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State, Department of Workforce Development v. United States Department of Education

United States District Court, W.D. Wisconsin

December 3, 2019

UNITED STATES DEPARTMENT OF EDUCATION, BETSY DeVOS, in her official capacity as Secretary of the United States Department of Education, and THERESA TAYLOR, Respondents.


          James D. Peterson District Judge

         This case involves a dispute over the award of a vending machine services contract for two Wisconsin correctional facilities in Racine County, Wisconsin. The contract was awarded under the Randolph-Sheppard Act, a federal law that gives priority to blind persons in awarding contracts to operate vending machines on government property.

         Theresa Taylor, a blind vending machine operator, sought the Racine contract from the Wisconsin Department of Workforce Development (DWD), through its Division of Vocational Rehabilitation, which administers the Randolph-Sheppard program in Wisconsin. But DWD awarded the contract to another blind vendor, Joelyn Belsha. As provided under the Randolph-Sheppard Act, Taylor asked the United States Department of Education to convene a panel to arbitrate the dispute between Taylor and DWD over the vending contract. Taylor prevailed in the arbitration, and the arbitration panel ordered that Taylor be given the contract and awarded money damages. DWD has petitioned this court to review the decision of the arbitration panel.

         Now before the court are two mirror-image motions: DWD's motion to vacate the arbitration panel's decision, Dkt. 26, and Taylor's motion to confirm and enforce it. Dkt. 24. The Department of Education filed the administrative record, Dkt. 21, but it has not otherwise participated in the case. Taylor asks for oral argument on her motion. The procedural history of this case is protracted, but the court reviews the arbitration decision under the Administrative Procedure Act, which limits review to the administrative record. The parties have adequately briefed the issues and oral argument is unnecessary.

         The arbitration panel found that DWD was persistently biased against Taylor, and that she was decisively disadvantaged by DWD's decision to use 2013 profitability data to evaluate the competing applicants. But the key factual findings are not supported by substantial evidence, and the arbitration panel's ultimate conclusions are arbitrary and capricious. The court concludes that there were no material deficiencies in the 2013 selection process and that Taylor unreasonably chose not to participate in that process. The court will deny Taylor's motion to enforce the arbitration award, grant DWD's motion to vacate and reverse the arbitration decision, and remand the case to the Department of Education with instructions to affirm the award of the contract to Belsha.


         A. The Randolph-Sheppard Act

         The Randolph-Sheppard Act, enacted in 1936 and codified at 20 U.S.C. § 107, establishes a voluntary federal-state program to provide employment opportunities to the blind by giving them priority for contracts to operate vending machines on government property. Responsibility for administering this program is divided between state and federal agencies. At the federal level, the Secretary of Education interprets and enforces the Act's provisions and designates state licensing agencies to implement the program in the states. 20 U.S.C. § 107a. The designated state licensing agency for Wisconsin is DWD, which carries out its Randolph-Sheppard Act responsibilities through its “business enterprise program.” DWD's business enterprise program is governed by Wis.Stat. § 47.03(4)-(8) and by implementing regulations in the Wisconsin Administrative Code, Chapter DWD 60.

         As a condition of participating in the Randolph-Sheppard program, DWD must afford certain procedural protections to blind vendors. A blind vendor licensed under the program who is dissatisfied with DWD action relating to the program can file a grievance, and if dissatisfied with the resolution of the grievance, the vendor can ask for further review, including ultimately a full evidentiary hearing. Wis. Admin. Code DWD 60.05; 20 U.S.C. § 107d-1(a). If the vendor is dissatisfied with the results of the full evidentiary hearing, the vendor can submit the matter to arbitration before a panel to be convened for that dispute by the Department of Education. Wis. Admin. Code DWD 60.05(4); 20 U.S.C. § 107d-1(a). Decisions by Department of Education arbitration panels are final agency actions reviewable in federal court under the Administrative Procedure Act. 20 U.S.C. § 107d-2(a).

         B. Procedural history

         1. The Racine Correctional Institution and Sturtevant Transitional Facility contract

         Taylor has worked as a licensed blind vendor since 2006, when she was first appointed to run vending machines at the Southern Wisconsin Center-which serves veterans, the cognitively disabled, and female prisoners in a minimum-security facility. AR-143.[1] In October of 2007, Taylor was asked to temporarily take over vending operations at three Wisconsin correctional facilities: Racine Correctional Institution, Sturtevant Transitional Facility, and the Racine Youthful Offender Correctional Facility. She served as the interim operator of those facilities for four years.

         In the meantime, DWD was preparing to select permanent operators for those three sites. DWD decided that Racine Correctional Institution and Sturtevant Transitional Facility together would be bid out for selection of a permanent operator as a “stand-alone” facility, because they were considered large enough to provide full-time employment for a single operator. AR-236. That meant that the operator who won that bid would have to give up her existing sites. By contrast, DWD decided to bid out the Racine Youth Offender Correctional Facility vending machines as an “add-on” site, meaning that it would be added to an operator's existing sites. AR-237.

         2. 2011 interviews

         In July 2011, DWD sent out the bid announcement for Racine Youth Offender Correctional Facility. AR-23. Taylor and Joelyn Belsha, another licensed blind operator, interviewed for the position. Taylor scored 110 points based on scores from three interviewers on the panel; Belsha scored 104 points. AR-412. So DWD offered Taylor the site, and she accepted. AR-345.

         DWD sent out the bid announcement for Racine Correctional Institution and Sturtevant Transitional Facility (the “RCI/STF” site) in August 2011. Once again, Taylor and Belsha interviewed for the position, along with two other blind vendors. Taylor scored a total of 96 points from the interview panel, whereas Belsha scored 101 points. AR-410. Belsha was awarded the RCI/STF site.

         3. Taylor's grievance and the full evidentiary hearing

         Taylor sent a grievance letter to DWD contesting the selection of Belsha as the permanent operator of the RCI/STF site. AR-414-15. Specifically, Taylor contended that DWD had failed to consider a letter of recommendation that she received from the RCI/STF facilities manager, which she had presented at the interview. AR-414. By ignoring her recommendation letter and selecting Belsha, Taylor said, DWD had violated Wisconsin Administrative Code § DWD 60.08, which requires that “the licensee deemed to be best suited for an available business enterprise” be selected.

         DWD held a hearing on Taylor's grievance on November 8, 2011, after which business enterprise program director Kim Pomeroy denied Taylor's grievance, explaining that “[r]esumes and references are not requested of the interviewees because [DWD] is responsible for personnel records of the [business enterprise program] operators and is familiar with the training and performance of each operator.” AR-418.

         At that point, Taylor asked for a full evidentiary hearing in accordance with § 107d-1(a) of the Randolph-Sheppard Act and the corresponding state statute, Wisconsin Statute § 47.03. The full evidentiary hearing took place on May 8, 2012. (The hearing was audio recorded, but the recording was too poor to transcribe, so there is no official transcript of the proceedings.)

         According to records from that hearing, Taylor testified that Greg Feypel (a DWD employee who administered the business enterprise program) had contacted her on August 26, 2011 to discuss the RCI/STF bid. According to Taylor, Feypel “expressed the thought of giving Belsha RCI/STF due to her UW-Parkside location not being profitable and to ‘even out' things.” AR-423. Feypel denied that he had said this, and he testified that that “his conversation with Taylor was just trying to explain the ‘stand-alone' versus ‘add-on' site” arrangement. AR-425.

         The hearing panel determined that the interviews for the RCI/STF contract did not comply with DWD's own policies, and that the selection of Belsha over Taylor had not been “adequately justified” under § DWD 60.08's requirement that the “best suited” licensee be selected. Id. The hearing panel identified the following problems with the process: (1) there had been no site facilities manager or designee on the interview panel, as required by DWD policy, see AR-347; (2) the selection had been based solely on the interview score, whereas DWD policy said that scores would be considered as part of the selection process; (3) the panel had not submitted a written recommendation with justification of their selection to the business enterprise program director; and (4) the panel hadn't accepted Taylor's letter of recommendation. AR-425. The panel acknowledged that DWD's policy allowed for discretion in determining whether to accept recommendation letters and other such materials, but it noted that “resumes and references are almost universally recognized as appropriate and helpful in job interviews, ” and that it seemed “unreasonable to ignore a candidate's successful operation of the precise facility at issue for such a long time.” AR-426. The panel also acknowledged Taylor's concern that DWD had improperly factored Belsha's perceived financial need into its selection decision, noting that the evidence and their findings “clearly suggest[ed] that [DWD] might well have considered factors outside the ambit of selecting the candidate best suited for the business being bid.” Id.

         In light of these findings, the hearing panel recommended that DWD: (1) set aside the selection of Belsha as the permanent operator for the RCI/STF site; (2) give the candidates an opportunity to interview again with a different panel comprised as the selection policy directs; (3) prepare new interview questions and benchmarks; (4) accept resumes and references if offered by a candidate and consider relevant factors other than just the interview scores; (5) require the interview panel to submit a written recommendation to DWD justifying its selection; and (6) select the candidate best suited for the business enterprise, regardless of the candidate's need or the desire to even out sites among operators. Id. The hearing panel did not say who should serve as interim operator of the RCI/STF site during the re-interview process.

         4. DWD's final decision on Taylor's grievance

         The evidentiary hearing panel's recommendations were passed along to Michael Greco, the acting administrator of DWD, in accordance with the procedures outlined in Wisconsin Administrative Code § DWD 60.05(3). On June 12, 2012, Greco issued a final decision on Taylor's grievance in which he mostly accepted the evidentiary hearing panel's recommendations. He ordered that: (1) DWD would conduct a new interview process to decide on the permanent operator for the RCI/STF site; (2) the same candidates would be invited to re-interview in front of a new panel, the composition of which would reflect DWD policy; (3) the interviews would use new questions and benchmarks; and (4) the interview panel members would submit a written recommendation to DWD justifying its selection; but (5) resumes and references would not be accepted. AR-429. Greco also decided that Belsha would continue to operate the RCI/STF vending machines in the meantime

         5. Taylor's appeal to U.S. Department of Education

         Taylor disagreed with Greco's handling of her grievance, so on July 23, 2012, she filed a complaint against DWD with the U.S. Department of Education. In that complaint, Taylor alleged that DWD had discriminated and retaliated against her, and she requested as a remedy that she “be placed as permanent operator of the vending sites” and receive “financial compensation for the loss of revenue and hardship resulting from [DWD's] actions.” AR-3.

         More than nine months passed after Taylor's filing with the Department of Education. On May 6, 2013, the Department of Education acknowledged receipt of Taylor's complaint. AR-6. That same day, the Department of Education sent Greco a letter notifying him that Taylor had lodged a complaint against DWD seeking a Randolph-Sheppard Act arbitration panel and that the complaint was “being reviewed.” AR-4.

         6. 2013 interviews

         While Taylor's complaint was pending before the Department of Education, DWD formulated new interview questions and benchmarks for selecting best-suited operators for stand-alone sites. See AR-578-83. This was an involved process, during which DWD sought review and comment from the Elected Committee of Blind Vendors (a committee of operators that coordinates with DWD in administering the business enterprise program, see Wis. Admin. Code § DWD 60.03), as well as from the larger pool of blind vendors. AR-281-82. On March 12, 2013, DWD and the Elected Committee jointly approved the new benchmarks. AR-438- 39.

         On June 18, 2013, DWD sent a re-interview notice to the candidates who had originally interviewed for the RCI/STF site in 2011. Taylor's interview was scheduled for June 27, 2013. AR-572. On June 24, Taylor emailed Feypel, the DWD employee who administered the business enterprise program, and Lorie Lange, the director of DWD's business enterprise program, to ask that the re-interview be delayed until after her appeal to the Department of Education was completed. AR-438. Lange responded that, in accordance with Greco's decision on Taylor's grievance, DWD would proceed with the re-interview process as planned. AR-437. Taylor replied to ask that Lange explain how the interview would be administered, how points would be awarded, and whether the candidates would be evaluated based on the status of their businesses as of the original date of the RCI/STF site interview in 2011. Id. Lange sent Taylor a copy of the recently approved benchmarks. Id. And in a subsequent email, Ralph Mikell (another DWD employee) confirmed to Taylor that candidates would be evaluated based on their current business data rather than their data from 2011, when the original interviews had been conducted. AR-436.

         When she learned that she would be evaluated based on her current business data, Taylor withdrew from the re-interview process. In a June 26, 2013 email to Lange and Mikell, Taylor wrote:

Due to my pending appeal regarding this matter, I am informing [DWD] that I will not be attending the re-interview on Thursday, June 27, 2013. Also, I strongly disagree with the re-interview, it is unethical and does not f[o]llow the decision rendered by the panel members of my evidentiary hearing. As well as, the fact that it is unacceptable to conduct a re-interview for a site bid out 2 years ago, based on an operator[']s current business status. All candidates['] statuses have drastically changed during the last two years, including many aspects that directly [a]ffects the outcome of Thursday[']s re-interview.
The arbitration process is moving forward and both parties can express their facts and reasoning at that time. I look forward to resolving this issue at that time.

Id. The re-interviews went forward without Taylor, and Belsha was once again selected as the permanent operator for the RCI/STF site. AR-282. Greco informed the Department of Education about these developments in a ...

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