Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alnd-2_06-cv-04842/USCOURTS-alnd-2_06-cv-04842-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1331 Fed. Question: Breach of Contract

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

DAVID J. STEWART,

Plaintiff,

v.

MARGARET SPELLINGS, et al.,

Defendants.

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CIVIL ACTION NO.

06-AR-4842-S

MEMORANDUM OPINION

Before the court is the motion of defendants, Margaret

Spellings, who is the United States Secretary of Education

(“Spellings”), and the Alabama Department of Rehabilitation

Services (“ADRS”) (together, “defendants”), for summary judgment in

the above-entitled action brought by plaintiff, David J. Stewart

(“Stewart”). For the reasons that follow, defendants’ motion will

be granted.

Procedural History

Stewart appeals to this court from a final agency action of

the United States Department of Education pursuant to the RandolphSheppard Act, 20 U.S.C. § 107, et seq. (the “Act”). Stewart

initiated administrative proceedings by filing a complaint on

October 7, 2003 with the United States Department of Education

(“DOE”). He had already exhausted the administrative proceedings

available in the ADRS. Stewart, who is a duly licensed blind

vendor under the Act, alleged in his October 7, 2003 complaint that

the ADRS Business Enterprise Program violated the Act by removing

FILED

 2007 Jun-28 PM 12:56

U.S. DISTRICT COURT

N.D. OF ALABAMA

Case 2:06-cv-04842-WMA Document 27 Filed 06/28/07 Page 1 of 11
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him from his contract as operator of the dining facility at

Redstone Arsenal adjacent to Huntsville, Alabama, and by acting

arbitrarily and capriciously. Stewart demanded that Spellings

convene an arbitration panel to grant him injunctive and monetary

relief. As required by the Act, the DOE convened an arbitration

panel on July 19, 2005. On October 12, 2006, after a hearing, the

three-member arbitration panel issued the following ruling, with

one member dissenting:

* * * * *

This matter involves the efforts to award the

contract to operate the military dining hall at Redstone

Arsenal to blind vendor, David Stewart, in 2003.

On 11/13/02 the Alabama Department of Rehabilitation

Services (“ADRS”) Business Enterprise Program (“BEP”)

issued a memorandum regarding Facility Announcement No.

202-21 regarding the military dining hall at Redstone

Arsenal in Huntsville. The outside military dining hall

contractor at this location was and is KCA, Inc. (“KCA”).

The blind vendor is required to enter into a joint

venture with KCA to operated this facility. The prior

blind vendor at this location since 1997 was Robert

Kelly. The joint venture between Kelly and KCA at this

location is called the K & K Joint Venture. Beginning

11/1/02, Kelly also began operating the dining hall at

Maxwell Airforce Base in Montgomery, Alabama.

On 1/7/03, Stewart received official written

notification that he had been awarded the opportunity to

operate the military dining hall at Redstone (Exhibits 3

and 4). At some point in January 2003 BEP suggested that

Stewart meet with all parties involved. That meeting was

held 2/4/03. At that meeting, Stewart indicated his wife

could not work with him in this venture, as Kelly’s wife

had, and asked to receive two percent of the four percent

general and administrative costs that had been going to

KCA. Fred Anderson of KCA rejected that offer, based

primarily on the existing fixed cost nature of the

contract with the Army at Redstone, and insisted on

Case 2:06-cv-04842-WMA Document 27 Filed 06/28/07 Page 2 of 11
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entering into a joint venture with Stewart on the exact

same terms KCA had with Kelly, known as the K & K Joint

Venture. In fact, BEP gave Stewart a proposed operating

agreement at this meeting that required Stewart to enter

into a joint venture with KCA identical to the K & K

terms.

About one week later, Stewart called KCA to talk

with Anderson to ask when he would receive the joint

venture documents proposed by KCA that Anderson, at the

2/4 meeting, said he would send to Stewart. Anderson was

out of town. On 2/13/03, Ray Dennis, Director of BEP,

wrote Stewart giving him a deadline of 2/21/03, eight

calendar days away, to enter into all agreements and

documents to operate Redstone (Exhibit 6). That same

day, 2/13/03, Stewart’s attorney, Scott LaBarre wrote

Dennis at BEP, without knowledge of Dennis’ letter to

Stewart, asking if Stewart was required to enter into the

identical joint venture terms as Kelly had with KCA.

Apparently, most if not all letters between the parties

involved were by fax and thus received shortly after

sent.

On 2/14/03, Dennis wrote LaBarre that Dennis needed

a release from Stewart before he could communicate with

LaBarre. Stewart sent the executed release to Dennis on

2/18/03 (Exhibit 9). That same day, 2/18/03, LaBarre

wrote Dennis stating that Stewart did not refuse to sign

the operating agreement with BEP but asked for

clarification of terms, and stated Stewart had no gotten

the proposed joint venture agreement from Anderson at KCA

that Anderson said he would send to Stewart at the

conclusion of the 2/4 meeting. That letter from LaBarr

to Dennis also indicated that Stewart intended to operate

the Redstone dining hall facility.

Also that same day, 2/18/03, Dennis wrote LaBarre

stating that BEP did not require that Stewart enter into

the exact same joint venture terms and conditions with

KCA that Kelly had, stating the terms of the joint

venture were between Stewart and KCA. That letter from

Dennis to LaBarre also repeated for the second time the

2/21 deadline (Exhibit 11).

Sometime that same day, 2/18, Stewart talked with

Anderson at KCA over the phone. Anderson apparently

indicated that he and KCA would not work at all with or

agree to any terms with Stewart regarding the Redstone

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dining hall facility.

On 2/19 LaBarre wrote Dennis again, informing Dennis

that Anderson had told Stewart the day before that KCA

would not work in any way whatsoever with Stewart, and

requested the immediate help by BEP with this impasse

between KCA and Stewart, and suggesting a conference call

(Exhibit 12). That same day, 2/19, Dennis wrote LaBarre

reiterating for the third time the 2/21 deadline or the

Redstone facility would be offered to the next blind

vendor in line.

On 2/20/03, Dennis sent Stewart a joint venture

identical to K & K, with the only change being the

substitution of Stewart’s corporate name for that of

Kelly, as a joint venture that would be acceptable to

BEP. That joint venture document stated that it could

not be changed unless KCA agreed, as long as BEP operates

the dining facility at Redstone (Exhibit 14).

February 21 was the deadline day. LaBarre wrote

Dennis that day asking for immediate help with the

negotiations between Stewart and KCA, and stated again

that Stewart could not negotiate or enter into a joint

venture with KCA because KCA refused to do so with

Stewart.

On 2/26/03, Dennis wrote LaBarre stating that BEP

had bypassed Stewart and moved on to the next eligible

blind vendor for the dining hall facility at Redstone.

This was ultimately awarded to Ben Fordham who began

operating the Redstone dining facility on 4/1/03 under

the identical same terms as the joint venture between

Kelly and KCA.

On 3/19/03, ADRS Commissioner Steve Shivers held the

commissioner’s conference as requested by LaBarre on 3/3

(Exhibit 17). On 4/1/03, Shivers issued his decision in

favor of BEP (Exhibit 20). On 8/5/03, Hearing Officer

Frank Jones conducted a full evidentiary hearing pursuant

to Stewart’s 4/2 request. On 9/5/03, James issued his

opinion in favor of BEP.

The panel chairman was notified of his selection on

1/19/05. On 3/24/05 this matter was set for an

arbitration hearing on 7/19/05. All parties had a full

and complete opportunity to call and question witnesses,

and present evidence and documents. There is no

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arbitrability issue. The matter is properly before the

arbitration panel for its decision. The transcript was

received on 8/31/05. Post hearing briefs were received

on 10/17 and 18 of 2005. The delay in issuing a more

prompt decision from the panel has been caused by a hand

injury suffered by the panel chairman in early 2006. 

Section 20 U.S.C. Section 107d-4 of the RandolphShephard Act (“Act”) reads as follows:

“The Commissioner shall insure,

through promulgation of appropriate

regulations, that uniform and

effective training programs,

including on-the-job training, are

provided for blind individuals,

through services under the

Rehabilitation Act of 1973. He

shall further insure that State

agencies provide programs for upward

mobility (including further

education and additional training or

retraining for improved work

opportunities) for all trainees

under this chapter, and that followalong services are provided to such

trainees to assure that their

maximum vocational potential is

achieved.”

The Administrative Code Rules of the Alabama

Department of Rehabilitation Services states that

licensed blind vendors selected for a facility must

complete a final inventory and forfeit any agreement to

operate as well as any right of possession, control,

privilege, priority, or advantage over the vendor’s

current facility. Rule 795-7-4-.01(3)(q). Those rules

require that a licensed blind vendor selected for a

facility must execute an operating agreement for that

facility. Rule 795-7-4-.01(3)(s). And the rules require

that each licensed blind vendor must agree in writing to

perform certain enumerated duties and responsibilities as

a condition of participation in the program. Rule 795-7-

10-.01.

Complainant’s Position

Mr. Stewart contends that the Alabama BEP violated

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the Randolph-Shephard Act by denying Stewart’s “upward

mobility” rights to achieve Stewart’s “maximum vocational

potential” when the Alabama BEP did not advocate for

Stewart in the impasse between Stewart and KCA over the

joint venture agreement, and on 2/13/03 set an arbitrary

and capricious deadline fro receipt of the joint venture

agreement and all other documents from Stewart by

2/21/03, only eight days later.

ADRS Position

The ADRS contends tah there is nothing in the

Randolph-Shephard Act, its rules or regulations, that

establishes, any duty, obligation or requirement that BEP

intervene for or on behalf of Stewart in his joint

venture negotiations with KCA (Transcript 114, 123 and

210). The Alabama BEP has never done this before for any

blind vendor. Joint venture negotiations in Alabama have

always been solely between the blind vendors and outside

military dining hall contractors, such as KCA. The ADRS

contends Stewart had plenty of time, approximately oneand-a-half months, between his 1/8/03 acceptance and the

2/21 deadline, to get the joint venture deal done with

KCA; and that Stewart and/or his attorney were told three

times of the 2/21 deadline, on 2/13, 2/18 and 2/19. The

ADRS also points out that the contract with the Army at

Redstone was a fixed price contract (Transcript 197).

Thus, KCA was legally entitled to refuse to change the

joint venture financial terms with Stewart until any new

deal with the Army at that location, which in fact did

occur in 2004 or 2005 with vendor Fordham and KCA

(Transcript 220).

DISCUSSION

The Randolph-Shephard Act, its rules and

regulations, give little or no guidance or specificity

regarding the details and requirements of the Alabama BEP

in such a situation of an impasse between the blind

vendor and the dining hall contractor. At the 2/4

meeting, Stewart essentially demanded that fifty percent

of the general and administrative costs that KCA was

receiving under the fixed price contract be given to

Stewart, in large part because Stewart’s wife could not

work with him at this location. KCA through Anderson

refused to agree to this contractual modification

primarily based on the fixed price nature of the contract

with the Army. In addition, the management services

Case 2:06-cv-04842-WMA Document 27 Filed 06/28/07 Page 6 of 11
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agreement between the ADRS and KCA states KCA is entitled

to the compensation in the K & K joint venture even if

Kelly is replaced.

Stewart was asking, requesting, insisting, demanding

(pick your verb) that KCA cut its gross in half or go to

the Army and renegotiate in midstream. KCA did not have

to do that. BEP had no authority to force that. And the

Army had no reason to agree to any changes.

While KCA and Stewart were free to agree to

different joint venture terms, there is no requirement

that they do so. Nothing in the Randolph-Shephard Act,

its rules or regulations, clearly or specifically

requires BEP to step into the refusal of KCA to deal or

agree with Stewart to operate this facility and attempt

to forge a breakthrough in the negotiations, or to force

a vendor on a military dining hall contractor. Alabama

BEP has never done this for any blind vendor under

similar circumstances, so there is no binding past

practice supporting Stewart’s position.

On 2/13/03, Stewart and his attorney were notified

they had eight more days to enter into a joint venture

with KCA or BEP would move on to the next qualified blind

vendor. While some may view that as too short a period

of time, the panel cannot say as a matter of law or fact

that it is a fatally unreasonable or short period of time

for Stewart to get a deal done with KCA. Based on the

evidence and the record, the panel holds that the eightday advance notice of the deadline was reasonable,

appropriate, not arbitrary, not capricious, proper and

did not violate the Randolph-Shephard Act, its rules or

regulations. The Act does not prohibit BEP from setting

such a deadline. Stewart had a reasonable amount of time

(with three written notices of the 2/21 deadline on 2/13,

18 & 19) to enter into a joint venture with KCA by 2/21.

In addition, Stewart had a total of 1 1⁄2 months, from his

acceptance on 1/8/03 until the 2/21/03 deadline, to

finalize the joint venture with KCA. Stewart apparently

made a conscious decision not to, effectively removed

himself.

These events in January and February of 2003 did not

occur in a vacuum. This was not just about Stewart. BEP

was also rightly concerned with Kelly managing two large

dining hall facilities hundreds of miles apart. And BEP

and Kelly had just begun at Maxwell for the very first

Case 2:06-cv-04842-WMA Document 27 Filed 06/28/07 Page 7 of 11
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time. BEP was responsible for seeing both dining hall

facilities were properly managed, not just Redstone.

Redstone was no more and no less important than Maxwell.

Stewart contends it was impossible for him to do a

deal with KCA from, at least, 2/18 when Anderson told

Stewart that KCA would not work with Stewart on operating

this facility. That may be true. This position of KCA

was apparently due in large part to the fixed price

contract with the Army at Redstone until renegotiation

and renewal in 2004 or 2005. KCA was perfectly within

its rights to take such a position. There is nothing in

the Act, its regulations, or the record in this case that

required KCA to do business with Stewart, and only

Stewart.

Any and all other contentions, arguments and claims

of the Complainant have been fully and carefully

considered by the panel and have been found insufficient

based on the evidence and record in this matter.

AWARD

The claims of the Complainant are denied.

 * * * * *

Standard of Review

Stewart’s appeal of the DOE’s final action is subject to the

review provisions of the Administrative Procedures Act (“APA”),

specifically, Chapter 7, Title V of the United States Code. 20

U.S.C. § 107d-2(a). 5 U.S.C. § 706 provides: 

To the extent necessary to decision and when presented,

the reviewing court shall decide all relevant questions

of law, interpret constitutional and statutory

provisions, and determine the meaning or applicability of

the terms of an agency action. The reviewing court

shall— 

(1) compel agency action unlawfully withheld or

unreasonably delayed; and 

(2) hold unlawful and set aside agency action,

Case 2:06-cv-04842-WMA Document 27 Filed 06/28/07 Page 8 of 11
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findings, and conclusions found to be— 

(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. 

In making the foregoing determinations, the court

shall review the whole record or those parts of it

cited by a party, and due account shall be taken of

the rule of prejudicial error. 

The Eleventh Circuit has explained that “[i]n determining whether

a regulation is arbitrary and capricious, the scope of review is

narrow: a reviewing court’s ‘task is limited to determining whether

the decision was based on a consideration of the relevant factors

and whether there has been a clear error of judgment.” Florida

Fruit & Vegetable Ass’n v. Brock, 771 F.2d 1455, 1459 (11th Cir.

1985) (citing Ryder Truck Lines, Inc. v. United States, 716 F.2d

1369, 1378 (11th Cir. 1983)). 

Case 2:06-cv-04842-WMA Document 27 Filed 06/28/07 Page 9 of 11
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Summary Judgment Standard

Rule 56(b), Fed. R. Civ. P., provides a mechanism by which a

defendant “may, at any time move with or without supporting

affidavits for a summary judgment in the party’s favor as to all or

any part thereof.” “The summary judgment procedure is particularly

appropriate in cases in which the court is asked to review . . . a

decision of a federal administrative agency.” (citing Wright,

Miller & Kane, Federal Practice And Procedure: Civil 2d § 2733,

Vol. 10A at 366 (1983)). Rule 56 is a useful mechanism in cases

such as this one, because the record is automatically complete when

the action arrives in federal court. See id. (“[I]n reviewing an

agency rulemaking, the court considers the record that was before

the agency, and that record is before the court”) (citing Citizens

to Preserve Overton Park v. Volpe, 401 U.S. 402, 420, 91 S.Ct. 814,

825, 28 L.Ed.2d 136 (1971); Ryder Truck Lines, Inc. v. United

States, 716 F.2d 1369, 1378 (11th Cir. 1983)). Stewart, who is pro

se, fails to understand the scope of this court’s authority and

wants a de novo consideration.

Discussion

In their opposition to Stewart’s motion to amend pleadings,

which the court has deemed to be a Rule 56 motion, defendants

contend that there are no grounds to reverse the arbitration

panel’s determination under the applicable standard of review. As

defendants point out, Stewart does not even argue that the findings

Case 2:06-cv-04842-WMA Document 27 Filed 06/28/07 Page 10 of 11
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of the arbitration panel were arbitrary, capricious, an abuse of

discretion, or otherwise not in accordance with the law. Instead,

he essentially seeks a second (or third) bite at the apple by

making the same allegations in this court that he made in his

administrative complaint with the DOE, and asks this court to

substitute its judgment for that of the arbitration panel. This is

something the court is not permitted to do. North Buckhead Civic

Ass’n v. Skinner, 903 F.2d 1533, 1539 (11th Cir. 1990) (“The

reviewing court is not authorized to substitute its judgment for

that of the agency concerning the wisdom or prudence of the

proposed action”). Just as Stewart has not attempted to show how

the arbitration panel’s findings should be reversed under the

proper standard of review, the court is unable to detect anything

from the administrative record that suggests that the panel acted

arbitrarily or capriciously, abused its discretion, or did not act

in accordance with the law. Accordingly, defendant’s motion for

summary judgment will be granted.

DONE this 28th day of June, 2007.

_____________________________

WILLIAM M. ACKER, JR.

UNITED STATES DISTRICT JUDGE

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