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National Industries for The Blind v. Department of Veterans Affairs

United States District Court, District of Columbia

November 7, 2017

NATIONAL INDUSTRIES FOR THE BLIND, et al., Plaintiffs,
v.
DEPARTMENT OF VETERANS AFFAIRS, et al., Defendants. ALPHAPOINTE, Plaintiff,
v.
DEPARTMENT OF VETERANS AFFAIRS, et al., Defendants.

          MEMORANDUM OPINION AND ORDER DENYING DEFENDANTS' MOTION TO STAY THE INSTANT PROCEEDINGS

          KETANJI BROWN JACKSON, UNITED STATES DISTRICT JUDGE.

         On May 30, 2017, the United States Court of Federal Claims resolved a dispute about the procurement policy that Congress intended for the Department of Veterans Affairs (“the VA”) to use when deciding whether the products of veteran-owned small businesses will be prioritized over those made by small businesses that employ blind and severely disabled individuals. See PDS Consultants, Inc. v. United States, 132 Fed.Cl. 117 (Fed. Cl. 2017). The Court of Federal Claims held, in essence, that when the VA seeks to procure goods and services, veteran-owned small businesses get preference over those that employ the blind and disabled, see PDS Consultants, 132 Fed.Cl. at 128, and this ruling-which involved the resolution of an apparent conflict between the Javits-Wagner-O'Day Act (“JWOD”), 41 U.S.C. §§ 8501-06 (requiring federal agencies to purchase certain items from small businesses that employ blind and disabled individuals), and the Veterans Benefits, Health Care, and Information Technology Act of 2006 (“VBA”), 38 U.S.C. §§ 8127-28 (mandating that the VA limit competition for its procurement to veteran-owned small businesses under certain conditions)-is currently on appeal to the Federal Circuit.

         In the instant consolidated cases, Plaintiffs National Industries for the Blind, Bosma Industries for the Blind, Winston-Salem Industries for the Blind (collectively, “NIB Plaintiffs”) and Plaintiff Alphapointe have brought their own, substantively similar challenges to the VA's procurement practices. (See generally NIB Compl., ECF No. 1; Alphapointe Compl., ECF No. 25.) Before this Court at present is a motion that Defendants VA, VA Secretary David Shulkin, and the United States of America have filed-and that Defendant-Intervenor PDS Consultants (“PDS”) supports-requesting a stay of the instant proceedings pending the Federal Circuit's ruling in PDS Consultants. (See Mem. in Supp. of Defs.' Mot. to Stay Proceedings (“Mot. to Stay”), ECF No. 20-1; see also PDS's Resp. in Supp. of Defs.' Mot. to Stay Proceedings (“PDS Stay Br.”), ECF No. 29.) Defendants point out that the complaints at issue here raise similar legal issues to those that are now pending in the case before the Federal Circuit, and that the parties overlap; therefore, Defendants request a stay in the interest of judicial efficiency. (See Mot. to Stay at 10; PDS Stay Br. at 3-5.)[1] In opposition to the stay motion, Plaintiffs argue, among other things, that the instant cases involve claims that are different than those in PDS Consultants, and that the parties are largely distinct; indeed, other than the VA defendants, only two of the five parties in the consolidated matters before this Court are also parties in the Federal Circuit case. (See Pls.' Opp'n to VA's Mot. to Stay Proceedings (“NIB Opp'n”), ECF No. 22, at 4-8; Pl. Alphapointe's Opp'n to Defs.' Mot. to Stay Proceedings (“Alphapointe Opp'n”), ECF No. 28, at 10-12.)

         For the reasons explained fully below, this Court has concluded that Defendants' motion to stay the instant proceedings must be DENIED. In short, Defendants have failed to carry their burden of demonstrating that a stay of the instant proceedings is warranted. Moreover, given that the VA is currently implementing the challenged procurement policy and has expressed its intention to continue to do so during the pendency of the Federal Circuit appeal (see Defs.' Notice, ECF No. 42), equitable considerations weigh heavily against the requested stay.

         I. BACKGROUND

         A. Factual Background

         At issue in the present case is the potential tension between two federal statutes that establish certain contracting priorities that the VA must implement when it undertakes procurements for goods or services. (See Alphapointe Compl. ¶¶ 2-4; NIB Compl. ¶¶ 2-3.) The JWOD, which was initially passed in 1938 and was amended in 1971, requires all government agencies (including the VA) to purchase certain products and services from designated nonprofits that employ blind and otherwise severely disabled people. See 41 U.S.C. §§ 8501-06. Under the JWOD's statutory scheme, the United States AbilityOne Commission, an independent agency, is charged with maintaining a procurement list, and “[a]n entity of the federal Government intending to procure a product or service on the procurement list . . . shall procure the product or service” from a qualified nonprofit on that list. Id. § 8504(a). The AbilityOne Commission also oversees the addition of items to the procurement list (hereinafter called “the AbilityOne List”). See Id. § 8503(a). Thus, by statute and regulation, certain designated non-profit manufacturers have long been preferenced with respect to procurements in the government-contracting realm.[2]

         More recently, in 2006, Congress enacted the VBA, which, among other things, established the Veterans First Contracting Program (“VFCP”). The VFCP applies only to procurement by the VA, and requires that agency to set goals for providing contracts to veteran-owned small businesses. See 38 U.S.C. § 8127(a). It also directs the VA to give procurement priority to veteran-owned small businesses under certain conditions. Specifically, before undertaking a procurement, VA contracting officers must conduct an analysis-commonly referred to as the “Rule of Two”-to determine whether there are at least two veteran-owned small businesses capable of performing the work. See Id. § 8127(d). If the officer has a “reasonable expectation” that at least two such contractors will submit offers and that “the award can be made at a fair and reasonable price that offers best value to the United States[, ]” the VA must limit competition for that contract to veteran-owned small businesses only. Id.

         Since the passage of the VBA, the VA has issued a number of regulations and policies that guide its contracting officers in applying the respective priorities embodied in the JWOD and the VBA.[3] For example, when the VA initially promulgated the rule that implements the VBA, it did so in a way that maintained AbilityOne's priority status. (See Alphapointe Compl. ¶ 4; NIB Compl. ¶ 3.) Then, in 2016, the Supreme Court held that the VA must conduct the Rule of Two analysis when awarding contracts under the Federal Supply Schedule, see Kingdomware Techs., Inc. v. United States, 136 S.Ct. 1969 (2016), and in response to that decision, the VA issued a new policy in the form of a “Class Deviation” from the VA Acquisition Regulation (“the VAAR”) (“the 2016 Class Deviation”), but kept the policy requiring mandatory priority for the AbilityOne program intact. (See Alphapointe Compl. ¶ 5; NIB Compl. ¶ 4.)[4]

         In March of 2017, the VA issued an amended Class Deviation (“the 2017 Class Deviation”). (See Alphapointe Compl. ¶ 38; NIB Compl. ¶ 31.) The 2017 Class Deviation requires VA contracting officers to conduct the aforementioned Rule of Two analysis before purchasing certain items on the AbilityOne List, depending upon when the items were added to the list. For any items added to the AbilityOne List on or after January 7, 2010-the date on which the VA issued its initial regulations implementing the VBA-the Rule of Two analysis is required. (See Alphapointe Compl. ¶¶ 39-40; NIB Compl. ¶¶ 32-33.) But for items that were added to the AbilityOne List before January 7, 2010, the 2017 Class Deviation requires VA contracting officers to continue to purchase the items from AbilityOne nonprofits without applying the Rule of Two. (See id.)

         The Court of Federal Claims entertained a challenge to the 2017 Class Deviation in the context of a bid protest that a veteran-owned small business brought in PDS Consultants, Inc. v. United States, 132 Fed.Cl. 117 (Fed. Cl. 2017).[5] In that case, PDS (the Defendant-Intervenor in the instant consolidated cases) filed a bid protest action against the VA to challenge the agency's purchase of eyewear from Winston-Salem Industries for the Blind (a nonprofit that intervened as a defendant in the PDS Consultants matter and is one of the plaintiffs here). See Id. at 119-20. On May 30, 2017, the Court of Federal Claims issued an opinion finding that the VA should have applied the Rule of Two to all procurements that had taken place after the passage of the VBA in 2006, regardless of when the product or service was placed on the AbilityOne List. See Id. at 126. That court thus concluded that the 2017 Class Deviation was “contrary to the VBA statute” insofar as that policy suggested that “items added to the List prior to 2010 are forever excepted from the VBA's requirements[, ]” and as a result, the court rejected the VA's application of the 2017 Class Deviation to the eyewear contracts at issue. Id. at 128.

         Winston-Salem noticed an appeal in the PDS Consultants case on July 28, 2017. (See Ex. 1 to Resp. of NIB Pls. to Defs.' Notice, Docketing Statement, PDS Consultants, Inc. v. United States, No. 17-2379 (Fed. Cir. Sept. 1, 2017) (“PDS Appeal Docketing Statement”), ECF No. 45-1, at 2.) And because the Court of Federal Claims has granted a stay of its judgment pending appeal, see PDS Consultants, Inc. v. United States, No. 16-1063C, 2017 WL 3821803, at *1 (Fed. Cl. Sept. 1, 2017), the VA has continued to implement the 2017 Class Deviation with respect to its procurements, even as the parties are presently litigating issues related to that policy in the Federal Circuit. (See Defs.' Notice at 2; see also PDS Appeal Docketing Statement at 3 (stating that whether the VA must perform the Rule of Two analysis under the VBA before it purchases items from AbilityOne nonprofits is one of the issues to be decided on appeal).)

         B. Procedural History

         On May 24, 2017, the NIB Plaintiffs filed a complaint in this Court that claimed that the 2017 Class Deviation is both substantively unlawful and procedurally defective under the Administrative Procedure Act (“APA”). (See NIB Compl. ¶ 6.) The NIB Plaintiffs argue that the 2017 Class Deviation reflects “an unreasonable interpretation of the VBA that ignores the mandatory language of the JWOD Act[, ]” and these Plaintiffs also allege that the VA issued the 2017 Class Deviation without complying with the notice-and-comment requirements of the APA, the Office of Federal Procurement Policy Act (“OFPPA”), and the FAR. (See id.) As relief, the NIB Plaintiffs seek a declaration that the 2017 Class Deviation violates the APA, the OFPPA, and the FAR (see id., Request for Relief, ¶ 1), as well as a permanent injunction prohibiting enforcement of the 2017 Class Deviation (see id., Request for Relief, ¶ 2).

         Plaintiff Alphapointe filed its complaint on July 28, 2017. (See Alphapointe Compl. (originally filed in Civ. No. 17-1528); see also Notice of Related Case, ECF No. 23.) Alphapointe challenges the 2017 Class Deviation, as well as an alleged newer VA procurement policy that is purportedly reflected in a June 2017 email that Alphapointe received from the VA. (See Alphapointe Compl. ¶¶ 44-46.) Alphapointe argues that the VA's policy regarding government-contracting preferences violates the APA because the agency has arbitrarily and capriciously ignored the requirements of the JWOD, and because the agency has failed to adhere to the notice-and-comment requirements of the APA. (See Id. ¶¶ 54-57.) As relief, Alphapointe seeks a declaration that the 2017 Class Deviation violates the APA, as well as preliminary and permanent injunctions prohibiting the VA from enforcing the 2017 Class Deviation. (See id., Request for Relief, ¶¶ 1-3.)[6] This Court consolidated the NIB Plaintiffs' and Alphapointe's cases on August 4, 2017.

         In a motion filed on July 17, 2017, Defendants have asked this Court to stay the instant proceedings pending the Federal Circuit's resolution of the PDS Consultants case. (See generally Mot. to Stay.) Defendants argue that, because PDS Consultants is factually related to the matters at hand, “considerations of consistency and judicial efficiency warrant application of the court-developed rule of practice by which the second-filed case is stayed[.]” (Id. at 1.) Defendant-Intervenor PDS also supports the stay on the grounds of judicial efficiency, and it further argues that both it and the government would suffer hardship in the absence of a stay. (See PDS Stay Br. at 2, 5.) For their part, the NIB Plaintiffs and Alphapointe vigorously oppose staying the instant proceedings; they argue that this case should go forward despite the Federal Circuit appeal because PDS Consultants involves different parties, different facts, and different causes of action. (See Alphapointe ...


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