Court Opinion

ID: 4451026
Source: CourtListenerOpinion
Date Created: 2019-10-29 16:00:39.530249+00
Date Added: 2024-06-11T14:02:37.215998
License: Public Domain

NOTE: This disposition is nonprecedential.

  United States Court of Appeals
      for the Federal Circuit
                 ______________________

     ELECTRA-MED CORPORATION, A2A
   INTEGRATED LOGISTICS, INC., ZILLION
SOLUTIONS, INC., ALLIANT ENTERPRISES, LLC,
             Plaintiffs-Appellants

                            v.

 UNITED STATES, AMERICAN MEDICAL DEPOT,
        MEDLINE INDUSTRIES, INC.,
             Defendants-Appellees

                   KREISERS, LLC,
                       Defendant
                 ______________________

                       2019-1266
                 ______________________

    Appeal from the United States Court of Federal Claims
in No. 1:18-cv-00927-EGB, Senior Judge Eric G. Bruggink.
                 ______________________

                Decided: October 29, 2019
                 ______________________

   ERIC CRUSIUS, Holland & Knight LLP, Tysons, VA, ar-
gued for all plaintiffs-appellants. Also represented by AMY
LYNN NOVAK FUENTES, GREGORY R. HALLMARK; DAVID S.
BLACK, McLean, VA; MARY BETH BOSCO, Washington, DC.
2                ELECTRA-MED CORPORATION v. UNITED STATES

    DAVID MICHAEL KERR, Commercial Litigation Branch,
Civil Division, United States Department of Justice, Wash-
ington, DC, argued for defendant-appellee United States.
Also represented by JOSEPH H. HUNT, CLAUDIA BURKE,
ROBERT EDWARD KIRSCHMAN, JR.

   ROBERT JOSEPH SNECKENBERG, Crowell & Moring,
LLP, Washington, DC, argued for defendant-appellee
American Medical Depot.  Also represented by AMY
LADERBERG O'SULLIVAN.

   KRISTEN ITTIG, Arnold & Porter Kaye Scholer LLP,
Washington, DC, argued for defendant-appellee Medline
Industries, Inc. Also represented by MICHAEL EDWARD
SAMUELS.
                 ______________________

    Before LOURIE, CLEVENGER, and DYK, Circuit Judges.
DYK, Circuit Judge.
     Electra-Med Corporation, A2A Integrated Logistics,
Inc., Zillion Solutions, Inc., and Alliant Enterprises, LLC
(collectively, “Electra-Med” or “Plaintiffs”) appeal a judg-
ment of the Court of Federal Claims (“Claims Court”) re-
fusing to grant injunctive relief in a bid protest case.
    The background of the case is as follows. On February
24, 2016, the Department of Veterans Affairs (“VA”)
awarded four contracts to American Medical Depot, Med-
line Industries, Inc., Kreisers, LLC, and Cardinal Health
200, Inc. The entities are referred to as “Prime Vendors.”
Each contract covers a distinct geographic area in the
United States and requires the corresponding Prime Ven-
dor to stock, store, and distribute medical supplies from a
“Master List” (also known as the “formulary”) against
which VA hospitals place orders. These contracts were
part of a 2016 effort by the VA to centralize its supply chain
and to restrict ordering exclusively to the Master List in
ELECTRA-MED CORPORATION v. UNITED STATES                    3

order to ensure that supplies are properly tracked and com-
pliant with safety regulations.
     Originally, the VA expected to populate the Master List
itself by entering into contracts directly with suppliers. Af-
ter a number of attempts at vendor solicitation between
2016 and 2018, however, the Master List still contained
only a small fraction of the approximately 80,000 items
necessary to fully support the VA’s healthcare network. In
order to rapidly enlarge the number of items on the Master
List, the VA decided to outsource the selection of suppliers
to its four Prime Vendors by changing the Prime Vendor
contracts from “distribution” to “distribution and supply.”
J.A. 1162.
    In March 22, 2018, the VA issued a Class Justification
and Approval (“J&A”) under 41 U.S.C. § 3304(e)(1)(A) to
explain its use of non-competitive procedures for the modi-
fication of the Prime Vendor contracts. The J&A explained
that the Prime Vendors were positioned to immediately
add items to the Master List because “they already ha[d]
established commercial contracts with suppliers.” J.A.
121. The period of performance on the contracts was ex-
tended to 24 months, set to expire in April of 2020. The
Prime Vendors agreed to the modification and the con-
tracts were executed in April and May of 2018.
    On June 27, 2018, Electra-Med, a group of service-dis-
abled, veteran-owned small businesses, filed a complaint in
the Claims Court challenging the J&A as legally insuffi-
cient to justify the non-competitive sourcing and sought to
enjoin the contract modification. Three of the four Prime
Vendors—Medical Depot, Medline Industries, Inc.,
Kreisers, LLC—intervened. The Claims Court found that
the contract modification was an “end-run” around the
Competition in Contracting Act (“CICA”) and was also a vi-
olation of the VA’s obligation under 38 U.S.C. § 8127 to con-
sider veteran-owned small businesses for award of
contracts. The government does not now dispute the
4                ELECTRA-MED CORPORATION v. UNITED STATES

Claims Court’s conclusions that the contracts violated var-
ious statutory requirements. The sole issue on appeal is
remedy.
     Despite these statutory violations, the Claims Court
denied an injunction to Electra-Med based on the signifi-
cant public harm that would result if the VA’s medical sup-
ply chains were disrupted, “impact[ing] the health, safety,
quality and timeliness of care to Veterans.” J.A. 8 (quoting
J&A, J.A. 120) The Claims Court also found that Electra-
Med’s injury—the loss of the opportunity to compete for a
government contract—though irreparable, was temporary
and speculative, not weighing heavily in favor of an injunc-
tion. The Claims Court emphasized that the contract mod-
ification was temporary and that there were only 18
months left of the contract term. Electra-Med appeals the
denial of injunctive relief.
                                I
     We review a Claims Court’s denial of an injunction for
abuse of discretion. See, e.g., Dell Fed. Sys., L.P. v. United
States, 906 F.3d 982, 991 (Fed. Cir. 2018); PGBA, LLC v.
United States, 389 F.3d 1219, 1223 (Fed. Cir. 2004). The
public interest is a central consideration of determining
whether an injunction is appropriate. See Weinberger v.
Romero-Barcelo, 456 U.S. 305, 312 (1982) (“In exercising
their sound discretion, courts of equity should pay particu-
lar regard for the public consequences in employing the ex-
traordinary remedy of injunction.” (citing R.R. Comm'n. v.
Pullman Co., 312 U.S. 496, 500 (1941)). We conclude that
the Claims Court did not abuse its discretion in view of the
public interest factor and the limited period remaining on
the contracts. Indeed, as of the date of argument on appeal,
the contracts at issue only had six months remaining. In
view of the significant public interest factor of patient
safety and the brevity of the remaining term, and without
deciding the question of the extent of Electra-Med’s irrepa-
rable injury, we find that the Claims Court did not abuse
ELECTRA-MED CORPORATION v. UNITED STATES                   5

its discretion in denying the injunction, and affirm the de-
nial of the injunction.
                               II
     The question remains, however, as to whether we
should remand to the Claims Court. On appeal, the VA
emphasized the fact that the contract modifications are “a
temporary measure,” U.S. Br. 19, and that, under the new
Prime Vendor contracts, supply acquisition will “essen-
tially go[] back to the original intended process” with
“Prime Vendors doing the distribution” and “the Master
List [being] populated [by the VA] with a variety of
measures, including blanket purchase agreements.” Oral
Arg. 19:54–20:23, http://oralarguments.cafc.uscourts.gov/
default.aspx?fl=2019-1266%20%282%29.MP3.
    We note, however, that the modified Prime Vendor con-
tracts appear to have an additional options period that
would allow the contracts to be extended past April 2020.
One of the Prime Vendors indicated at oral argument that
there is a possibility that such an extension may be neces-
sary for the government to complete its current solicitation
for new Prime Vendors and suppliers. We thus remand the
case to the Claims Court to hold the challenge in abeyance
in case the government elects to exercise the option and ex-
tends the contract period, while continuing to fail to comply
with its obligations under CICA and 38 U.S.C. § 8127 after
the expiration of the current contracts. A remand is neces-
sary because the government’s exercise of the option may
not be considered a new procurement, creating a situation
where Electra-Med could be prevented from challenging
this term extension in a new proceeding. See Coast Prof’l,
Inc. v. United States, Fin. Mgmt. Sys., Inc., 828 F.3d 1349,
1355–56 (Fed. Cir. 2016) (an extension of a contract by op-
tion is not typically a new procurement). Moreover, if the
government elects to continue the procurement past April
of 2020, a different issue will be presented as to the
6                ELECTRA-MED CORPORATION v. UNITED STATES

appropriateness of injunctive relief for the period after
April 2020.
    The decision of the Claims Court is affirmed to the ex-
tent that it denied an injunction for the contract terms ex-
piring in April 2020, and the case is remanded for further
proceedings consistent with this opinion.
                AFFIRMED AND REMANDED
                          COSTS
    No costs.