State of Hawaii, Department of Human Services, Division of Vocational Rehabilitation, Hoopono-Services for the Blind v. United States Marine Corps

Filing 100

ORDER GRANTING Plaintiff's Amended Motion For Preliminary Injunction re 32 .On the basis of the foregoing, Hooponos amended motion for a preliminary injunction, filed March 8, 2019, is HEREBY GRANTED. The Order Granting Plaintiff's Motion for Temporary Restraining Order, filed May 11, 2018, is HEREBY DISSOVLED, and this Court HEREBY ISSUES a preliminary injunction, according to the terms set forth in this Order. Signed by JUDGE LESLIE E. KOBAYASHI on 8/21/2019. (cib)

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. 18-00128 LEK

Plaintiff,
vs.
UNITED STATES MARINE CORPS, BY
AND THROUGH GENERAL ROBERT B.
NELLER, INCUMBENT COMMANDANT OF
THE MARINE CORPS, IN HIS
OFFICIAL CAPACITY;
Defendant.

ORDER GRANTING PLAINTIFF’S AMENDED
MOTION FOR PRELIMINARY INJUNCTION
On March 8, 2019, Plaintiff State of Hawai`i,
Department of Human Services, Division of Vocational
Rehabilitation, Ho`opono - Services for the Blind (“Ho`opono”),
filed its “Supplemental Memorandum in Support of Its Motion for
Declaratory and Injunctive Relief,” which is construed as its
amended motion for a preliminary injunction (“Amended Motion”).1
[Dkt. no. 61.]

On April 12, 2019, Intervenor the Severson

Group, LLC (“TSG”) and Defendant United States Marine Corps, by

1

Ho`opono filed its original Motion for Declaratory and
Injunctive Relief on April 3, 2018 (“4/3/18 Motion”). [Dkt.
nos. 2 (4/13/18 Motion), 3 (mem. in supp. of 4/3/18 Motion).]

and through General Robert B. Neller, Incumbent Commandant of
the Marine Corps, in his official capacity (“Marine Corps”),
filed their respective memoranda in opposition to the Amended
Motion.

[Dkt. nos. 62 (“TSG Opp.”), 63.]

Ho`opono filed its reply memoranda.

On May 10, 2019,

[Dkt. nos. 76, 77.]

The

Marine Corps’ April 12, 2019 memorandum in opposition was
withdrawn and replaced by an amended memorandum, filed on
May 29, 2019.

[Dkt. nos. 85 (notice of withdrawal), 86 (“Marine

Corps Opp.”).]
The Amended Motion came on for an evidentiary hearing
on June 14, 2019.

[Minutes, filed 6/14/19 (dkt. no. 91).]

parties filed their closing briefs on June 28, 2019.

The

[Dkt.

nos. 96 (Marine Corps’ brief), 97 (TSG’s brief), 98 (Hoopono’s
brief).]

On July 16, 2019, this Court issued an entering order

informing the parties of its ruling on the Amended Motion.
[Dkt. no. 99.]
order.

The instant Order supersedes that entering

Hoopono’s Amended Motion is hereby granted, and a

preliminary injunction is hereby entered, pending the resolution
of the arbitration between the Marine Corps and Ho`opono.
BACKGROUND
The relevant background is set forth in this Court’s
May 11, 2018 Order Granting Plaintiff’s Motion for Temporary

2

[Dkt. no. 32.2]

Restraining Order (“TRO Order”).

It will only

be briefly restated here.
Ho`opono is the state licensing agency (“SLA”) for
purposes of the Randolph-Sheppard Vending Stand Act (“RSA”), 20
U.S.C. § 107, et seq., in Hawai`i.
at *1.

TRO Order, 2018 WL 2187977,

Hoopono’s licensed blind vendor and teaming partner

Blackstone Consulting, Inc. (“BCI” and collectively “Ho`opono
Contractor”) operated the food service facilities at the Marine
Corps Base Hawai`i (“MCBH”) pursuant to a five-year contract
that commenced on March 1, 2013 and was worth approximately
$14 million.3

Id. at *1-2.

The contract ran through the end of

February 2018, but the Marine Corps exercised the extension
clause to extend the contract through May 15, 2018.

Id. at *2.

Hoopono’s “services . . . consistently received satisfactory
ratings, with one excellent rating.”

Id. at *1.

The instant case arises from a dispute concerning
Hoopono’s bid for the subsequent contract period.

On

September 25, 2017, the Marine Corps issued Solicitation
number M003-18-17-R-0003 for a new MCBH food services contract,

2

The TRO Order is also available at 2018 WL 2187977. The
TRO Order addressed Hoopono’s Motion for Temporary Restraining
Order (“TRO Motion”), filed on April 17, 2018. [Dkt. nos. 12
(TRO Motion) & 13 (mem. supp. of TRO Motion).]
3

At the time of the TRO Order, Hoopono’s licensed blind
vendor was Stanley Young. 2018 WL 2187977, at *1.
3

with a base term of one year and four option years
(“Solicitation”).

On October 24, 2017, the Marine Corps issued

an amendment to the Solicitation, adding certain minimum
staffing requirements (“Amendment 1”).

Two further amendments

were issued thereafter, but they are not relevant to the instant
case.

Id. at *2-3.
Ho`opono submitted its response to the Solicitation

(“Ho`opono Proposal”) on November 17, 2017, but it was rated as
unacceptable as to its food services operations plan and its
staffing and transition plan.

Thus, the Ho`opono Proposal was

given an overall technical rating of unacceptable, meaning that
Hoopono’s past performance and the price in the Ho`opono
Proposal were not considered, and the RSA priority was not
applied.

The Ho`opono Proposal was excluded from the

competitive range, and the contract was ultimately awarded to
TSG, a private vendor that submitted the only proposal found to
be in the competitive range (“TSG Proposal”).

Id. at *3 & n.10.

The amount of the contract awarded to TSG was $18,419,014.74.
Id. at *4.
2018.

TSG’s contract was scheduled to begin on April 15,

Following a thirty-day overlap with Ho`opono for

transition purposes, TSG was scheduled to begin sole operation
of the MCBH food service facilities as of May 16, 2018.

Id.

However, the TRO Order requires the Marine Corps to maintain
Ho`opono as the MCBH food services vendor, and it prohibits the
4

Marine Corps from putting its contract with TSG into effect,
until this Court rules on the issue of whether Ho`opono is
entitled to a preliminary injunction.

Id. at *9.

On June 28, 2018, TSG filed a motion to intervene.
[Dkt. no. 38.]

The motion was orally granted on August 10,

2018, and in an order filed on August 22, 2018.

[Dkt. nos. 50

(minutes of hearing on the motion to intervene), 53 (order).]
I.

Stipulated Facts
A.

Food Service Operations
After this Court issued the TRO Order, the Marine

Corps suspended TSG’s performance of the new contract by issuing
a Stop Work Order.

Any contractor who receives a Stop Work

Order can request an equitable adjustment, or it can make a
claim under the Contract Disputes Act (“CDA”).

The contractor

can pursue administrative or judicial remedies if it is
dissatisfied with the Marine Corps’ final decision on the CDA
claim.

[Amended Stipulation Re: Pltf.’s Suppl. Motion for

Declaratory and Injunctive Relief (“Stipulated Facts”), filed
6/27/19 (dkt. no. 95), at ¶ 3.4]

4

Although the Stipulated Facts are not signed by this
Court, [Stipulated Facts at pg. 6,] the original stipulation
was, [Stipulation Re: Pltf.’s Suppl. Motion for Declaratory and
Injunctive Relief, filed 5/23/19 (dkt. no. 84)]. At the hearing
on the Amended Motion, Hoopono’s counsel noted that some
language had been inadvertently omitted from the original
stipulation. The omitted language was read into the record and
(. . . continued)
5

In August 2018, the Marine Corps and Ho`opono entered
into a sole-source, one-year, bridge contract worth
$3,991,901.20.

Under the bridge contract, the Ho`opono blind

vendor receives a share of the net profits, but is also
responsible for a share of any net losses.
net profits “average up to $9,000 a month.”

[Id. at ¶ 5.]

The

[Id.]

Since June 2018, i.e., since the TRO Order has been in
effect, the Marine Corps has issued ten Contractor Discrepancy
Reports (“CDRs”) and completed two Contractor Performance
Assessment Reports (“CPARs”) to address concerns regarding the
Ho`opono Contractor’s “level of staffing, staff turnover, food
safety, cleanliness, property accountability, and completion of
contractor employee background checks.”

[Id. at ¶ 2.]

The

Ho`opono Contractor responded to each CDR in a timely manner.
[Id.]

Some of the concerns were “rebutted or refuted . . . to

the satisfaction of the contracting officer,” but, in other
instances, the compensation to the Ho`opono Contractor was
decreased as a result of the CDR.

[Id.]

There have been no

written notices of performance concerns since April 1, 2019.
[Id.]

confirmed by opposing counsel. This Court instructed Ho`opono
to file an amended stipulation. [Trans. of 6/14/19 hrg. on
Amended Motion (“6/14/19 Trans.”), filed 6/17/19 (dkt. no. 92),
at 6-7.]
6

B.

Arbitration Proceedings
On June 29, 2018, the Marine Corps submitted a letter

to the United States Department of Education (“US DOE”),
designating the Marine Corps’ arbitration panel member, but the
US DOE has not directed Ho`opono to identify its panel member.
Ho`opono is waiting for further direction from the US DOE.
at ¶ 6.]

[Id.

Ho`opono “has not failed to timely respond to any

request from the [US DOE] related to this dispute.”

[Id. at

¶ 11.]
TSG submitted requests to intervene in the arbitration
on July 5, 2018 and September 13, 2018, but no action has been
taken on those requests.

[Id. at ¶ 7.]

On April 29, 2019, the Marine Corps made a formal
request to the US DOE that the arbitration panel be convened,
and Ho`opono joined in that request on May 20, 2019.

However,

as of the date of the hearing on the Amended Motion, the
Secretary of the US DOE had not convened the arbitration panel.
[Id. at ¶¶ 8-10.]
II.

Evidence Submitted for the Amended Motion
Virgil Stinnett replaced Mr. Young as Hoopono’s

licensed blind vendor at MCBH, as of November 1, 2018.

[Amended

Motion, Decl. of Virgil Stinnett (“Stinnett Decl.”) at ¶ 3.]

As

Hoopono’s licensed blind vendor at MCBH, Mr. Stinnett receives
approximately $9,000 per month.

[Id. at ¶ 14.]
7

If the Ho`opono

Contractor is displaced at MCBH during the pending arbitration,
Mr. Stinnett “may never be able to recover from this financial
set back,” even if Ho`opono ultimately prevails in the
arbitration and is reinstated at MCBH.

[Id. at ¶ 19.]

TSG “is a service-disabled veteran-owned small
business, and a participant in the U.S. Small Business
Administration’s [(“SBA”)] 8(a) Program.”5

[TSG Opp., Decl. of

5

The United States Supreme Court has stated that the SBA
8(a) Program:
is available to small businesses controlled by
socially and economically disadvantaged
individuals as the SBA has defined those terms.
The 8(a) program confers a wide range of benefits
on participating businesses, see, e.g., 13 CFR
§§ 124.303–124.311, 124.403 (1994); 48 CFR
subpt. 19.8 (1994), one of which is automatic
eligibility for subcontractor compensation
provisions . . . , 15 U.S.C. § 637(d)(3)(C)
(conferring presumptive eligibility on anyone
“found to be disadvantaged . . . pursuant to
section 8(a) of the Small Business Act”). To
participate in the 8(a) program, a business must
be “small,” as defined in 13 CFR § 124.102
(1994); and it must be 51% owned by individuals
who qualify as “socially and economically
disadvantaged,” [13 C.F.R.] § 124.103. The SBA
presumes that black, Hispanic, Asian Pacific,
Subcontinent Asian, and Native Americans, as well
as “members of other groups designated from time
to time by SBA,” are “socially disadvantaged,”
[13 C.F.R.] § 124.105(b)(1). It also allows any
individual not a member of a listed group to
prove social disadvantage “on the basis of clear
and convincing evidence,” as described in
§ 124.105(c). Social disadvantage is not enough
to establish eligibility, however; SBA also
requires each 8(a) program participant to prove
(. . . continued)
8

Robert Severson (“Severson Decl.”) at ¶ 3.6]

Mr. Severson states

that, during the transition period with Ho`opono, TSG “incurred
project-specific costs of approximately $20,000” for items such
as “equipment, uniforms, travel costs, hiring costs, shipping,
supplies, administrative, and management payroll costs”
(“Start-up Costs”).7

[Id. at ¶¶ 6-7.]

include TSG’s “overall overhead costs.”

The Start-up Costs do not
[Id. at ¶ 7.]

TSG

expected to receive $3.5 million in annual revenue under the
MCBH contract.

[Id. at ¶ 9.]

Mr. Severson emphasizes that,

because TSG’s MCBH contract had a base-year and four option
years, TSG “has already lost the opportunity to perform the base
year,” and it is “at risk of the entire period of performance
running out before the [arbitration] is resolved.”

[Id. at

¶ 10.]

“economic disadvantage” according to the criteria
set forth in [13 C.F.R.] § 124.106(a).
Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 207 (1995)
(some alterations in Adarand).
6

Robert Severson is the TSG President and Chief Executive
Officer. [Severson Decl. at ¶ 2.] Mr. Severson previously
served as a Marine for twenty-seven years. [Id. at ¶ 16.]
7

Mr. Severson later submitted testimony that the precise
amount of the Start-up Costs was $22,221.83. [Decl. of Robert
Severson, filed 5/17/19 (dkt. no. 83) (“Suppl. Severson Decl.”),
at ¶ 10.]
(. . . continued)
9

Mr. Severson acknowledges that, if TSG’s MCBH contract
is ultimately terminated, TSG “may be able to submit a
termination settlement proposal or request for equitable
adjustment.”

[Id. at ¶ 11.a.]

However, he argues TSG is being

irreparably harmed by the TRO Order because TSG has no means to
obtain immediate recovery of the Start-up Costs and the costs
that it incurred because of the Stop Work Order.8

[Id.]

Further, he asserts “it is unlikely” that TSG will recover all
of its Start-up Costs and other costs, such as the costs to
prepare the TSG Proposal, even if it submits a termination
settlement proposal or a request for equitable adjustment.
at ¶ 11.b.]

[Id.

TSG has also incurred legal fees and other costs in

this action, as well as in other proceedings in which TSG has
attempted to protect its interest in the MCBH contract.

[Suppl.

Severson Decl. at ¶ 17.]
In addition, Mr. Severson asserts the TRO Order is
causing TSG non-monetary harm, including: depriving TSG of “the
opportunity to build upon its strong past performance record by
adding a contract with substantial size and scope”; [Severson
Decl. at ¶ 13;] and “increase[ing] the risk that TSG will lose

8

Mr. Severson states the Marine Corps “has advised TSG that
it will not consider a request for equitable adjustment under
the stop work order until the stop work order is resolved.”
[Suppl. Severson Decl. at ¶ 16.c.]
(. . . continued)
10

valuable personnel,”9 [id. at ¶ 14].

He speculates that, if TSG

were performing the MCBH contract, TSG “would be able to
leverage it to win more contracts in the future.”

[Id.]

DISCUSSION
I.

Jurisdiction
At the outset, the Marine Corps argues this Court

lacks jurisdiction to issue an injunction in this case because
Ho`opono has not, and cannot, present an independent claim for
judicial relief at this time.

RSA arbitration decisions are

subject to judicial appeal and review under the Administrative
Procedure Act (“APA”), 5 U.S.C. §§ 701-06, as final agency
actions.

See Sauer v. U.S. Dep’t of Educ., 668 F.3d 644, 647

(9th Cir. 2012) (citing 20 U.S.C. § 107d-2(a)).

The Marine

Corps argues this matter will not be ripe for judicial review
until the US DOE arbitration panel issues a final decision.
A district court in the Eastern District of Virginia
has addressed the same issue, and its analysis is persuasive.
The district court stated:
the suit for injunctive relief is based on
Plaintiffs’ independent legal right to arbitrate
the Government’s alleged failure to comply with
the Randolph Sheppard Act. . . . [T]he RSA,
provides that:

9

Mr. Severson later stated that the loss of revenue caused
by the TRO Order “left [TSG] with no option but to lay off
personnel.” [Suppl. Severson Decl. at ¶ 14.]
11

Whenever any State licensing agency
determines that any department, agency, or
instrumentality of the United States that
has control of the maintenance, operation,
and protection of Federal property is
failing to comply with the provisions of
this chapter or any regulations issued
thereunder (including a limitation on the
placement or operation of a vending facility
as described in section 107(b) of this title
and the Secretary’s determination thereon)
such licensing agency may file a complaint
with the Secretary who shall convene a panel
to arbitrate the dispute pursuant to section
107d-2 of this title, and the decision of
such panel shall be final and binding on the
parties except as otherwise provided in this
chapter.
20 U.S.C. § 107d-1 (emphasis added). Once the
Secretary receives any such complaint, the
Secretary “shall convene an ad hoc arbitration
panel . . . give notice, conduct a hearing, and
render its decision which shall be subject to
appeal and review as a final agency action for
purposes of [the APA]” 20 U.S.C. § 107d-2. If
the panel finds that an act or practice of an
agency or department violates the RSA, then the
head of that department is instructed to
terminate the act or practice and take “such
other action as may be necessary to carry out the
decision of the panel.” Id.
Plaintiffs have filed a complaint for
arbitration with the Department of Education
alleging that the Government’s decision to
exclude Plaintiffs from the competitive range
violated the RSA. Plaintiffs are presently
performing the contract at Fort Benning. If
Plaintiffs had been included in the competitive
range, under the RSA Plaintiffs would have
received priority to perform the contract at Fort
Benning, subject only to limited exceptions. The
RSA gives this Court authority to review the
arbitration panel’s decision as a final agency
action under the Administrative Procedure Act.
20 U.S.C. § 107d-2. Therefore, the Court FINDS
12

that it has jurisdiction to grant injunctive
relief to maintain the status quo of Plaintiffs
and Defendant’s contractual relationship while
their arbitration is pending pursuant to Federal
Rule of Civil Procedure 65.
Ga. Vocational Rehab. Agency Bus. Enter. Program v. United
States, Civil Action No. 4:18cv148, 2019 WL 279992, at *4 (E.D.
Va. Jan. 22, 2019) (emphasis and some alterations in Ga.
Vocational).

For the same reasons as those set forth in Georgia

Vocational, this Court concludes that it has jurisdiction over
Hoopono’s request in the Amended Motion.
II.

Preliminary Injunction
The standards applicable to Hoopono’s request for a

preliminary injunction are the same as those applied to
Hoopono’s request for a TRO.

See Washington v. Trump, 847 F.3d

1151, 1159 n.3 (9th Cir. 2017) (noting “the legal standards
applicable to TROs and preliminary injunctions are substantially
identical” (citation and internal quotation marks omitted)).
Thus, the applicable standards are set forth in the TRO Order,
2018 WL 2187977, at *5, and will not be repeated here.

Further,

because the same standards apply, the evidence presented in
connection with the TRO Motion will be considered in ruling on
the Amended Motion.

See also Stipulated Facts at ¶ 4 (“The

parties further stipulate that all of the documents and evidence
presented at the hearing granting the TRO in this case, are all

13

also stipulated into evidence and to be considered for the
hearing on the [preliminary injunction].”).
A.

Likelihood of Success
Ultimately, the issue of whether the Marine Corps

violated the RSA in awarding the MCBH contract to TSG is for the
US DOE arbitration panel to decide.
107d-2(a), 107d-2(b)(2).

See 20 U.S.C. §§ 107d-1(b),

However, in reviewing the Amended

Motion, this Court must determine whether Ho`opono is likely to
succeed on the merits in the arbitration.

See, e.g., Kansas v.

United States, 171 F. Supp. 3d 1145, 1158 (D. Kan. 2016), aff’d
in part sub nom., Kansas ex rel. Kan. Dep’t for Children &
Families v. SourceAmerica, 874 F.3d 1226 (10th Cir. 2017).10
As noted in the TRO Order, the Ho`opono Proposal was
not included in the competitive range because it received
unacceptable ratings for its food services operations plan and
staffing and transition plan.

2018 WL 2187977, at *3.

Hoopono’s position is that the Ho`opono Proposal should have
been included in the competitive range because the proposal
included the staffing levels that the Ho`opono Contractor had

10

Because the SLA had prevailed in the RSA arbitration by
the time the appeal was decided, the Tenth Circuit declined to
address the issue of whether the district court erred in
granting the SLA a preliminary injunction during the pendency of
the arbitration. Kansas, 874 F.3d at 1236 n.3.
14

been providing under the original contract, including its option
periods, plus the increases required by Amendment 1.

See id.

The RSA’s implementing regulations provide:
(a) Each department, agency, or instrumentality
of the United States in control of the
maintenance, operation, and protection of Federal
property shall take all steps necessary to assure
that, wherever feasible, in light of appropriate
space and potential patronage, one or more
vending facilities for operation by blind
licensees shall be located on all Federal
property Provided that the location or operation
of such facility or facilities would not
adversely affect the interests of the United
States. Blind persons licensed by State
licensing agencies shall be given priority in the
operation of vending facilities on any Federal
property.
(b) Any limitation on the location or operation
of a vending facility for blind vendors by a
department, agency or instrumentality of the
United States based on a finding that such
location or operation or type of location or
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 warranted. A
determination made by the Secretary concerning
such limitation shall be binding on any
department, agency, or instrumentality of the
United States affected by such determination.
The Secretary shall publish such determination in
the Federal Register along with supporting
documents directly relating to the determination.
34 C.F.R. § 395.30(a)-(b) (emphasis in original).

At the

hearing on the TRO Motion, Eileen Keating Carnaggio11 testified

11

Ms. Carnaggio, a civilian employee of the Marine Corps,
was the contracting officer who handled Solicitation and the
(. . . continued)
15

that she was not aware of any written findings that the terms in
the Solicitation’s Performance Work Statement (“PWS”) were
necessary to avoid an adverse effect on the United States’
interests.

[Trans. of 5/9/18 hrg. on TRO Motion (“5/9/18

Trans.”), 5/17/18 (dkt. no. 35), at 31-32.]

In fact, it

appeared that Ms. Carnaggio was not aware of the requirements of
§ 395.30(a) and (b).

During her cross-examination by Hoopono’s

counsel, Ms. Carnaggio testified:
Q
Did you make a written finding that the
PWS and its limits were necessary so that the
interests of the United States would not be
adversely affected?
A
I’m not aware of a document like that.
It’s like a DNF?[12]
. . . .
Q
And you did not send anything to the
Secretary of Education indicating that the limits
in the PWS were necessary in order to not
adversely affect the interests of the United
States, correct?
A
I – I – I’m really kind of confused by
the question. I don’t really understand it.
. . . .

evaluation and award of the contract referenced therein.
[Marine Corps’ Exhibit List, filed 4/25/18 (dkt. no. 17), Exh. O
(Decl. of Eileen Keating Carnaggio (“Carnaggio Decl.”)) at ¶¶ 1,
3.]
12

This appears to refer to a Determination and Findings,
also referred to as a “D&F.” See Federal Acquisition Regulation
(“FAR”), 48 C.F.R. § 1.701.
16

THE WITNESS: We wrote that PWS in the manner
to improve the services on the Marine Corps Base,
to improve the mess hall services. We weren’t
trying to make it difficult for anybody to
propose or we weren’t trying to make any kind of
limitations of anybody. We were just trying to
write it in a way that we could provide good
services to the Marines. So I just don’t really
understand this limitation thing that you’re
referring to. I don’t – I don’t understand it.
Sorry.
[5/9/18 Trans. at 31-33 (emphasis added).]

Based on

Ms. Carnaggio’s testimony, it is clear that, if § 395.30(a) and
(b) applied to the PWS in the Solicitation, as amended, the
Marine Corps failed to comply with the requirements in those
sections.

The Marine Corps’ position is that the PWS in the

Solicitation, as amended, only contained the terms that were
necessary to achieve the desired quality of dining services at
MCBH.

In the Marine Corps’ view, those terms were not

limitations, and therefore it was not required to consult the
US DOE Secretary to determine whether a limitation was warranted
to avoid an adverse effect on the United States’ interests.
However, the evidence presented in connection with the
TRO Motion shows that the “terms” of the PWS in the
Solicitation, as amended, effectively excluded Ho`opono from
eligibility for the MCBH contract.

See, e.g., 5/9/18 Trans. at

28-29 (Ms. Carnaggio’s testimony about the staffing requirements
in the PWS); Mem. in supp. of 4/3/18 Motion, Exh. 9-1
(Amendment 1) at 17, § 2.6.1 (Staffing Requirements).
17

Thus, in

the US DOE arbitration, Ho`opono is likely to succeed on the
merits of the following issues: 1) the terms of the PWS were
limitations that required a written justification to the US DOE
Secretary, and a determination by the secretary that the
limitations were warranted; 2) the Marine Corps failed to comply
with those requirements; and 3) the bidding process for the
Solicitation therefore violated the RSA.13

The first requirement

for a preliminary injunction – likelihood of success on the
merits – is satisfied.

See Winter v. Nat. Res. Def. Council,

Inc., 555 U.S. 7, 20 (2008) (listing requirements).
B.

Irreparable Harm
In the TRO Order, it was determined that,
even if Ho`opono prevails in the arbitration, the
Marine Corps’ sovereign immunity would preclude
Ho`opono from recovering any monetary damages
from the Marine Corps. Because of the inability
to recover monetary losses incurred while the
arbitration is pending, the imminent economic
injury Ho`opono and Mr. Young face would be
irreparable. Thus, the irreparable harm factor
weighs in favor of granting the TRO.

2018 WL 2187977, at *8.

There have been no changes in the

material circumstances of this case since the entry of the TRO

13

Ho`opono contests other aspects of the bidding and award
process for the Solicitation. However, for purposes of the
Amended Motion, it is sufficient that Ho`opono is likely to
succeed on the merits of the issue of § 395.30(b) compliance.
It is not necessary to address whether Ho`opono is likely to
succeed on the merits of all of the issues in the arbitration.
18

Order.

Hoopono’s replacement of Mr. Young with Mr. Stinnett as

its licensed blind vendor for the MCBH food services operations
does not change the irreparable harm analysis.

It is the State

of Hawai`i Department of Human Services, through Ho`opono, that
enters into contracts with the Marine Corps, not the individual
blind vendors.

See, e.g., Carnaggio Decl. at ¶ 4 (“The

incumbent contractor is the State of Hawaii’s Department of
Human Services, Ho`opono Services for the Blind Branch.”).
There has been no evidence that Ho`opono violated the current
MCBH bridge contract by replacing Mr. Young with Mr. Stinnett,
another licensed blind vendor.

This Court therefore rejects

TSG’s argument that Ho`opono has failed to maintain the status
quo that was preserved in the TRO Order.
The evidence presented in connection with the TRO
Motion establishes that both Ho`opono and the licensed blind
vendor assigned to MCBH would face irreparable harm unless the
status quo is maintained.

For example, Lea Dias14 testified that

the loss of the MCBH contract “would be a huge loss of
opportunity for the blind vending program” because “[i]t would
be a loss of income for” the blind vendor “[a]nd it would be a

14

Ms. Dias is Hoopono’s Branch Administrator, and has been
in that position since 2009. [Mem. in supp. of 4/3/18 Motion,
Exh. 2 (Decl. of Lea Dias (“Dias Decl.”)) at ¶¶ 2, 6.] She was
Hoopono’s contact person for its original MCBH contract. [Id.
at ¶ 27.]
19

lost opportunity and minimizing the intent of the RandolphSheppard Act.”

[5/9/18 Trans. at 45-46.]

Ms. Dias testified

that every blind vending contract is important to Ho`opono
because the federal blind vending program is “the most
successful program for employment for blind people in the
history of the United States.

It maximizes opportunities for

blind individuals to become self-sufficient and to become
entrepreneurs, to be tax-paying citizens, to live the American
dream.”

[Id. at 48.]
Mr. Stinnett receives substantial income from the MCBH

contract,15 and the loss of that income would cause him
irreparable harm because the Marine Corps’ sovereign immunity
would preclude him from recovering money damages from the Marine
Corps if Ho`opono prevails in the arbitration.

See Stinnett

Decl. at ¶¶ 14, 19; TRO Order, 2018 WL 2187977, at *7
(discussing sovereign immunity (some citations omitted) (citing
Sauer v. U.S. Dep’t of Educ., 668 F.3d 644, 647 (9th Cir. 2012);
5 U.S.C. § 702; Premo v. Martin, 119 F.3d 764, 771 (9th Cir.

15

Mr. Stinnett’s income from the blind vending facility
that he was assigned to prior to MCBH was greater than his
anticipated income from the MCBH operation. See Stinnett Decl.
at ¶¶ 13-14. However, that fact is irrelevant to the
irreparable harm analysis because his anticipated income from
the MCBH operation is significant, and there has been no
evidence suggesting that the transfer of Mr. Stinnett to
Hoopono’s MCBH operation was improper.
20

1997))).

Thus, Ho`opono and Mr. Stinnett are likely to suffer

irreparable harm in the absence of a preliminary injunction.
The second Winter requirement also weighs in favor of granting
the Amended Motion.
C.

Balancing of the Equities
The third Winter requirement – that the equities weigh

in the plaintiff’s favor – involves weighing the possible harm
that would be caused by a preliminary injunction against the
possible harm that would be caused by not issuing a preliminary
injunction.

See TRO Order, 2018 WL 2187977, at *8 (quoting

Univ. of Hawai`i Prof’l Assembly v. Cayetano, 183 F.3d 1096,
1108 (9th Cir. 1999)).
In granting the TRO Motion, it was found that any
injury the Marine Corps would suffer if a TRO was granted was
outweighed by the injury that Ho`opono and its blind vendor
would suffer if a TRO was not issued.

Id. at *9.

The Marine

Corps has not presented any evidence in connection with the
Amended Motion that would alter this analysis.

Although there

is evidence of some concerns with the Ho`opono Contractor’s
performance at MCBH since the issuance of the TRO Order, all of
those concerns have been resolved, and there have been no
concerns raised since April 1, 2019.

[Stipulated Facts at ¶ 2.]

Further, there has been no evidence suggesting that the concerns
which were raised prior to April 1, 2019 were of such a serious
21

nature that they should alter this Court’s balancing of the
equities in this matter.

Therefore any injury the Marine Corps

would suffer if a preliminary injunction is granted is
outweighed by the injury that Ho`opono and its blind vendor
would suffer if a preliminary injunction is not issued.
In the TRO Order, the possible harm that a TRO would
cause TSG was considered, and the possible harm to TSG was found
to be primarily economic and outweighed by the possible harm to
Ho`opono if a TRO was not entered.
9.

See 2018 WL 2187977, at *8-

However, at that time, “[t]here [wa]s no evidence about the

severity of [TSG]’s economic injury if a TRO [wa]s granted.”
Id. at *9.

Evidence about the possible economic and non-

economic harm to TSG is now before this Court.
The losses TSG has incurred because of the TRO Order
and the Stop Work Order are regrettable and, without a doubt,
painful to TSG.

However, TSG has remedies at law, which are

mandated by the FARs.
(a) The Contracting Officer may, at any time, by
written order to the Contractor, require the
Contractor to stop all, or any part, of the work
called for by this contract for a period of
90 days after the order is delivered to the
Contractor, and for any further period to which
the parties may agree. The order shall be
specifically identified as a stop-work order
issued under this clause. Upon receipt of the
order, the Contractor shall immediately comply
with its terms and take all reasonable steps to
minimize the incurrence of costs allocable to the
work covered by the order during the period of
22

work stoppage. Within a period of 90 days after
a stop-work order is delivered to the Contractor,
or within any extension of that period to which
the parties shall have agreed, the Contracting
Officer shall either—
(1)

Cancel the stop-work order; or

(2) Terminate the work covered by the order
as provided in the Default, or the
Termination for Convenience of the
Government, clause of this contract.
(b) If a stop-work order issued under this
clause is canceled or the period of the order or
any extension thereof expires, the Contractor
shall resume work. The Contracting Officer shall
make an equitable adjustment in the delivery
schedule or contract price, or both, and the
contract shall be modified, in writing,
accordingly, if—
(1) The stop-work order results in an
increase in the time required for, or in the
Contractor’s cost properly allocable to, the
performance of any part of this contract;
and
(2) The Contractor asserts its right to the
adjustment within 30 days after the end of
the period of work stoppage; provided, that,
if the Contracting Officer decides the facts
justify the action, the Contracting Officer
may receive and act upon a proposal
submitted at any time before final payment
under this contract.
(c) If a stop-work order is not canceled and the
work covered by the order is terminated for the
convenience of the Government, the Contracting
Officer shall allow reasonable costs resulting
from the stop-work order in arriving at the
termination settlement.
(d) If a stop-work order is not canceled and the
work covered by the order is terminated for
default, the Contracting Officer shall allow, by
23

equitable adjustment or otherwise, reasonable
costs resulting from the stop-work order.
48 C.F.R. § 52.242-15 (emphases added).

Mr. Severson emphasizes

that neither an equitable adjustment nor a termination
settlement is immediately available, and he asserts that neither
will compensate TSG for all of the costs TSG has incurred.

Even

accepting these representations, the monetary harm that TSG
would suffer if a preliminary injunction is entered is
outweighed by the monetary harm that Ho`opono and its blind
vendor would suffer if a preliminary injunction is not entered.
Hoopono’s potential monetary harm is more severe because, even
if Ho`opono prevails in the US DOE arbitration, Ho`opono has no
remedy at law if it is displaced from the MCBH food services
operation while the arbitration is pending.
TSG also asserts it is suffering non-monetary impacts
because of the TRO Order, and it will continue to suffer such
impacts if a preliminary injunction is entered.

As to TSG’s

position that it is being deprived of the opportunity to build
its performance record, Mr. Severson himself admits TSG already
has a “robust past performance record.”
¶ 13.]

[Severson Decl. at

“TSG has performed four contracts for dining services

within the last five years, with an average contract value of
$1.9 million per year.”

[Suppl. Severson Decl. at ¶ 22.]

Further, since it was initially awarded the MCBH contract, TSG

24

submitted six other contract proposals.

[Id. at ¶ 23.]

Thus,

TSG’s inability to build its performance record by operating the
MCBH food service facilities cannot be found to be a substantial
harm.

Mr. Severson also testified that, if TSG were performing

the MCBH contract, TSG would be able to use that experience to
obtain more high-value contracts.

[Id. at ¶ 22.]

No evidence

has been submitted to support this position, nor has evidence
been submitted that its non-performance of the MCBH contract
precluded it from obtaining any other contract.

Finally, TSG’s

loss of personnel is regrettable, but that loss is comparable to
the loss of personnel that the Ho`opono Contractor would
experience if a preliminary injunction is not entered.

Thus,

the non-monetary harm that TSG would suffer if a preliminary
injunction is entered does not outweigh the non-monetary harm
that Ho`opono and the Ho`opono Contractor would suffer if
preliminary injunction is not entered.
Having considered all of the potential harms that are
likely to result if a preliminary injunction is entered and all
of the potential harms that are likely to result if one is not
entered, it is clear that the third Winter requirement weighs in
favor of entering a preliminary injunction.
D.

Public Interest
The analysis of the fourth Winter requirement – that

the public interest weigh in the plaintiff’s favor – set forth
25

in the TRO Order also applies to Hoopono’s request for a
preliminary injunction.

See 2018 WL 2187977, at *9.

However,

the record now includes evidence regarding the public’s interest
in seeing the MCBH Contract awarded to TSG, a participant in the
SBA 8(a) Program.

The purposes of the SBA 8(a) Program are

laudable, and the public has an interest in seeing government
contracts awarded to qualifying small businesses.

However, the

Solicitation states:
The Randolph Sheppard Act vendor (a State
Licensing Agency) will be afforded priority for
award of the contract. Therefore, if a State
Licensing Agency submits a proposal that is among
the most highly rated proposals with a fair and
reasonable price and if it is judged to have a
reasonable chance of being selected for award as
determined by the contracting officer after
applying the evaluation criteria contained in the
solicitation and completeing [sic] any required
consultation with the U.S. Department of
Education, the State Licensing Agency will
receive the contract award.
[Mem. in supp. of 4/3/18 Motion, Exh. 9 (Solicitation) at 101 of
103, ¶ 2 (citations omitted).]

Thus, by its own terms, the

Solicitation placed the RSA priority above the SBA 8(a) Program
set-aside.

Hoopono’s position in this case is that the Marine

Corps violated the RSA at multiple stages of the solicitation
and award process and, had the Marine Corps complied with the
RSA, the MCBH contract would have been awarded to Ho`opono, not
to the SBA 8(a) Program participant.

It is because Congress has

expressly stated that the RSA vendor will have priority – and
26

not because TSG is unworthy of being awarded the MCBH contract –
that is the basis for granting the preliminary injunction.
Issuing a preliminary injunction would further the
RSA’s purposes by preserving the status quo until the
arbitration panel determines whether the Marine Corps violated
the RSA.

Preserving the status quo is appropriate because

Ho`opono has established that it is likely to succeed on the
merits of at least one of the issues in the arbitration.

The

fourth Winter requirement therefore weighs in favor of granting
the Amended Motion.
E.

Summary
Because Ho`opono has established all of the

requirements in the Winter analysis, a preliminary injunction is
warranted in this case.

Hoopono’s Amended Motion is GRANTED,

and the Marine Corps is ORDERED to maintain Ho`opono as the food
services vendor at MCBH by maintaining the current bridge
contract and/or entering into similar contracts.

The Marine

Corps must maintain Ho`opono as the food services vendor at
MCBH, and the Marine Corps is prohibited from putting the MCBH
contract with TSG into effect, until there is a final decision
in the pending arbitration before the US DOE or until the
injunction is lifted.

27

CONCLUSION
On the basis of the foregoing, Hoopono’s amended
motion for a preliminary injunction, filed March 8, 2019, is
HEREBY GRANTED.

The Order Granting Plaintiff’s Motion for

Temporary Restraining Order, filed May 11, 2018, is HEREBY
DISSOVLED, and this Court HEREBY ISSUES a preliminary
injunction, according to the terms set forth in this Order.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAI`I, August 21, 2019.

STATE OF HAWAI`I, DEPARTMENT OF HUMAN SERVICES, DIVISION OF
VOCATIONAL REHABILITATION, HOOPONO-SERVICES FOR THE BLIND VS.
UNITED STATES MARINE CORPS, ETC.; CV 18-00128 LEK-KJM; ORDER
GRANTING PLAINTIFF'S AMENDED MOTION FOR PRELIMINARY INJUNCTION

28