Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-97-05046/USCOURTS-caDC-97-05046-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

---

<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 13, 1998 Decided February 13, 1998

No. 97-5046

OBER UNITED TRAVEL AGENCY, INC. AND 

SOCIETY OF TRAVEL AGENTS IN GOVERNMENT (STAG),

APPELLANTS

v.

UNITED STATES DEPARTMENT OF LABOR,

APPELLEE

Appeal from the United States District Court 

for the District of Columbia 

No. 94cv1111

Barry Roberts argued the cause and filed the briefs for 

appellants.

Marina Utgoff Braswell, Assistant United States Attorney, 

argued the cause for appellee, with whom Mary Lou Leary,

United States Attorney at the time the brief was filed, R. 

Craig Lawrence, Assistant United States Attorney, and WilUSCA Case #97-5046 Document #330667 Filed: 02/13/1998 Page 1 of 8
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

liam J. Stone, Attorney, United States Department of Labor, 

were on the brief.

Before: SILBERMAN, WILLIAMS, and SENTELLE, Circuit 

Judges.

Opinion for the Court filed by Circuit Judge SILBERMAN.

SILBERMAN, Circuit Judge: Appellants Ober United Travel 

Agency, Inc. (Ober) and the Society of Travel Agents in 

Government challenge the Department of Labor's determination, affirmed by the district court, that travel management 

contracts are covered by the provisions of the Service Contract Act. We agree with the district court.

I.

For many years, General Accounting Office (GAO) regulations prevented the federal government from using travel 

agents; government agencies purchased airline tickets directly from air carriers. Following the deregulation of the airline 

industry in the late 1970s, however, the demand for travel 

agents' services increased. With many new airlines and a 

myriad of discount fares now available to passengers, travel 

agents' expertise could reduce costs dramatically for customers. Following a successful experimental program, the GAO 

ended the prohibition against the government's use of travel 

agents in 1984.

The government now gives travel agencies business 

through a competitive bidding process. Government agencies, either on their own or through the General Services 

Administration, issue bid solicitations for travel management 

contracts. While these contracts differ in some respects, they 

typically are "no-cost" contracts. The government neither 

directly pays a travel agency for its services nor is obligated 

to buy any tickets through that travel agency; instead, almost 

all travel management contracts oblige the travel agency to 

pay the government for the right to service its employees. 

The government agency may not utilize the services of another travel agency, although it is still free to deal directly with 

air carriers and other principals. The travel agency receives 

USCA Case #97-5046 Document #330667 Filed: 02/13/1998 Page 2 of 8
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

its compensation in the form of commission from air carriers 

and other travel suppliers, such as rental car companies.

The United States Air Force issued a bid solicitation for a 

travel management contract. Ober protested the inclusion of 

provisions requiring bidders to comply with the Service Contract Act (SCA), 41 U.S.C. § 351 et seq. (1994). The SCA 

mandates that service contracts specify the minimum level of 

wages and benefits, as determined by the Secretary of Labor, 

provided to employees working on those contracts. By its 

terms, it applies to "[e]very contract (and any bid specification therefor) entered into by the United States ... in excess 

of $2,500 ... the principal purpose of which is to furnish 

services in the United States through the use of service 

employees." 41 U.S.C. § 351(a) (1994) (emphasis added).

Appellants petitioned the Administrator of the Department 

of Labor's Wage and Hour Division for a ruling regarding the 

applicability of the SCA to travel management contracts. 

The Administrator, in a signed letter, determined that travel 

management contracts were covered. The Board of Service 

Contract Appeals (BSCA) affirmed the Administrator's ruling. Appellants challenged the BSCA's ruling as arbitrary 

and capricious. But the district court granted summary 

judgment in favor of the Department.

II.

Appellants are not explicit as to their arbitrary and capricious charge, but it would seem they are claiming that the 

Secretary unreasonably characterized the principal purpose 

of travel management contracts. Appellants rely on our only 

previous case to consider the SCA's principal purpose requirement. In American Federation of Labor and Congress 

of Industrial Organizations v. Donovan, 757 F.2d 330 (D.C. 

Cir. 1985), we rejected a challenge to the Secretary's regulation providing that contracts for the sale of timber were not

covered by the Act. Although timber sale contracts generally 

include provisions requiring buyers to perform certain services such as building temporary roads and performing erosion control activities, these services, the Secretary reasoned, 

USCA Case #97-5046 Document #330667 Filed: 02/13/1998 Page 3 of 8
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

were ancillary to the principal purpose of the contracts: the 

sale of timber. Appellants similarly insist that the "principal 

purpose" of travel management contracts is not "to furnish 

services," as the Secretary concluded, but rather to sell 

concession rights to travel agencies. Donovan is of little help 

to appellants, however, since we deferred in that case to the 

Secretary's appraisal of the contracts' principal purpose. In 

any event, although the government does often receive compensation for awarding travel management contracts, we 

think it is impossible to conclude that the Secretary's determination as to their principal purpose is unreasonable. It 

seems to us that the contracts involved in Donovan were 

much more aimed at the selling of timber, and the services 

were ancillary, whereas here the reverse is so. After all, the 

government did not enter into these contracts until deregulation of the airlines made the reservation and ticketing services offered by travel agents particularly important, and 

appellants do not show that the government seeks to raise 

significant revenue through this device.

Appellants would buttress their rather weak argument by 

asserting that the Secretary's decision is inconsistent with the 

way the government interprets "procurement contract" in 

other statutory provisions. A "procurement contract" must 

be used when "the principal purpose of [an] instrument is to 

acquire ... property or services for the direct benefit or use 

of the United States Government." 31 U.S.C. § 6303(1) 

(1994). The government's regulation defines a procurement 

contract as "a mutually binding legal relationship obligating 

the seller to furnish the supplies or services ... and the 

buyer to pay for them. It includes all types of commitments 

that obligate the Government to an expenditure of appropriated funds...." 48 C.F.R. § 2.101 (1996) (emphasis added). 

It is undisputed that travel management contracts do not 

directly draw upon appropriated funds.1 Appellants there-

__________

1 Appellants, though, do not suggest that the payments to 

carriers, which ultimately supply the funds for the travel agents' 

commissions, come from any source other than appropriated funds.

USCA Case #97-5046 Document #330667 Filed: 02/13/1998 Page 4 of 8
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

fore argue that they could not have as their principal purpose 

the government's acquisition of services.

The government is rather unclear as to whether travel 

management contracts are actually treated as procurement 

contracts. It suggests that its regulation, including commitments to expenditures of appropriated funds, does not necessarily exclude commitments not implicating appropriated 

funds, but it never says whether the latter are covered. 

Assuming arguendo, however, that appellants are correct

that the government regulation restricts the definition of a 

procurement contract to those commitments involving the 

expenditure of appropriated fundsit does not follow that the 

Secretary's determination is vulnerable. It could mean, for 

instance, that the government's procurement regulation is 

underinclusive or it might mean the statutes have different 

coveragethey do have different purposes. One seeks to 

bring efficiency to the procurement process; the other aims 

to protect labor standards among contractors' employees. If 

the statutes were thought to have a different reach, it would 

be because the term "property or services" or the word 

"contract" had a different meaning under 31 U.S.C. § 6303 

than comparable language under the SCA. Be that as it may, 

none of this has much to do with the interpretation or 

application of the SCA's "principal purpose" language.

Appellants' alternative claims directly dispute the Secretary's interpretation of other SCA language. They argue 

that the SCA only applies to government contracts that draw 

upon appropriated funds because the SCA states that "subject to limitations in annual appropriation Acts ... contracts 

to which [the SCA] applies may ... be for any term of years 

not exceeding five." 41 U.S.C. § 353(d) (1994). But, as 

should be quite apparent, that language, by acknowledging 

that further appropriations Acts could limit the period of 

contracts covered by the statute, hardly indicates that the 

SCA applies solely to contracts that are funded through 

appropriations.

To be sure, as appellants observe, a companion section, 41 

U.S.C. § 354 (1994), directs the Comptroller General to aid in 

USCA Case #97-5046 Document #330667 Filed: 02/13/1998 Page 5 of 8
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

the enforcement of the SCA by distributing the names of 

violating persons or firms to all government agencies. At the 

time this provision was passed, appellants point out that the 

Comptroller General dealt only with accounts involving appropriated fundswhich they infer supports their interpretation of § 353(d)but it could just as easily mean only that 

this enforcement technique was not available (then) if the 

particular contract involved did not implicate appropriated 

funds.

Nor are we persuaded by appellants' contention that the 

SCA provision stating that its coverage extends to contracts 

"in excess of $2,500" means no-cost contracts are excluded. 

The statute does not specify how one is to determine whether 

a contract is in excess of $2,500; it certainly does not say that 

the government must be obligated to pay $2,500, which 

appellants seem to assert.2 Accordingly, the Secretary of 

Labor has issued a regulation stating that "concession contracts are considered to be contracts in excess of $2,500 if the 

contractor's gross receipts under the contract may exceed 

$2,500." 29 C.F.R. § 4.141(a) (1997). And, appellants do not 

dispute that travel management contracts produce more than 

$2,500 in revenue for travel agencies.

Appellants finally claim that travel management contracts 

are entirely exempt from the SCA because 41 U.S.C. § 356(3) 

(1994) excludes from coverage "any contract for the carriage 

of ... personnel ... where published tariff rates are in 

effect." The direct sale of air, bus, and rail tickets obviously 

falls within this language, so appellants contend that the 

exemption also includes tickets purchased from an independent travel agent acting on behalf of the carrier. The Secretary, however, does not so expansively interpret the exemp-

__________

2 Appellants claim that at a minimum the phrase "in excess of 

$2,500" must mean that a party has an obligation under the 

contract in excess of $2,500. We see nothing, however, in the SCA 

which requires that the value of the contract be measured by a 

party's obligated expenditures, as opposed to actual revenues or 

actual expenditures.

USCA Case #97-5046 Document #330667 Filed: 02/13/1998 Page 6 of 8
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

tion. She contends that travel management contracts are not 

"for carriage" but are only for reservation and ticketing 

services.

The government, in defense of its regulation and interpretations of the statute, characterizes the SCA as remedial 

legislation and reminds us of the old maxim of statutory 

interpretation that remedial statutes are to be liberally construed. Although courts have often used the maxim (the 

Supreme Court referred to it 30 years ago in Peyton v. Rowe,

391 U.S. 54, 65 (1968)), it is not at all apparent just what is 

and what is not remedial legislation; indeed all legislation 

might be thought remedial in some senseeven massive 

codifications. We suspect that the phrase typically has been 

used to give judicial approval to a particular set of policy 

viewpoints. And, we have recognized that in a post-Chevron

era such policy-oriented canons of statutory construction may 

not be used to evaluate agency interpretations of ambiguous 

statutes. See Michigan Citizens for an Indep. Press v. 

Thornburgh, 868 F.2d 1285, 1292 (D.C. Cir.), aff'd by an 

equally divided Court, 493 U.S. 38 (1989) (declining to employ 

the canon that exemptions to antitrust laws should be narrowly construed to override a department's interpretation of a 

particular statute).

On the other hand, as we have implied, we think the 

Secretary's regulation setting forth how the SCA's monetary 

threshold for coverage is to be measured, and her interpretation of the reference to "appropriation Acts" certainly rests 

on a permissible interpretation of the ambiguities in the 

statute. See Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The travel agency 

profits by virtue of its contract with the government, and the 

SCA is designed to ensure that a contractor's employees also 

benefit under such contracts by having their wages raised to 

a prevailing standard. From the employee's vantage point, it 

does not matter whether the contractor is paid directly by the 

government or indirectly through commissions paid by the 

carriers who in turn charge the government.

USCA Case #97-5046 Document #330667 Filed: 02/13/1998 Page 7 of 8
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Similarly, we think the Secretary's interpretation of the 

"carriage of personnel" exemption easily passes the permissibility test.

* * * *

Accordingly, the judgment of the district court is hereby 

affirmed.

USCA Case #97-5046 Document #330667 Filed: 02/13/1998 Page 8 of 8