Blind Vendors v. NH CV-98-011-M 03/17/98 UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

New Hampshire Committee of Blind Vendors, Plaintiff,

v. Civil No. 98-011-M

The State of New Hampshire, Department of Administrative Services, Defendant.

O R D E R

The New Hampshire Committee of Blind Vendors ("CBV") brings

this action seeking declarative and injunctive relief against the

New Hampshire Department of Administrative Services. CBV claims

that the State violated the provisions of the Surface

Transportation Act,

, et seq., by awarding

contracts to operate vending facilities at highway rest areas

without giving priority to blind vendors licensed by the State

under the Randolph-Sheppard Act,

, et seq. The

State moves to dismiss CBV's complaint, alleging, among other

things, that CBV has failed to exhaust its administrative

remedies. Accordingly, it says that the court lacks subject

matter jurisdiction. See Fed. R. Civ. P. 12(b)(1). CBV objects.

Standard of Review

"When faced with a motion to dismiss for lack of subject

matter jurisdiction. Rule 12 (b)(1), Fed. R. Civ. P., the party

asserting jurisdiction has the burden to establish by competent proof that jurisdiction exists." Stone v. Dartmouth College,

(D.N.H. 1988) (citing O'Toole v. Arlington

Trust C o .,

(1st Cir. 1982); C. Wright & A.

Miller, 5 Federal Practice and Procedure § 1350, at 555 (1969 &

Supp. 1987)). Unlike the situation presented with typical

motions to dismiss (e.g., for failure to state a claim), however,

the court "may consider pleadings, affidavits, and other

evidentiary materials without converting the motion to dismiss to

a motion for summary judgment." Lex Computer & Management Corp.

v. Eslinqer & Pelton, P.C.,

(D.N.H. 1987);

see also Richmond, F & P R. Co. v. United States,

(4th Cir. 1991) cert, denied,

(1992); see also

Lawrence v. Dunbar,

(11th Cir. 1990) .

Nevertheless, the court "should apply the standard applicable to

a motion for summary judgment, under which the nonmoving party

must set forth specific facts beyond the pleadings to show that a

genuine issue of material fact exists." Richmond,

(citing Celotex Corp. v. Catrett,

(1986)). "The moving party should prevail only if the material

jurisdictional facts are not in dispute and the moving party is

entitled to prevail as a matter of law."

Discussion

I. The Randolph-Sheppard Vending Stand Ac t .

Congress enacted the Randolph-Sheppard Vending Stand Act,

-107f, to provide "blind persons with remunerative

2 employment, enlarg[e] the economic opportunities of the blind,

and stimulat[e] the blind to greater efforts in striving to make

themselves self-supporting."

(a). To accomplish

those goals, the Randolph-Sheppard Act grants priority to

licensed blind vendors who wish to operate vending facilities on

federal property.

(b).

The Secretary of Education administers the Act at the

federal level and designates state licensing agencies ("SLAs") to

implement programs under the Act at the state level. In New

Hampshire, that licensing agency is the Department of Education,

Division of Vocational Rehabilitation Services.

In a recent opinion, the Court of Appeals for the District

of Columbia Circuit described how the Randolph-Sheppard Act

operates:

Blind persons interested in participating in the program must apply to their SLA for a license to operate as a blind vendor. The SLA then applies to the federal government seeking to place the licensee on federal property. When the SLA and the federal government have agreed on a suitable location for the vending facility, the SLA eguips the facility and furnishes the initial stock and inventory. From that point forward, the blind vendor operates as the sole proprietor of the vending facility. He is entitled to its profits and presumably absorbs its losses.

Committee of Blind Vendors v. District of Columbia,

(D.C. Cir. 1994) (citations omitted). See also Tenn. Dept.

3 of Human Serv. v. U.S. Dept, of Educ.,

(6th Cir. 1992) .

The Randolph-Sheppard Act also established an administrative

grievance procedure, pursuant to which "any blind licensee who is

dissatisfied with any action arising from the operation or

administration of the vending facility program may submit to a

State licensing agency a reguest for a full evidentiary hearing."

20 U.S.C. § 107d-l(a). If the vendor is dissatisfied with any

decision rendered following such a hearing, he or she may file a

complaint with the Secretary, who then convenes a panel to

arbitrate the dispute. The decision of the arbitration panel is

binding on the parties and subject to appeal under the provisions

of the Administrative Procedures Act. 20 U.S.C. § 107d-2(a) .

II. The Surface Transportation Ac t .

As part of the Surface Transportation Act (the "STA"),

Congress authorized states to place vending facilities in rest

and recreation areas located on federal rights-of-way along the

interstate highway system.

(b). Prior to the

passage of section 111(b), nocommercial establishments were

permitted at those locations. Section 111(b) of the STA

provides, in part, that:

Such vending machines may only be operated by the State. In permitting the placement of vending machines, the State shall give priority to vending machines which are operated through the State licensing agency designated pursuant to section 2 (a)(5) of the

4 Act of June 20, 1936, commonly known as the "Randolph- Sheppard A c t ."

(b) (emphasis supplied). Unlike the Randolph-

Sheppard Act, however, the STA does not explicitly establish any

form of administrative grievance procedure for those who believe

they have an actionable claim under its provisions.

III. The Parties' Dispute.

CBV alleges that the State violated the provisions of the

STA when it awarded a vending contract to C.C. Vending, Inc.

(authorizing it to operate vending machines at certain interstate

rest areas) and failed to give priority to those vending machines

which CBV operates through the Department of Education. CBV says

that because section 111 (b) of the STA is the sole authority for

the operation of vending facilities on the interstate highway

system, and because the STA is silent as to an administrative

grievance procedure, it may pursue its claims under section

111(b) directly in this forum.1

The State, on the other hand, argues that before pursuing

any claims in this court regarding the operation of vending

1 Other than asserting that the administrative procedures established under Randolph-Sheppard do not apply in this case, CBV has not advanced any argument(s) that might support a claim that it should be excused from those administrative procedures (e.g., futility of an administrative proceeding, agency bias or taint, unreasonable or prejudicial delay associated with the administrative process, etc.). See e.g., McCarthy v. Madiaan,

(1992).

5 facilities on federal property, CBV must first exhaust its

administrative remedies under the Randolph-Sheppard Act. Because

CBV has failed to pursue those administrative remedies, the State

says that this court lacks subject matter jurisdiction over CBV's

claims.2

At issue here, then, is whether a party who alleges that the

State violated its rights under section 111 (b) of the STA may

pursue that claim directly in federal court or whether it must

first comply with the administrative grievance procedure

established under the Randolph-Sheppard Act. No federal court

appears to have addressed the issue and, unfortunately, neither

the STA itself nor its legislative history provides much in the

way of guidance. See, e.g., H.R. Rep. 97-555 (1982), reprinted

in 1982 U.S.C.C.A.N. 3639.

Nevertheless, it seems apparent that Congress intended the

provisions of section 111 (b) of the STA to be enforced through

the administrative grievance procedure established under the

Randolph-Sheppard Act. First, the language of the Randolph-

Sheppard Act supports the view that all disputes concerning the

State's administration of the vending program must be submitted

to arbitration before they may be considered by a federal court.

2 Parenthetically, the court notes that the State also claims that the Eleventh Amendment precludes any award of monetary damages. At a minimum, that issue is open to debate. See, e.g., Premo v. Martin,

(9th Cir. 1997), cert, denied, ___ U.S. ,

(1998).

6 As noted above, the Randolph-Sheppard Act specifically provides

that, "any blind licensee who is dissatisfied with any action

arising from the operation or administration of the vending

facility program" may avail itself of the grievance procedure.

20 U.S.C. § 107d-l(a) (emphasis supplied). See also 34 C.F.R.

395.13(a). It would be difficult to argue that CBV's claims

against the State "arise from" anything other than the State's

alleged failure to properly administer the vending facility

program and its apparent failure to afford priority to CBV with

regard to the operation of vending machines at interstate highway

rest areas.

It is egually important to note that section 111(b) of the

STA merely authorizes states to operate vending facilities in

places under federal control where formerly such facilities were

not permitted. Beyond that, the statute simply obligates states

to afford priority to licensed blind vendors as a condition

precedent to exercising the right to place vending machines at

federal rest areas. The statute implicitly adopts the regulatory

and administrative scheme established by the Randolph-Sheppard

Act as the means for insuring that the priority intended for

licensed blind vendors is actually extended by the state. As the

Court of Appeals for the Eleventh Circuit observed:

Section 111 (b) is merely a delegating statute, generally granting to individual states the authority to "permit the placement of vending machines in rest and recreation areas, and in safety rests areas, constructed or located on rights-of-way on the

7 Interstate System in such State." Should an individual state decide to allow placement of vending machines at interstate rest areas, the statute then requires that state to give priority to vending machines operated through the state licensing agency designated pursuant to section 2(a)(5) of the "Randolph-Sheppard Act."

Sentinel Communications Co. v. Watts,

(11th

Cir. 1991) .

It would be illogical to presume that Congress intended

section 111(b) to create a singularly unique category of vending

facilities to be operated by blind vendors (i.e., those at

federal rest areas) and vest in operators of those facilities a

similarly unique direct cause of action in federal district

court. A far more reasonable conclusion is that Congress

intended state-licensed blind vendors to pursue their right to

priority when it comes to operating vending facilities at federal

sites, regardless of location, through the administrative process

established under Randolph-Sheppard. Nothing in the STA suggests

that while state-licensed blind vendors must pursue the

administrative process if they have been wrongfully denied

priority in operating a vending facility in a federal post

office, they are nevertheless free to bring a direct claim in

federal court if they are denied priority in operating a similar

vending facility at an interstate highway rest area.

Section 111(b) of the STA merely broadens the list of

federal locations at which licensed blind vendors are to be given priority in the operation of vending facilities, by adding to

that list rest and recreation areas situated along the interstate

highway system. It does not otherwise alter or augment the

rights of blind vendors under the Randolph-Sheppard Act.

Accordingly, the court concludes that blind vendors aggrieved by

conduct of the State in connection with the awarding of contracts

to operate vending facilities at interstate rest areas must

pursue the administrative remedies afforded under the Randolph-

Sheppard Act before seeking relief in federal district court.

Because CBV has yet to exhaust those administrative

remedies, its suit is premature. See Myers v. Bethlehem

Shipbuilding Corp.,

(1938) (holding that there

is a "long settled rule of judicial administration that no one is

entitled to judicial relief for a supposed or threatened injury

until the prescribed administrative remedy has been exhausted.");

see also Fillinger v. Cleveland Soc. for the Blind,

(6th Cir. 1978) ("Congress' decision to provide

administrative and arbitration remedies for aggrieved blind

vendors clearly evidences a policy judgment that the federal

courts should not be the tribunal of first resort for the

resolution of such grievances. Rather, congressional policy as

reflected in the 1974 amendments is that blind vendors must

exhaust their administrative and arbitration remedies before

seeking review in the district courts."). Finally, even if it were persuaded that Congress had not

specifically mandated exhaustion under these circumstances, the

court would, in the exercise of its discretion, require CBV to

exhaust its administrative remedies before seeking judicial

intervention. See e.g., McCarthy v. Madigan,

(1992) ("Of 'paramount importance' to any exhaustion inquiry is

congressional intent. Where Congress specifically mandates,

exhaustion is required. But where Congress has not clearly

required exhaustion, sound judicial discretion governs.")

(citations omitted). See also, Christopher W. v. Portsmouth

School Committee,

(1st Cir. 1989) (noting

that the exhaustion doctrine "enables the agency to develop a

factual record, to apply its expertise to the problem, to

exercise its discretion, and to correct its own mistakes, and is

credited with promoting accuracy, efficiency, agency autonomy,

and judicial economy.").

Pursuant to the Randolph-Sheppard Act, the State is required

to establish a comprehensive administrative process specifically

designed to address, among other things, the particular type of

claim CBV raises (e.g., that the State, through one of its

agencies, has failed to give it priority in the operation of

vending facilities). See, e.g., Middendorf v. U.S. General

Services Admin., No. 96-35077,

(9th Cir. August 5,

1996) (holding that blind vendor cannot pursue claims against GSA

in federal court until she has first exhausted administrative

10 remedies under Randolph Sheppard); Morris v. State of Maryland,

No. 89-1013,

(4th Cir. July 11, 1990) (holding

that before suing the State of Maryland for alleged violations of

Randolph-Sheppard, plaintiffs must first exhaust their

administrative remedies). At least in the first instance, CBV

should attempt to resolve its claim through that process.

Conclusion

If its allegations are true, CBV certainly appears to have a

meritorious claim that the State, through its Department of

Administrative Services, violated federal law when it awarded a

contract to operate vending machines at rest areas along the

federal interstate system without giving priority to blind

vendors licensed by the Department of Education. Nevertheless,

because CBV has yet to pursue its administrative remedies under

the Randolph-Sheppard Act, its suit here is premature. And, even

if the court were empowered to resolve the parties' dispute

notwithstanding CBV's failure to pursue its administrative

remedies, considerations of judicial economy and deference to

agency expertise in this area, among other things, counsel in

favor of reguiring CBV to exhaust the administrative remedies

available to it. Accordingly, defendant's motion to dismiss

(document no. 3) is granted without prejudice.

11 SO ORDERED.

Steven J. McAuliffe United States District Judge

March 17, 1998

cc: Derwood J. Haskell, Esq. Nancy J. Smith, Esq.

12