United States District Court, District of Columbia
P. Mehta United States District Judge
lawsuit arises out of a disputed contract to supply infant
formula in the Commonwealth of Virginia under the federal
Special Supplemental Nutrition Program for Women, Infants,
and Children (“WIC”). Overseen by the U.S.
Department of Agriculture (“USDA”), the WIC
program provides grants to state agencies to fund food
benefits and other related services to low-income women and
children. In the spring of 2016, the Virginia Department of
Health (“VDH”) issued a notice of Intent to Award
a contract for the supply of infant formula to Plaintiff
Gerber Products Company. Plaintiff's competitor, Abbott
Nutrition, challenged that preliminary award, claiming that
VDH had evaluated the competing bids using the wrong data.
VDH consulted with USDA officials, who agreed that state
officials had relied on incomplete data when initially
awarding the contract to Plaintiff. VDH then re-opened the
bid process and ultimately awarded the contract to Abbott
believes it lost the Virginia infant formula contract because
of the USDA's actions. Plaintiff claims that the USDA
gave advice to VDH that was at odds with the agency's
positions in other state procurements and directed VDH to
rescind the Intent to Award and re-open the bid process.
Plaintiff now brings suit to prevent such events from
happening again. Plaintiff asks the court to issue an order
requiring the USDA “to clarify and consistently apply
guidance on required data to be included in State WIC
solicitations” and “to cease providing
inconsistent or disparate direction or advice regarding data
requirements for State WIC infant formula
procurements.” Although Plaintiff paints a sympathetic
picture, the court cannot grant the relief it seeks. As
explained below, Plaintiff both lacks standing to bring suit
and fails to challenge a final agency action under the
Administrative Procedure Act. For those reasons, the court
grants Defendants' Motion to Dismiss. The court also
denies Plaintiff's request for leave to take discovery.
U.S. Department of Agriculture (“USDA”), through
its sub-component, the Food and Nutrition Service, runs the
Special Supplemental Nutrition Program for Women, Infants,
and Children (“WIC”). Am. Compl., ECF No. 24
[hereinafter Am. Compl.], ¶ 29. WIC is funded by the
USDA but is administered by state agencies. Id.
¶¶ 29-30. Under the program, the federal government
provides grants to states, which in turn provide
“supplemental foods and nutrition education” to
qualifying low-income women and children. Child Nutrition
Act, 42 U.S.C. § 1786; Am. Compl. ¶¶ 29-30.
the products the WIC program provides is infant formula.
See 42 U.S.C. § 1786(f)(15). Under the
statutory scheme, states are required to administer a
competitive bidding process, or similar cost containment
system, in which companies bid to secure exclusive contract
rights to provide infant formula to that state. Id.
§ 1786(h)(8)(A)(i). The USDA's regulations,
generally speaking, require states to use a
“single-supplier competitive system, ” whereby
state WIC agencies “solicit sealed bids from infant
formula manufacturers to supply and provide a rebate for
infant formulas.” 7 C.F.R. § 246.16a(b)(1) (2011).
The prevailing manufacturer gives the state agency a rebate
for each unit of formula purchased by WIC participants in
exchange for an exclusive supplier contract. 42 U.S.C. §
spring of 2016, the Commonwealth of Virginia's WIC
agency, the Virginia Department of Health
(“VDH”), announced an Intent to Award its WIC
infant formula contract to Plaintiff. Am. Compl. ¶ 41.
Plaintiff's competitor, Abbott Nutrition, challenged
VDH's decision, arguing that VDH had used incorrect data
to determine the lowest bidder. Id. ¶ 44.
According to Abbott Nutrition, VDH incorrectly used estimates
of infants consuming only milk-based formula, when it should
have included infants using soy-based and milk-based lactose
free infant formula. Id.
WIC Director Michael Welch sought guidance from the USDA
following Abbott Nutrition's protest. Welch e-mailed a
group of USDA officials to ask whether the USDA's
regulations required state agencies to consider all
participating infants in evaluating bids, or just those using
milk-based formula. Id. ¶¶ 47-49. The Food
and Nutrition Service's WIC branch chief for the
Mid-Atlantic Region, Jaime Van Lieu, informed Welch that the
USDA's regulations required, for bidding purposes, an
estimate of all participating infants, except those who are
breastfeeding or prescribed exempt formulas. Id.
¶ 49; Compl., ECF No. 1 [hereinafter Compl.], Ex. 1, ECF
No. 1-9 [hereinafter Pl.'s Ex. 1], at 7-9. Van Lieu
admitted the regulations were ambiguous, but pointed to
preambles to the relevant rules to support her conclusion,
noting that “USDA's legal folks typically reference
preambles when there is vagueness in the regs.”
Pl.'s Ex. 1 at 9. Van Lieu also reported that a recent
winning bid from another state in her region, Pennsylvania,
included all non-exempt infants that receive formula.
Id. Following this exchange, VDH canceled its Intent
to Award the contract to Plaintiff “due to missing
data, ” reopened bidding, and thereafter awarded the
contract to Abbott Nutrition. Am. Compl. ¶¶ 51, 53,
challenged VDH's revocation of its Intent to Award at
every turn. At the start, Plaintiff sent a letter to VDH
protesting the revocation and sent a copy to the USDA. Am.
Compl. ¶¶ 54-55, 61. The USDA deferred to VDH, and
VDH, in turn, rejected the protest on the ground that
Plaintiff could not challenge VDH's decision not
to award a contract. Compl., Ex. 8, ECF No. 1-16; Am. Compl.
¶¶ 67-68. Plaintiff's subsequent administrative
protests also proved unsuccessful. Compl., Ex. 11, ECF No.
1-19; Am. Compl. ¶¶ 75, 90. Plaintiff also twice
sued VDH in Virginia state court-first, after VDH announced
the re-bid, and then again after it awarded the contract to
Abbott Nutrition-only to see VDH prevail in both cases. Am.
Compl. ¶¶ 84, 93-94.
September 2016, Plaintiff brought suit in this court against
both federal and VDH officials, seeking a temporary
restraining order (“TRO”) enjoining VDH officials
from announcing a new bid solicitation and requiring them to
re-instate the original Intent to Award to Plaintiff. This
court denied the motion for a TRO, finding that it lacked
both personal jurisdiction over the Virginia state officials
and subject matter jurisdiction to hear the claims against
them. Gerber Prod. Co. v. Vilsack, No. 16-1696, 2016
WL 4734357, at *1 (D.D.C. Sept. 9, 2016). The court also held
that, because it could not order the federal officials to
grant the requested injunctive relief, Plaintiff lacked
standing to sue them. Id.
failed to recapture the Virginia contract, Plaintiff embarked
on a different strategy. It voluntarily dismissed the
Virginia state officials from this suit, see Notice
of Voluntary Dismissal, ECF No. 21, and then filed an Amended
Complaint solely against USDA officials
(“Defendants”). The Amended Complaint alleges
that the USDA violated the Administrative Procedure Act
(“APA”) (1) by treating the Virginia procurement
differently than similarly situated state procurements, and
(2) by violating its own regulations when it directed VDH to
re-open bidding. Am. Compl. ¶¶ 109-23. As to its
first APA claim, Plaintiff alleges that the USDA has not
acted consistently when it comes to intervening in various
states' infant formula procurements. Id.
¶¶ 109-13. Plaintiff points to a host of other
instances in which state agencies awarded contracts based on
the same purportedly deficient data that Plaintiff submitted
to VDH, without any corresponding demand from the USDA to
re-open bidding. Id. ¶¶ 95-102. As to its
second APA claim, Plaintiff contends that the USDA violated
its own regulations when it “usurped the role of the
VDH procurement officer and improperly directed
cancellation” of the Intent to Award. Id.
¶ 118. To remedy these alleged violations, Plaintiff
asks the court to order the USDA “to clarify and
consistently apply guidance on required data to be included
in State WIC solicitations” and “to cease
providing inconsistent or disparate direction or advice
regarding data requirements for State WIC infant formula
procurements.” Id. at 31.
move to dismiss Plaintiff's Amended Complaint on several
grounds. First, under Rule 12(b)(1) of the Federal Rules of
Civil Procedure, they contend that the court is without
subject matter jurisdiction to hear Plaintiff's claims
because Plaintiff lacks Article III standing. Defs.' Mot.
to Dismiss, ECF No. 25, Mem. in Supp., ECF No. 25-1
[hereinafter Defs.' Mot.], at 9-18. Second, under Rule
12(b)(6), Defendants argue that Plaintiff has not met the
threshold requirement for challenging agency action under the
APA because the action Plaintiff seeks to challenge is
neither “agency action, ” under 5 U.S.C. §
702, nor “final, ” under 5 U.S.C. § 704.
Defs.' Mot. at 8, 19-26. Third, also under Rule 12(b)(6),
Defendants argue that Plaintiff fails to state a claim under
the APA because (1) the regulation the USDA ...