Bird v. United States Department of Education

Filing 89

OPINION AND ORDER. Signed on 5/31/2017 by Judge Anna J. Brown. (pvh)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON

JERRY BIRD,

3:14-CV-00843-YY

Plaintiff,

OPINION AND ORDER

v.
UNITED STATES DEPARTMENT OF
EDUCATION, REHABILITATIONS
SERVICES ADMINISTRATION, and
the OREGON COMMISSION FOR THE
BLIND,
Defendants.

BROWN, Judge.
Magistrate Judge Youlee Yim You issued Findings and
Recommendation (#74) on February 24, 2017, in which she
recommends this Court:

(1) deny the Motion (#50) for Summary

Judgment filed by Defendant Oregon Commission for the Blind
(OCB); (2) vacate the Order of Defendant United States Department
of Education (DOE)

Arbitration Panel issued March 17, 2014,

denying Plaintiff Jerry Bird’s request for a determination that
OCB violated the requirements of state and federal law regarding
the operation of vending facilities by blind vendors; and
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(3) award Plaintiff compensatory damages, including attorneys’
fees and costs.

Plaintiff and OCB have each filed timely

Objections to portions of the Findings and Recommendation.

The

matter is now before this Court pursuant to 28 U.S.C. § 636(b)(1)
and Federal Rule of Civil Procedure 72(b).
For the reasons that follow, the Court ADOPTS in part and
DECLINES to ADOPT in part the Magistrate Judge’s Findings and
Recommendations and REMANDS this matter to the Arbitration Panel
as herein specified.

STANDARDS
When any party objects to any portion of the Magistrate
Judge's Findings and Recommendation, the district court must make
a de novo determination of that portion of the Magistrate Judge's
report.

28 U.S.C. § 636(b)(1).

See also Dawson v. Marshall, 561

F.3d 930, 932 (9th Cir. 2009); United States v. Reyna-Tapia, 328
F.3d 1114, 1121 (9th Cir. 2003)(en banc).
If no objections to the Magistrate Judge’s Findings and
Recommendation are timely filed, this Court is relieved of its
obligation to review the record de novo, but reviews only the
legal principles de novo for any errors.

Id.

Because this is an appeal from an arbitration award under
the Randolph-Sheppard Act (RSA), 20 U.S.C. § 107, et seq., it is
reviewed as an agency action under the Administrative Procedures
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Act (APA), 5 U.S.C. § 706.
(9th Cir. (1997).

Premo v. Martin, 119 F. 3d 764, 768

The agency decision is “entitled to a

presumption of regularity,” and the court may not substitute its
judgment for that of the agency.

Ctr. for Biological Diversity

v. U.S. Fish & Wildlife Serv., 807 F.3d 1031, 1043 (9th Cir.
2015)(quoting San Luis & Delta-Mendota Water Auth. v. Jewell, 747
F.3d 581, 601 (9th Cir. 2014), cert. denied, 135 S. Ct. 948, 950
(2015)).

The court must uphold the agency action unless the

court finds the decision was
(A) arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law;
(B) contrary to constitutional right, power, privilege,
or immunity;
(C) in excess of statutory jurisdiction, authority, or
limitations, or short of statutory 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.
5 U.S.C. § 706(2).

BACKGROUND
I.

Regulatory Background
The RSA is a federal law that provides opportunities for

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blind persons who desire to operate vending facilities on federal
property.

The stated purposes of the RSA are to “provid[e] blind

persons with remunerative employment, [to] enlarg[e] the economic
opportunities of the blind, and [to] stimulat[e] the blind to
greater efforts in striving to make themselves self-supporting.”
20 U.S.C. § 107(a).

The Rehabilitation Services Administration

within the DOE administers the RSA with the help of state
agencies.

20 U.S.C. §§ 107a, 107b.

These state agencies,

referred to as “state licensing agencies” (SLA), issue licenses
to blind persons to make them eligible to operate vending
facilities on federal properties.
OCB is an agency of the State of Oregon responsible for
providing services to Oregon citizens who are blind.
Stat. §§ 346.110-346.270.

Or. Rev.

OCB is also the SLA responsible for

administering the RSA in Oregon.

OCB advocates to provide

vending services in state public buildings or on public property
on behalf of blind persons who are licensed under the Oregon
state law sometimes referred to as the “Oregon mini-RSA.”
Or. Rev. Stat. §§ 346.510-346.570.
The Blind Enterprise Consumer Committee (BECC) is a group of
elected managers from the blind-vendors community who actively
participate with OCB in major administrative decisions and who
affect the overall administration of the blind-vendors program
and policies under the RSA and Oregon law.

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See 34 C.F.R

§ 395.14.
Oregon Revised Statutes § 346.540(1) obligates OCB to:
(1) look for locations in state public buildings or state
properties suitable for vending services to be operated by
persons who are blind; (2) make leases or licensing agreements
with agencies or departments in such locations to establish
vending facilities; (3) select, train, license and establish
qualified persons who are blind as managers of such vending
facilities; and (4) adopt rules to assure the proper and
satisfactory operation of such vending facilities.
Oregon Revised Statutes § 346.520 sets out the statutory
preference for blind vendors in public buildings:
(1) For the purposes of providing persons who are blind
with remunerative employment, enlarging the economic
opportunities of those persons and stimulating them to
greater efforts to make themselves self-supporting with
independent livelihoods, persons who are blind and who
are licensed . . . shall operate vending facilities in
or on any public buildings or properties where, in the
discretions of the head of the department or agency in
charge of the maintenance of such buildings or
properties, such vending facilities may properly and
satisfactorily operate.
Oregon Revised Statutes § 346.530 requires:
(1) Each head of the department or agency in charge of
the maintenance of public buildings or properties
shall:
(a) Periodically notify [OCB] in writing of any
and all existing locations where vending facilities are
in operation or where vending facilities might properly
and satisfactorily be operated.
(b) Not less than 30 days prior to the
reactivation, leasing, re-leasing, licensing or
issuance of permit for operation of any vending
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facility, inform [OCB] of such contemplated action.
. . .
(2) If [OCB] makes an offer to operate a vending
facility under the provisions of this section and the
offer is not accepted for reasons other than the
decision to have no vending facility on the premises,
such head of the department or agency shall notify the
commission in writing of the reasons for refusing its
offer, including but not limited to the terms and
conditions of the offer which was accepted, if any.
(3) Any contract or agreements entered into subsequent
to July 1, 1975, which is not in compliance with or in
violation of ORS 346.2220 and 346.510 to 346.570, shall
be null and void.
II.

Factual Background
Plaintiff is a licensed blind vendor under the RSA and

Oregon law.

In late 2005 Plaintiff and OCB discussed the

possibility of Plaintiff relinquishing his interest in a vending
facility he operated at the Oregon Lottery in exchange for
interests in other vending facilities, including Chemeketa
Community College.
In July 2006 OCB entered into an agreement with Chemeketa to
provide vending services, but Plaintiff and OCB were “in a
standoff” over the assignment of the vending contract at
Chemeketa to Plaintiff.

Instead OCB contracted with Courtesy

Vending to provide these vending services from July 1, 2006,
through June 30, 2007.

The OCB/Courtesy contract also required

Courtesy to pay commissions on the gross sales to OCB.

In the

summer of 2006 Plaintiff filed a grievance with OCB regarding

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this dispute, and OCB appointed an arbitration panel to resolve
Plaintiff’s grievance.
In 2007 OCB entered into a five-year agreement with
Chemeketa regarding the operation of vending services at their
facilities, and Plaintiff was assigned the vending rights under
this agreement.

This agreement gave OCB the exclusive right to

operate food and coffee vending services at the Chemeketa main
campus and required a $100 per month payment to Chemeketa to be
used to replace existing vending machines.

The agreement also

had a “no-cause” termination clause.
In 2008 Chemeketa entered into another contract with
Northwest Innovations, Inc. (NWI) to provide food services at
Chemeketa.

At the same time NWI entered into a separate

agreement with Pepsi Bottling for “pouring rights” for
carbonated-beverage services at Chemeketa.
In July 2009 the arbitration panel that OCB appointed in
2006 to resolve Plaintiff’s grievance at that time issued an
award to Plaintiff.

The panel found OCB had violated the RSA and

ordered OCB (1) to pay Plaintiff an amount equal to net revenues
from the Chemeketa contract retroactive to 2007, (2) to award
Plaintiff the Chemeketa vending contract, and (3) to consult with
BECC regarding further actions regarding vending that might
become available at Chemeketa.
When OCB became aware of the Chemeketa contract with NWI

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following the July 2009 arbitration award, OCB contended
Chemeketa had neither given OCB the notice required by Oregon law
nor given OCB an opportunity to bid on these vending services as
required by Oregon law.

Despite negotiations this dispute was

not resolved, and in March 2011 OCB filed a complaint in Marion
County Circuit Court against Chemeketa alleging it failed to
comply with Oregon law and seeking to have the contracts
nullified under Oregon law.

Chemeketa settled the lawsuit by

terminating the vending agreements, including the agreement with
OCB that was managed by Plaintiff.
In July 2011 Chemeketa submitted all vending services for
competitive bid, and OCB and two other private vending companies
responded to the bid request.

In August 2011 Chemeketa awarded

the contract for all vending services to Courtesy Vending.
Chemeketa provided written notice to OCB of the reasons for not
accepting OCB’s bid, including the fact that the Courtesy bid was
a “better offer.”

Plaintiff and BECC encouraged OCB to protest

Chemeketa’s notice, but, based on advice from the Oregon Attorney
General’s Office that there was no valid basis to do so, OCB did
not protest.
In August 2012 Plaintiff filed a complaint with the DOE in
which Plaintiff contended OCB violated the provisions of the RSA
and Oregon law.

The Secretary of the DOE appointed an

arbitration panel (Panel) to resolve Plaintiff’s complaint.

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In

September 2013 the Panel held a hearing.

In March 2014 the Panel

issued a decision in which it concluded OCB had not violated
provisions of the RSA or Oregon law and that Plaintiff was not
entitled to any award of damages or attorneys’ fees.

The Panel

found specifically that:
1. “Chemeketa had the discretion under Oregon law to
determine which bid was satisfactory to Chemeketa, and
no violation of the law occurred when [OCB] did not
challenge Chemeketa’s discretion to select Courtesy
Vending.”
2. “[T]he law does not require that contracts for
vending services on Other Property be for an indefinite
period of time.”
3. “[A]ctive participation by the BECC was not
required” and was not “a major administrative decision
affecting the overall administration of the program.”
4. “Because Chemeketa has the discretion to award
vending contracts to vendors presenting superior bids
for those contracts, [OCB] was not obligated by state
or federal law to try to stop or to prevent those
vending contracts.”
On May 22, 2014, Plaintiff filed this action for review of
the Panel’s decision and named OCB, among others, as a defendant.
Plaintiff alleged the Panel erred in its decision that OCB had
not violated the RSA or Oregon law.

Plaintiff requested this

Court set the Panel’s Order aside and award him monetary damages
together with attorneys’ fees and costs.
On October 30, 2015, OCB filed a Motion (#50) for Summary
Judgment.
On February 24, 2017, the Magistrate Judge issued her

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Findings and Recommendation (#74), and the matter was referred to
this Court.

On April 10, 2017, Plaintiff and OCB each filed

Objections to the Magistrate Judge’s Findings and Recommendation.
III. Magistrate Judge’s Findings
The Magistrate Judge made the following Findings:
1. The RSA does not require permits for vending
services on other properties to be issued for an
indefinite period, and the Panel was correct when it
concluded OCB did not violate the RSA when it entered
into an agreement with Chemeketa that contained a “nocause” termination clause.
2. The Panel correctly concluded OCB is not required
to allow BECC to actively participate in the litigation
decisions regarding the Chemeketa vending contracts.
3. The Panel erroneously concluded Chemeketa has the
discretion under Oregon law to refuse an offer by OCB
in favor of a “better offer” by a non-blind vendor.
4. The Eleventh Amendment does not provide OCB, as an
agent of the State of Oregon, with sovereign immunity
from an award of damages in an arbitration proceeding
under the RSA.
5.
The Panel erroneously failed to award damages to
Plaintiff.
Thus, the Magistrate Judge recommends this Court reverse the
decision of the Panel, deny OCB’s Motion for Summary Judgment,
award Plaintiff damages of $54,000.00 plus reasonable attorneys’
fees and costs, and award Plaintiff $2,000.00 per month until
OCB regains the Chemeketa facility vending contracts on behalf of
Plaintiff “or finds suitable alternative vending opportunities”
for Plaintiff.

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DISCUSSION
As noted, Plaintiff and OCB have each objected to portions
of the Magistrate Judge’s Findings and Recommendation.
I.

Portions of the Findings and Recommendation to which neither
party objects.
Neither party objects to that portion of the Findings and

Recommendation in which the Magistrate Judge concludes OCB did
not violate the RSA when it entered into an agreement with
Chemeketa that contained a “no-cause” termination clause.

The

Court, therefore, is relieved of its obligation to review the
record de novo as to this portion of the Findings and
Recommendation.
Cir. 2009).

See Dawson v. Marshall, 561 F.3d 930, 932 (9th

See also United States v. Reyna-Tapia, 328 F.3d

1114, 1121 (9th Cir. 2003)(en banc).
Having reviewed the legal principles de novo, the Court does
not find any error in this portion of the Findings and
Recommendation.
II.

OCB’s Objections to the Findings and Recommendation.
OCB concedes the Magistrate Judge correctly determined OCB

did not violate the RSA by agreeing to operate the vending
facilities at Chemeketa under a permit that allowed for “nocause” termination and that OCB was not required to allow BECC to
participate in OCB’s litigation decisions regarding vending at
Chemekata.

OCB, however, objects to the Magistrate Judge’s

11 - OPINION AND ORDER

Findings and Recommendation that Oregon law requires a mandatory
preference or right of first refusal for blind vendors and an
agency does not have the discretion to refuse an offer by OCB in
favor of a “better offer.”

OCB also objects to the Magistrate

Judge’s recommended award of money damages and attorneys’ fees on
the grounds that (1) the Eleventh Amendment precludes an award of
money damages against OCB as an agent of the state; (2) even if
Plaintiff could recover damages, the record is incomplete and the
issue of damages should be remanded to the Panel for
determination; and (3) an award of attorneys’ fees is premature
and unwarranted under the law.
A.

Right of First Refusal
The Panel found the language of Oregon Revised Statutes

§ 346.520 was ambiguous and does not create a right of first
refusal when read in conjunction with Oregon Revised Statutes
§ 346.530.

The Panel, therefore, concluded Chemeketa had the

discretion to accept the “best offer” for vending services.

The

Magistrate Judge, however, finds the Panel incorrectly
interpreted Oregon law based on principles of statutory
construction, recommends reversal of the Panel’s decision, and
concludes Oregon law creates a right of first refusal for vending
services by blind vendors.

The Court agrees.

In its Objections to this portion of the Magistrate
Judge’s Findings and Recommendation, OCB merely reiterates the

12 - OPINION AND ORDER

arguments contained in its summary judgment briefings and made at
oral argument before the Magistrate Judge.
This Court has carefully considered OCB’s Objections
and concludes they do not provide a basis to modify the Findings
and Recommendation.

The Court also has reviewed the pertinent

portions of the record de novo and does not find any error in the
Magistrate Judge's Findings and Recommendation.
B.

Sovereign Immunity
The Magistrate Judge relied on Ninth Circuit precedent

in Premo v. Martin, 119 F.3d 764 (9th Cir. 1997), to conclude
that the Eleventh Amendment does not apply to RSA arbitration
proceedings and does not preclude an award of compensatory
relief.

In Premo the Ninth Circuit held:
We conclude that the Eleventh Amendment does not apply
to Randolph-Sheppard arbitration proceedings and thus
does not limit the authority of arbitration panels
convened under the Act to award compensatory relief.
In addition, we believe the overwhelming implication of
the Act is that participating states have waived their
sovereign immunity to suit in federal court for the
enforcement of such awards.

119 F.3d at 769.

OCB, however, contends subsequent holdings by

the United States Supreme Court in Federal Maritime Commission v.
South Carolina State Ports Authority (FMC), 535 U.S. 743 (2002),
and Sossamon v. Texas, 563 U.S. 277 (2011), abrogate Premo.

This

Court disagrees with OCB’s contention.
In FMC the defendant filed a complaint with the Federal
Maritime Commission against the South Carolina State Port
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Authority for violation of the Shipping Act, 46 U.S.C. § 1701, et
seq., after the Port Authority denied permission to berth one of
defendant’s cruise ships.

An administrative law judge found the

Port Authority was an arm of the state and entitled to sovereign
immunity.

The Commission on its own motion reversed that

decision and concluded sovereign immunity did not extend to
executive branch proceedings.

The Fourth Circuit reversed, and

the Commission petitioned for review.

The Supreme Court held

state sovereign immunity precluded the Commission from
adjudicating a private party’s complaint against a nonconsenting
state.

As the Magistrate Judge correctly noted, the FMC court

does not discuss waiver of sovereign immunity when a state opts
into a federal statutory scheme, which was the central issue in
Premo.
In Sossamon v. Texas a state prisoner brought a civilrights action under the Religious Land Use and Institutionalized
Persons Act of 2000 (RLUIPA), 42 U.S.C. § 2000cc, against prison
officials who refused to allow the inmate to participate in
religious services while on cell restriction and barred his use
of the prison chapel.

The district court granted summary

judgment for the state on the ground that sovereign immunity
barred the plaintiff’s claim for monetary relief.

The court of

appeals affirmed and held the statutory phrase “appropriate
relief against a government” in RLUIPA did not unambiguously

14 - OPINION AND ORDER

notify the state that its acceptance of federal funds was
conditioned on a waiver of sovereign immunity as to claims for
monetary relief.

The Supreme Court affirmed.

The Supreme Court

noted a state’s consent to waiver of immunity must be
“unequivocally expressed” in the text of the relevant statute,
and RLUIPA’s authorization of “appropriate relief against a
government” is not an unequivocal expression of such consent.
563 U.S. at 285-86.
Here the clear language of the RSA that the state
agrees to “submit grievances of any blind licensee . . . to
arbitration” as authorized in the RSA is explicit consent to such
a process that will be final and binding on the parties.
20 U.S.C. § 107d-1.

See also Premo, 119 F.3d at 769.

The Premo

court also noted it was “widely recognized that this language
permits arbitration panels to award compensatory relief.”

Id.

On this record the Court agrees with the Magistrate
Judge that Eleventh Amendment sovereign immunity does not apply
to arbitration proceedings under the RSA and does not preclude an
award of compensatory damages against OCB by the arbitration
panel.
C.

Damages
OCB contends even if the Court finds sovereign immunity

does not apply, the record is incomplete and the issue of damages
should be remanded to the Panel for determination.

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OCB argues

the question of damages was never decided by the Panel.

In

particular, OCB emphasizes it never had the opportunity to
challenge the assumption that its actions caused Plaintiff to
lose income or to present evidence that such loss should be
offset by the money that Plaintiff earned in other employment.
Plaintiff responds that evidence submitted during the
arbitration hearing regarding his income at the time of the
Chemeketa contracts is sufficient to support an award of damages.
Plaintiff also argues OCB failed to raise or even to brief the
issue of damages before the Panel and, therefore, should be
precluded from raising any objections to this Court’s award of
damages.
The Court notes Plaintiff’s complaint for arbitration
filed with the DOE on August 29, 2012, did not raise the issue of
damages, but sought only an award of attorneys’ fees and costs.
Moreover, the record reflects the four issues identified by the
Panel did not directly relate to an award of monetary damages,
and, in fact, the Panel only addressed the legal issues arising
from Plaintiff’s allegations that OCB violated the RSA and/or
Oregon law.

The Panel’s analysis resulted in its determination

that OCB did not violate either.

Consequently, the Panel

summarily concluded Plaintiff was “not entitled to an award of
damages or attorney fees.”
The Court notes Plaintiff does not allege in his

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Complaint that the Panel’s failure to award damages was an error,
but asserted only that the Panel erred in its determination that
OCB had not violated the RSA or Oregon law.
As noted, a court reviews decisions of an arbitration
panel convened under the RSA as final agency actions under the
APA.

20 U.S.C. § 107d–2(a).

The standard of review applicable

to agency actions depends on whether the challenged action rests
on factual findings or legal conclusions.

When a case is

reviewed on the record of an agency, the agency's findings of
fact must be upheld if they are supported by substantial
evidence.

5 U.S.C. § 706(1)(E).
Here the record reflects the Panel did not make any

finding or address the amount of damages that Plaintiff may have
been entitled to if the Panel had determined OCB violated Oregon
law and was not protected by sovereign immunity.

Under the RSA,

as noted, decisions by an arbitration panel are reviewable on the
record as a “final agency action.”

Because the Panel did not

make any “factual findings or legal conclusions” as to the amount
of damages, this Court concludes that issue is not ripe for
review in this proceeding.

See 5 U.S.C. § 706.

On this record the Court has already agreed with the
Magistrate Judge that OCB violated Oregon law; that OCB does not
have sovereign immunity under the circumstances; and, therefore,
that Plaintiff is entitled to compensatory damages.

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The amount

of Plaintiff’s compensatory damages, however, was not addressed
by the Panel in its Order and, therefore, cannot be the subject
of this Court’s review.

Accordingly, the Court does not adopt

the Magistrate Judge’s recommendation to award Plaintiff damages
in the amount of $54,000.00 and monthly income of $2,000.00.
D.

Attorneys’ Fees
OCB also objects to the Magistrate Judge’s award of

attorneys’ fees on the ground that there is not any authority for
such an award, but Plaintiff does not specifically respond to
this Objection.

The Court notes the Panel did not award

attorneys’ fees to Plaintiff in its Order.
Again, because the Panel did not make any “factual
findings or legal conclusions” as to an award of attorneys’ fees,
that issue is not before this Court for review.

See 5 U.S.C.

§ 706.
Accordingly, the Court does not adopt the Magistrate
Judge’s recommendation for an award of attorneys’ fees to
Plaintiff.
III. Plaintiff’s Objections to the Findings and Recommendation.
The Magistrate Judge upheld the Panel’s determination that
OCB was not required to allow BECC’s active participation in the
decisions regarding the Chemeketa contracts and, therefore, did
not violate the RSA.
Plaintiff objects to this portion of the Findings and
18 - OPINION AND ORDER

Recommendation and contends the arbitration decision in July 2009
required OCB to allow BECC to participate actively.

According to

Plaintiff, therefore, that decision is res judicata in this
dispute.

To support his position, however, Plaintiff merely

reiterates the arguments contained in his summary-judgment
briefs.
This Court has carefully considered Plaintiff’s Objections
and concludes they do not provide a basis to modify the Findings
and Recommendation.

The Court also has reviewed the pertinent

portions of the record de novo and does not find any error in the
Magistrate Judge's Findings and Recommendation.

SUMMARY
In summary, the Court concludes:
1.

Oregon Revised Statutes §§ 346.520 and 346.530 provide

for a right of first refusal for vending services by persons who
are blind;
2.

OCB correctly interpreted Oregon regulations and did

not violate the RSA regarding the involvement of BECC in the
litigation decisions as to the Chemeketa Community College
vending contracts; and
3.

OCB, a state agency, is not immune under the Eleventh

Amendment from an award of monetary damages under the RSA or
Oregon law.

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CONCLUSION
The Court ADOPTS in part Magistrate Judge Youlee Yim You’s
Findings and Recommendation (#74) and, accordingly, DENIES
Defendant Oregon Commission for the Blind's Motion (#50) for
Summary Judgment to the extent that it seeks a determination that
there is not a right of first refusal for vending services
provided by blind vendors pursuant to Oregon law.

The Court

DECLINES to adopt the Findings and Recommendation (#74) for an
award of monetary damages and attorneys’ fees to Plaintiff as
beyond the scope of this Court’s authority to review agency
action under the APA.
As explained herein and consistent with the Magistrate
Judge’s Findings and Recommendation, the DOE Arbitration Panel’s
decision is VACATED in part, and this matter is REMANDED to the
Arbitration Panel to determine the amount of Plaintiff’s
compensatory damages, if any; to determine whether Plaintiff is
entitled to an award of attorneys’ fees; and, if so, to determine
the amount of attorneys’ fees to which Plaintiff is entitled.
IT IS SO ORDERED.
DATED this 31st day of May, 2017.
/s/ Anna J. Brown
____________________________
ANNA J. BROWN
United States District Judge

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