations in Iraq and
Afghanistan, and we are kind of looking forward
at next years, and there’s a sense, and I think
this is generally Army, why they sense that, we
are confident that large formations are not going
to be deployed the way they were from 2005 to ‘15
in the next five years.
CHAIRMAN BROWN:

So basically a downsizing.

MAJ. POND: Yes, a significant downsizing.
I mean from the contractor, again, operating the
7

facility, preparing the meals, serving the meals,
cooking the food, doing everything basically, to
Army cooks taking over those positions, and then
the contractor, the DFA or Dining Facility
Attendant contractor is washing the dishes,
sweeping the floors, and taking out the trash.
. . . .
CHAIRMAN BROWN: So is the Army able to make
that decision in and of itself or do they under
the federal law have to check with the Department
of Education?
MAJ. POND: The Army is allowed to define
its requirement in the sense that if we decided
that we don’t want full food services, there
really is no way for a vendor to say, yes, you
do.
CHAIRMAN BROWN:
that against the --

But, do you have to bump

MAJ. POND: But, there is -- I would say that
it’s true that there is a procedural, a legal
requirement to consult prior to removing that
priority. And for reasons that I do not know,
that apparently was not -- not apparently -- was
not -- was not followed in this case.
I would -- and it’s just speculating, but I
don’t -- I don’t think there was anything.
[Id. at CAR000088-90 (Arb. Trans. at 65-67).]
Major Pond argued that Hoopono’s position that the RSA
applied to the solicitation and award of the 2016-22 Contract
was an attempt to improperly extend the scope of the RSA.

He

argued the RSA does not apply when the contractor is to perform
“ancillary services which pertain to the operation of a dining
facility” because adopting such a position would extend the RSA

8

to virtually any work performed at a dining facility, including
replacing a light bulb, painting the walls, or repairing the air
conditioning system.

[Id. at CAR000093-94 (Arb. Trans. at 70-

71).]
In the Decision, the arbitration panel identified the
following issues presented in the case:
Is the [Army] placing a limitation on the
operation of a vending facility by pulling back
its cafeteria service to an in-house operation,
changing its full service FFS contract
requirements to a DFA contract?
. . . .
Whether DFA services are “pertaining to the
operation”[3] of cafeterias on a federal facility?
[AR (dkt. no. 69-1) at CAR001138-39 (Decision at 11-12).]

As to

the first issue, the panel stated:
The Arbitration Panel notes that under the 2007
JWA no-poaching provision, a “prime contract for
operation of a military dining facility” (left
for RSA) is distinguished from one that is

3

For example, the RSA regulations state:
All contracts or other existing arrangements
pertaining to the operation of cafeterias on
Federal property not covered by contract with, or
by permits issued to, State licensing agencies
shall be renegotiated subsequent to the effective
date of this part on or before the expiration of
such contracts or other arrangements pursuant to
the provisions of this section.

34 C.F.R. § 395.33(c) (emphasis added).
9

“supporting the operation” (left for JWOD).[4]
JWA reflected the 2006 nonbinding Joint Report
which had distinguished the FFS and DFA
contracts. While there is some logic to think
that the Army returning to an in-house status is
a change producing a limitation, such a
conclusion without clearer legislative guidance
would seem to too heavily impact the Army’s
ability to operate. Therefore, the Panel is
disinclined to accept the argument and does not
find RSA section 107(b)(2) violated.
[Id. at CAR001138 (Decision at 11).]
The JWOD is a more general procurement
statute and counterpart statute to the RSA. The
JWOD is intended “to increase employment and
training opportunities for persons who are blind
or have other severe disabilities through the
purchase of commodities and services from
qualified nonprofit agencies employing [such]
persons.” 41 C.F.R. § 51–1.1(a) (emphasis
supplied). Like the RSA, the JWOD is applicable
to dining facility contracts for military mess
halls. See [NISH v.] Cohen, 247 F.3d [197,] 205
[(4th Cir. 2001)]. But, unlike the RSA, which
“deals explicitly with . . . the operation of
cafeterias,” the JWOD is a “general procurement
statute.” Id.
Kan. ex rel. Kan. Dep’t for Child. & Fams. v. SourceAmerica, 826
F. App’x 272, 275 (4th Cir. 2020) (emphasis and some alterations
in SourceAmerica) (footnote omitted).
[I]n 2006, Congress enacted the “no poaching”
provision in § 856 of the [JWA]. Pub. L.
In the Decision, “JWA” refers to section 856 of the John
Warner Defense Authorization Act for Fiscal Year 2007, Pub.
L. 109-364, 120 Stat. 2347 (2006), and “JWOD” refers to the
Javits-Wagner-O Day Act (later known as AbilityOne), ch. 697, 52
Stat. 1196 (1938) (currently codified, as amended, at 41 U.S.C.
§§ 8501 to 8506). See AR at CAR001132 & n.13, CAR001134
(Decision at 5 & n.13, 7 & n.24).
4

10

No. 109-364, § 856, 120 Stat. 2083 (2006).
Congress explained that the contracts covered
under the “no poaching” provision include “a food
service contract . . . for full food services,
mess attendant services, or services supporting
the operation of all or any part of a military
dining facility . . . that was awarded under
either the [RSA] or the [JWOD].” Id. . . .
Kan. ex rel. Kan. Dep’t for Child. & Fams. v. SourceAmerica, 874
F.3d 1226, 1234 (10th Cir. 2017) (some alterations in
SourceAmerica).

The JWA stated: the RSA “does not apply to full

food services, mess attendant services, or services supporting
the operation of a military dining facility that, as of the date
of the enactment of this Act, were services on the procurement
list established under section 2 of the” JWOD; and the JWOD
“does not apply at the prime contract level to any contract
entered into by the Department of Defense as of the date of the
enactment of th[e JWA] with a State licensing agency under the
[RSA] for the operation of a military dining facility.”
Pub. L. No. 109–364, § 856(a)(1)-(2).

JWA,

The arbitration panel

described the JWA as “a temporary freeze on contract competition
between extant RSA/JWOD contractors for cafeteria
services. . . . for contracts extant as of the day of the
passage of the law.”
at 8).]

[AR (dkt. no. 69) at CAR001135 (Decision

Hoopono’s position was that, under the JWA, “JWOD only

applies in two instances: to contracts poached before
October 17, 2006 and to subcontracts.”

11

[Id. at CAR001135 n.25

(Decision at 8 n.25).]

Thus, Ho`opono argued that, because the

Contract was a prime contract that was in existence when the JWA
was enacted, the no-poaching provision prevented the application
of the JWOD to the 2016-22 Solicitation because the 2016-22
Contract was a follow-on contract to the Army’s original
Contract with Ho`opono.

The arbitration panel disagreed.

As to the second issue, whether DFA services pertain
to the operation of a federal cafeteria facility, the
arbitration panel acknowledged that FFS contracts with blind
vendors under the RSA included DFA functions, including
janitorial services, but “[t]here always seemed to be a primary
food component[.]”

[Id. at CAR001139 (Decision at 12).]

However, in light of the JWOD and JWA, the arbitration panel
interpreted DFA functions as “related” but “separable” under the
RSA.

[Id.]

Thus, the panel ruled that, “[i]f the prime

contract is for FFS, the blind vendor has the priority under RSA
even as the FFS single contract includes DFA duties.

If it is a

single contract for DFA, other non-profits are authorized to
bid.”5

[Id.]

As to Hoopono’s argument based on the JWA no-

The arbitration panel noted that, while blind vendors
arguably could bid for DFA contracts, they may soon be
ineligible to do so, based on the evolving the law and policies
in this area. [AR (dkt. no. 69-1) at CAR001139 (Decision at
12).] However, this observation is not relevant to the instant
Appeal because it is undisputed that Ho`opono was not eligible
to bid on the 2016-22 Contract after Amendment 4 to the 2016-22
Solicitation.
5

12

poaching provision, the arbitration panel ruled that the
provision did not preclude the Army from choosing to apply the
RSA’s priority to the 2016-22 Solicitation, but the panel also
ruled that provision did not clearly require the Army to do so.
[Id.]

The panel therefore ruled that Ho`opono did not present

substantial evidence showing that the Army violated the RSA by
failing to apply the RSA’s priority in the solicitation process
for the 2016-22 Contract.

[Id. at CAR001139-40 (Decision at 12-

13).]
III. The Instant Appeal
On October 21, 2019, Ho`opono filed a motion asking
this Court to stay the Appeal, pending the outcome of: Kansas ex
rel. Kansas Department for Children & Families v. SourceAmerica,
No. 19-1452, which was pending before the Fourth Circuit; and
Texas Workforce Commission v. United States Department of
Education, No. 19-50283, which was pending before the Fifth
Circuit.

[Dkt. no. 83.]

The motion to stay was granted, and

the case was administratively closed.

[Minute Order - EO: Court

Order Staying and Administratively Closing Case, filed 1/3/20
(dkt. no. 88).]

Following decisions by the Fourth Circuit and

the Fifth Circuit, the stay was lifted, and Hoopono’s Appeal
proceeded on the merits.

[Minute Order - EO: Court Order:

Vacating Status Conference Scheduled for November 13, 2020;

13

Lifting Stay; and Issuing Deadlines, filed 11/12/20 (dkt.
no. 96).]
Ho`opono argues the arbitration panel’s Decision was
“arbitrary, capricious, an abuse of discretion, otherwise
contrary to law, and not supported by substantial evidence.”
[Opening Brief at 1.]

Ho`opono first argues the RSA applies to

DFA service contracts at Schofield.

Further, even if the RSA

does not apply to DFA service contracts in general, the
reduction in the scope of the Schofield contract from FFS to DFA
eliminated an existing RSA opportunity.

This required the

approval of the Secretary of Education, but the Army did not
obtain the Secretary’s approval before eliminating the RSA
opportunity.
STANDARD
“An arbitral award under the Randolph–Sheppard Act is
reviewed as an agency action under the standards set forth in
the Administrative Procedure Act (‘APA’), 5 U.S.C. § 706.”
Premo v. Martin, 119 F.3d 764, 768 (9th Cir. 1997) (citing 20
U.S.C. § 107d–2).

This Court must set aside the arbitration

panel’s Decision if this Court finds that the Decision is
(A) arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with
law;
(B) contrary to constitutional right, power,
privilege, or immunity;

14

(C) in excess of statutory jurisdiction,
authority, or limitations, or short of statutory
right;
(D) without observance of procedure required by
law;
(E) unsupported by substantial evidence in a
case subject to sections 556 and 557 of this
title or otherwise reviewed on the record of an
agency hearing provided by statute; or
(F) unwarranted by the facts to the extent that
the facts are subject to trial de novo by the
reviewing court.
See § 706(2).

In reviewing the Decision, this Court must

“review the whole record or those parts of it cited by a
party[.]”

See § 706.
Hoopono’s Appeal focuses upon § 706(2)(A).

This

district court has stated:
“This standard of review is ‘highly deferential,
presuming the agency action to be valid and
affirming the agency action if a reasonable basis
exists for its decision.’” Ranchers Cattlemen
Action Legal Fund United Stockgrowers of Am. v.
U.S. Dep’t of Agric., 499 F.3d 1108, 1115 (9th
Cir. 2007) (citation omitted). A court may not
substitute the agency’s judgment with its own.
See Earth Island [Inst. v. Carlton], 626 F.3d
[462,] 468 [(9th Cir. 2010)]. Instead,
a decision may only be reversed as arbitrary
and capricious “if the agency relied on
factors Congress did not intend it to
consider, entirely failed to consider an
important aspect of the problem, or offered
an explanation that runs counter to the
evidence before the agency or is so
implausible that it could not be ascribed to
a difference in view or the product of
agency expertise.”
15

Id. at 468–69 (citation omitted). . . .
Hsiao v. Stewart, Civil No. 18-00502 JAO-KJM, 2021 WL 1113641,
at *8 (D. Hawai`i Mar. 23, 2021).
DISCUSSION
I.

Whether the RSA Applies to DFA Service Contracts
Blind persons who have been licensed pursuant to the

RSA are “authorized to operate vending facilities on any Federal
property,” 20 U.S.C. § 107(a), and they are given priority in
the operation of such facilities, § 107(b).

For purposes of the

RSA,
“vending facility” means automatic vending
machines, cafeterias, snack bars, cart services,
shelters, counters, and such other appropriate
auxiliary equipment as the Secretary may by
regulation prescribe as being necessary for the
sale of the articles or services described in
section 107a(a)(5) of this title and which may be
operated by blind licensees[.]
20 U.S.C. § 107e(7); see also 34 C.F.R. § 395.1(d) (defining
what constitutes a cafeteria for purposes of the RSA).

It is

undisputed that the Schofield cafeteria/dining facilities where
the DFA services were to be provided under the 2016-22 Contract
are vending facilities for purposes of the RSA.

Thus, the Court

must determine whether the provision of the DFA services
described in the 2016-22 Solicitation constitutes the operation
of a vending facility.

16

Neither the RSA statutes nor their implementing
regulations contain an express definition of the operation of a
vending facility.

See 20 U.S.C. § 107e; 34 C.F.R. § 395.1; see

also, generally, 20 U.S.C. §§ 107 to 107f; 34 C.F.R. §§ 395.1 to
395.38.

After the arbitration panel issued its Decision, the

Secretary issued a letter, dated March 5, 2018, addressed to
United States Representative Pete Sessions (“Opinion Letter”).
[Opening Brief, Exh. A.6]

The Opinion Letter followed an

October 17, 2017 discussion between the Secretary and
Representative Sessions about the RSA.

[Id. at PageID #: 3738.]

In the letter, the Secretary stated:
There has been some dispute over the types of
contracts to which the [Randolph-Sheppard Act]
priority applies. Defense Department regulations
distinguish between “full food service” and
“dining facility attendant” contracts. Under
“full food service” contracts, the vendor manages
the entire operation of the cafeteria, including
food preparation. Under “dining facility
attendant” contracts, the vendor manages those
aspects of the cafeteria besides food preparation
because military personnel prepare the food.
The Education Department believes that the
Randolph-Sheppard Act priority applies to both
types of cafeteria contracts. The term
“operation” in the Act means that the vendor must
“manage” or “direct the working of’ [sic] the
cafeteria. Oxford English Dictionary (2d ed.
1989). Nothing in the Randolph-Sheppard Act
The Secretary’s Opinion Letter is also available on the
Department of Education, Rehabilitation Service Administration’s
website,
https://rsa.ed.gov/about/programs/randolph-sheppard-vendingfacility-program/resources (last visited May 24, 2021).
6

17

requires a vendor to participate in every
activity of the cafeteria in order to “manage” or
“direct the working of’ [sic] the cafeteria.
Where a vendor is responsible for all the
functions of the cafeteria aside from those
performed by military personnel--such as
supervisory, administrative, and sanitationrelated functions--the vendor can be said to
“manage” the cafeteria, even if the vendor is not
preparing the food. Indeed, the cafeteria would
not be able to operate without the vendor
performing those functions.
Some contracts may be limited to discrete tasks
so as not to entail overall “operation” of the
cafeteria, but that characterization would not
apply to all “dining facility attendant”
contracts.
[Id.]
Courts have differed in their treatment of the Opinion
Letter.

The district court order that the Fourth Circuit

reviewed in SourceAmerica gave the Opinion Letter no weight.
[T]he district court declined to give the
Secretary’s Opinion Letter any deference or
consideration, based on the fact that the DOE
itself disavowed the Opinion Letter as either its
general position or its litigation position on
the proper interpretation of RSA with respect to
the Fort Riley DFA contract. The district court
further explained “[Kansas] cannot credibly argue
that a letter written by the Secretary [of DOE]
to a congressman constitutes an agency
interpretation promulgated in the exercise of the
authority to make rules carrying the force of
law.”
SourceAmerica, 826 F. App’x at 281 (4th Cir. 2020) (some
alterations in SourceAmerica).

In the instant Appeal, while not

expressly disavowing the opinions in the Opinion Letter,

18

Defendant argues the Opinion Letter is not a binding agency
interpretation, and therefore the letter is not entitled to
deference under Chevron U.S.A. Inc. v. Nat. Res. Def. Council,
Inc., 467 U.S. 837 (1984).7

[Answering Brief at 23-24.]

The

Fifth Circuit has stated: “Although the Secretary’s letter does

7

The Ninth Circuit has stated:
We review the validity of an agency’s
regulatory interpretation of a statute under the
two-step framework set forth in Chevron, U.S.A.,
Inc. v. Nat. Res. Def. Council, Inc., 467 U.S.
837, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984).
The first step is to ask, “has [Congress]
directly spoken to the precise question at
issue.” Id. at 842, 104 S. Ct. 2778. If
Congress’s intent is clear, then that is the end
of our inquiry. Id. at 842–43, 104 S. Ct. 2778.
If, however, “the statute is silent or ambiguous
with respect to the specific issue,” we proceed
to step two and ask if the agency’s action is
“based on a permissible construction of the
statute.” Id. at 843, 104 S. Ct. 2778. Even if
we believe the agency’s construction is not the
best construction, it is entitled to “controlling
weight unless [it is] arbitrary, capricious, or
manifestly contrary to the statute.” Id. at 844,
104 S. Ct. 2778.

Or. Rest. & Lodging Ass’n v. Perez, 816 F.3d 1080, 1086 (9th
Cir. 2016) (alterations in Or. Rest.) (footnote and some
citations omitted). However, as a preliminary matter - “Chevron
step zero” - it must be determined whether the Chevron analysis
applies. Id. at 1086 n.3. “An ‘administrative implementation
of a particular statutory provision qualifies for Chevron
deference when it appears that Congress delegated authority to
the agency generally to make rules carrying the force of law,
and that the agency interpretation claiming deference was
promulgated in the exercise of that authority.’” Id. (quoting
United States v. Mead Corp., 533 U.S. 218, 226–27, 121 S. Ct.
2164, 150 L. Ed. 2d 292 (2001)).
19

not carry the force of law, we find it presents a ‘reasonable
interpretation’ of the Act, such that it is persuasive and is
therefore ‘entitled to respect.’”

Texas Workforce Comm’n v.

United States Dep’t of Educ., 973 F.3d 383, 390 (5th Cir. 2020)
(quoting Christensen v. Harris Cnty., 529 U.S. 576, 587, 120 S.
Ct. 1655, 146 L. Ed. 2d 621 (2000)).
In Christensen, the United States Supreme Court
stated,
an interpretation contained in an opinion letter[
is] not . . . arrived at after, for example, a
formal adjudication or notice-and-comment
rulemaking. Interpretations such as those in
opinion letters — like interpretations contained
in policy statements, agency manuals, and
enforcement guidelines, all of which lack the
force of law — do not warrant Chevron-style
deference. See, e.g., Reno v. Koray, 515 U.S.
50, 61 (1995) (internal agency guideline, which
is not “subject to the rigors of the
Administrative Procedur[e] Act, including public
notice and comment,” entitled only to “some
deference” (internal quotation marks omitted)).
Instead, interpretations contained in formats
such as opinion letters are “entitled to respect”
under our decision in Skidmore v. Swift & Co.,
323 U.S. 134, 140 (1944), but only to the extent
that those interpretations have the “power to
persuade,” ibid. See [EEOC v.] Arabian American
Oil Co., [499 U.S. 244,] 256–258 [(1991)].[8]
Christensen, 529 U.S. at 587 (some alterations in Christensen)
(some citations omitted).

In Arabian American Oil, the Supreme

Arabian American Oil was superseded on other grounds by
the Civil Rights Act of 1991. See, e.g., Est. of Reynolds v.
Martin, 985 F.2d 470, 474 (9th Cir. 1993); Stender v. Lucky
Stores, Inc., 780 F. Supp. 1302, 1304 (N.D. Cal. 1992).
8

20

Court recognized the following facts as giving EEOC guidelines
the “power to persuade, if lacking power to control[,]” “the
thoroughness evident in its consideration, the validity of its
reasoning, its consistency with earlier and later
pronouncements.”

499 U.S. at 257 (citation and quotation marks

omitted).
The Secretary’s Opinion Letter is not entitled to
Chevron deference because it did not result from a formal
publication and comment process.

This Court also concludes that

the Opinion Letter is not entitled to the “respect” described in
Christensen because it does not have the type of “power to
persuade” described in Arabian American Oil.

While the

reasoning in the Secretary’s Opinion Letter appears to be sound,
there is insufficient information in the letter to evaluate the
thoroughness of the consideration.

Further, because there were

no earlier pronouncements regarding the issue of what
constitutes the “operation” of a cafeteria, and there have been
no later pronouncements on the issue, the consistency factor is
not present.

This Court therefore declines to consider the

Secretary’s Opinion Letter in the instant Appeal.
Without considering the Opinion Letter, this Court
cannot conclude that the arbitration panel’s ruling that DFA
services do not constitute the operation of a vending facility
on federal property was “arbitrary, capricious, an abuse of
21

discretion, or otherwise not in accordance with law[.]”

See 5

U.S.C. § 706(2)(A).
The original Contract between Ho`opono and the Army
was a prime contract for the operation of Schofield’s dining
facilities, and that contract was in existence when the JWA was
passed, and therefore the Contract was subject to the nopoaching provision of the JWA, Pub. L. No. 109-364, § 856, and
the JWOD did not apply to the Contract.

However, the 2016-22

Contract was solicitated as a new contract, not an extension of
the original Contract, and therefore the 2016-22 Contract was
not in existence when the JWA was passed.

Thus, the JWA no-

poaching provision did not apply to the solicitation process for
the 2016-22 Contract.

The arbitration panel, considering the

relationship between the RSA, the JWA, and the JWOD, concluded
that DFA services, although related to FFS duties, were
separable, and therefore the RSA’s priority is not required in
the solicitation process for a DFA contract.

In so ruling, the

arbitration panel did not: “rel[y] on factors Congress did not
intend it to consider”; “entirely fail[] to consider an
important aspect of the problem”; nor “offer[] an explanation
that runs counter to the evidence before” it.

See Earth Island

Inst., 626 F.3d at 469 (citation and quotation marks omitted).
While the United States Department of Education, in its
expertise, could propose regulations defining the operation of a
22

vending facility on federal property to include the provision of
DFA services for the facility and could go through the formal
administrative process to adopt such regulations, it has not
done so.

There is a plausible difference in the view of the

existing statutes and regulations regarding the issue of whether
the provision of DFA services constitutes the operation of a
vending facility on federal property.

See id.

The arbitration

panel’s ruling that the RSA did not apply to a contract for DFA
services at Schofield was not “arbitrary, capricious, an abuse
of discretion, or otherwise not in accordance with law[.]”
Hoopono’s Appeal is therefore denied, and the arbitration
panel’s Decision is affirmed, as to this issue.
II.

Whether a Limitation Was Placed on
the Operation of a Vending Facility
It is undisputed that departing from the scope of the

Contract, which required FFS duties, to requiring only DFA
duties in the 2016-22 Contract rendered Ho`opono ineligible to
bid.

The RSA states that: “Any limitation on the . . .

operation of a vending facility based on a finding that such
. . . 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.”

20 U.S.C. § 107(b) (emphasis added).

The

arbitration panel found that the Army narrowed the scope of the

23

contracted services because of the increased availability of
Army cooks.

[AR (dkt. no. 69-1) at CAR001130 (Decision at 3).]

Only a contract for DFA services was necessary “because Army
Regulations prohibit Army cooks from performing those
functions.”

[Id.]

Defendant does not contest that this was the

reason for the reduction in the scope of work.

See Answering

Brief at 6-7 (discussing the return of Army cooks who had been
deployed in Iraq and Afghanistan).

It is undisputed that, under

the Contract, Ho`opono was operating vending facilities at
Schofield.

The decision to reduce the scope of the contracted

services because of the return of deployed cooks was essentially
a decision that continuing to have a contractor perform those
services “would adversely affect the interests of the United
States.”

See § 107(b).

Defendant’s arguments in this Appeal

present an analogous position - that it was in the Army’s best
interest to have the previously deployed cooks resume the food
service duties at the Schofield facilities.

See Answering Brief

at 6 (“the Army Soldiers/cooks who were hired and trained by the
Army for the specific purpose of operating the dining facilities
returned to their duty assignments from deployment and would
perform their FFS functions” (emphasis added)).
Defendant’s position is it was not necessary for the
Army to seek a justification ruling from the Secretary before
reducing the scope of the Schofield dining facilities contract
24

because the reduction did not constitute a “limitation” for
purposes of § 107(b).

Defendant asserts § 107(b) “was never

intended to compel an agency to renew contracts after they have
expired,” and “the [statute’s] legislative history reveals that
the provision was designed for a narrower purpose — preventing
federal agencies from thwarting the RSA priority by imposing
arbitrary restrictions on blind vendors’ operations.”
[Answering Brief at 19 (citing S. Rep. No. 93-937, at 16 (1974)
(citing concerns about agencies “imposing arbitrary and harmful
limitations on blind vendor operations with respect to the kinds
of merchandise a blind vendor was permitted to sell, with
respect to the location of a blind stand, or with respect to the
amount of income permitted to accrue to a vendor”)).]
The RSA does not define “limitation.”

The Ninth

Circuit has stated:
“When a statute does not define a term, we
typically ‘give the phrase its ordinary
meaning.’” FCC v. AT & T Inc., 562 U.S. 397,
403, 131 S. Ct. 1177, 179 L. Ed. 2d 132 (2011)
(quoting Johnson v. United States, 559 U.S. 133,
138, 130 S. Ct. 1265, 176 L. Ed. 2d 1 (2010)).
To determine the ordinary meaning of a word,
“consulting common dictionary definitions is the
usual course.” Cal. All. of Child & Family
Servs. v. Allenby, 589 F.3d 1017, 1021 (9th Cir.
2009). “If the language has a plain meaning or
is unambiguous, the statutory interpretation
inquiry ends there.” CVS Health Corp. v.
Vividus, LLC, 878 F.3d 703, 706 (9th Cir. 2017)
(citation omitted).

25

Animal Legal Def. Fund v. U.S. Dep’t of Agric., 933 F.3d 1088,
1093 (9th Cir. 2019).

A “limitation” is “something that

limits,” and a limit is “something that bounds, restrains, or
confines.”

Limitation, Merriam-Webster, https://www.merriam-

webster.com/dictionary/limitation (last visited May 25, 2021);
Limit, Merriam-Webster, https://www.merriamwebster.com/dictionary/limits (last visited May 25, 2021).
Further, § 107(b) specifically refers to “[a]ny limitation,”
(emphasis added,) and the plain meaning of the term “any”
indicates that “limitation” is to be interpreted broadly.

See

Any, Merriam-Webster, https://www.merriamwebster.com/dictionary/any (last visited May 25, 2021) (stating
“any” means “EVERY — used to indicate one selected without
restriction” (emphasis in original)).
Changing the scope of the work contacted for the
Schofield dining facilities from FFS duties to DFA duties,
eliminating the RSA’s priority, and soliciting the 2016-22
Contract as solely a 100% small business set-aside contract
restrained or confined Ho`opono - the incumbent service provider
under the Contract - from bidding on the 2016-22 Contract.

This

is particularly true because the Army initially informed
Ho`opono that the Army intended to apply the RSA’s priority in
the bidding process for the 2016-22 Contract, and the RSA’s
priority was not removed until Amendment 4 to the 2016-22
26

Solicitation.

See AR (dkt. no. 62-4) at CAR000139 (12/22/15

Letter); AR (dkt. no. 67-1) at CAR000917-32 (Amendment 4).

The

reduction of duties from FFS to DFA therefore constituted a
“limitation” for purposes of § 107(b).

Accord SourceAmerica,

826 F. App’x at 286 (4th Cir. 2020) (“the Army’s decision to
forego the FFS contract with Kansas in favor of a DFA contract
did more than just ‘limit’ a blind vendor’s operation of the
vending facility; it eliminated it altogether” (citation
omitted)).

Because the term “[a]ny limitation” has a plain and

unambiguous meaning, it is not necessary to proceed further in
the statutory interpretation analysis.9

See Animal Legal Def.

Fund, 933 F.3d at 1093.

Even if this Court considered the legislative history
cited by Defendant, [Answering Brief at 19 (citing S. Rep.
No. 93-937, at 16 (1974)),] which reflects Congress’s concern
regarding limitations on a licensed blind vender such as
restrictions on the type of merchandise sold, the location of
the vending operation, and the amount of income, it would not
change this Court’s analysis. Although those examples are cited
in the RSA’s legislative history, nothing in the language of the
RSA statutes suggests that the term “limitation” means only
those types of restrictions. Thus, the legislative history of
the RSA does not preclude this Court’s interpretation of the
term “limitation.” Accord SourceAmerica, 826 F. App’x at 285–86
(4th Cir. 2020) (discussing the reduction of a FFS contract to a
new DFA contract and citing Minn. Dep’t of Jobs & Training v.
Riley, 18 F.3d 606, 608 (8th Cir. 1994) (addressing the practice
of charging commission on the blind vendor’s operation), and
Minn. Dep’t of Econ. Sec. v. Riley, 107 F.3d 648, 650 (8th Cir.
1997) (addressing the installation of vending machines that
would compete with the blind vendor)).
9

27

This Court concludes that the arbitration panel’s
ruling that the § 107(b) justification review requirement did
not apply in this case was arbitrary and capricious and was not
in accordance with law.

The arbitration panel’s analysis of

this issue “runs counter to the evidence before” the panel and,
based on the plain language of § 107(b), the panel’s analysis
was “so implausible that it could not be ascribed to a
difference in view or the product of agency expertise.”
Earth Island Inst., 626 F.3d at 469.

See

Hoopono’s Appeal is

therefore granted as to this issue, and this portion of the
arbitration panel’s Decision is vacated.
III. Effect of this Court’s Ruling
Because this Court has vacated a portion of the
arbitration panel’s Decision, judgment in this case will be
entered in favor of Ho`opono.

In addition, Ho`opono requests

the following relief:
b)

vacate the Arbitration Decision;

c)
order the Army to promptly comply with the
Randolph-Sheppard Act in soliciting new bids for
the services at issue;
d)
order the Army to terminate the existing
contract and immediately enter a bridge contract
with Ho`opono for the services currently being
provided in contradiction to the Act;
e)
enjoin the Army from exercising options
under the existing contract that would perpetuate
its violation of the Act; and

28

f)
enjoin the Army from further violations of
the Act in bid solicitations for Schofield
Barracks, including upon expiration of the
current DFA contract at the facility.
[Opening Brief at 29.]

Defendant responds that these requests

for relief are not properly before this Court in the instant
Appeal, which presents the limited issue of whether the
arbitration panel’s Decision should be set aside.

Defendant’s

position is that Ho`opono is only entitled to a remand to the
arbitration panel.

[Answering Brief at 25-26 (citing Sauer v.

U.S. Dep’t of Educ., 668 F.3d 644, 653 (9th Cir. 2012) (citing
Maryland State Dep’t of Educ. v. U.S. Dep’t of Veterans Affairs,
98 F.3d 165, 169-70 (4th Cir. 1996) (“[T]he statute places the
responsibility for ending the violation on the head of the
federal entity and does not authorize a [20 U.S.C.] § 107d-1(b)
arbitration panel to order the federal entity to take specific
remedial action.”))).]
In Sauer, the Ninth Circuit stated:
[T]wo of our sister circuits have held that an
arbitration panel convened under § 107d–1(b)
lacks authority to order a federal agency to take
remedial action; under this interpretation of the
Act, a state licensing agency would not have the
ability (let alone the obligation) to enforce a
§ 107d–1(b) arbitration decision against the
federal government.
668 F.3d at 653 (citing Md. State Dep’t of Educ. v. U.S. Dep’t
of Veterans Affairs, 98 F.3d 165, 169–70 (4th Cir. 1996); Ga.
Dep’t of Human Res. v. Nash, 915 F.2d 1482, 1492 (11th Cir.
29

1990)).

However, because the Ninth Circuit ultimately did not

reach the issue of whether a SLA would be able to enforce an
arbitration decision against a federal agency, id., it cannot be
said that the Ninth Circuit in Sauer adopted the Fourth Circuit
interpretation of § 107d-1(b) that Defendant quotes in the
Answering Brief.
This Court nevertheless agrees with Defendant that the
relief sought by Ho`opono cannot be issued against the Army here
because the Army is not a party to the instant Appeal, although
the Army was the respondent in the proceedings before the
arbitration panel.

This Court therefore remands the instant

case to the arbitration panel to issue a decision consistent
with this Order.

See § 107d-1(b) (“the decision of [the

arbitration] panel shall be final and binding on the parties
except as otherwise provided in this chapter[,]” i.e. 20 U.S.C.
Chapter 6A).
CONCLUSION
For the foregoing reasons, Hoopono’s appeal from the
arbitration panel’s July 24, 2017 Decision, filed August 28,
2017, is HEREBY GRANTED IN PART AND DENIED IN PART, and the
Decision is HEREBY AFFIRMED IN PART AND VACATED IN PART.

The

Appeal is GRANTED, insofar as: the arbitration panel’s Decision
is VACATED as to the panel’s ruling that the Army was not
required to comply with the § 107(b) review requirement in this
30

case; judgment in the instant Appeal will be entered in favor of
Ho`opono; and the case is REMANDED to the arbitration panel to
enter a decision consistent with this Order.

The Appeal is

DENIED in all other respects.
There being no remaining issues in the instant Appeal,
the Clerk’s Office is DIRECTED to enter judgment in favor of
Ho`opono, pursuant to this Order, and to close the case
immediately.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, May 27, 2021.

STATE OF HAWAII, DEPARTMENT OF HUMAN SERVICES, DIVISION OF
VOCATIONAL REHABILITATION, HOOPONO – SERVICES FOR THE BLIND VS.
U.S. DEPARTMENT OF EDUCATION, REHABILITATION SERVICES
ADMINISTRATION; CV 17-00430 LEK-RT; ORDER: GRANTING IN PART AND
DENYING IN PART PLAINTIFF’S APPEAL; AFFIRMING IN PART AND
REVERSING IN PART THE ARBITRATION PANEL’S JULY 24, 2017
DECISION; AND REMANDING THE CASE TO THE ARBITRATION PANEL

31