Coalition Govt Proc v. Fed Prison Indust ( 2004 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206 2 Coalition for Gov’t Procurement, et al. No. 01-2231
ELECTRONIC CITATION: 2004 FED App. 0101P (6th Cir.) v. Federal Prison Industries, Inc., et al.
File Name: 04a0101p.06
_________________
UNITED STATES COURT OF APPEALS COUNSEL
FOR THE SIXTH CIRCUIT ARGUED: Stephen M. Ryan, MANATT, PHELPS &
_________________ PHILLIPS, Washington, D.C., for Appellants. Charles R.
Gross, UNITED STATES ATTORNEY, Grand Rapids,
COALITION FOR GOVERNMENT X Michigan, for Appellees. ON BRIEF: Stephen M. Ryan,
PROCUREMENT , et al., - Michael T. Brown, MANATT, PHELPS & PHILLIPS,
Plaintiffs-Appellants, - Washington, D.C., for Appellants. Charles R. Gross,
- No. 01-2231 UNITED STATES ATTORNEY, Grand Rapids, Michigan,
- for Appellees. David T. Ralston, Jr., HOPKINS & SUTTER,
v. > Washington, D.C., Philip A. Nacke, FOLEY & LARDNER,
,
- Washington, D.C., for Amicus Curiae.
FEDERAL PRISON INDUSTRIES, -
ECONOMUS, D. J., delivered the opinion of the court, in
INC., et al., - which GILMAN, J., joined. GIBBONS, J., concurred in the
Defendants-Appellees. - judgment only.
-
N _________________
Appeal from the United States District Court
for the Western District of Michigan at Grand Rapids. OPINION
No. 99-00919—Robert Holmes Bell, Chief District Judge. _________________
Argued: February 6, 2003 PETER C. ECONOMUS, District Judge.
Decided and Filed: April 12, 2004 I. OVERVIEW
Before: GILMAN and GIBBONS, Circuit Judges; This appeal draws the court into the longstanding conflict
ECONOMUS, District Judge.* between the government’s policy of employing federal
inmates in the manufacture of goods and the challenges faced
by the private industries compelled to compete with inmate-
produced wares. Nearly seven decades ago, the United States
Supreme Court addressed the “evil” posed by “the sale of
convict-made goods in competition with the products of free
labor,” and opined, “[F]ree labor, properly compensated,
cannot compete successfully with the enforced and unpaid or
*
The Honorable Peter C. Economus, United States District Judge for underpaid convict labor of the prison.” Whitfield v. Ohio, 297
the Northern District of Ohio, sitting by designation.
1
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v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
U.S. 431, 439 (1936). Since Whitfield, the debate over the Constitution, U.S. CONST . amend. V.3 The Coalition asserts
use of inmate labor largely has been reserved for the that UNICOR violated the foregoing provisions from 1991-
policymakers operating in the other branches of government. 1995 when it significantly expanded its production of office
The role of the courts has been limited to examining whether furniture without initiating the public notice and comment
the terms and conditions of inmate employment comply with procedures required by section4 4122. The Coalition further
constitutional and statutory standards. See generally Hope v. asserts that the Board violated the organic statute and the
Pelzer, 536 U.S. 730 (2002) (examining liability of prison APA when it authorized UNICOR’s 1995-1996 requests to
officials pursuant to 42 U.S.C. § 1983 where said officials significantly expand production of office furniture. Finally,
disciplined an inmate for refusal to work on a “chain-gang”); the Coalition contends that UNICOR’s direct dealings with
Richardson v. McKnight, 521 U.S. 399, 405-06 (1999) private manufacturers and purchasers of office furniture
(acknowledging that privately-operated prisons may be held violate the organic statute and the APA.
liable for injuries suffered by inmates employed on “chain
gangs” and “work-farms”). This appeal requires, however, As the issues raised in this appeal are matters of first
that the court re-enter the conflict and examine whether the impression among the courts of appeals, we begin our
agency charged by Congress to manage inmate labor -- analysis with an extensive examination of the statutory and
Federal Prison Industries, Inc. – has acted within its regulatory framework governing UNICOR’s operations. We
administrative authority. thereafter address the specific assignments of error.
Specifically, the appellants-plaintiffs, the Coalition for
Government Procurement (“CGP”) – a non-profit trade
association representing manufacturers of office furniture --
and several CGP members,1 appeal the district court’s award
of summary judgment in favor of Federal Prison Industries,
Inc. (“FPI” or “UNICOR”),2 and its Board of Directors (the
“Board”), in this action brought pursuant to UNICOR’s
organic statute, 18 U.S.C. §§ 4121-4129 (2003), the judicial
3
review provisions of the Administrative Procedures Act The district court also awarded summary judgme nt to the appellees-
(“APA”), 5 U.S.C. §§ 701-706, and the Just Compensation defenda nts, Steve B. Schwalb (“Schwalb”), and the United States
Clause of the Fifth Amendment to the United States Attorney General. Schw alb is U NIC OR ’s Assistant Director and Chief
Operating Officer charged with supervising UNICO R’s day-to-day
operations. The Co alition brought suit against Schwalb in his official
capacity. It is well-settled that “[a] suit against a public emp loyee in his
1
or her official capacity is a suit against the agency itself.” Mitchell v.
Herman Miller, Inc. (“Herman Miller”), Haworth, Inc. (“Haworth”), Chapman, 343 F.3d 811, 822 (6th Cir. 2003). Accordingly, the
and Knoll, Inc. (“Knoll”). For ease of reference, the term “Coalition” as Coalition’s claims against Schwalb are actually claims against UNICOR.
used throughout this Opinion shall refer collectively to CGP and the Similarly, the Coalition’s official-capacity claims asserted against the
individual app ellants-plaintiffs. Attorney G eneral are claims against the United S tates.
2 4
“UNICOR” is the commercial or “trade” name of Federal Prison All references to the term “section” are to that of title 18 of the
Industries, Inc. See 29 C .F.R. § 345 .11(a) (20 03). United States Code, unless otherwise noted.
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v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
II. BACKGROUND As the use of inmate-labor increased throughout the
nineteenth and early-twentieth centuries, so too did the cries
A. The Historical Underpinnings of UNICOR’s from the private enterprises, trade associations and labor
Organic Statute unions that viewed such programs as threats to free markets
and employment. State legislatures responded by enacting
In the words of one leading scholar, “The history of the measures limiting the scope of inmate-manufactured products.
prison is in large measure a history of prison labor.”5 While See, e.g., Whitfield, 297 U.S. at 435-440 (examining an Ohio
the issues underlying the instant appeal are steeped in this statute barring the sale of inmate goods manufactured outside
lengthy history, we narrow our focus to the historical events of the state of Ohio). Similarly, Congress enacted a series of
giving rise to UNICOR. measures designed to curtail the interstate sale of inmate-
produced goods.9
1. Early Congressional Responses to Inmate-
Labor Programs Notwithstanding the apparent hostility exhibited by the
federal government to the states’ use of inmate labor,
The emergence of the penitentiary system at the end of the Congress promoted inmate-labor programs within the federal
eighteenth century resulted in the states taking custody of
large and restless inmate populations whose ward placed
considerable pressures on state treasuries.6 The states
responded with efforts designed to reduce “idle hands” among
the inmates while promoting the self-sufficiency of the the prison with materials and supervisors, and ultimately distributed the
penitentiary.7 Central to these efforts were inmate-labor finished product. Id. However, the state retained control and custody of
inmate laborers. Id. The piece-price system was a hybrid of the contract
programs.8 system, in that employers paid a stipulated price for each finished good
rather than paying daily wages. Id. The fourth -- the state-use system --
enabled the state to contro l the manufacture of products that, in turn, were
5 purchased by governm ent age ncies. Id.
Stephen P. G arvey, Freeing Prisoners’ Labor, 50 STAN . L. R EV .
339, 342 (199 8). Prof. Garvey’s article presents an insightful analysis of
9
inmate labor. The Hawes-Cooper Act, ch. 79, 45 Stat. 1084, divested inmate-
manufactured goods of their interstate character thereby subjecting such
6 goods to strict state regulatio n. See Hawes-Coop er Ac t, ch. 79, 45 Stat.
See id. at 340-70.
1084 (1929). The Ashurst-Sumners Act, ch. 412, 49 Stat. 494, enacted by
7 Congress in 1935, made it a federal crime to knowingly transport inmate-
See id. manufactured goods into a state that prohibited their sale. See Ashurst-
8
Sumners Act, ch. 412, 49 Stat. 494 (1935 ). Congress passed the Walsh-
State operated inmate-labor programs generally fell within four Healey Act, ch. 881, 49 Stat. 2036, in 1937 , that prevented the contracting
classifications -- lease, contract, piece-price, and state-use. See gen erally out of inmate labor for use in federal government contracts. See W alsh-
T H E O X F OR D H ISTORY OF THE P R IS O N : T HE P RACTICE OF P U N IS H M E N T IN Healey Act, ch. 881, § 1(d), 49 Stat. 2036, 2037 (1937) (codified as
W ESTERN S OCIETY (Norval Morris et al. eds., 1997 ); D A V ID J. R OTHMAN , amended at 41 U.S.C. §§ 35-45 ). Furthermore , Congress amended the
T H E D IS C O VE R Y O F T H E A S Y LU M 82-85 (1971). The lease system placed Ashurst-Sumners Act in 1 940 to fede rally pro scribe the interstate
inmates under the control of private-sector enterprises that compensated transportation and sale of inmate-made goods irrespective of state law.
the state for the prisoners’ services. Id. Under the contract-system, the See Act of Oct. 14, 1940, ch. 872, 54 Stat. 1132 (codified as amended at
private-sector contracted with the state for labor on a d aily basis, provided 18 U.S.C. §§ 1761-17 62).
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v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
penitentiary system. For instance, Congress authorized the providing that, “The several Federal departments and
Attorney General in 1918 independent establishments and all other Government
institutions of the United States shall purchase at not to
to establish, equip, maintain, and operate at the United exceed current market prices, such products of the industries
States Penitentiary in Atlanta, Georgia, a factory or herein authorized to be carried on their requirements and as
factories for the manufacture of cotton fabrics to supply may be available.” Act of May 27, 1930, ch. 340 § 7, 46 Stat.
the requirements of the War and Navy Departments, the at 392.
Shipping Corporation, cotton duck suitable for tents and
other army purposes and canvas for mail sacks and for Congress did not, however, authorize the unfettered use of
the manufacture of mail sacks and other similar mail- inmate labor. It directed the Attorney General to establish
carrying equipment for the use of the United States only those industries “as [would] give the inmates a
Government. maximum opportunity to acquire a knowledge and skill in
trades and occupations which w[ould] provide them with a
Act of July 10, 1918, ch. 144, § 1, 40 Stat. 896, 896. means of earning a livelihood upon release.” Act of May 27,
Similarly, Congress authorized a factory to be constructed at 1930, ch. 340 § 7, 46 Stat. at 392. Similarly, while the 1930
the Leavenworth, Kansas federal penitentiary for the Act “provide[d] employment for all physically fit inmates,”
“manufacture of shoes, brooms, and brushes.” Act of April 3, it did so only in such “diversified forms as [would] reduce to
1924, ch. 81, 43 Stat. 33, 44-45. a minimum competition with private industry or free labor.”
Act of May 27, 1930, ch. 340 § 1, 46 Stat. at 391. Moreover,
Congress thereafter expanded the use of inmate labor to all Congress explicitly directed that inmate-manufactured
federal penitentiaries. See Act of May 27, 1930, ch. 340 §1, products were “not for sale to the public in competition with
46 Stat. 391, 391 (hereinafter the “1930 Act”) (“[T]he private enterprise.” Act of May 27, 1930, ch. 340 § 3, 46
Attorney General shall provide employment for all physically Stat. at 391.
fit inmates in the United States penal and correctional
institutions.”). Congress expressly authorized the use of 2. The Creation of UNICOR
inmate labor in two areas. First, the Attorney General was “to
make available the services of United States prisoners” for Four years later, Congress charged the President “to create
use by federal agencies and departments in the “construction a body corporate of the District of Columbia to be known as
or repairing roads . . . ; clearing, maintaining, and reforesting ‘Federal Prison Industries.’” Act of June 23, 1934, ch. 736
public lands; building levees; and for constructing or § 1, 48 Stat. 1211, 1211 (hereinafter the “1934 legislation”).10
repairing any public ways or works.” Act of May 27, 1930, The 1934 legislation otherwise mirrored the 1930 Act with
ch. 340 § 2, 46 Stat. at 391. Secondly, the Attorney General
was “to establish such industries as w[ould] produce articles
and commodities for consumption in the United States penal 10
The President was “to transfer to [UNICOR] the duty of
and correctional institutions or for sale to the departments and determining in what manner and to what extent industrial operations shall
independent establishments of the Federal Government.” Act be carried on in the Federal penal and correctional institutions,” as well
of May 27, 1930, ch. 340 § 3, 46 Stat. at 391. The 1930 Act as to transfer “any part or all of the other powers or duties [then] vested
in the Attorney General” relating to inmate labor. Act of June 23, 1934,
also created a limited market for inmate-produced wares ch. 73 6 § 3 , 48 S tat. at 1211.
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v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
one significant addition: the creation of a board of directors Exec. Order No. 6917 ¶ 3. It further provided, “The heads of
(the “board”). Congress directed the President to appoint a the several executive departments, independent
five-member board of directors, with industry, labor, establishments and Government owned and Government
agriculture, retailers / consumers, and the Attorney General controlled corporations shall cooperate with [UNICOR] in
each represented by one member. See Act of June 23, 1934, carrying out its duties and shall purchase, at not to exceed
ch. 736 § 2, 48 Stat. at 1211. While Congress vested current market prices, the products or services of [UNICOR],
UNICOR with broad discretion to manage inmate-operations, to the extent required by law.” Exec. Order No. 6917 ¶ 9.
it empowered the board with the authority to balance such
operations with the need to protect private industries. See Act B. UNICOR’s Organic Statute
of June 23, 1934, ch. 736 § 3, 48 Stat. at 1211 (“It shall be the
duty of the board of directors to diversify so far as practicable 1. 18 U.S.C. §§ 4121-4129
prison industrial operations and so operate the prison shops
that no single private industry shall be forced to bear an undue Congress incorporated the provisions of the 1930 Act, the
burden of competition from the products of the prison 1934 legislation and the Executive Order as part of the
workshops.”). enactment of Title 18 of the United States Code.12 See Act of
June 25, 1948, Pub. L. No. 80-722, 62 Stat. 683, 851. With
On December 11, 1934, President Franklin D. Roosevelt limited exception, the current version of UNICOR’s organic
issued Executive Order 6917 (the “Executive Order”), see statute maintains its historical underpinnings.
(J.A. 983),11 creating UNICOR and appointing the board.
The Executive Order expressly provided: Title 18 of the United States Code, section 4121,
establishes UNICOR as a “government corporation of the
[UNICOR] shall have power to determine in what District of Columbia . . . administered by a Board of six
manner and to what extent industrial operations shall be directors, appointed by the President to serve at the will of the
carried on in the several penal and correctional President without compensation.13 18 U.S.C. § 4121 (2003).
institutions of the United States and shall, so far as
practicable, so diversify prison industrial operations that
no single private industry shall be forced to bear an
undue burden of competition with the products of prison
workshops. It shall also have power to do all things it is
authorized to do by said Act of June 23, 1934, and all
things incident to or necessary or proper in the exercise
of its functions. 12
The Eightieth Congress’s 1948 revision of the federal criminal
code is the statutory foreru nner o f UN ICO R’s organic statute. See Act of
June 25, 1 948 , Pub . L. No . 80-7 22, 6 2 Stat. at 851 .
11 13
Section 744 of the 1940 ed ition of the United States Code was the Congress expanded the board in 1948 to include a representative
first codification of the Executive O rder. See 18 U.S.C. § 744 (1940). See from the Secretary of Defense. See Act of June 29, 1948, Pub. Law. No.
also Garza v. Miller, 688 F.2d 480 , 485 (7th C ir. 198 2). 821 , § 3, 62 Stat. 110 0, 11 00.
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v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
Section 4122 (a)14 vests UNICOR with broad discretion to 18 U.S.C. § 4122 (b)(1).15
manage inmate operations, providing, in pertinent part:
Section 4123 of the organic statute mirrors the 1930 Act in
[UNICOR] shall determine in what manner and to that only those “forms of employment shall be provided as
what extent industrial operations shall be carried on in will give inmates . . . a maximum opportunity to acquire a
Federal penal and correctional institutions for the knowledge and skill in trades and occupations which will
production of commodities for consumption in such provide them with a means of earning a livelihood upon
institutions or for sale to the departments or agencies of release.” 18 U.S.C. § 4123. The section further limits
the United States, but not for sale to the public in UNICOR’s operations so as to “not curtail the production of
competition with private enterprise. any existing arsenal naval yard or other Government
workshop.” 18 U.S.C. § 4123.
18 U.S.C. § 4122 (a).
Section 4124 (a)16 enshrines the mandatory obligation of
Section 4122(b)(1) delineates the duties of the board. federal agencies and departments to purchase, “at not to
Similar to the 1934 legislation, this subsection provides: exceed current market prices, such products [manufactured by
UNICOR] as meet their requirements and may be available.”
Its board of directors shall provide employment for the 18 U.S.C. § 4124 (a). Subsection (b) creates a dispute
greatest number of those inmates in the United States resolution process whereby any “[d]isputes as to the price
penal and correctional institutions who are eligible to quality, character, or suitability of [UNICOR] products shall
work as is reasonably possible, diversify, so far as be arbitrated by a board consisting of the Attorney General,
practicable, prison industrial operations and so operate the Administrator of General Services, and the President, or
the prison shops that no single private industry shall be
forced to bear an undue burden of competition from the
products of the prison workshops, and to reduce to a
minimum competition with private industry or free labor.
15
During the 19 88 amendme nt process discussed infra, Congress
amended the earlier statute’s reference from “all physically fit inmates,”
to “the greatest number of those inmates . . . who are eligible to work as
is reasonably possible.” Com pare Act of June 25, 1948, Pub. L. No. 80-
14 722, 62 Stat. at 851 with 18 U .S.C. § 412 2 (b)(1).
Congress did not divide the 194 8 version of section 412 2 into
subse ctions. With minor modification, the current versions o f section 16
4122 (a) and (b)(1) are identical to the 194 8 version of 412 2. Com pare As with section 412 2, Congress did not divide the 1948 version of
Act of June 25, 1948, Pub. L. No. 80-722, 62 Stat. at 851 with 18 U.S.C. section 412 4 into su bsections. W ith minor modification, the current
§ 4122 (a), (b)(1). Subsections (c), (d) and (e) to the current version of versions of section 4124 (a) and (b) are identical to the former 4124.
section 4122 were enacted as p art of the 194 8-19 49 amendme nts Com pare Act of June 25, 1948, Pub. L. No. 80-722, 62 Stat. at 851 with
address ing inmates held by the Department of Defense and the 18 U.S.C. § 4124 (a), (b). Added in 1990, subsection (c) of the current
Commissioner of the District of Co lumbia. See Act of June 29, 1948, ch. section 4124 prescrib es the manner in which Fede ral agencies and
719 §§ 1 -2, 62 Stat. 110 0, 11 00; A ct of M ay 11, 194 8, ch. 2 76, 6 2 Stat. dep artments must report purchases of UN ICO R’s prod ucts, see 18 U.S.C.
230. These subsections are immaterial to our analysis. The remaining § 4124 (c), while subsection (d) requires UNICOR to publish a catalog of
subsections found in the current version of 4122 are discussed infra. its prod ucts, see 18 U.S.C. § 41 24 (d).
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v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
their representatives.”17 18 U.S.C. § 4124 (b). The decisions 2. The 1988 Amendments and the
of the dispute resolution board are “final and binding on all Comprehensive Advanced Review Process
parties.” Id. (“CARP”)
The current version of Section 4125, as in the 1930 Act, Guided by its organic statute, UNICOR operated for
empowers the Attorney General decades below the legislative radar. The 1980's witnessed,
however, a dramatic rise in the number of inmates confined
to make available to the heads of the several departments, to federal institutions.18 UNICOR therefore expanded its
the services of United States prisoners under terms, operations in order to provide employment “for the greatest
conditions, and rates mutually agreed upon, for number of those inmates . . . who [were] eligible to work as
construction or repairing roads, clearing, maintaining, [] reasonably possible.” 18 U.S.C. § 4122(b)(1). Echoing the
and reforesting public lands; building levees, and cries of a century earlier, this increased utilization of inmate
constructing or repairing any public ways or works labor drew calls from private industries seeking to curtail
financed wholly or in major part by funds appropriated UNICOR’s operations.
by Congress.
Congress responded in 1988 by passing a series of
18 U.S.C. § 4125 (a). amendments to UNICOR’s organic statute. See Anti-Drug
Abuse Act of 1988, 100 Pub. L. No. 690, §§ 7093- 7096, 102
The remaining provisions of the organic statute address Stat. 4181, 4411-14. Pertinent to the instant appeal, the
UNICOR’s financial and reporting requirements. Section amendments to section 4122 mandated that UNICOR
4126 requires UNICOR to place “monies” generated by its “conduct its operations so as to produce products on an
operations into the Treasury of the United States, see 18 economic basis, but avoid capturing more than a reasonable
U.S.C. § 4126 (a), and establishes accounting procedures share of the market among Federal departments, agencies, and
relating to UNICOR’s operations, see 18 U.S.C. § 4126 (b)- institutions for any specific product.” See Anti-Drug Abuse
(f). Section 4127 requires the board to submit an annual Act of 1988, 100 Pub. L. No. 690, § 7096, 102 Stat. at 4413
report to Congress detailing UNICOR’s operations. (codified at 18 U.S.C. § 4122(b)(2)). Additionally, the
amended section 4122 directed UNICOR to “concentrate on
providing to the Federal Government only those products
which permit employment of the greatest number of those
inmates who are eligible to work as is reasonably possible.”
Id. Furthermore, Congress instructed UNICOR to “diversify
its products so that its sales are distributed among its
17 industries as broadly as possible.” See Anti-Drug Abuse Act
The 194 8 version of section 412 4 provided that the dispute
resolution board was to be comprised of the “Comptroller General of the
United States, the Director of the Bureau of Federal Supply, Department
of Treasury, and the Director o f the Bureau of the B udge t, or their 18
representatives.” See Act of June 25, 1948, Pub. L. No. 80-7 22, 6 2 Stat. See A L FR E D B L UM S T EIN & A L LE N J. B ECK , P O P U LA T IO N G ROWTH
at 851. The section has been amended over the years to account for IN U.S. P R IS O N S , 1980-1996, 26 P R IS O N S : C R IM E A N D J USTICE – A REVIEW
changes within federal dep artments and agencies. OF R E S EA R C H 17 (199 9).
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v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
of 1988, 100 Pub. L. No. 690, § 7096, 102 Stat. at 4413 Anti-Drug Abuse Act of 1988, 100 Pub. L. No. 690, § 7096,
(codified at 18 U.S.C. § 4122(b)(3)). 102 Stat. at 4414 (codified at 18 U.S.C. § 4122(b)(4)(A)).
The CARP further required UNICOR to publicize the
The most sweeping provisions of the 1988 legislation were proposal within the affected sector, provide the
those limiting UNICOR’s discretion to increase production Comprehensive Impact Study to the public, and solicit
levels. Congress required that “[a]ny decision by [UNICOR] comments from the affected sector. See Anti-Drug Abuse Act
to produce a new product or to significantly expand the of 1988, 100 Pub. L. No. 690, § 7096, 102 Stat. at 4414
production of an existing product be made by the board.” See (codified at 18 U.S.C. § 4122(b)(4)(B)-(D)). Congress also
Anti-Drug Abuse Act of 1988, 100 Pub. L. No. 690, § 7096, afforded interested industry representatives with “a reasonable
102 Stat. at 4413 (codified at 18 U.S.C. § 4122(b)(4)). opportunity” to present comments directly to the board. See
Congress further required UNICOR and the board to initiate Anti-Drug Abuse Act of 1988, 100 Pub. L. No. 690, § 7096,
a notice and comment procedure prior to entering a new 102 Stat. at 4414 (codified at 18 U.S.C. § 4122(b)(4)(D)).
product area or significantly expanding UNICOR’s existing The last stage of the CARP directed UNICOR to publicize the
operations. See Anti-Drug Abuse Act of 1988, 100 Pub. L. board’s final decision “in a publication designed to most
No. 690, § 7096, 102 Stat. at 4414 (codified at 18 U.S.C. effectively provide notice to potentially affected private
§ 4122(b)(4)-(5)). vendors” of the affected product. See Anti-Drug Abuse Act
of 1988, 100 Pub. L. No. 690, § 7096, 102 Stat. at 4414
Congress’s newly minted notice and comment procedure -- (codified at 18 U.S.C. § 4122(b)(5)).
the comprehensive advanced review process (“CARP”)--
required the board to receive and consider a written analysis 3. The Guidelines
prepared by UNICOR detailing any proposed “significant
expansion’s”19 potential impact on the private sector (the Notwithstanding Congress’s detailed attention to the
“Comprehensive Impact Study” or “market study”)20. See CARP, the 1988 amendments did not define the term
“significantly expand.” Therefore, on December 4, 1989,
UNICOR published an interim definition of the term in
19 Commerce Business Daily (“CBD”). See (J.A., 179-81, 434-
W e limit our analysis to the provisions o f the organic statute
pertaining to “significant expansion,” as those are the issues raised by the 36, 667-669, 1097 ¶ 4, 1484 ¶ 36). Representatives from
parties to the instant app eal. private industry -- including CGP -- provided comments
20
regarding the interim definition. See (J.A., 1008-1024, 1813-
Congress required that the Comprehensive Impact Study provide, 15).
at the minimum , information regarding:
(i) the number of vendors currently meeting the requirements of
the Federal Governm ent for the product; (iv) the pro jected growth in the Federal Government demand for
(ii) the proportion of the Federal Government market for the the product; and
product currently served by sma ll businesses, small (v) the pro jected ability of the Federal G overnment market to
disadvantaged businesses, or businesses operating in labor sustain both Fed eral Prison Ind ustries and private ven dors.
surplus areas;
(iii) the size of the Federal Government and non-Federal See Anti-Drug Abuse Act of 1988, 100 Pub. L. No. 69 0, § 7 096 , 102 Stat.
Go vernm ent markets for the pro duct; at 4414 (codified at 18 U.S.C. § 41 22(b)(4)(A)(i)-(v)).
No. 01-2231 Coalition for Gov’t Procurement, et al. 17 18 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
On January 2, 1991, UNICOR published its final definition 5% - Less than 10 % 3%, provided it does not
of “significant expansion.” See (J.A., 182-84, 437-38, 670-71, cause FPI’s market share
1097 ¶ 5, 1639 ¶ 36). The final definition established a two- to exceed 10%
tiered approach (the “Guidelines”) for identifying whether a
planned increase in production required the initiation of the 10% - Less than 15% 2% provided it does not
CARP. The first tier directed UNICOR to monitor “proposed cause FPI’s market share
production increases . . . as part of [its] annual planning to exceed 15%
cycle,” under the two scenarios where a significant expansion
could arise: 15% - Less than 20% 1.5% provided it does not
cause FPI’s market share
1. The specific product will be produced at a new to exceed 20%
factory and not offset by a corresponding reduction in
production at another location; or 20% - Less than 25% 1% provided it does not
cause FPI’s market share
2. The specific product will be produced at an existing to exceed 25%
factory or factories, and will be accompanied by at
least a 10% increase in capacity resulting from Over 25% Any increase in market
expanding any of the following three inputs of share would be deemed
production: a) Plant size; b) Equipment capacity; c) “significant”
Inmate employment.
(J.A., 182-84, 437-38, 670-71, 1098 ¶ 8, 1485 ¶ 8.)
(J.A., 11-12, 182-84, 437-38, 670-71, 1097 ¶ 6, 1484-85 ¶ 6.)
C. The Board’s Significant Expansion Decisions
Where either of the above scenarios occurred, the second
tier of the Guidelines required UNICOR to examine the Following the promulgation of the Guidelines, UNICOR
federal government market for the specific product and pursued a policy of maintaining a relatively low market share
develop an estimate of FPI’s current and projected market in new product areas, rather than significantly expanding its
share. See (J.A.,182-84, 437-38, 670-71, 1098 ¶ 7, 1485 ¶ 7). existing operations. See (J.A., 351-52). Federal inmate
The Guidelines required UNICOR to pursue the CARP when populations continued, however, to increase throughout the
its current market share position exceeded its “allowable early 1990's.21 This increase compelled UNICOR to shift its
market share” in accordance with the following sliding scale: policy and request that the appellee-defendant, Board,
authorize several significant expansions. See (J.A., 351-52).
UN ICO R’s Current Mrkt. Share Allow able Mrkt. Share Incre ase
0% - Less than 5 % Any increase, provided it
does not cause FPI’s
market share to exceed 5%
21
See B L UM S T EIN & B ECK , supra at 17.
No. 01-2231 Coalition for Gov’t Procurement, et al. 19 20 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
1. UNICOR’s Significant Expansion of Dorm & data . . . is adequately collected.” (J.A., 1341.) With respect
Quarters Furniture Production to the second recommendation, the White Paper noted, “Over
the past year, formal direction has been given and a number
UNICOR first proposed to significantly expand its of steps have been taken, to correct this deficiency.” (J.A.,
production of dorm and quarters furniture (“D & Q furniture”) 1341.)
from approximately $20 million in annual sales in 1995 to
$35 million in annual sales by the year 2000 (hereinafter the On March 8, 1996, the Board partially authorized
“D & Q furniture expansion”). See Quarters Furniture Mfrs. UNICOR’s proposed significant expansion of D & Q
Ass’n v. Federal Prison Indus., No. 95-2237 (D. D.C. Mem. furniture. See QFMA, at 6. In its decision, the Board
Opinion filed Aug. 28, 1998) (hereinafter “QFMA”) at 6. acknowledged the violations chronicled in the White Paper.
Shortly after presenting the proposal to the Board, UNICOR Id. The Board determined, however, that it would have
discovered several irregularities regarding its past compliance approved these expansions had UNICOR presented the
with the Guidelines. Id. The Board responded by ordering an proposals in a timely manner. See QFMA, at 7. It further
internal investigation to determine the extent of these determined that UNICOR’s then-current market share, the
irregularities. Id. limited non-federal market for D & Q furniture, and the
industry’s domination by small businesses, required a lesser
On January 26, 1996, UNICOR issued a “White Paper” expansion than that sought by UNICOR. See QFMA, at 8-9.
detailing its historical production of D & Q furniture. See Accordingly, the Board approved a significant expansion to
(J.A., 1330-1341). The White Paper identified three $26 million in annual sales by the year 2000, rather than the
occasions throughout 1991-1993 where UNICOR was $35 million requested by UNICOR. See QFMA, at 8-9.
obliged, but failed, to initiate the CARP.22 UNICOR
explained that its failure to comply with the Guidelines was
the result of the inherent difficulties in monitoring inmate
employment levels, plant size, and equipment capacity, as
well as interpretative difficulties with the definition of
significant expansion. See (J.A., 1339-41). The White Paper
offered two recommendations. First, it advised that, “The
definition of Significant Expansions needs to be reviewed,
with input from the private sector, to make sure it is fair, clear
and practical in its application.” (J.A., 1341.) Secondly,
“[W]hatever factors are chosen as indicators of significant
expansion, mechanisms must be put in place so that necessary
22
The three instances were, as follows: (1) when FCI Sheridan began
manufacturing D & Q furniture in 1991; (2) when production increased
between 1991 and 1992; and (3) when production inc reased in 19 93. See
(J.A., 1334-1339).
No. 01-2231 Coalition for Gov’t Procurement, et al. 21 22 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
2. UNICOR’s Significant Expansion of Systems fifteen percent in 1995 to approximately twenty-four percent
Furniture Production in 2000. See (J.A., 203). As the Systems Furniture
Expansion triggered each tier of the Guidelines, the Board
UNICOR meanwhile proposed to significantly expand its initiated the CARP.
production of Office Furniture.23 Specifically, UNICOR
proposed to expand its existing systems furniture production UNICOR accordingly prepared a Comprehensive Impact
from $70.5 million in annual sales in 1995 to $150 million in Study regarding the potential impact of the Systems Furniture
annual sales by the year 2000 (hereinafter the “Systems Expansion on the private sector (the “Systems Impact
Furniture Expansion”). See (J.A., 203, 1102 ¶ 50). Study”). See (J.A., 200-49). It placed notice of the Systems
UNICOR’s initial estimates indicated that the Systems Furniture Expansion in the CBD, see (J.A., 198-99, 1101¶¶
Furniture Expansion would increase inmate employment by 37-39), and mailed notice to various vendors and trade
approximately eighty-six percent.24 See (J.A., 225). associations, including Herman Miller, see (J.A., 185-95,
UNICOR further estimated that the proposed expansion 1101 ¶ 38).
would require the activation of a new systems furniture
factory.25 See (J.A., 225). The market share analysis UNICOR thereafter provided the Systems Impact Study to
indicated that the Systems Furniture Expansion would requesting entities and received various comments. See (J.A.,
increase UNICOR’s federal market share from approximately 249-69, 337-40, 1101 ¶¶ 41-42). CGP requested that the
Board hold a public hearing on the proposed significant
expansion.26 See (J.A., 251-69, 336-37).
23
The term “Office Furniture” refers to the class of goods at issue in The Board held a public hearing on December 7, 1995
this app eal. Included in Office Furniture are three sub-classes of goo ds: where representatives from several trade associations – CGP,
(1) systems furniture; (2) office seating furniture; and (3) office case the Business Products Industry Association (“BPIA”),27 and
good s. Systems furniture are products that typically fit or attach together
to form multiple workstations such as panel systems, desking systems, as
the Business and Institutional Furniture Manufacturer’s
well as filing, storage, and shelving com ponents. See (J.A., 1476 ¶ 1). Association (“BIFMA”)28 – presented a coordinated
Office seating furniture are prod ucts such as office chairs, task chairs,
stools, sofas, and modular seating. See (J.A., 1477 ¶ 2). Office case
goods are products typically associated with an individual user and 26
include desks, crede nzas, corner unit work surfaces, desk extensions, and In preparation for the hearing, UNICOR issued a final version of
storage units. See (J.A., 1477 ¶ 3). the Systems Impact Study in October, 1995 (the “Final Systems Impact
Study”) that, inter alia, incorp orated and addressed the comments
24 submitted by the private-sector. See (J.A., 287-3 35); see also (J.A., 270-
UNICOR determined that its systems furniture operations
employed 940 inmates in 199 5. See (J.A., 225). UN ICOR ’s preliminary 86).
projections revealed that the proposed expansion required an additional 27
810 emp loyees. See (J.A., 225). BP IA is a trade association representing 175 office furniture
manufacture rs and 625 office furniture dealers. See (J.A., 372).
25
UNICOR proposed to close its system furniture factory at FPC 28
Duluth and tra nsfer those 10 7 inmate jobs to a newly constructed factory B IFM A is a nonprofit trade association consisting of over 250
at FCC Coleman. See (J.A., 225). It estimated that the factory at FCC manufacturers of business, office and institutional furniture and their
Coleman wou ld employ 6 00 inmates. See (J.A., 225). supp liers. See (J.A., 583).
No. 01-2231 Coalition for Gov’t Procurement, et al. 23 24 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
opposition to the proposed significant expansion. See (J.A., (4) UNICOR’s alternative methods to address increased
346-419). inmate populations (i.e., subcontracting, vertical
integration, recycling, and sales to charitable
On February 6, 1996, the Board authorized the Systems organizations) failed to achieve UNICOR’s statutory
Furniture Expansion. See (J.A., 420-22). The Board mandate to employ the maximum number of
determined: inmates. See (J.A., 422).
FPI has proposed that the corporation increase The Board authorized annual sales in the amount of $130
production of systems and ADP furniture to $150 million million by the year 2000, rather than the $150 million
annually by FY 2000. After analyzing the material requested by UNICOR. See (J.A.,420-21). It “encouraged
submitted, and reviewing the testimony heard on this FPI to pursue partnerships with members of the systems and
matter, it is the finding of the Board of Directors that a ADP furniture industry in the effort to lessen FPI’s impact on
somewhat reduced expansion is appropriate and would the private sector.” (J.A., 422). The Board explained: “Since
not result in FPI capturing more than a reasonable share [we have] determined that an FPI sales level less than
of the market or constitute an undue burden on the requested is appropriate, [we] do[] so with the expectation
systems and ADP furniture industry. that resulting partnerships should be substantial, in order to
absorb significant FPI employment.” (J.A., 422.)
(J.A.,420). With regard to its further judgment that “the sales
levels authorized . . . [would] not place an undue burden upon 3. UNICOR’s Significant Expansion of Office
the systems and ADP furniture industry nor free labor,” (J.A., Seating Furniture Production and the
421), the Board emphasized four factors: Board’s Retroactive Authorization of the
1991-1992 Unauthorized Expansions
(1) The majority of the firms in the industry were “not
heavily involved in the Federal market for systems UNICOR further proposed to expand office seating
and ADP furniture” (J.A., 421.) Indeed, “[f]or most furniture production from $54.4 million in annual sales in
of the companies listed on the GSA schedules for 1995 to $110 million in annual sales by 2001 (the “Office
systems and ADP furniture, less than 4% of their Seating Expansion”). See (J.A., 470). UNICOR’s initial
total sales [went] to the Federal government.” (J.A., estimates indicated that the Office Seating Expansion would
421.) increase inmate employment between eighty-five to one
hundred percent.29 See (J.A., 496). UNICOR further
(2) The total domestic market for systems furniture was estimated that the proposed expansion would require the
large and projected to grow throughout the
expansion thereby offsetting UNICOR’s increased
sales. See (J.A., 421).
(3) The industry was dominated by a small number of 29
UNICOR determined that its office seating furniture processes
large firms. See (J.A., 421-22). employed 790 inmates in 1995. See (J.A., 496). UNICO R’s preliminary
projections revealed that the proposed expansion required an additional
600 -800 emp loyees. See (J.A., 496).
No. 01-2231 Coalition for Gov’t Procurement, et al. 25 26 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
activation of three new office seating furniture factories.30 indicating its expected decline in market share during 1991.31
See (J.A., 496). Pursuant to the Guidelines, UNICOR See (J.A., 514).
conducted a market share analysis indicating that the Office
Seating Expansion would increase UNICOR’s federal market With respect to the 1992 increase in inmate employment,
share from approximately twenty-one percent in 1995 to UNICOR conceded that the increase, coupled with its
approximately thirty-four percent in 2001. See (J.A., 496). expected market share of 10.89%, required the initiation of
Consequently, the Board initiated the CARP. the CARP. See (J.A., 476). UNICOR repeated the
explanation that it failed to “track the level of inmate
UNICOR prepared a Comprehensive Impact Study employees for each product.” (J.A., 476.) It reasoned,
regarding the potential impact of the Office Seating however, that “It [was] likely that had an examination of
Expansion on the private sector (the “Office Seating Impact FPI’s [office] seating production taken place, FPI would have
Study”). See (J.A., 467-526). While preparing the Office initiated the guidelines process at this time.” (J.A., 476.)
Seating Impact Study, UNICOR again discovered that it Therefore, “[i]n light of the fact that FPI failed to initiate the
failed to comply with the Guidelines, this time in 1991 and industry involvement guidelines process in response to its
1992. See (J.A., 470, 475-76, 1497 ¶¶ 106-08). Specifically, expansion of production in FY 1992,” (J.A., 477), UNICOR
inmate employment levels increased more than ten percent in requested the Board to “[R]atify the Corporation’s expansion
each year, but UNICOR did not conduct a market share of office seating during that time, taking into consideration
analysis. UNICOR explained its failure in regard to the 1991 the relevant data for that point in time,” (J.A., 477).
increase:
UNICOR then pursued all of the relevant procedures under
[A]t the time, FPI focused most of its guidelines [sic] the CARP for the purposes of obtaining: (1) the Board’s
vigilance and analysis on the opening of new factories, ratification of the 1991 and 1992 expansions; and (2) the
and did not maintain an accurate tracking of inmates Board’s authorization of the proposed Office Seating
employed producing office seating. Furthermore, it was Expansion. See (J.A., 439-567, 1107 ¶¶ 91-92). CGP and
the belief of FPI staff that the corporation’s share of the Knoll received versions of the Office Seating Impact Study,
Federal market for office furniture was decreasing, due see (J.A., 527-28, 531); however, they declined to respond
to a sharp increase in Federal procurements. Thus, the with any comments. BIFMA, a member of the CGP’s board
public involvement guideline process [the CARP] would of directors, provided extensive written comments, as well as
not be required since there was no growth in FPI’s requested a hearing. See (J.A., 553-54, 561-63, 1108 ¶¶ 98-
market share. 99); (App. to Br. of Defs.-Appellees).
(J.A., 476.) In support of this explanation, UNICOR attached In July, 1996, the Board held a public hearing regarding the
to the Office Seating Impact Study a chart from 1990 Office Seating Expansion. See (J.A., 572-646).
30 31
UN ICOR estimated that the Office Seating Expansion required the The chart indicated that UNICO R had an estimated 10.06% market
activation of factories at FCI Beckley, FCI Edgefield, and FCI Victorville. share in 1990 and an expected market share of 8.86% in 199 1. See (J.A.,
See (J.A., 496). 514 ).
No. 01-2231 Coalition for Gov’t Procurement, et al. 27 28 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
Representatives from, inter alia, BIFMA, Herman Miller, Turning to the proposed Office Seating Expansion, the
Haworth, and Knoll attended the hearing and jointly presented Board authorized the proposal, resting its decision on four
statements in opposition to the proposed significant bases: (1) the federal office seating market was slightly over
expansion. See (J.A., 572-646, 1108 ¶¶ 101-103). $1 billion, rather than the smaller figure advanced by BIFMA;
(2) the federal market was projected to expand during the
In September, 1996, the Board issued its decision: pertinent period, thereby minimizing UNICOR’s increased
(1) retroactively ratifying the 1991-1992 unauthorized market share; (3) the domestic office seating market was
expansions; and (2) authorizing the proposed Office Seating expected to expand, thereby increasing sales for the private
Expansion. See (J.A., 654-59). With respect to the sector manufacturers; and (4) UNICOR’s proposed expansion
unauthorized expansions, the Board reasoned: would not affect private-sector employment as the impact of
UNICOR’s expansion would be dispersed throughout
In connection with another earlier instance of numerous manufacturers in the industry. See (J.A., 657-58).
unauthorized expansion, the Board has undertaken a
review of expansion in all FPI product lines since 4. UNICOR’s Significant Expansion of Office
implementation of the guidelines, being conducted by Case Goods Production
independent auditors.
UNICOR also proposed to significantly expand its
.... production of office case goods from $30.3 million in annual
sales in 1995 to $80 million in annual sales by 2001 (the
The question, now, however, is how to deal with this “Office Case Goods Expansion”). See (J.A., 681). Similar to
situation in the context of office seating. Any analysis the prior proposed expansions of systems furniture and office
and decision must begin with FPI’s statute, which seating, UNICOR projected that the Office Goods Expansion
provides that FPI should have no unreasonable share of would result in an approximately fifty percent increase in
the market, and should not unduly impact on any single inmate employment and require the activation of three new
private industry. Any remedial action will be predicated factories.32 See (J.A., 703). UNICOR further projected that
on what extent, if any, the statute has been violated in its market share would increase from approximately thirteen
these two very important aspects. percent in 1995 to approximately thirty percent in 2001. See
(J.A., 703). Therefore, the Board initiated the CARP.
(J.A., 655.) The Board accordingly examined UNICOR’s
federal market share from1990-1994, as well as the private UNICOR prepared a Comprehensive Impact Study
sector sales of office seating. The Board concluded, “[B]ased regarding the potential impact of the Office Case Goods
on market performance since 1991 the industry has not been Expansion on the private sector (the “Office Case Goods
adversely affected, and that UNICOR’s market share is
reasonable. The Board therefore approves FPI’s request to
ratify its sales levels achieved, subsequent to and as a result
32
of is expanded capacity during 1991 and 1992.” (J.A. 656.) UNICOR estimated that the Office Case Goods Exp ansion wou ld
employ an additional 500-750 inmates and require the activation of
factories at Forrest City, A R, a high security prison in the mid -Atlantic
region, as well as at a future site. See (J.A., 703).
No. 01-2231 Coalition for Gov’t Procurement, et al. 29 30 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
Impact Study”). See (J.A., 678-722). UNICOR proceeded D. Quarters Furniture Mfrs. Ass’n v. Federal Prison
with the CARP, and the Coalition submitted comments on the Indus.
proposed expansion. See (J.A., 723-94, 1111 ¶¶ 139-40).
Shortly following the Board’s 1996 significant expansions
The Board held a hearing on October 8, 1996 whereby decisions, the Quarters Furniture Manufacturers’ Association
BIFMA and others presented statements in opposition to the (“QFMA”) – an industry association comprised of private
Office Case Goods Expansion. See (J. A. 796-890, 1111 manufacturers of D & Q furniture – filed a complaint in the
¶ 142). United States District Court for the District of Columbia
challenging the D & Q furniture significant expansion. See
On December 17, 1996, the Board issued its decision QFMA, at 1-27. Principally relying on the White Paper,
authorizing the Office Case Goods Expansion. See (J.A., QFMA alleged that UNICOR and the Board violated the APA
891-896). The Board rested its decision on the projected by failing to initiate the CARP from 1992-1995. See QFMA,
growth of the federal market, as well as the projected growth at 2. QFMA alternatively alleged that in the event the
in the domestic market for sales of office case goods. The Guidelines allowed for such unauthorized expansions, the
Board acknowledged, however, the large discrepancy between Guidelines themselves violated section 4122 and the APA.
UNICOR’s estimate regarding the size of the federal market Id. QFMA’s complaint requested declaratory relief, as well
and the private-sector’s significantly lower estimate.33 See as an injunction “prohibiting the defendants from continuing
(J.A., 893). In an effort to account for the discrepancy, the to violate the statute, and directing [UNICOR] to return to
Board authorized less than UNICOR’s full expansion request appropriate levels of production.” Id.
– authorizing a growth to $70 million by 2001. See (J.A.,
892-93). Additionally, the Board directed UNICOR to UNICOR conceded that it violated the Guidelines during
convene an independent panel of experts to review its 1992-1995, but asserted that “[T]he Board’s March 1996
methodology for calculating the federal market, and agreed to decision [authorizing the significant expansion of D & Q
consider any request to modify the expansion decision in the Furniture] superceded and effectively moot[ed] plaintiff’s
event the panel uncovered errors in UNICOR’s methodology. case.” See QFMA, at 10.
See (J.A., 893-96).
The court partially concurred in UNICOR’s contention,
opining that the failure on the part of QFMA to challenge
UNICOR’s current production levels precluded equitable
relief in the form of a “roll-back” of current production. See
QFMA, at 12-13. The court reasoned, however, that
“[W]here the agency wholly fails to comply with its
regulations, and provides no record for its decision, the court
should conclude that the agency acted unlawfully, and should
vacate the decision with a remand to the agency.” QFMA, at
33 16 (citations omitted). The court then acknowledged that “[I]t
The Board indicated that UNICOR estimated the size of the Federal could order the Board to adjust the future levels of FPI’s
office ca se goods market at $2 21.3 million, wherea s the private industry
estimate pro jected a market of $169 .4 million. See (J. A., 893).
production to return to the market that portion of the share
No. 01-2231 Coalition for Gov’t Procurement, et al. 31 32 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
that the Board decides crossed the line from reasonable to furniture34 violated the APA and organic statute (Count VIII).
unreasonable.” QFMA, at 12 (citation omitted). Accordingly, The second claim alleged that UNICOR’s practice of selling
the court remanded the matter to the Board “with directions Office Furniture directly to private subcontractors employed
that the Board must illicit [sic] comments with respect to the on federal projects violated the express prohibition of section
increases in FY 1991 to 1995 . . . make specific findings as to 4121, as well as the APA (Count IX).
whether FPI obtained more than a reasonable share of the
market . . . and ascertain what percent of the share was Following lengthy discovery, the parties filed cross-
unreasonable.” See QFMA, at 25. motions for summary judgment. By order dated August 8,
2001, the district granted the defendants’ motion in its
E. The Underlying Action entirety, while denying the Coalition’s motion. See 154 F.
Supp. 2d at 1156.
More than a year later, the Coalition filed the underlying
action challenging UNICOR’s significant expansions in The instant appeal ensued.
Office Furniture production. See Coalition for Gov’t
Procurement v. Federal Prison Indus., 154 F. Supp. 2d 1140 III. STANDARD OF REVIEW
(W.D. Mich 2001). The complaint specifically alleged seven
classes of claims. The first class of claims (Counts I-III) This Court reviews the grant of summary judgment de
alleged that UNICOR engaged in unauthorized significant novo. See Brooks v. American Broadcasting Cos., 932 F.2d
expansions of systems furniture, office seating, and office 495, 500 (6th Cir. 1991). Summary judgment is proper “if the
case goods throughout 1991-1995 (hereinafter the pleadings, depositions, answers to interrogatories, and
“unauthorized significant expansions”) in violation of section admissions on file, together with the affidavits, if any, show
4122 and the APA. The second class (Count IV) alleged that that there is no genuine issue as to any material fact and that
the Board’s retroactive authorization of the 1991 and 1992 the moving party is entitled to a judgment as a matter of law.”
unauthorized expansions in office seating (hereinafter the FED . R. CIV . P. 56 (c). When confronted with a properly
“retroactive authorization”) violated the APA and the organic supported motion for summary judgment, the nonmoving
statute. The third class (Count V) sought relief arising from party must set forth specific facts showing that there is a
the Board’s purported violations of the organic statute and the genuine issue for trial. A genuine issue for trial exists “if the
APA in authorizing UNICOR’s 1995-1996 requests to
significantly expand its production of systems furniture,
office seating, and office case goods (hereinafter the “1996 34
significant expansion decisions”). The fourth class (Count “Pass through” furniture was furniture sold by UNICO R that was
manufactured by non-prison ers. UN ICO R ackno wledged its use of “pass
VI) presented a facial challenge to the Guidelines, whereas through” furniture in rare circumstances where it accepted an order and
the fifth class (Count VII) alleged that UNICOR’s was unable to meet the federal agency’s delivery requirements because of
unauthorized significant expansions in 1991-1995 constituted “fires, inmate, lockdowns, work stoppages, adverse weather including
a compensable taking in violation of the Fifth Amendment. fog, tooling problems within an internal facto ry, or as a result of a
The final class of claims challenged two of UNICOR’s customer accelerated due date.” (J.A., 1070.) In such cases, UNICOR
purchased the pro duct from a private sector manu facturer with who m it
practices with respect to the private sector. The first alleged had a prior contractual relationship, and then re-sold the product to the
that UNICOR’s practice of promoting “pass through” federal agency. See (J.A., 1117 ).
No. 01-2231 Coalition for Gov’t Procurement, et al. 33 34 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
evidence is such that a reasonable jury could return a verdict Council, Inc. v. Sec. & Exch. Comm’n, 606 F.2d 1031, 1045,
for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 1048-49 (D.C. Cir. 1979). While de novo, we tailor our
477 U.S. 242, 248 (1986). review to determine whether “statutorily prescribed
procedures have been followed.” Id. at 1045.
The Coalition advances its claims (with the exception of the
takings claim) pursuant to UNICOR’s organic statute and the IV. THE CLAIMS CHALLENGING THE
APA. It is well-settled that UNICOR’s organic statute does UNAUTHORIZED SIGNIFICANT
not authorize a private right of action. See Galvan v. Fed. EXPANSIONS, THE 1996 SIGNIFICANT
Prison Indus., 199 F.3d 461, 465 (D.C. Cir. 1999) (“Congress EXPANSION DECISIONS, AND THE
purposefully kept FPI out of the commercial world and BOARD’S RETROACTIVE AUTHORIZATION
limited its exposure to the courts.”). However, the APA
provides for judicial review of agency action.35 See 5 U.S.C. The Coalition’s first three classes of claims – those
§§ 701-706. challenging the unauthorized significant expansions, the 1996
significant expansion decisions, and the Board’s retroactive
When reviewing an administrative agency’s final decision authorization (hereinafter collectively, the significant
under the APA, we review the district court’s summary expansion claims) – share common issues of fact and law.36
judgment decision de novo, while reviewing the agency’s Accordingly, we initially address these claims in their
decision under the arbitrary and capricious standard. See entirety.
Sierra Club v. Slater, 120 F.3d 623, 632 (6th Cir. 1997)
(citation omitted). Thus, the agency’s decision will be set
aside “only if it is arbitrary, capricious, an abuse of discretion,
or otherwise not in accordance with the law.” Slater, 120
F.3d at 632 (citations omitted). Alternatively, when the issue
is whether the agency followed the requisite legal procedure,
our review is limited, but exacting. See Natural Res. Def.
35
Section 70 2 of the APA provides, in pertinent part:
A person suffering legal wrong because of agency action, or
adversely affected or aggrieved by agency action within the
meaning of a relevant statute, is entitled to judicial review
thereof. An action in a court of the United States seeking relief 36
other than money damages and stating a claim that an agency or The Coalition’s facial challenge to the Guidelines (Count VI) also
an officer or employee thereof acted or failed to act in an official shares commo n issues of fact and law with the significant expansion
capacity or under color of legal authority shall not be dismissed claims. The district court determined, however, that U NIC OR ’s
nor relief therein be denied on the ground that it is against the promulgation of new guidelines in 1997 effectively mooted Count VI.
United States or that the United States is an ind ispensable party. See 154 F. Sup p. 2d at 1152. Cf. Product De velopment and Prod uction:
Pub lic Involvement Procedures, 62 F ED . R EG . 11 46 5 (M ar. 12, 1997).
5 U.S.C. § 702 . The Co alition does not appeal this determinatio n.
No. 01-2231 Coalition for Gov’t Procurement, et al. 35 36 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
A. Jurisdictional and Procedural Challenges Scientology of California v. United States, 506 U.S. 9, 12
(1992) (quotation omitted).
1. Mootness
Amicus asserts that the significant expansion claims are
The defendants, through amicus curiae, Correctional moot because UNICOR has completed the challenged activity
Vendors Association (“CVA”),37 assert that the significant -- that is, all of the alleged unlawful increases in production
expansion claims are moot. We review questions of mootness have occurred and the sales have been consummated.
de novo. See Craft v. United States, 233 F.3d 358, 373 (6th However, completion of activity is not the hallmark of
Cir. 2000). The heavy burden of demonstrating mootness mootness. Rather, a case is moot only where no effective
rests on the party claiming mootness. See Friends of the relief for the alleged violation can be given. See McPherson,
Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 119 F.3d at 458.
167, 189 (2000).
The mootness question therefore turns on whether this court
Article III of the United States Constitution vests this court can award the Coalition “any effectual relief.” Church of
with jurisdiction to address actual cases and controversies. Scientology, 506 U.S. at 12. Our analysis begins with an
See U.S. CONST . art. III, § 2. Under the “case or controversy” examination of the relief requested.
requirement, we lack authority to issue a decision that does
not affect the rights of the litigants. See Southwest Amicus construes the relief sought by the Coalition as
Williamson County Cmty. Assoc. v. Slater, 243 F.3d 270, 276 follows: (1) a declaration that the defendants violated section
(6th Cir. 2001). Indeed, we have a “continuing obligation” to 4122 and the APA by repeatedly failing to initiate CARP
enquire whether there is a present controversy as to which during 1991-1995; (2) a declaration that the Board’s 1996
effective relief can be granted. Id. at 276 (citing McPherson significant expansion decisions violated the organic statute
v. Mich. High Sch. Athletic Ass’n, Inc., 119 F.3d 453, 458 and the APA; (3) an order rescinding the 1996 significant
(6th Cir.1997)). expansion decisions; and (4) a declaration that the Board’s
retroactive authorization violated the organic statute and the
“‘The test for mootness is whether the relief sought would, APA. See (Br. of Amicus Curiae Correctional Vendors Ass’n
if granted, make a difference to the legal interests of the Supporting Appellee and Dismissal at 5-6).
parties.’” Bowman v. Corr. Corp. of Am, 350 F.3d 537, 550
(6th Cir. 2003) (quoting McPherson, 119 F.3d at 458). An The Coalition’s multiple requests for declaratory relief
appeal becomes moot if events have taken place during the warrant caution. We previously have recognized that
pendency of the appeal that make it “impossible for the court declaratory judgment actions often require courts to face the
to grant any effectual relief whatever . . . .” Church of difficult task of distinguishing “between actual controversies
and attempts to obtain advisory opinions on the basis of
hypothetical controversies.” Kardules v. City of Columbus,
37
95 F.3d 1335, 1343-44 (6th Cir. 1996) (citation omitted); see
CVA is a non-p rofit trade association incorporated in W ashington, also Brennan v. Rhodes, 423 F.2d 706, 706-07 (6th Cir. 1970)
D.C. that represents over twenty-five ven dors who sell products to (stating that the Declaratory Judgment Act, 28 U.S.C.
UNICOR. More than ha lf of CV A’s me mbe rs pro vide U NIC OR with §§ 2201-2202,“does not broaden the jurisdiction granted to
components used in the manufacture of Office Furniture.
No. 01-2231 Coalition for Gov’t Procurement, et al. 37 38 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
the federal courts by the Constitution and statutes enacted decisions . . . were arbitrary and capricious for three reasons.
pursuant thereto,” and that, consequently, “there still must be First, the Board failed to consider the fundamental question
a case or controversy before a federal court can assume of whether FPI’s previously expanded Office Furniture
jurisdiction and reach the merits of a [declaratory judgment production complied with its Guidelines and was
action]”). Thus, the Supreme Court has held that when appropriate.”); (Br. of Amicus Curiae Correctional Vendors
considering the potential mootness of a claim for declaratory Ass’n Supporting Appellee and Dismissal at 5) (“Plaintiffs
relief, “the question is ‘whether the facts alleged, under all the posit that the earlier purported unauthorized significant
circumstances, show that there is a substantial controversy, expansions taint these subsequent expansions.”); see also 154
between parties having adverse legal interests, of sufficient F. Supp. 2d at 1151 (“Plaintiffs also argue that the Board’s
immediacy and reality to warrant the issuance of a declaratory decision on future increases failed to consider whether the
judgment.’” Super Tire Eng’g Co. v. McCorkle, 416 U.S. 115, then current production levels during 1996 were even legal.”).
122 (1974) (quoting Maryland Cas. Co. v. Pacific Coal & Oil As it is undisputed that the Board has authorized UNICOR’s
Co., 312 U.S. 270, 275 (1941)). current production levels through the 1996 significant
expansion decisions, see (J.A., 1198-1202), and the 1996
The potential mootness of the claims challenging the decisions, in turn, rest on UNICOR’s allegedly unlawful
unauthorized significant expansions production throughout 1991-1995, claims challenging the
unauthorized significant expansions potentially impact
At first blush, the Coalition’s request for an order declaring UNICOR’s current production levels. The Coalition
that UNICOR engaged in unauthorized significant expansions transforms potential into an immediate reality by requesting
during 1991-1995 appears to lack the “sufficient immediacy this court to issue an order (1)“directing FPI to roll back
and reality” necessary to escape the mootness doctrine. production to the levels authorized before the violations
Standing alone, an order from this court declaring that occurred”; (2) “giv[ing] back those sales FPI unlawfully
UNICOR violated the organic statute and, or, the APA nearly took”; or (3) “capping FPI’s production at current levels and
a decade ago, would have little, if any, impact on the current requiring FPI’s Board to fully account for the agency’s past
legal interests of the parties. See City of Los Angeles v. violations before undertaking future expansion proceedings.”
Lyons, 461 U.S. 95 (1983); cf. Reeve Aleutian Airways, Inc. (Reply Br. of Pls.-Appellants at 27.)
v. United States, 889 F.2d 1139, 1142 (D.C. Cir. 1989) (“Past
exposure to illegal conduct fails to establish a present The proposed relief sought demonstrates that the Coalition
controversy . . . without a showing of present adverse seeks more than a declaration that UNICOR unlawfully and
effects.”). significantly expanded from 1991-1995. The Coalition has
argued throughout the litigation that the unauthorized
A more searching review of the record reveals, however, significant expansions resulted in its loss of $450 million in
that the Coalition has forged the requisite link between sales. See, e.g., (J.A., 28, 1410-11). As a remedy for this
UNICOR’s past practices and the current interests of the purported loss, the Coalition persistently has sought an order
parties. Specifically, the Coalition contends that the Board restoring the lost sales to the current market -- a result the
predicated the 1996 significant expansion decisions on data Coalition terms an “equitable volume sales replacement
reflecting UNICOR’s purportedly unlawful production from
1991-1995. See (Br. of Pls.-Appellants at 53) (“The 1996
No. 01-2231 Coalition for Gov’t Procurement, et al. 39 40 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
remedy,” see (J.A., 1471).38 While amicus interprets this Northwest Envtl. Def. Ctr. v. Gordon, 849 F.2d 1241, 1245
requested relief as relating exclusively to the takings claim (9th Cir. 1988) (determining that claims asserted against
discussed infra, the Coalition conclusively has demonstrated federal agencies alleging that the agencies unlawfully
that its “equitable volume sales replacement remedy” pertains authorized the overfishing of coho salmon during the 1986
to the unauthorized significant expansion claims. season were not moot because the court could award
awarding injunctive relief in the form of “higher escapement
Having discerned the thrust of the relief requested, we must provisions and lower quotas in 1989”).
now consider whether this court has the authority to award
such relief. It is well-established that federal courts possess We conclude, therefore, that this court has the broad
broad discretion to fashion equitable remedies. See United discretionary authority to award relief in a manner akin to the
States v. R.W. Meyer, Inc., 932 F.2d 568, 572-73 (6th Cir. “equitable volume sales replacement remedy” proposed by
1991) (observing the “principle of equity that the chancellor the Coalition. We neither must determine at this stage of the
has broad discretion to frame a decree”). It also is established proceedings whether the Coalition ultimately is entitled to
that we may craft declaratory and injunctive relief designed such relief, nor must we define the specific parameters of the
to preclude a federal agency from acting in contravention of relief. As we repeatedly have stated, the determinative factor
its statutory and regulatory authority. See Howard v. Pierce, in the mootness inquiry is whether the court possesses the
738 F.2d 722, 730 (6th Cir. 1984) (holding that the court may authority to afford the Coalition any effectual relief. Because
award declaratory and injunctive relief in order to ensure that the response to this query is in the affirmative, the Coalition’s
the Department of Housing and Urban Development adopted claims challenging the unauthorized significant expansions
regulations consistent with its enabling statute). Furthermore, present actual cases or controversies.
the court may require an agency to modify its current or
future practices in order to account for past violations of its The potential mootness of the claim challenging the 1996
statutes or regulations. See Charter Township of Huron, significant expansion decisions
Michigan v. City of Dearborn, Michigan, 997 F.2d 1168,1175
(acknowledging the court’s authority to issue an injunction The Coalition’s claim challenging the 1996 significant
requiring the agency to conduct an environmental assessment expansion decisions also presents a justiciable case or
notwithstanding the implementation of the completed action); controversy. As discussed supra, the production levels
approved by the Board in 1996 are manifested in UNICOR’s
current production levels. It follows a fortiori that in the
38
event the Board authorized the 1996 significant expansions in
For example, the complaint requested “injunctive relief to stop FPI contravention of the organic statute and the APA, any
from continuing its violation of the Constitution, the AP A, FP I’s organic equitable remedy for these violations necessarily would
statute, and its own regulations, and directing FPI to return to the
competitive market sales equal to in excess of $450 million, the amount impact UNICOR’s current production levels.
inapp ropriately taken.” (J.A., 27-2 8.) Similarly, the Coalition requested
in its motion for sum mary judgm ent that the “[c]ourt, at this time, order Amicus attempts to escape this result by emphasizing that
FPI to reduce its planned Office Furniture sales volume, from FY 2002 the Coalition’s complaint did not request the “equitable
through FY 2004 or any other period the [c]ourt deems reasonable, that volume sales replacement remedy” in regard to the 1996
FPI Office Furniture sales in FY 19 90 through FY 1 995 exceed ed the significant expansion decisions. See (Br. of Amicus Curiae
appropriate FY 1 989 levels.” (J.A., 1474.)
No. 01-2231 Coalition for Gov’t Procurement, et al. 41 42 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
Correctional Vendors Ass’n Supporting Appellee and The potential mootness of the claim challenging the
Dismissal at 5). Indeed, the complaint requested: (1) a retroactive authorization
declaration that the 1996 significant expansion decisions
violated the organic statute and the APA; and (2) an Our conclusions as to the justiciable nature of the
injunction rescinding those decisions. Amicus contends that unauthorized significant expansion and 1996 significant
because the sales authorized by the 1996 significant expansion claims apply with equal force to the claim
expansion have been completed, any proposed recission of challenging the Board’s retroactive authorization. Simply, in
such sales is beyond this court’s authority. See (Br. of the event we determine that the Board lacked the authority to
Amicus Curiae Correctional Vendors Ass’n Supporting retroactively authorize a significant expansion occurring in
Appellee and Dismissal at 17) (“Rescinding already 1991-1992, the inescapable conclusion is that UNICOR
accomplished expansions and consummated sales is not engaged in unauthorized significant expansions during those
feasible.”) (Citation omitted). years. The potential remedy for the Board’s unlawful conduct
would be the “equitable sales volume replacement remedy”
While it is beyond cavil that the Coalition initially suitable for all other unauthorized significant expansions
requested a recission of the 1996 significant expansion during the 1991-1995 period. Therefore, the Coalition’s
decisions, the manner of relief requested before the district claim challenging the retroactive authorization is not moot.
court, while relevant, is not determinative in examining
whether the claim is moot on appeal.39 Rather, the 2. Issue Exhaustion
dispositive issue is whether this court possesses the authority
to award any effectual relief. Church of Scientology, 506 Notwithstanding the existence of justiciable cases or
U.S. at 12. The foregoing analysis reveals that the court has controversies, the defendants assert that the administrative
the authority to order a “roll-back” or “capping” of waiver doctrine bars judicial review of the unauthorized
UNICOR’s production. We may draw on this remedy in the significant expansion and the retroactive authorization claims.
event the Board unlawfully authorized the 1996 significant The administrative waiver doctrine, commonly referred to as
expansions that, in turn, impacted UNICOR’s current issue exhaustion, provides that it is inappropriate for courts
production levels. Accordingly, the Coalition’s claim reviewing agency decisions to consider arguments not raised
challenging the 1996 significant expansion presents a before the administrative agency involved. See United States
justiciable case or controversy. v. L.A. Tucker Truck Lines, Inc., 344 U.S. 33, 37 (1952)
(“Simple fairness . . . requires as a general rule that courts
should not topple over administrative decisions unless the
administrative body not only has erred but has erred against
objection made at the time appropriate under its practice.”);
see also Michigan Dep’t of Envtl. Quality v. Browner, 230
F.3d 181, 183 n.1 (6th Cir. 2000) (concluding that issues not
39
raised during the agency’s notice and comment period were
In any even t, the Co alition requested that the district court grant waived for purposes of appellate review); Cellnet
“any other such relief as necessary to establish a status quo in Federal Communications, Inc. v. FCC, 149 F.3d 429, 442 (6th Cir.
Office Furniture sales and ensure that FPI no longer engages in illegal
practices.” (J.A., 1411.)
1998) (ruling that the plaintiff’s claim for judicial review was
No. 01-2231 Coalition for Gov’t Procurement, et al. 43 44 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
barred because it had not followed the Environmental United States Court of Appeals for the Fifth Circuit thereafter
Protection Agency’s administrative review procedures). declined to address arguments that the petitioner had not
Courts decline to consider issues not raised before an agency raised in her request for review by the Appeals Council. See
because to do otherwise would “deprive the [agency] of an 200 F.3d 229, 230 (5th Cir. 1998). The Supreme Court
opportunity to consider the matter, make its ruling, and state reversed, holding that the inquisitorial nature of the Social
the reasons for its action.” Unemployment Comp. Comm’n v. Security proceedings precluded the application of an issue
Aragon, 329 U.S. 143, 155 (1946). exhaustion requirement. See Sims, 530 U.S. at 112.
The district court determined that the Coalition waived the In reaching its decision, the Court identified three scenarios
unauthorized significant expansion and the retroactive giving rise to issue exhaustion. First, the Court observed that
authorization claims because it did not raise these challenges issue exhaustion requirements are “largely creatures of
during the hearings before the Board. The district court statute,” and determined that a party’s failure to comply with
opined: a statutorily-imposed issue exhaustion requirement precluded
the assertion of federal jurisdiction. Sims, 530 U.S. at 107
Procedural objections like those Plaintiffs bring in this (citing Woelke & Romero Framing, Inc. v. NLRB, 456 U.S.
case are precisely the type of issues appropriately raised 645 (1982)). The Court alternatively observed that an
before the Board during its comment period, and thus agency’s regulations may impose the issue exhaustion
subject to waiver if not raised. requirement. See Sims, 530 U.S. at 108. “And when
regulations do so, courts reviewing agency action regularly
The Board of FPI provided an opportunity for Plaintiffs ensure against the bypassing of that requirement by refusing
and other interested parties to raise the issue of to consider unexhausted issues.” Id.
procedural violations during three separate meetings of
the Board during 1996. Plaintiffs were not only aware of The Court went on to recognize a third scenario -- a
the proceedings, but were aware of the issues to be raised judicially-imposed issue exhaustion requirement – which it
at the hearings, and fully participated in the hearings. analogized “to the rule that appellate courts will not consider
arguments not raised before trial courts.” Sims, 530 U.S. at
154 F. Supp. 2d at 1147 (citations omitted). 108-09. The Court reasoned that the degree to which such an
analogy applies depends on whether the particular
Notably, the district court did not rely on Sims v. Apfel, 530 administrative proceeding is similar to traditional litigation --
U.S. 103 (2000), where the Supreme Court set forth the that is, whether the proceeding before the administrative
contours of the issue exhaustion doctrine. The Court agency is sufficiently “adversarial,” as opposed to
specifically confronted a scenario where the Social Security “inquisitorial.” Sims, 530 U.S. at 109-110 (“[T]he desirability
Administration (“SSA”) denied the petitioner’s claims for of a court imposing a requirement of issue exhaustion
benefits, and the petitioner sought review before the Social depends on the degree to which the analogy to normal
Security Appeals Council (“Appeals Council”). See Sims, adversarial litigation applies in a particular administrative
530 U.S. at 105. The Appeals Council denied review, and the proceeding.”) (Citations omitted). Therefore, where no
petitioner filed suit in district court, which rejected all of the statutory or regulatory requirement exists, a judicially-
petitioner’s claims. See Sims, 530 U.S. at 105-06. The imposed requirement of issue exhaustion is based on the
No. 01-2231 Coalition for Gov’t Procurement, et al. 45 46 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
extent to which the particular administrative proceeding is 530 U.S. at 111 (citing Richardson v. Perales, 402 U.S. 389,
analogous to “normal adversarial litigation.” Sims, 530 U.S. 400-01(1971)). The plurality further emphasized that no
at 109. representative went before the ALJ on behalf of the Social
Security Commissioner to oppose the claim for benefits, and
In considering whether the district court properly imposed there was “no indication that the Commissioner oppose[d]
an issue exhaustion requirement in the case sub judice, we claimants before the Appeals Council.” Id. The plurality also
initially observe that such a requirement exists in neither noted that the agency’s regulations expressly directed the
UNICOR’s organic statute nor its regulations. Accordingly, Appeals Council to conduct the review process “in an
this court must determine whether the significant expansion informal and non-adversarial manner.” Id. (citing 20 C.F.R.
hearings before the Board were sufficiently adversarial as to § 404.900(b)). Indeed, the parties were permitted, but were
warrant the imposition of an issue exhaustion requirement. not required, to file briefs with the Appeals Council. See
Sims, 530 U.S. at 113-14 (O’Connor, J., concurring) (citing
While no court has addressed the precise issue at bar, we 20 C.F.R. § 404.975). The form on which the claimant
observe that the Sims plurality40 found several factors requested review of her case provided only three lines for the
relevant in determining that the Social Security proceedings claimant to state the details of her request for review. See
possessed an inquisitorial character. The plurality gave great Sims, 530 U.S. at 112 (citing 20 C.F.R. § 422.205(a)). An
weight to the responsibility vested in the Administrative Law accompanying notice stated that the form should only take ten
Judge (“ALJ”) and the Appeals Council -- rather than the minutes for the claimant to complete.41 Id. Finally, the
claimant -- for investigating the facts and developing Appeals Council possessed the authority to review any new
arguments both for and against granting benefits. See Sims, material evidence outside of the record promulgated by the
parties, and its plenary power vested it with authority to
review cases without the applicant’s approval. See Sims, 530
40
The Court unanimously agreed in the aspects of Justice T hom as’s U.S. at 111 (citing 20 C.F.R. § 404.976(a)). The co-existence
majo rity decision delineating the issue exhaustion doctrine. See Sims, 530 of the foregoing factors – the broad investigatory authority
U.S. at 115-16 (Breyer, J., d issenting) (“[The ma jority] points out that the vested to the decision-maker, the unilateral nature of the
ordinary waiver rule as applied to administrative agencies ‘is an analogy
to the rule that appellate court will not consider arguments not raised proceedings, and the express informality of the administrative
before trial courts.’ And the plurality argues that the agency proceedings process -- led the plurality to conclude that “[T]he general
here at issue, unlike those before trial courts, are not adversarial rule of issue exhaustion makes little sense in this particular
proceedings. Although I agree with both propositions, I do not see how context.” See Sims, 530 U.S. at 112 (quotation and citation
they lead to the plurality’s conclusions.”) (Citations omitted). The Court omitted).
reached different conclusions in the applicatio n of the d octrine to Social
Security proceedings at issue. Com pare Sims, 530 U.S. at 113
(O’Connor, J., concurring) (“I write separately because, in my view, the In contrast, this court has identified, albeit in a different
agency’s failure to notify claimants of an issue exhaustion requirement in context, the relevant factors when considering whether a
this context is a sufficient basis for our decision.”) with 530 U.S. at 118-
19 (Breyer, J., d issenting) (“Th e Social Security Ad ministratio n says that
it does not apply its waiver rule where the claimant is not represented. 41
And I ca nnot say it is ‘arbitrary capricious, or an ab use of discretion,’ to This fact led Justice O’Connor to conclude that the Ap peals
app ly the waiver rule when a claimant was represented before the App eals Council discouraged parties from providing reasons and proceeded
Council, as was petitioner, by an attorney.”) (Citations om itted). without them. See Sims, 530 U.S. at 113-14 (O ’Connor, J., concurring).
No. 01-2231 Coalition for Gov’t Procurement, et al. 47 48 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
proceeding is sufficiently adversarial. In Detroit Free Press submit post-hearing briefs. See Delta Found., 303 F.3d at
v. Ashcroft, 303 F.3d 681 (6th Cir. 2002), a panel of this court 561 (citations omitted). The court concluded, “[U]nlike the
held that “[a] deportation proceeding, although SSA proceedings in which the Appeals Council itself, and not
administrative, is an adversarial, adjudicative process.” the claimant, ha[d] the responsibility for identifying the
Detroit Free Press, 303 F.3d at 696. The panel emphasized claims and developing arguments, the parties appear before
that “[c]onsistent with the adversarial nature of judicial the DAB as adversaries, charged with presenting their
proceedings, a deportation proceeding is commenced with a arguments and supporting witnesses and effectively
‘Notice to Appear,’ a charging document or complaint-like discrediting opposing parties through cross-examination.”
pleading which vests jurisdiction with the immigration See Delta Found., 303 F.3d at 561-62.
court.”42 Detroit Free Press, 303 F.3d at 698 (citations
omitted). Additionally, an evidentiary standard governed the With these principles in mind, we find that the Board’s
deportation proceedings (i.e., the government was required to significant expansion hearings do not give rise to an issue
prove its allegations by clear and convincing evidence), and exhaustion requirement. As with the proceedings before the
the agency’s decision was to be predicated on “reasonable, Appeals Council, the rules governing the significant
substantial, and probative evidence.” See Detroit Free Press, expansion hearings vest full fact-finding authority with the
303 F.3d at 698 (citations omitted). Furthermore, all Board. For example, the rules provide:
interested parties had the right to appear and be heard during
the deportation proceedings, and the presiding immigration The record before the Board is limited to the market
judge maintained an impartial role. See Detroit Free Press, study, comments and materials submitted in response to
303 F.3d at 698-99 (citations omitted). the market study (including the trade association’s
comments), corporate management recommendations,
Similarly, the United States Court of Appeals for the Fifth and material submitted by commenters in response to
Circuit placed similar emphasis on procedural elements in corporate management’s recommendations. No new
determining that proceedings before the Health and Human documentation or arguments from commenters will be
Services Departmental Appeals Board (“DAB”) were of a received or heard at the presentation that have not been
sufficient adversarial character to require exhaustion of issues. submitted in compliance with these rules, unless
See Delta Found., Inc. v. United States, 303 F.3d 551, 561-62 permitted by the Board.
(5th Cir. 2002). In reaching its conclusion, the Fifth Circuit
found four factors relevant: (1) the aggrieved party and the ....
agency’s representative appeared before the DAB; (2) each
party participated in developing an appeal file; (3) each party The Board members may direct questions to a
could make oral presentations, submit briefs, and cross- commenter to elicit further information, and may request
examine witnesses; and (4) each party was afforded leave to that additional material be provided for the record.
(J.A., 176-77, 431-432, 664-65.) The Board has explained its
42
fact-finding role as follows:
The “Notice to Appear” provided notice to the non-citizen of the
charges asserted and was served in acco rdance w ith applicable rules. See
Detroit Free Press, 303 F.3d at 698 (citatio ns om itted).
No. 01-2231 Coalition for Gov’t Procurement, et al. 49 50 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
The process is that upon hearing your [private 3. Laches
industry’s] information here, we’ll take everything that
you have to say. If there is something that is not clear, if The defendants nevertheless assert that the equitable
there’s a comment which you make that doesn’t jive with doctrine of laches precludes judicial review of the Coalition’s
the record as we know it, or is new information that we significant expansion claims.43
are hearing for the first time, then what we will do
following this hearing is to ask [UNICOR] to provide us “Laches is the ‘negligent and unintentional failure to
more information or go outside [UNICOR] to gather protect one’s rights.’” Nartron Corp. v. STMicroelectronics,
information ourselves. 305 F.3d 397, 408 (6th Cir. 2002) (quoting Elvis Presley
Enter., Inc. v. Elvisly Yours, Inc., 936 F.2d 889, 894 (6th Cir.
(J.A., 577.) 1991)). “Laches consists of two elements: (1) unreasonable
delay in asserting one’s rights; and (2) a resulting prejudice to
Furthermore, the Board has the exclusive authority to the defending party.” Brown-Graves Co. v. Central States,
solicit information and question the “commenters.” In the Southeast & Southwest Areas Pension Fund, 206 F.3d 680,
words of the Board’s chairman during the Office Case Goods 684 (6th Cir. 2000).
hearing, “[This] is not a process that is a give-and -take where
you ask questions of the board and we’re in a position to With respect to the first element, there is a strong
respond. What we basically do here is listen to your presumption that a plaintiff’s delay in bringing suit is
presentation and then consider that material, plus all the reasonable as long as the analogous statute of limitations has
material that is on the record, and make a decision.” (J.A., not lapsed. See Herman Miller, Inc. v. Palazzetti Imp. & Ex.,
803.) The broad discretion vested in the Board is of particular Inc., 270 F.3d 298, 321 (6th Cir. 2001) (citing Tandy Corp. v.
import in that UNICOR does not present any proposal to the Malone & Hyde, Inc., 769 F.2d 362, 365-66 (6th Cir. 1985)).
Board during the hearings. The significant expansion “Only rarely should laches bar a case before the analogous
hearings are limited to presentations made by “commenters,” statute has run.” Tandy Corp., 769 F.2d at 366.
not including the agency, and there lacks any cross-
examination, counter-arguments, or any type of discussion It is undisputed that the six-year statute of limitations for
that reasonably can be defined as “adversarial.” Therefore, bringing civil actions against the United States governs this
the significant expansion hearings bear the hallmarks of action. See 28 U.S.C. § 2401(a) (“Every civil action
inquisitorial proceedings in that the Board dominates the fact- commenced against the United States shall be barred unless
finding process and the agency is not present during the the complaint is filed within six years after the right of action
proceedings. Consequently, the Board’s significant
expansion hearings are not adversarial and do not warrant a
judicially-imposed issue exhaustion requirement. 43
The defendant raised the laches defense in the ir Answer and fully
briefed the issue on summary judgment. See (J.A., 160, 940-47). The
Accordingly, the district court erred in determining that the district court did no t address the issu e given its finding with respect to
Coalition waived judicial review of the unauthorized issue exhaustion. See 154 F. Supp. 2d at 1151. W e may consider,
significant expansion and the retroactive authorization claims. however, this issue as p art of our de novo review. See Abercrombie &
Fitch Stores, Inc. v. Am. Eagle Outfitters, Inc., 280 F.3d 61 9, 629 (6th Cir.
200 2).
No. 01-2231 Coalition for Gov’t Procurement, et al. 51 52 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
first accrues.”). It is further undisputed that the statute of Furniture production. The defendants’ laches defense
limitations commenced upon the Board’s issuance of the 1996 therefore fails as a matter of law.
significant expansion decisions.44 Accordingly, the earliest
date upon which the limitations period expired was February B. The Coalition’s Unauthorized Significant
6, 2002 -- six years following the issuance of the Board’s Expansion Claims
system furniture significant expansion decision.
Having traversed the jurisdictional and procedural
The Coalition filed its complaint well within the limitations hinterlands, we arrive at the substantive allegations presented
period; therefore, a strong presumption arises that the claims in the unauthorized significant expansion claims. The
were filed within a reasonable time. In an attempt to Coalition alleges that “From 1991-1995, [UNICOR]
overcome this presumption, the defendants direct the court to repeatedly violated its statute by significantly expanding
the close ties between CGP and QMFA during the litigation Office Furniture production without prior Board review and
challenging the D & Q furniture significant expansion. The approval.” See (Br. of Pls.-Appellants at 12). It further
defendants emphasize that CGP partially incurred the expense alleges that UNICOR “[R]epeatedly violated the Guidelines
of the QFMA litigation. See (Br. of the Defs.- Appellees at by failing to undertake the required data collection internal
41-42); (J.A., 1004). Apparently, the defendants suggest that analysis.” See (Br. of Pls.-Appellants at 12).
CGP had a concomitant obligation to file an action at the time
of the QFMA litigation challenging the significant As a threshold matter, we note that UNICOR cannot escape
expansions of Office Furniture. liability by asserting that the Guidelines establish a higher
standard than that imposed by Congress in section 4122. It is
Even considering CGP’s role, if any, in the QFMA a fundamental tenet of administrative law that “an executive
litigation, the defendants fail to overcome the strong agency must be rigorously held to the standards by which it
presumption of reasonable delay. See, e.g., (J.A., 1004). The professes its action to be judged.” Vitarelli v. Seaton, 359
defendants fail to acknowledge that several Coalition U.S. 535, 546 (1959) (Frankfurter, J., concurring in part and
members, including Knoll, did not manufacture D & Q dissenting in part). Thus, “it is incumbent upon agencies to
furniture and were unaware of the QFMA litigation. See follow their own procedures . . . even where the internal
(J.A., 1585 ¶¶ 9, 12,15). Of greater pertinence, the Coalition procedures are possibly more rigorous than otherwise would
contends that it was the factual information produced through be required.” Morton v. Ruiz, 415 U.S. 199, 235 (1974)
the QFMA litigation that alerted it that UNICOR’s (citations omitted); see also Vitarelli, 359 U.S. at 546-47
purportedly unlawful activities extended to Office Furniture. (Frankfurter, J., concurring in part and dissenting in part)
Accordingly, the Coalition cannot be said to have (“[I]f [agency action] is based on a defined procedure, even
unreasonably delayed in filing suit as it was unaware of though generous beyond the requirements that bind such
UNICOR’s potentially unlawful activities in regard to Office agency, that procedure must be scrupulously observed . . . .
He that takes the procedural sword shall perish with that
sword.”).
44
The defendants argued before the district court that claims arising The unauthorized significant expansion claims arise from
before November 24, 1993 were barred as a matter of law. See (J.A., UNICOR’s purported violations of the Guidelines.
945 ). The defendants have aban doned the argum ent on appeal.
No. 01-2231 Coalition for Gov’t Procurement, et al. 53 54 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
Specifically, the Coalition avers that UNICOR violated the asserting error to demonstrate prejudice from the error.” Air
Guidelines on eighty-two occasions throughout 1991-1995. Canada v. Dep’t of Trans., 148 F.3d 1142, 1156 (D.C. Cir.
See (J.A., 1422). However, the record reveals that the vast 1998).
majority of these violations are the cumulative and annual
effects of ten core violations. We consider the core violations The Coalition is unable to demonstrate prejudice arising
seriatim. from the opening of the systems furniture factory at FCI
Schuykill. Simply, had UNICOR conducted the market share
1. The purported core violations occurring in analysis in 1991 (when the Board authorized the opening of
UNICOR’s systems furniture production the Schuykill factory), UNICOR would have discovered an
during 1991-1995 increase within the allowable market share from 10.8% to
11.6%. See (J.A., 926, 1099 ¶¶ 18, 20). UNICOR therefore
The Coalition contends that two core violations occurred was not required to initiate the CARP and no discernible
during UNICOR’s production of systems furniture from prejudice was sustained by the Coalition as a result of
1991-1995. The first violation occurred in 1991 when the UNICOR’s violation of the Guidelines.
Board authorized the start-up of a new systems furniture
factory to be located at FCI Schuykill without performing the We need not draw on the prejudicial error rule in
requisite market share analysis. See (J.A., 912-13). addressing the second purported core violation arising from
UNICOR’s production of systems furniture. Similar to the
UNICOR concedes that it was required to perform the claim challenging the opening of the Schuykill factory, the
market share analysis. See (J.A., 1100 ¶ 25, 1266-67, 1492 Coalition alleges that the Board’s 1994 authorization of a new
¶¶ 77-78, 1643 ¶¶ 77-78). UNICOR asserts, however, that it systems furniture factory at FCC Coleman violated the
was not required to initiate the CARP because a subsequent Guidelines because UNICOR neither conducted the market
review of market share revealed an allowable increase from share analysis nor initiated the CARP.
10.8% in 1991 to 11.60% in 1992. See (J.A., 926, 1100 ¶¶
18, 20). The district court rejected this claim, concluding:
The plain text of the APA supports UNICOR’s position. It is true that FPI’s increase in market share from 9.6%
The APA instructs reviewing courts to take “due account . . . [in 1994] to 14.3% [in 1995] was over the [G]uidelines
of the rule of prejudicial error.” 5 U.S.C. § 706. “[T]his limit, even taking into account the prior years’ market
court applies a prejudicial error rule to APA cases, such that shares. The trigger prong, however, is not satisfied.
a mistake that has no bearing on the ultimate decision or Plaintiffs rely upon the fact that FPI was planning on
causes no prejudice shall not be the basis for reversing an increased capacity in a new factory at the Federal
agency’s determination.” Slater, 120 F.3d at 637 (citation Corrections Facility in Coleman to satisfy the trigger
omitted). The rule eliminates the necessity of remand requirement. That factory was not activated until
following judicial review when the error that the agency has February of 1996. No offsetting reduction in capacity,
made was not prejudicial and did not impinge on fundamental therefore, was necessary in FY 1994, and consequently
rights. See N.Y. Pub. Interest Research Group v. Whitman, the trigger prong was not met. When the Coleman
321 F.3d 316, 333 (2d Cir. 2003). It “requires the party factory was activated, FPI was under the increased
No. 01-2231 Coalition for Gov’t Procurement, et al. 55 56 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
production levels approved by the Board on February 6, Board authorized an increase in employment levels from 888
1996. Therefore, there was no unauthorized increase in employees in 1992 to 983 employees in 1993; (2) when the
systems furniture. Board authorized the activation of new factories at FCI
Seagoville and FCI Three Rivers in 1991; (3) when the Board
154 F. Supp. 2d at 1148.45 authorized the activation of new factories at FCI Bastrop and
FCI Florence in 1993; and (4) when the D & Q furniture
The record supports the district court’s well-reasoned factory at USP Leavenworth manufactured a special order of
conclusion. While UNICOR initially intended to commence office seating furniture in 1995.
production at FCC Coleman in June, 1995, it continually
delayed opening the factory until 1996.46 As indicated supra, The district court correctly rejected these claims, again
the Systems Impact Study included the activation of FCC relying on its analysis that in each instance the Coalition had
Coleman among the proposals ultimately approved by the failed to demonstrate that each tier of the Guidelines had been
Board. See (J.A., 225). As the 1995 Systems Furniture triggered. See 154 F. Supp. 2d at 1148-49.
Expansion disclosed the planned activation of FCC Coleman,
UNICOR opened the Coleman factory in accordance with the For example, UNICOR offset the $44,545 in 1995 sales at
Guidelines and section 4122. the Leavenworth factory with a corresponding decrease of
$1.8 million in sales at four factories.47 Therefore, the first
2. The purported core violations occurring in tier of the Guidelines was not triggered in 1995. UNICOR
UNICOR’s office seating furniture also offset the opening of office seating factories at FCI
production during 1991-1995 Bastrop and FCI Florence in 1993 with decreases in
production at five factories.48 Notwithstanding this
A similar fate befalls the four core violations occurring diminished capacity, UNICOR actually increased its sales in
within UNICOR’s office seating furniture production during 1993 by $48,788 from the previous year. However,
1991-1995. The Coalition alleges that UNICOR failed to UNICOR’s operating plan for 1993 estimated a $14 million
conduct the requisite market share analysis: (1) when the
47
45
UNICOR ceased production at the Texarkana factory and reduced
Notwithstanding its holding in regard to issue exhaustion, the production at its factories in Bastrop, Marianna and T hree R ivers. See
district court went on to consider the substantive allegations of the (J.A., 512).
unauthorized significant expansion claims. See 154 F. Supp. 2d at 1147-
51. 48
The Bastrop and Florence factories produced approximately $3
46
million in aggregates sales in 1993 and approximately $1 2 million in
UNICOR’s FY 1994 Operating Plan indicated an expected aggregate sales in 199 4. See (J.A., 512). UNICOR decreased production
June,1995 “Activation Date” for the systems furniture factory at FCC in 1993 at its Allenwood, La Tuna, Sheridan, Tallahassee and Three
Coleman. See (J.A., 902-03). The 1995 Operating Plan indicated a Rivers office seating factories by an aggregated $ 4.9 million in sa les. See
Decemb er, 1995 Activation D ate. See (J.A., 905-11). The Systems (J.A., 512). UNICOR continued to decrease production at those five
Impact Study discussed in detail the transfer of equipment from the factories in 199 4, as we ll as decreased production at its Ashland,
Duluth systems furniture factory to the new factory at FCC Coleman, to Marianna, and Texarkana factories, for a com bined decrease of $14
be opened in 1 996 . See (J.A., 225). million in sales. See (J.A., 512).
No. 01-2231 Coalition for Gov’t Procurement, et al. 57 58 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
decrease from 1992 sales. Because the Guidelines required 3. The purported core violation occurring in
UNICOR to review only “proposed production increases,” UNICOR’s office case goods furniture
UNICOR was not required to perform the market share production during 1991-1995
analysis. See (J.A., 1646 ¶ 108). Similarly, despite
UNICOR’s planned increase in inmate employment from 888 The seventh alleged core violation arose during UNICOR’s
employees in 1992 to 983 employees in 1993, see (J.A., 900, production of office case goods during 1991-1992. During
1497 ¶ 108, 1646 ¶ 108), UNICOR was not required to this period, the number of inmates employed in the
conduct the market share analysis because of the planned production of office case goods increased from 1,066 in 1991
decrease in its 1993 production.49 Therefore, the opening of to 1,358 in 1992. See (J.A., 774, 1110 ¶¶ 117, 120).
the new factories and the increases in employment in 1993 Meanwhile, UNICOR’s share of the federal market increased
did not trigger the first tier Guidelines. Thus, UNICOR was from 12.9% to 15.2%. See (J.A., 1504 ¶ 147, 1651 ¶ 147).
not required to conduct a market share analysis.
Faced with this apparent unauthorized significant
UNICOR’s activation of new factories at FCI Seagoville expansion, the district court concluded:
and FCI Three Rivers in 1991, furthermore, did not result in
prejudice to the Coalition. As with the authorization of the The office case goods increase in FY 1992 was not a
Schuykill systems furniture factory in 1991, the activation of significant increase. Between FY 1991 and 1992 there
the Seagonville and Three Rivers office seating factories did was an inmate employment increase of over 10% (the
not cause UNICOR to exceed its allowable market share. As trigger), and an increase in market share of 2.3%. These
discussed in the Office Seating Impact Study, UNICOR increases would normally be considered a significant
estimated it having a 8.86% market share in 1991 – a planned increase. Plaintiffs fail to consider, however, that the
decrease from its 10.06% market share in 1990. See (J.A., [G]uidelines also require that “the prior three years of
514). While UNICOR’s actual market share increased from production will be reviewed, to ensure that usual and/or
13.99% in 1990 to 14.6% in 1991, see (J.A., 1500 ¶¶ 124-25, abnormal fluctuations are taken into account and
1649 ¶¶ 124-25), this actual increase fell within the allowable normalized.” Inmate employment was 1,243 in 1990,
market share. Accordingly, UNICOR was not required to 1,066 in 1991, and 1,358 in 1992. By 1995, inmate
initiate the CARP. employment was 1,462. Taking the prior years into
account, the Court finds that the spike in 1992 in inmate
employment was a result of a low point of employment
in 1991 rather than a significant increase by itself.
154 F. Supp. 2d at 1148-49 (citation omitted).
The Coalition does not specifically challenge the district
court’s conclusion on appeal, and we find the reasoning of the
49
district court well-supported by the facts and law.
In any event, UNICOR actually decreased by 110 the number of Accordingly, no violation occurred with respect to
employees employed in the production o f office seating during 19 93. See
(J.A., 1 106 ¶ 77).
No. 01-2231 Coalition for Gov’t Procurement, et al. 59 60 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
UNICOR’s production of office case good furniture from “[f]or the most part, [UNICOR] ha[d] made minimal
1991-1995. purchases of additional production equipment,” (J.A., 1338).
While it is recognized that the White Paper examined
4. The core violation arising from UNICOR’s UNICOR’s production of D & Q furniture, rather than Office
failure “to undertake the required data Furniture, the conclusions remain pertinent because a
collection internal analysis.” significant number of factories that produced D & Q furniture
also produced Office Furniture.50
The Coalition attempts to salvage the unauthorized
significant expansion claims by relying on UNICOR’s failure The record further demonstrates that prejudice did not
to collect data regarding plant size and equipment capacity result from UNICOR’s failure to track plant size and
throughout 1991-1995. UNICOR concedes that it did not equipment capacity. Specifically, the foregoing analysis
collect information regarding plant size and equipment reveals that, in this case, the Coalition suffered prejudice only
capacity as required by the Guidelines. It nevertheless asserts where plant size or equipment capacity exceeded a ten percent
that the deficient data collection did not result in any increase and UNICOR’s market share increased beyond the
prejudice to the Coalition. allowable threshold. The Coalition’s claims necessarily are
limited to the four occasions during 1991-1995 where
While we do not readily concur in an agency’s failure to UNICOR’s market share increased beyond the allowable
adhere to its own promulgated procedures, the limited facts of limits: (1) the 1995 increase in systems furniture production
this case compel the conclusion that there is a lack of any from a 9.6% market share in 1994 to a 14.3% share in 1995;
prejudice suffered by the Coalition as a result of UNICOR’s (2) the 1992 increase in office seating production from a
omissions. The Coalition has not presented any supporting 14.6% market share in 1991 to a 18.5% share in 1992; (3) the
evidence from which an inference can be drawn that either 1993 increase in office seating production from the 18.5%
plant size or equipment capacity increased beyond the ten market share in 1992 to a 20.5% share in 1993; and (4) the
percent threshold in any given year. We acknowledge that the 1992 increase in office case goods production from a 12.9%
Guidelines place an affirmative duty on UNICOR to produce market share in 1991 to a 15.2% share in 1992.
such evidence and that the agency should bear the
consequences of not generating the requisite data. However, However, these four increases in Office Furniture
we cannot turn a blind eye to the uncontroverted and production are attributable to identifiable factors other than
overwhelming evidence in the record demonstrating that the increases in plant size or equipment capacity. For instance,
Coalition did not sustain any prejudice as a result of the parties acknowledge that the 1992 increases in office
UNICOR’s violations. seating and office case goods production derive from
For example, the White Paper examined UNICOR’s failure
to monitor plant size and equipment capacity and presented
50
several conclusions indicating that UNICOR did not expand The White Paper indicated: “[I]n most instances, the factories
these inputs of production beyond the ten percent threshold. produced other lines in addition to D & Q. As a result, the same
Indeed, the White Paper concluded that “[T]he amount of production space used to manufacture D & Q furniture was also used to
production space [] decreased by over 40%,” (J.A., 1335), and produce FP I’s Centurion office furniture line or FPI’s metal racking and
shelving, depending on the factory.” (J.A., 1335.)
No. 01-2231 Coalition for Gov’t Procurement, et al. 61 62 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
dramatic increases in inmate employment during that year.51 C. The Claim Challenging the Retroactive
Similarly, the 1995 market share increase in systems furniture Authorization
was the result of a decrease in the size of the federal market
and a dramatic drop in production in 1994.52 Consequently, The claim challenging the Board’s retroactive authorization
UNICOR’s systems furniture production was at abnormally parallels the foregoing claims in that the Coalition asserts that
depressed levels in 1994, which in turn, exacerbated the data UNICOR significantly expanded its production of office
for 1995. With respect to the 1993 increases in office seating, seating furniture in 1991 and 1992 without initiating the
assuming arguendo that an inference could be gleaned from CARP (the ninth and tenth core violations). The Coalition
the record that equipment capacity or plant size increased by goes on to assert that the Board lacked the authority to
ten percent or more during that year, as discussed supra, the retroactively authorize these purported significant expansions.
planned decrease in production rendered the Guidelines
inapplicable. Addressing the first issue – whether UNICOR significantly
expanded its production of office seating furniture in 1991
The lack of any evidence proffered by the Coalition, the and 1992 – the foregoing analysis reveals that the 1991
direct evidence found in the White Paper showing that neither expansion was not significant under the Guidelines. While
equipment capacity nor plant size increased from 1991-1995, inmate employment increased more than ten percent,
and the uncontroverted evidence demonstrating that increases UNICOR estimated it having a 8.86% market share in 1991
in UNICOR’s production were caused by other factors, all – a planned decrease from its 10.06% market share in 1990.
compel the finding that the Coalition suffered no prejudice as See (J.A., 514). UNICOR’s actual market share increased
a result of UNICOR’s failure to collect data regarding plant from 13.99% in 1990 to 14.6% in 1991. See (J.A., 1500
and equipment capacity. Thus, the unauthorized significant ¶¶ 124-25, 1649 ¶¶ 124-25). This actual increase also fell
expansion claims fail as a matter of law. within the allowable market share. Accordingly, UNICOR
was not required to initiate the CARP prior to expanding its
production of office seating in 1991.
UNICOR did concede in the Office Seating Impact Study
that it significantly expanded its production of office seating
furniture in 1992. See (J.A., 476-77). The issue before the
Court, therefore, is whether the Board possessed the authority
51 to retroactively authorize the 1992 significant expansion.
Inmate employment in office seating production increased from
739 employees in 1991 to a high of 888 during 1992. See (J.A., 1105-06
17 74,77). Additionally, the “spike” in the number of inmates producing Our analysis is governed by the familiar standards
office case good s was the result of abnormally low levels of employment established in Chevron U.S.A. Inc. v. Natural Resources
in 1991. See 154 F. Supp. 2d at 1148-49. Defense Council, Inc., 467 U.S. 837 (1984). Under Chevron,
52
we first determine “whether Congress has directly spoken to
The federal systems market declined from a record high of $4 52.2 the precise question at issue,” id. at 842; if it has not, we
million in 199 3 to $ 433 .6 in 19 94. See (J.A., 208). Meanwhile, enquire “whether the agency’s answer is based on a
UN ICO R’s production decreased from $52,601,756 in sales in 1993 to permissible construction of the statute,” id. at 843.
$41 ,424 ,737 in 199 4. See (J.A., 1100 1126 , 28).
No. 01-2231 Coalition for Gov’t Procurement, et al. 63 64 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
The plain text of the organic statute is unequivocally remanded the matter to the Board “with directions that the
prospective in nature. For instance, section 4122 requires the Board must illicit [sic] comments with respect to the increases
initiation of the CARP “[b]efore the board of directors makes in FY 1991 to 1995 . . . make specific findings as to whether
a final decision.” 18 U.S.C. § 4122(b)(4). Furthermore, the FPI obtained more than a reasonable share of the market . . .
section repeatedly refers to “plans” and “proposals” for and ascertain what percent of the share was unreasonable.”
significant expansions. 18 U.S.C. § 4122(b)(4)(B), (C). A See QFMA, at 25.
construction of the statute that allows for retroactive
authorization renders nugatory these multiple provisions It is well-settled that when an agency makes an error of law
delineating the prospective application of the CARP. Thus, in its administrative proceedings, a reviewing court should
it is with little hesitation that we determine that the Board remand the case to the agency so that the agency may take
lacks the authority to retroactively authorize prior significant further action consistent with the correct legal standards. See
expansions.53 South Prairie Constr. Co. v. Local No. 627, Int’l Union of
Operating Eng’rs, 425 U.S. 800, 806 (1976) (per curiam).
As a remedy for the unlawful significant expansion, the However, an exception to this general rule exists where it is
Coalition urges this court to adopt the approach utilized in “crystal-clear [that the] Board error renders a remand an
QFMA.54 As discussed supra, the district court in that case unnecessary formality.” NLRB v. Food Store Employees
Union, 417 U.S. 1, 8 (1974).
53 A critical distinction exists between QFMA and the case at
W e pause to no te that the p rejud icial erro r rule of the APA is
inapp licable to UNICOR and the Board’s violation of section 412 2. As
bar that renders a remand “an unnecessary formality.” In
the United States Co urt of Appe als for the Seco nd C ircuit recen tly QFMA, the district court emphasized that the Board had not
observed, “The rule of p rejud icial erro r inform s our re view of an agency’s provided prior notice of its intent to retroactively authorize
adherence to its statute and regulations; it has never b een used to the significant expansions in D & Q furniture production. See
introduce discretion into actions mad e mandatory by C ongress.” QFMA, at 17 (“[I]t appears . . . that the 1996 notice,
Whitman, 321 F.3d at 334.
comment, and approval by the Board solicited information
54 and comments on future production levels, not the prior
As discussed during our analysis of the mootness question supra,
the Coalition requested the equitable volume sales replacement remedy
production levels.”). This lack of notice led the district court
and declaratory relief in relation to the retroactive authorization claims. to conclude:
W ith respect to declaratory relief, it is acknowledged that UNICO R and
the Board violated section 4122 by not initiating the CARP prior to the [T]o the extent the [d]efendants rely on the White
1992 significant expansion in office seating. However, for the reasons Paper and the March 1996 decision in support of their
discussed supra, the request for declaratory relief is moot. We further earlier decisions, these documents are nothing more than
conclude that the retroactive authorization claim does not fall within the
well-defined “capable of repetition, yet evading review” exception to the
moo tness doctrine. See Suster v. M arshall, 149 F.3d 523, 527 (6th Cir.
1998). This exception applies where “(1) the challenged action [is] in its necessarily is too short in d uration “to be fully litigated prior to
duration too short to be fully litigated prior to cessation or expiration, and cessation.” Id. However, the underlying facts of this appeal do not
(2) there [is] a reasonable expectation that the same com plaining party support the conclusion that the C oalition will likely be subjec t to this
[will] be subject to the same action again.” Spencer v. Kemna, 523 U.S. same action again. Our analysis focuses, therefore, on the equitable
1, 17 (1998) (quotation omitted). Retroactive decision-making volum e sale replace ment remedy.
No. 01-2231 Coalition for Gov’t Procurement, et al. 65 66 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
post hoc rationalizations for their earlier decisions . . . Plaintiffs had proper notice of the Board’s intent to
The difficulty with relying on post hoc decisions is that consider retroactive approval of the significant increases
it ignores the fact that the agency may not have made the in office seating production, as well as an opportunity to
same decision had it received timely comments . . . comment at that administrative hearing. Therefore the
Furthermore, as noted above, it is not clear from the Board was within its authority to consider and decided
record whether [p]laintiff was notified in 1995-1996 that the issue and in so doing did not violate the
the Board, in 1996, would be considering the past Administrative Procedures Act.
violations, and would entertain comments regarding the
past violations. In the absence of evidence supporting 154 F. Supp. 2d at 1150-51 (citations omitted).
the decision at the time it was made, the court must
conclude that the decision was issued without observance While we disagree with the district court’s conclusion that
of proper procedures, and therefore violated the APA. the “Board was within its authority” to retroactively authorize
the 1992 significant expansion for the reasons previously
QFMA, at 18 (citations and footnote omitted). discussed, the notice provided to the Coalition, as well as the
manner in which the Board authorized the prior significant
In contrast, it is uncontroverted in the instant case that expansion, weigh strongly against remanding this matter to
UNICOR disclosed the 1992 (as well as the purported 1991) the Board. Were we to remand the matter in accordance with
significant expansions and publically requested the Board for QFMA, we would likely do so with instructions to “illicit [sic]
retroactive authorization. The private sector responded by comments” with respect to the 1992 significant expansions,
providing comments to UNICOR and testimony to the Board “to make specific findings as to whether [UNICOR] obtained
that expressly recognized UNICOR’s request for retroactive more than a reasonable share of the market” during 1992, and
authorization. See (J.A., 544, 562, 588, 1107 ¶¶ 99-100). to “ascertain what percent of the share was unreasonable.”
Relying on this notice, the court below reasoned: See QFMA, at 25. However, the Board has complied with
these potential instructions. The Office Seating Impact Study
This [c]ourt adopts the reasoning of [QFMA] but solicited comments, the private sector responded, and the
comes to a different finding in the present case because Board engaged in an analysis of the relevant factors
the record indicates that Plaintiffs were given adequate concluding, “[B]ased on market performance since 1991 the
notice that the Board would consider approving the past industry has not been adversely affected, and that UNICOR’s
significant increases in office seating production. The market share is reasonable. The Board therefore approves
office seating impact study made available to the public FPI’s request to ratify its sales levels achieved, subsequent to
in advance of the Board’s 1996 decision clearly and as a result of its expanded capacity during 1991 and
identified the expansion problems experience in 1991 1992.” (J.A. 656.) Hence, it is “crystal-clear” that a remand
and 1992 with office seating. For both 1991 and 1992, to the Board would do little more than duplicate processes
the report states that increases in production should have already undertaken. Food Store Employees Union, 417 U.S.
triggered “an analysis of market share”to determine the at 8.
necessity of initiating the guidelines process.
Moreover, the facts of the instant appeal preclude our
.... awarding of the equitable sales volume replacement remedy.
No. 01-2231 Coalition for Gov’t Procurement, et al. 67 68 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
The Coalition has not provided any evidence to support its Furniture production complied with its Guidelines and
purported $450 million in lost sales. It follows that the was appropriate. Second, the determinations that FPI’s
Coalition has not presented any evidence addressing only seating and case goods production did not take an
those sales lost as a result of the 1992 significant expansion unreasonable share of the Federal markets for these
in office seating. Furthermore, a remand to the district court products were based on a flawed and inaccurate market
for a damages hearing would likely confound, rather than share methodology. Third, the decisions followed
clarify the matter, in light of the Coalition’s failure to present improper ex parte communications to which the private
any evidence of “injury” during the office seating furniture sector had no opportunity to address or rebut.
expansion hearings. The Coalition did not present any
evidence of lost sales during the 1996 expansion hearings.55 See (Br. of Pls.-Appellants at 53-54).
The Coalition likewise has not presented any verifiable
evidence of lost sales during these proceedings. Therefore, it The APA establishes a scheme of “reasoned
would be an impermissible exercise in speculation for this decisionmaking.” Motor Vehicle Mfrs. Ass’n of United
court to order the requested relief. States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 52
(1983). “Not only must an agency’s decreed result be within
Accordingly, we determine that the Board lacked the the scope of its lawful authority, but the process by which it
authority to retroactively authorize UNICOR’s 1992 reaches that result must be logical and rational.” Allentown
significant expansions of office seating furniture production. Mack Sales and Service, Inc. v. National Labor Relations Bd.,
We further determine that a remand to the board is 522 U.S. 359, 374 (1998).
unnecessary. Moreover, the Coalition has not advanced
sufficient evidence demonstrating an entitlement to its An agency’s decision will be set aside “only if it is
equitable volume sales replacement remedy. arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with the law.” Slater, 120 F.3d at 632
D. The Claim Challenging the Board’s 1996 (citations omitted). This arbitrary or capricious standard is
Expansion Decisions the least demanding review of an administrative action. See
Davis v. Kentucky Fin. Cos. Ret. Plan, 887 F.2d 689, 693 (6th
The Coalitions relies on three factors allegedly Cir. 1989). It requires the party challenging the agency’s
demonstrating the “arbitrary and capricious” nature of the action to “show that the action had no rational basis or that it
Board’s 1996 expansion decisions: involved a clear and prejudicial violation of applicable
statutes or regulations.” McDonald Welding v. Webb, 829
First, the Board failed to consider the fundamental F.2d 593, 595 (6th Cir. 1987). If there is any evidence to
question of whether FPI’s previously expanded Office support the agency’s decision, the agency’s determination is
not arbitrary or capricious. See Oakland County Bd. of
Com’'rs v. U.S. Dep’t of Labor, 853 F.2d 439, 442 (6th Cir.
55
W e clarify that the Coalition did not waive its request for relief by 1998).
failing to presen t such evidence to the Bo ard. Th e omission o f such
evide nce in 1 996 , howe ver, is relevant to the issue as to whether there is However, deferential judicial review under the APA does
sufficient evidence for us to award the equitable volumes sales not relieve the agency of its obligation to develop an
replacement rem edy.
No. 01-2231 Coalition for Gov’t Procurement, et al. 69 70 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
evidentiary basis for its findings. To the contrary, the APA two sources of data relating to the size of the federal market:
reinforces this obligation. See, e.g., Motor Vehicle (1) the General Services Administration Federal Supply
Manufacturers Ass’n, 463 U.S. at 43 (“[T]he agency must Schedules (“FSS”); and (2) the Federal Procurement Data
examine the relevant data and articulate a satisfactory Center (“FPDC”). The FSS provided data for all federal
explanation for its action including a rational connection government purchases except those relating to the Department
between the facts found and the choice made.”) (quotation of Defense, the United States Postal Service, the legislative
omitted); Securities & Exchange Comm’n v. Chenery Corp., and judiciary branches, credit card purchases and special
318 U.S. 80, 94 (1943) (“The orderly function of the process orders. The FPDC maintained similar data, except that it did
of review requires that the grounds upon which the not account for purchases less than $25,000.
administrative agency acted are clearly disclosed and
adequately sustained.”). UNICOR utilized the FSS in the Final Systems Impact
Study’s calculation of the federal market, noting “It is
The Coalition’s three challenges to the 1996 expansion difficult to determine the exact amount of Federal systems
decisions fall short of demonstrating arbitrary and capricious furniture buys from private vendors not captured by the
decision-making on the part of the Board. As a threshold [FSS].” (J.A., 294.) The Coalition does not challenge
matter, the Coalition’s claim that the Board failed to consider UNICOR’s use of the FSS. Rather, the Coalition objects to
UNICOR’s past production levels is factually inaccurate. As UNICOR’s use of the FPDC data in the impact studies
the district court correctly determined: relating to office seating and office case good furniture.
Specifically, the Coalition alleges that UNICOR made several
Plaintiffs also argue that the Board’s decision on future adjustments to account for the sales not captured by the FPDC
increases failed to consider whether the then current data that, in turn, exaggerated the size of the federal market.
production levels during 1996 were even legal. The
record does not support Plaintiffs’ contention. The The Coalition fails to acknowledge that UNICOR ceased its
Board itself recognized that certain increases had use of the FSS data because representatives from GSA would
occurred without prior Board approval, and carefully not verify the accuracy of the data. See (J.A., 1296, 1512
considered those increases and the context in which they ¶ 189, 1654 ¶ 190, 1684 ¶ 189). The Coalition further fails to
occurred before deciding that those increases did not acknowledge that the Board recognized the potential for
violate FPI’s governing statutes . . . Here, it is impossible difficulties in calculating the federal market and convened a
to conclude from the evidence that the Board failed panel of independent experts to review its methodology as
“entirely” to consider the problem of whether past part of the office case goods decision. See (J.A., 892-93).
increases exceeded the mandate of FPI because it The independent panel of experts – the Methodology Review
specifically addressed those increases in its 1996 hearing. Panel – approved of UNICOR’s methodology. See (J.A.,
918) (“It is the consensus of the Methodology Review Panel
154 F. Supp. 2d 1150-51. that the basic methodology used by FPI to estimate Federal
procurements is reasonable.”).
Additionally, the Coalition’s assault on the methodology
utilized by the Board in calculating the federal market ignores Consequently, the Coalition’s challenge to the methodology
several key facts. During the period in question, there were utilized by UNICOR to determine the size of the federal
No. 01-2231 Coalition for Gov’t Procurement, et al. 71 72 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
market does not suggest that evidence is lacking to support interpretation of ‘longstanding’ duration,” Barnhart v.
the Board’s decision. Rather, it is a disagreement between the Walton, 535 U.S. 212, 220 (2002) (quoting North Haven Bd.
parties as to the ideal manner in which to calculate data that of Ed. v. Bell, 456 U.S. 512, 522, n. 12 (1982)), recognizing
is not otherwise readily obtainable. In such circumstances, that the agency’s practices rest on “‘a body of experience and
principles of deference to agency decision-making require informed judgment to which courts and litigants may properly
that we uphold the approach utilized by the Board. See resort for guidance,’” Bragdon v. Abbott, 524 U.S. 624, 642
Marsh v. Oregon Natural Resources Council, 490 U.S. 360, (1998) (quoting Skidmore v. Swift & Co., 323 U.S. 134, 139-
378 (1989) (holding that “an agency must have discretion to 140 (1944)).
rely on the reasonable opinions of its own qualified experts
even if, as an original matter, a court might find contrary It is reasonable to construe the organic statute as
views more persuasive.”). encouraging communications between the Board and
UNICOR. Section 4121 provides: “‘Federal Prison
In a final attempt to demonstrate the arbitrary and Industries’, a government corporation of the District of
capricious nature of the 1996 expansion decisions, the Columbia, shall be administered by a board of six directors,
Coalition alleges that the Board engaged in ex parte appointed by the President to serve at the will of the President
communications with UNICOR’s staff prior to, and without compensation.” 18 U.S.C. § 4121. “Administer” is
immediately following, the expansion hearings. UNICOR “[t]o manage or conduct . . . [or] to take charge of a business.”
readily admits that the Board requested information from BLACK’S LAW DICTIONARY 44 (6th Ed. 1990). While the
UNICOR’s staff that extended beyond that provided in the organic statute subsequently segregates the duties of
comprehensive impact studies, and that the Board directed the UNICOR and the Board, section 4121 demonstrates the inter-
staff to memorialize the Board’s final significant expansion relationship between the entities. Simply, the Board could
decisions in writing. UNICOR contends, however, that this not “take charge” of UNICOR without engaging in
interaction between it and the Board was consistent with the communications with its staff.
organic statute.
Furthermore, the Coalition’s assertion that section 4122,
UNICOR and the Board’s interpretation of section 4122 as and more specifically the CARP, prescribe the exclusive
permitting ex parte communications is entitled to deference process in which the Board and UNICOR may communicate
to the extent that its is reasonable. See Washington State is wholly devoid of merit.56 The statute provides no such
Dept. of Social and Health Servs. v. Guardianship Estate of
Keffeler, 537 U.S. 371, 385 (2003) (holding that cogent
“administrative interpretations . . . not [the] products of 56
Before the district court, the Coalition relied on 5 U.S.C. 557(d)(1)
formal rulemaking . . .warrant respect”); Christensen v. as the basis for its ex pa rte argum ent. Section 557(d)(1) is a broad
Harris County, 529 U.S. 576, 587 (2000) (“Interpretations provision that pro hibits any ex pa rte comm unications relevant to the
such as those in . . . policy statements, agency manuals, and merits of an agency proceeding between “any member of the body
enforcement guidelines, all of which lack the force of law -- comprising the agency” or any agency employee who “is or may
do not warrant Chevron-style deference.”); accord, United reaso nably be expected to be involved in the decisional process” and any
“interested person outside the agency.” 5 U .S.C. § 557 (d)(1 )(A)-(B ). The
States v. Mead Corp., 533 U.S. 218, 234 (2001). We purpo se of the ex pa rte communications prohibition is to ensure that
“normally accord particular deference to an agency “agency decisions required to be made on a public record are not
No. 01-2231 Coalition for Gov’t Procurement, et al. 73 74 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
limiting language. Rather, the text of the organic statute V. THE JUST COMPENSATION CLAUSE CLAIM
compels the conclusion that Congress envisioned close
interaction between the Board and UNICOR’s staff. The Coalition “constitutionalizes” its unauthorized
Moreover, Congress established the Board as one serving significant expansion claims by asserting that UNICOR’s
“without compensation” and without staff. It therefore is increased production during 1991-1995 constituted a “taking”
reasonable to construe the statute as authorizing pursuant to the Just Compensation Clause of the Fifth
communications, even ex parte communications, between the Amendment to the United States Constitution. The Just
Board and UNICOR’s staff. Compensation Clause does not prohibit the public taking of
private property, but only taking “without just compensation.”
We cannot find that the Board’s 1996 expansion decisions U.S. CONST . amend. V. The aim of the Clause is to prevent
were “arbitrary capricious or otherwise not in accordance with the government “from forcing some people alone to bear
law.” Slater, 120 F.3d at 632 (citations omitted). Indeed, we public burdens which, in all fairness and justice, should be
find the administrative record lengthy, detailed, and borne by the public as a whole.” Armstrong v. United States,
demonstrative of careful evaluation on the part of Board. 364 U.S. 40, 49 (1960). A party challenging governmental
Contrary to the assertions advanced by the Coalition, the action as an unconstitutional taking bears a substantial
Board did not passively authorize UNICOR’s significant burden. See Eastern Enter.v. Apfel, 524 U.S. 498, 523
expansion requests. The Board demonstrated a willingness to (1998)(citation omitted).
authorize lower expansions than that requested when the
evidence adduced required such reductions. Furthermore, A. Jurisdiction
when the Coalition challenged UNICOR’s data (i.e. in the
office case goods context), the Board convened a panel to As a threshold matter, UNICOR raises sovereign immunity
evaluate the data and agreed to alter its decision if further as a bar to the Coalition’s takings claim. Long-standing
information came to light. Thus, the Coalition’s claim authority suggests that a suit against UNICOR is essentially
challenging the 1996 significant expansions decision fails as a suit against the United States. See Galvan v. Fed. Prison
a matter of law. Accordingly, the Court therefore cannot hold Indus.,199 F.3d 461, 463-64 (D.C. Cir. 1999); Sprouse v. Fed.
that the Board’s decisions were arbitrary and capricious. Prison Indus., 480 F.2d 1, 4-5 (5th Cir. 1973). On the basis
of this authority, UNICOR asserts that it generally is immune
from suit unless it otherwise consents to be sued. See United
States v. Sherwood, 312 U.S. 584, 586 (1941).
The Coalition alleges that the APA expressly waives
UNICOR’s purported sovereign immunity. The APA’s
waiver of sovereign immunity applies to “an action in a court
influenced by private, off-the-record co mmunications from those of the United States seeking relief other than money
perso nally interested in the outcom e.” Raz Inland Navigation Co. v. damages.” 5 U.S.C. § 702. In addition, the APA provides
Interstate Com merce Co mm ’n, 625 F.2d 258, 260 (9th Cir. 1980) that judicial review of agency action is available only “if there
(quotation omitted). H owever, it applies to only co mmunicatio n with is no other adequate remedy in a court.” 5 U.S.C. § 704.
persons “outside of the agency”; therefore , it is patently inapplicable to
the case at bar.
No. 01-2231 Coalition for Gov’t Procurement, et al. 75 76 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
UNICOR contends that the APA’s waiver is inapplicable to UNICOR in the Court of Federal Claims on jurisdictional
the case at bar because the Coalition’s claim for $450 million grounds. Id. at 1335. Applying the non-appropriated funds
in lost sales is monetary in nature. UNICOR further contends doctrine (“NAFI”),58 the court examined UNICOR’s organic
that jurisdiction over this case properly rests in the Court of statute and determined:
Federal Claims.
[UNICOR] does not operate with appropriated funds. It
The Tucker Act, 28 U.S.C. § 1491(a)(1), vests the Court of is a self-sufficient corporation whose funds are derived
Federal Claims with exclusive jurisdiction to render judgment primarily from its product sales, and it receives no
upon any claim against the United States for money damages congressional appropriations . . . . [UNICOR] repaid its
exceeding $10,000 that “is founded either upon the initial funding soon after its inception in 1934 and has
Constitution, or any Act of Congress or any regulation of an never received any appropriations from Congress since
executive department, or upon any express or implied contract that time.
with the United States, or for liquidated or unliquidated
damages in cases not sounding in tort.” Id. It is well- ....
established that “[r]egardless of the nature of relief sought,
the availability of the Tucker Act remedy renders premature In light of [UNICOR’s] enabling legislation and
any takings claim in federal district court.”57 Eastern Enter., legislative history, we conclude that Congress has clearly
524 U.S. at 521 (quotation omitted). Thus, a claim for just expressed its intention that [UNICOR’s] funds are to be
compensation asserted against the United States must be segregated from the general federal revenues, thereby
brought to the Federal Court of Claims in the first instance, providing a “firm indication” that it intended to absolve
unless Congress has otherwise withdrawn the Tucker Act appropriated funds from liability for [UNICOR’s]
grant of jurisdiction. See Eastern Enter., 524 U.S. at 520; see actions. Accordingly, we agree with the Court of Federal
also United States v. Causby, 328 U.S. 256, 267 (1946) (“[I]f Claims’ conclusion that [UNICOR] is a NAFI for which
there is a taking, the claim ‘is founded upon the Constitution’
within the meaning of the Tucker Act.”). Consequently, we
initially must consider whether the Tucker Act’s monetary 58
The NAF I is triggered by the fact that judgments rendered by the
remedy is available to the Coalition. Court of Federal Claims “shall be paid out of any general appropriation.”
28 U.S.C. § 2517.
In Core Concepts of Fl. v. United States, 327 F.3d 1331
(Fed. Cir. 2003), the Court of Appeals for the Federal Circuit [The Court of Federal Claims’]Tucker Act jurisdiction may not
affirmed the dismissal of a Tucker Act suit brought against be invoked with respect to transactions that “involve agencies
where the statutory authority for the ac tivities [in suit]
specifically limited liability or expenditures to non appropriated
funds.” In other words, the existence of the court’s jurisdiction
57
under the T ucker Act m ust be confined to cases in which
An exception to the “presumption of Tucker Act availability” appropriated funds can be obligated.
exists where the challenged regulation requires a “direct transfer of funds
mandated by the Government.” Eastern Enter., 524 U.S. at 521. In such Furash & Co. v. United States, 46 Fed. Cl. 518, 520 (2000), aff’d, 252
an instance, the aggrieved party may seek im med iate equitable relief in F.3d 1336 (Fed. Cir. 2001) (quoting L’Enfant Plaza Prop., Inc. v. United
the district court. Id. States, 668 F.2d 121 1, 12 12 (Cl. Ct. 1 982 ).
No. 01-2231 Coalition for Gov’t Procurement, et al. 77 78 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
the United States is not financially answerable in that “prime objective” is simply to obtain money from the federal
court. government, the case belongs in federal claims court. Id.
Id. at 1335, 1337. The NAFI exception therefore precludes However, as we repeatedly have stated supra, the Coalition
the Coalition from asserting Tucker Act claims against seeks equitable, rather than monetary, relief in the form of a
UNICOR in the Court of Federal Claims. Moreover, there is roll-back, capping, or future adjustment of UNICOR’s
a substantial question as to whether a suit against UNICOR is production. Notwithstanding the patently equitable nature of
essentially a suit against the United States for sovereign the requested relief, UNICOR attempts to characterize this
immunity purposes, as funds from the federal treasury are not relief as seeking money from the U.S. Treasury. Specifically,
implicated in the event a judgment is rendered against UNICOR argues that in the event this court were to order the
UNICOR. See Aaron v. United States, 51 Fed. Cl. 690, 694 equitable volume sales replacement remedy, federal agencies
n.2 (Fed. Cl. 2002) (“Both courts held that the suits and departments would be compelled to purchase Office
essentially were against the United States and that the United Furniture from the private sector. Such purchases, UNICOR
States had not, insofar as relevant there, waived sovereign argues, necessarily draw on the federal treasury.
immunity. The issue in those decisions was not the one
resolved here [the NAFI] . . . we view the relevant language This court has rejected a similar argument, reasoning, “‘The
as dicta, and, in any event believe it to be inaccurate.”) (citing fact that a judicial remedy may require one party to pay
Sprouse, 480 F.2d 1 and Galvan, 199 F.3d at 463); see also money damages to another is not sufficient reason to
Zhen Hua-Gao v. Jenifer, 185 F.3d 548, 554 (6th Cir. 1999) characterize the relief as ‘money damages’.’” Veda, 111 F.3d
(“The general rule is that a suit is against the sovereign if the at 40 (quoting Bowen v. Mass., 487 U.S. 879, 893 (1988)).
judgment sought would expend itself on the public treasury We likewise decline to construe the requested relief as
or domain, or interfere with the public administration, or if seeking monetary damages; therefore, the district court
the effect of the judgment would be to restrain the properly asserted its jurisdiction over the Coalition’s takings
Government from acting, or to compel it to act.”). claim.
We decline to resolve the conflicting authority as to B. Regulatory Takings
whether UNICOR is entitled to sovereign immunity. It is
sufficient for our purposes here that the Coalition could not The United States Court of Appeals for the Federal Circuit,
advance its claim in the Court of Federal Claims. which has extensive expertise in federal-takings law in light
of its specialized jurisdiction, has developed a two-part test
Furthermore, we do not concur in UNICOR’s “to evaluate claims that a governmental action constitutes a
characterization of the relief sought by the Coalition. We taking of private property without just compensation.”
acknowledge that a party cannot circumvent the Tucker Act Maritrans Inc. v. United States, 342 F.3d 1344, 1352 (Fed.
“by suing solely for declaratory or injunctive relief in a case Cir. 2003) (citing M & J Coal Co. v. United States, 47 F.3d
where such relief is tantamount to a judgment for money 1148, 1153-54 (Fed Cir. 1995)). First, the court must
damages.” Veda v.United States Dep’t of the Air Force, 111 examine whether the claimant has established a cognizable
F.3d 37, 39 (6th Cir. 1997). Where the complaining party’s “property interest” for the purposes of the Just Compensation
Clause. Id.; accord, Raceway Park, Inc. v. Ohio, 356 F.3d
No. 01-2231 Coalition for Gov’t Procurement, et al. 79 80 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
677 (6th Cir. 2004) (“[T]here is no taking if there is no private However, as discussed throughout this opinion, several
property in the first place.”). Secondly, where a cognizable provisions of UNICOR’s organic statute ensure that
property interest is implicated, the court must consider UNICOR’s operation do not “undu[ly] burden” a single
whether a taking occurred. Id. private industry, 18 U.S.C. § 4122(b)(1), nor “capture more
than a reasonable share of the [federal] market,” 18 U.S.C. §
With respect to the first step, the Constitution neither 4122(b)(2). Furthermore, federal agencies and departments
creates nor defines the scope of property interests may request waiver approval from UNICOR to purchase
compensable under the Just Compensation Clause. See Bd. of products other than UNICOR items in the event they deem
Regents of State Colleges. v. Roth, 408 U.S. 564, 577 (1972). that their specific product and, or reasonable delivery
Rather, “existing rules and understandings” and “background requirements cannot be met. See 48 C.F.R. § 8.605. Where
principles” derived from an independent source, such as state, UNICOR grants the waiver request, the federal agency or
federal, or common law, define the dimensions of the department may purchase the product from a private sector
requisite property rights for purposes of establishing a manufacturer through GSA’s FSS program, or undertake a
cognizable taking. Lucas v. S. C. Coastal Council, 505 U.S. competitive process governed by federal procurement laws.59
1003, 1030 (1992). See generally 10 U.S.C. §§ 2302-2332; 41 U.S.C. §§ 5-707.
Relying on these provisions, the Coalition asserts: “Federal
The Coalition asserts that UNICOR’s “unauthorized law and regulations including the Competition in Contracting
expansions diminished Plaintiffs’ collective property right in Act and the Federal Acquisition Regulations establish that
the competitive Federal Government Office Furniture private sector Office Furniture manufacturers have the right
market.” (Br. of Pls.-Appellants at 61.) Federal government to compete for Federal Office Furniture procurements. [The
procurements of Office Furniture are governed by UNICOR’s Coalition is] listed on the GSA schedule as approved to sell
organic statute and the Federal Acquisition Regulations Office Furniture to the Federal government . . . .” (Br. of Pls.-
(“FAR”), 48 C.F.R. §§ 8.000 - 9905.506 (2003). Several Appellants at 61.)
provisions of the FAR mandate that federal agencies and
departments purchase products from UNICOR. See, e.g., 48 It is well-settled that “[t]he possibility of obtaining work
C.F.R. § 8.002(a)(1)(iii) (2003) (“[A]gencies shall satisfy from a listing in the [FSS] schedule has real business value,
requirements for supplies or services from . . . Federal Prison even if there [is] no guarantee of obtaining a certain amount
Industries, Inc.”); 48 C.F.R. § 8.602(a) (“Agencies shall of work.” See ACE-Fed.Reporters, Inc. v. Barram, 226 F.3d
purchase required supplies . . . made in Federal Penal and 1329, 1331 (Fed. Cir. 2000); see also Locke v. United States,
Correctional Institutions . . . .”). Additionally, section 4124(a) 283 F.2d 521, 523 (Ct. Cl. 1960) (“We cannot believe that in
requires “Federal departments and agencies and all other this instance plaintiff bargained merely to have his name
Government institutions of the United States [to] purchase at
not to exceed current market prices, such products”
manufactured by UNICOR “as meet their requirements and 59
may be available.” 18 U.S.C. § 4124(a). Indeed, UNICOR If UNICO R denies the request, the agency or department may
is a “mandatory source of supply”of Office Furniture for appeal the decision through UN ICO R’s O mbu dsman. See 48 C.F.R.
§ 8.605; (J.A., 165). In the event this appeal is denied, the federal agency
federal agencies and departments. See (Br. of Pls. - or department may appeal to decision to the dispute resolution board
Appellants at 5, 9); (Br. of Defs. - Appellees at 4). pursuant to sectio n 4124(b). See also 48 C.F.R. § 8.605 (c); (J.A., 165).
No. 01-2231 Coalition for Gov’t Procurement, et al. 81 82 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
printed in the supply schedule. It appears more important that impact of the regulation on the claimant; (2) the extent to
being in the schedule created a reasonable probability that which the regulation has interfered with distinct investment-
business would be obtained.”). Therefore, in this context, the backed expectations; and (3) the character of the
Coalition has a property right in competing for Office governmental action. Raceway Park, Inc., 356 F.3d at 677
Furniture sales to federal agencies. This property right is (citing Connolly v. Pension Benefit Gty. Corp., 475 U.S. 211,
limited, however, to those sales not captured by UNICOR’s 224 (1986)); see also Pa. Central Transp. Co. v. City of New
mandatory preference either through the limitations present in York, 438 U.S. 104, 124 (1978).
UNICOR’s organic statute, or those sales expressly waived by
UNICOR. The United States Court of Appeals for the District of
Columbia Circuit has explained the Penn Central factors in
Having established the Coalition’s property right, the detail:
second tier of review requires an examination as to whether
UNICOR’s activities constituted a compensable taking. The meaning of the three factors identified in Penn
While compensable takings generally occur as a result of a Central has been amplified by the Court, both in Penn
physical invasion or confiscation, where “a regulation goes Central and in later cases. The regulation’s economic
too far it will be recognized as a taking.” Pa. Coal Co. v. effect upon the claimant may be measured in several
Mahon, 260 U.S. 393, 415 (1922). “Real property, tangible different ways. See Hodel v. Irving, 481 U.S. 704, 714
property, and intangible property, all may be the subject of (1987) (looking to the market value of a property);
takings claims.” Maritrans Inc., 342 F.3d at 1352 (citing Keystone Bituminous Coal Ass’n v. DeBenedictis, 480
Lucas, 505 U.S. at 1015; Andrus v. Allard, 444 U.S. 51, 65 U.S. 470, 495-96 (1987) (looking to whether the
(1984); and Ruckelshaus v. Monsanto Co., 467 U.S. 986, regulation makes property owner’s coal operation
1003-04 (1984)). “commercially impracticable”); Andrus, 444 U.S. at 66
(looking to the possibility of other economic use besides
Regulatory takings law incorporates both a “categorical sale, which was prohibited by the challenged regulation);
taking,” where a regulation deprives property of all value, and Penn Central Transp. Co., 438 U.S. at 136 (focusing on
a “non-categorical” taking, where property is deprived of the ability to earn a reasonable rate of return). A
some, but not all of its economic value, as a result of reasonable investment-backed expectation “must be
government regulation. See Anderson v. Charter Township more than a ‘unilateral expectation or an abstract need.’”
of Ypsilanti, 266 F.3d 487, 493 (6th Cir. 2001) (citing Lucas, Ruckelshaus, 467 U.S. at 1005-06 (1984) (quoting
505 U.S. at 1019 n.8). “In the categorical-taking case, once Webb’s Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S.
it is proven that a regulation has deprived the land of all 155, 161(1980)). Claimants cannot establish a takings
economic value, compensation is automatically required claim “simply by showing that they have been denied the
under the Fifth Amendment.” Anderson 266 F.3d at 493 ability to exploit a property interest that they heretofore
(citing Lucas, 505 U.S. at 1015). had believed was available for development.” Penn
Central Transp. Co., 438 U.S. at 130. And the character
Where, as here, the party alleges the presence of a non- of the governmental action depends both on whether the
categorical taking, the court employs an “ad hoc, factual government has legitimized a physical occupation of the
inquiry,” into three significant factors: (1) the economic property, see Loretto v. Teleprompter Manhattan CATV
No. 01-2231 Coalition for Gov’t Procurement, et al. 83 84 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
Corp., 458 U.S. 419, 434-35 (1982), and whether the without giving the affected private sector vendors who
regulation has a legitimate public purpose, see Keystone sell to the Federal government certain due process rights.
Bituminous Coal Ass’n, 480 U.S. at 485. Finally, under
all three of these factors, the effect of the regulation must (J.A., 1456.) Beyond recognizing that its reasonable
be measured on the “parcel as a whole.” See Penn investment-backed expectation is dependent on UNICOR’s
Central Transp. Co., 438 U.S. at 130-31. production of Office Furniture for any given year, the
Coalition further recognizes the legitimacy of UNICOR’s
Dist. Intown Prop. Ltd. P’ship v. D.C., 198 F.3d 874, 879 conduct – the production of Office Furniture for the purposes
(D.C. Cir. 1999) (internal citations modified). of employing inmates. Indeed, the lone dispute concerning
UNICOR’s conduct during 1991-1995 is that UNICOR did
When viewed through the lens of Penn Central, a myriad not initiate the CARP prior to expanding production. Such
of deficiencies in the Coalition’s takings claim come into claims sound in due process, rather than takings law. The
focus. While the Coalition has asserted that UNICOR’s Coalition concedes such by stating:
production during 1991-1995 resulted in $450 million in lost
sales, it has failed to provide any supporting evidence for this Count 7 . . . alleges that by significantly increasing its
assertion. In addition, it is axiomatic that the Coalition’s production of Office Furniture from FY 1990-1995,
investment-backed expectations are limited by UNICOR’s without undertaking the statutorily required due process
exercise of its mandatory source of supply. As the Coalition procedures outlined in their organic statute, FPI’s illegal
acknowledges: expansion of Office Furniture Production, FPI
effectuated a regulatory taking in violation of the due
While it may change from year to year, there is a fixed process clause of the Fifth Amendment to the United
amount of Office Furniture that the Federal Government States Constitution.
will purchase at any given time. Within this fixed market
of Federal Office Furniture procurements is FPI’s (J.A. 1457) (internal errors in original).
mandatory source preferences. Regardless of how much
Office Furniture Defendant FPI produces in Federal We therefore agree that summary judgment was properly
penal and correction institutions, the Federal Government awarded to UNICOR with respect to the takings claim
must buy every stick of it before it can purchase Office because the Coalition has failed to establish the three Penn
Furniture made by the [Coalition]. Central factors: (1) that it lost $450 million in sales as a result
of UNICOR’s increased production; (2) that it had any strong
(J.A., 1456.) This acknowledgment crystalizes the deficiency investment backed expectations in light of UNICOR’s
of the Coalition’s takings claim. The Coalition continued: mandatory source of supply; and (3) that its interests
prevailed over of the legitimate interests of the federal
Concerned about the impact this regime could have on government in employing federal inmates.
private manufacturers . . . Congress amended FPI’s
statute to ensure that it does not take more than a
reasonable share of the Federal Office Furniture market
No. 01-2231 Coalition for Gov’t Procurement, et al. 85 86 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
VI. THE PASS-THROUGH FURNITURE CLAIM matter to the district court with instruction to vacate its award
of summary judgment on Count XIII of the complaint
Prior to oral argument, UNICOR filed notice with the court addressing UNICOR’s “pass-through” furniture practice.
indicating that the Board “adopted a resolution directing that
[UNICOR] cease using the ‘pass-through’ practice.” (Letter VII. UNICOR’S ENFORCEMENT OF ITS
from Assistant U.S. Attorney Charles R. Gross, filed Nov. 18, MANDATORY SOURCE
2002.) The notice asserted that as UNICOR had “voluntarily
ceased use of the [pass-through] practice,” the issue was The Coalition’s final claim challenges UNICOR’s practice
moot. Id. of selling Office Furniture directly to private sector
contractors employed on federal projects. In such instances,
During oral argument, counsel for the Coalition agreed that the private sector contractor has entered into a contract to
the “pass-through” furniture claim was moot, but requested construct a federal facility that includes the installation of
that the court vacate the district court’s decision in that Office Furniture. Occasionally, the private sector contractor
regard. will attempt to procure the Office Furniture from a private
manufacturer instead of UNICOR. When UNICOR becomes
Whether any opinion should be vacated on the basis of aware of the scenario, it attempts to enforce its mandatory
mootness is an equitable question. See U.S. Bancorp Mortg. source of supply in three ways: (1) provide the federal agency
Co. v. Bonner Mall P’ship, 513 U.S. 18, 26 (1994). When a or department with a waiver; (2) provide the Office Furniture
civil case becomes moot pending appellate adjudication, “the directly to the federal agency or department that, in turn, will
established practice . . . in the federal system . . . is to reverse provide it to the private sector contractor; or (3) sell the
or vacate the judgment below and remand with a direction to furniture directly to the private sector contractor for
dismiss.” United States v. Munsingwear, Inc., 340 U.S. 36, installation within the federal facility. See (Br. of Defs.-
39 (1950). Vacatur “clears the path for future relitigation” by Appellees at 8); (J.A., 1217-19, 1226b-h). The Coalition
eliminating a judgment the appellant could not oppose on alleges that this third option violates UNICOR’s express
direct review. Id. at 40. “Vacatur is in order when mootness prohibition against selling goods “to the public in competition
occurs through happenstance -- circumstances not attributable with private enterprise.” 18 U.S.C. § 4122 (a).
to the parties -- or, relevant here, the ‘unilateral action of the
party who prevailed in the lower court.’” Arizonans for 1. Standing
Offical English v. Ariz., 520 U.S. 43, 71-72 (quoting U.S.
Bancorp Mortgage Co., 513 U.S. at 23). “[W]here mootness The district court held that the Coalition lacked standing to
results from settlement, however, the losing party has challenge UNICOR’s practice because the Coalition “must
voluntarily forfeited his right legal remedy by the ordinary show an actual or threatened harm beyond an imagined
processes of appeal or certiorari, thereby surrendering his possibility of harm in order to have standing. Here, none of
claim to the equitable remedy of vacatur.” U.S. Bancorp the Plaintiffs [were] able to allege any kind of personal
Mortgage Co., 513 U.S. at 25. injury-in-fact.” 154 F. Supp. 2d at 1155.
Based upon this authority and the unilateral action of the Failure to establish standing is a jurisdictional defect. See
Board, this claim has become moot. We therefore remand the Lewis v. Casey, 518 U.S. 343, 349 n.1 (1996). To satisfy the
No. 01-2231 Coalition for Gov’t Procurement, et al. 87 88 Coalition for Gov’t Procurement, et al. No. 01-2231
v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.
requirements of Article III standing, “a plaintiff must, During oral argument, counsel for the Coalition disagreed
generally speaking, demonstrate that he has suffered ‘injury that the claim was moot, alleging that its claim extended
in fact,’ that the injury is ‘fairly traceable’ to the actions of the beyond the DOD context.
defendants, and that the injury will likely be redressed by a
favorable decision.” Bennett v. Spear, 520 U.S. 154, 162 We agree. It is undisputed that UNICOR enforces its
(1997) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, mandatory source of supply on all private sector contractors
560-61 (1992)). employed on federal projects where the agency has not
received a waiver. A plain reading of the newly enacted
In the instant matter, the district court failed to give legislation, as well as the implementing regulations,
appropriate consideration to the affidavit provided by Knoll’s demonstrate that they limit UNICOR’s practice solely in the
Vice President for Government Sales. See (J.A., 1583-88). context of DOD projects. See Defense Federal Acquisition
The affidavit demonstrated four identifiable occasions where Regulation Supplement; Competition Requirements for
Knoll had been requested by general contractors employed in Purchases From a Required Source, 68 F.R. 64559 (Nov. 14,
the construction of federal facilities to submit proposals for 2003). Consequently, the claim is not moot.
the sale of Office Furniture; it had incurred substantial
expense in preparing its proposals; UNICOR subsequently 3. UNICOR’s Practice
enforced its mandatory source of supply on the general
contractor; and the general contractor ultimately purchased As UNICOR enforces its mandatory source of supply on an
Office Furniture from UNICOR, rather than Knoll. See (J.A., ad hoc basis, see (J.A., 1225), we afford a pale of deference
1586-88). On at least one occasion, the general contractor to its statutory and regulatory interpretations only to the
“advised Knoll, Inc. that [it] would have ordered systems extent they are reasonable. See Washington State Dept. of
furniture from Knoll, Inc. had they not been forced to procure Social and Health Servs., 537 U.S. at 385. Notwithstanding
systems furniture from [UNICOR].” (J.A., 1587). the district court’s conclusion as to standing, it went on to
Accordingly, Knoll had standing to challenge UNICOR’s find UNICOR’s practice reasonable, opining
practice.
Congress has declared that federal agencies are
2. Mootness required to purchase FPI products unless they procure a
waiver from FPI. As Defendants and common sense
Prior to oral argument, UNICOR filed another notice with demonstrate, the actual purchaser is not the contractor,
the court, this time indicating that Congress had enacted but the federal agency for whom the contractor is
legislation, Pub. L. No. 107-314, 116 Stat. 2458 (2002), that constructing a facility. To allow a federal agency to
mooted the Coalition’s claim. See (Letter from Assistant U.S. escape the legal requirement of obtaining a waiver or
Attorney Charles R. Gross, filed Feb. 3, 2003.) The notice purchasing furniture from FPI simply by purchasing
indicated that the legislation provided that private sector furniture produced in the private sector using a
contractors employed on projects for the Department of subcontractor as a middle-man would subvert the will of
Defense (“DOD”)were “permitted, but [] not required, to Congress. Moreover, when FPI engages in this practice,
purchase products or services from UNICOR.” Id. it is not selling goods to the private sector because title
for those goods passes directly to the federal agency for
No. 01-2231 Coalition for Gov’t Procurement, et al. 89
v. Federal Prison Industries, Inc., et al.
whom the facility is being constructed. Therefore, FPI’s
practice of requiring private contractors to purchase FPI
furniture as part of a turn-key facility construction does
not violate FPI's governing statutes.
154 F. Supp. 2d at 1155-56.
The district court’s straightforward response to the issue at
bar is directly on target. The plain language of section
4122(a) prohibits sales “to the public,” but only “in
competition with private enterprise.” 18 U.S.C. § 4122 (a).
As discussed in the context of the Coalition’s takings claim,
the public competes for the federal Office Furniture market
only to the extent UNICOR is not a mandatory source of
supply. Therefore, a sale to a private sector contractor as a
means to enforce its statutory and regulatory mandatory
source of supply for federal agencies and departments
necessarily falls within UNICOR’s authority. As the district
court definitively stated, “common sense” demonstrates that
the actual purchaser in this context is the federal agency or
department.
The Court recognizes the potential for abuse with
UNICOR’s practice, although no actual improprieties have
been demonstrated in case sub judice. The Coalition’s
remedy rests not with the courts, but with the legislature.
VIII. CONCLUSION
For the foregoing reasons, we AFFIRM the order of the
district court, except those provisions concerning Count VIII
of the complaint (the “Pass-Through Furniture” claim). With
respect to Count VIII, we REMAND the matter to the district
court with instructions to VACATE its decision consistent
with our Opinion.