CS-360, LLC v. United States Small Business Administration

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
CS-360, LLC,
Plaintiff,
v.
Civil Action No. 13-0057 (CKK)
UNITED STATES SMALL BUSINESS
ADMINISTRATION,
Defendant.
MEMORANDUM OPINION
(November 11, 2013)
Plaintiff CS-360, LLC (“CS-360” or “Plaintiff”) brings this action against Defendant
United States Small Business Administration (“Defendant” or “SBA”) seeking a declaratory
judgment setting aside or vacating the November 15, 2012 Order by the Office of Hearing
Appeals of the United States Small Business Administration (“OHA”) dismissing as untimely
Plaintiff’s appeal of the size determination conducted by the Small Business Administration.
Presently before the Court are Defendant’s [14] Motion for Summary Judgment and Plaintiff’s
[15] Cross-Motion for Judgment on the Record. Upon consideration of the parties’
submissions,1 the relevant legal authorities, and the record as a whole, the Court GRANTS
1
While the Court renders its decision on the record as a whole, its consideration has focused on
the following documents: Def.’s Mot. for Summ. J., ECF No. [14] (“Def.’s MSJ”); Mem. in
Supp. of Def.’s Mot. for Summ. J., ECF No. [14-2] (“Def.’s Mem.”); Pl’s. Cross-Mot. for J. on
the Record, Mem. of P. & A. and Appendix, ECF No. [15] (“Pl.’s MSJ”); Def.’s Opp’n to Pl.’s
Mot. for Summ. J., ECF No. [18] (“Pl.’s Opp’n”); Pl.’s Cross-Opp’n to Def.’s Mot. for Summ.
J., ECF No. [19] (“Pl.’s Opp’n”); Def.’s Reply in Supp. of Mot. for Summ. J., ECF No. [20]
(“Def.’s Reply”); Pl.’s Cross-Reply to Def.’s Opp’n to Pl.’s Mot. for Summ. J., ECF No. [21]
(“Pl.’s Reply”); Administrative Record, ECF No. [13] (“AR SBA”).
1
Defendant’s [14] Motion for Summary Judgment, and DENIES Plaintiff’s [15] Cross-Motion for
Judgment on the Record.
I. BACKGROUND
In November 2009, CS-360, LLC applied to the Department of Veterans Affairs (“VA”)
for certification as a Service Disabled Veteran Owned Small Business (“SDVOSB”). See CS-
360, LLC v. U.S. Dep’t of Veteran Affairs, 846 F.Supp.2d 171, 175 (D.D.C. 2012). The VA
denied Plaintiff’s application, and in January 2011, Plaintiff filed a lawsuit in this Court
challenging the VA’s denials as arbitrary and capricious. Id. at 183-84. On March 6, 2012, this
Court remanded the issue to the VA for further consideration and explanation. Id. at 197. The
Court’s remand Order stated that “[w]here, as here, the district court cannot evaluate the
challenged action on the basis of the record presented, and the agency may be able to cure any
defects through further action, the proper course is to remand to the agency for additional
investigation or explanation.” Id. at 192. The Court further made clear that “[o]n remand, the
VA shall have the discretion to reopen the administrative record, to engage in additional fact-
finding, to supplement its explanation, and to reach the same or a different ultimate conclusion.”
Id. In a subsequent Order, this Court clarified the extensive scope of this remand to the VA,
explaining that although it “did not remand the case to Defendant so that the agency could
require Plaintiff to re-apply per 38 CFR Part 74’” the Court’s remand Order “unambiguously
provided” Defendant the freedom “to request updated information relevant to Plaintiff’s
eligibility for inclusion in the VetBiz VIP database. In other words, Defendant may re-open the
administrative record to collect evidence that speaks to current circumstances.” AR SBA 0102.
“Nothing in the Court’s remand Order precludes Defendant from seeking such information.” Id.2
On July 19, 2012, pursuant to these Orders, the VA formally requested a small business
size determination of CS-360 from the U.S. Small Business Administration (SBA). AR SBA
0105-0108. On September 25, 2012, SBA’s Office of Government Contracting Area II issued its
size determination finding Plaintiff to be other than small for any size standard below $16
million. AR SBA 0065-0078. Plaintiff received SBA’s size determination on September 26,
2012. AR SBA 0035.
On October 26, 2012, Plaintiff filed an appeal of this size determination before SBA’s
Office of Hearings and Appeals (“OHA”). AR SBA 0032-0044. On November 1, 2012, OHA
issued an Order to Show Cause as to why Plaintiff’s appeal should not be dismissed as untimely
under 13 C.F.R. § 134.304(a) because it was not filed within fifteen days after the date CS-360
received the size determination. AR SBA 0014. Appeals from SBA size determinations are
governed by 13 C.F.R. § 134.304(a), which states that “[s]ize appeals must be filed within 15
calendar days after receipt of the formal size determination.” Pursuant to 13 C.F.R. §
134.304(c), “[a]n untimely appeal will be dismissed.” This regulation became effective on
March 4, 2011 after opportunity for notice and comment. 76 Fed. Reg. 5680, 5685 (Feb. 2,
2011). Prior to March 4, 2011, SBA’s regulations provided that “[i]f the appeal is from a size
determination other than one in a pending procurement or pending Government property sale,
then the appeal petition must be filed and served within 30 days after appellant receives the size
determination.” 13 C.F.R. § 134.304(a)(2) (2009) (amended 2011).
On November 8, 2012, Plaintiff filed a response to the OHA’s Order to Show Cause,
arguing that its appeal was timely because OHA should have applied the regulation in existence
during the time period when Plaintiff submitted its application to the VA, which allowed thirty
days to file an appeal. AR SBA 0007-0012. Plaintiff contended that applying the current
3
regulation to its appeal would represent a retroactive application of this rule because Plaintiff
submitted its application to the VA in 2009, before the regulation took effect. AR SBA 0007.
Under Plaintiff’s view, the request for the size determination, although made in 2012, was
effectively a retroactive request to 2009-2010, because such a determination should have
properly been made as part of Plaintiff’s initial (and only) application to the VA. Id.Accordingly, Plaintiff contended, it should receive the benefit of the thirty day time limit for
appeals in effect prior to 2011. Id.On November 15, 2012, OHA issued an Order dismissing Plaintiff’s Appeal Petition as
untimely. AR SBA 0002-0005. The OHA decision concluded that despite Plaintiff’s claims,
application of the fifteen day time limit for appeals contained in 13 C.F.R. § 134.304(a)(2) would
not represent the retroactive application of a regulation. Id. On this point, the Administrative
Law Judge concluded:
While Appellant argues that VA should have referred this matter for a size
determination in 2009 or 2010, the fact remains that the VA did not do so. The
VA formally requested the size determination on July 19, 2012. The Area Office
issued the size determination on September 25, 2012, and Appellant received it on
September 26th. Therefore, in no way can the instant size determination be said
to be a transaction that was completed or pending on March 4, 2011. All the
actions concerning the size determination, from the VA’s request for it to the Area
Office’s investigation to the issuance of the determination, took place in 2012,
long after the March 4, 2011 effective date of the new OHA regulation on the
commencement of size appeals. None of these actions took place prior to March
4, 2011, nor were any of them pending on March 4, 2011. Therefore the
procedural regulations which became effective on March 4, 2011 apply to the
instant appeal. Under those regulations, Appellant had fifteen days to file this
appeal, a deadline it failed to meet.
AR SBA 0004. Subsequently, Plaintiff filed this suit, arguing that the OHA’s decision to dismiss
its appeal of the size determination as untimely was arbitrary, capricious, and contrary to law
because it applied the current regulation to the size appeal instead of the regulation in effect
during the 2009 time period. The parties have now filed cross-motions for summary judgment.
4
II. LEGAL STANDARD
Under Rule 56(a) of the Federal Rules of Civil Procedure, “[t]he court shall grant
summary judgment if the movant shows that there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.” However, “when a party seeks
review of agency action under the APA [before a district court], the district judge sits as an
appellate tribunal. The ‘entire case’ on review is a question of law.” Am. Bioscience, Inc. v.
Thompson, 269 F.3d 1077, 1083 (D.C. Cir. 2001). Accordingly, “the standard set forth in Rule
56[] does not apply because of the limited role of a court in reviewing the administrative record. .
. . Summary judgment is [] the mechanism for deciding whether as a matter of law the agency
action is supported by the administrative record and is otherwise consistent with the APA
standard of review.” Southeast Conference v. Vilsack, 684 F.Supp.2d 135, 142 (D.D.C. 2010).
A reviewing court can set aside agency action if it is “arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law” or “in excess of statutory jurisdiction,
authority, or limitations, or short of statutory right,” or “without observance of procedure
required by law.” 5 U.S.C. §§ 706(2)(A), (C), (D). An agency’s decision may be arbitrary or
capricious if any of the following apply: (i) its explanation runs counter to the evidence before
the agency or is so implausible that it could not be ascribed to a difference of view or the product
of agency expertise; (ii) the agency entirely failed to consider an important aspect of the problem
or issue; (iii) the agency relied on factors which Congress did not intend the agency to consider;
or (iv) the decision otherwise constitutes a clear error of judgment. Motor Vehicle Mfrs. Ass’n of
U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443(1983); accord Jicarilla Apache Nation v. U.S. Dep't of Interior, 613 F.3d 1112, 1118 (D.C. Cir.
2010). This standard of review is highly deferential to the agency; a court need not find that the
5
agency's decision is “the only reasonable one, or even that it is the result [the court] would have
reached had the question arisen in the first instance in judicial proceedings.” Am. Paper Inst.,
Inc. v. Am. Elec. Power Serv. Corp., 461 U.S. 402, 422, 103 S.Ct. 1921, 76 L.Ed.2d 22 (1983).
Plaintiff, as the party challenging the agency action, bears the burden of proof. Abington
Crest Nursing & Rehab. Ctr. v. Sebelius, 575 F.3d 717, 722 (D.C. Cir. 2009) (citing City of
Olmsted Falls v. Fed. Aviation Admin., 292 F.3d 261, 271 (D.C. Cir. 2002)). In assessing the
merits of Plaintiff’s challenge, the Court begins with the presumption that the Commission’s
actions were valid. Grid Radio v. Fed. Commc'ns Comm'n, 278 F.3d 1314, 1322 (D.C. Cir.
2002). So long as the agency decision has some rational basis, the Court is bound to uphold it.
Hosp. of Univ. of Penn. v. Sebelius, 634 F.Supp.2d 9, 13 (D.D.C. 2009) (citing Citizens to
Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971)).
III. DISCUSSION
Plaintiff argues that the OHA decision denying its appeal as untimely was “arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with law” for two reasons.
First, Plaintiff contends that, by rejecting the argument that application of the thirty day rule
represents retroactive application of the provision, the OHA “entirely failed to consider an
important aspect of the problem and offered an explanation for the decision that runs counter to
the evidence before the agency,” State Farm, 463 U.S. at 43. Pl.’s MSJ at 9. Next, Plaintiff
asserts that, in dismissing Plaintiff’s appeal as untimely, the OHA violated the prior version of
13 C.F.R. § 134.304(a), providing a thirty day time limit to file an appeal. Pl.’s MSJ at 14-16.
Yet, although stated as two separate grounds for setting aside the agency action, these
contentions resolve to a single argument. Just as it argued in its response to the OHA’s Order to
Show Cause, Plaintiff now contends before this Court that because the request for the size
determination to the VA was retroactive to the initial review of Plaintiff’s application in 2009
6
and 2010, Plaintiff should enjoy the benefit of procedural regulations governing the time for
appeal during these years. Elaborating on this argument, Plaintiff asserts that because the VA
had issued a final denial of its only application for SDVOSB verification in November 2010, no
application was pending before the VA at the time of the size determination. Pl.’s Opp’n at 2.
Accordingly, Plaintiff contends, the size determination must logically relate back to the original
application. And since this original application closed in November 2010, prior to the effective
date of the fifteen day time limit for appeals, Plaintiff should have been given thirty days to file
its appeal.
Admittedly, “[w]hat is and what is not a retroactive application of the law is not always
easy to discern.” Cookeville Regional Medical Ctr. v. Leavitt, 531 F.3d 844, 847 (D.C. Cir.
2008). Yet, as the Supreme Court has explained, “[a] statute does not operate ‘retrospectively’
merely because it is applied in a case arising from conduct antedating the statute’s enactment, or
upsets expectations based on prior law.” Landgraf v. USI Film Products, 511 U.S. 244, 269, 113
S.Ct. 1483, 128 L.Ed.2d 229 (1994) (internal citations omitted). “The conclusion that a
particular rule operates ‘retroactively’ comes at the end of a process of judgment concerning the
nature and extent of the change in the law and the degree of connection between the operation of
the new rule and a relevant past event.” Id. Courts are instructed to make “a commonsense,
functional judgment about ‘whether the new provision attaches new legal consequences to events
completed before its enactment.’” INS v. St. Cyr, 533 U.S. 289, 321, 121 S.Ct. 2271, 150
L.Ed.2d 347 (2001) (quoting Martin v. Hadix, 527 U.S. 343, 357-58, 119 S.Ct. 1998, 144
L.Ed.2d 347 (1999) (quoting Landgraf, 511 U.S. at 270)).
Here, despite the general complexity involved in questions of retroactivity, the Court has
little difficulty in concluding that OHA correctly determined that application of the fifteen day
7
time limit to Plaintiff does not constitute retroactive application of the law. The Court need not
engage in an intensive analysis of retroactivity here, see Landgraf, 511 U.S. at 269, because
simply put, Plaintiff’s argument for retroactivity is founded on a faulty premise. The notion that
Plaintiff’s size determination relates back to its initial application to the VA and accordingly
must be treated as if it occurred in 2009 and 2010 is contradicted by the text of this Court’s
remand Orders.
In its March 6, 2012 remand Order, this Court stated “[o]n remand, the VA shall be free
to exercise its discretion to reopen the administrative record, to engage in additional fact-finding,
to supplement its explanation, and to reach the same or a different ultimate conclusion.” CS-360,
846 F.Supp.2d at 197. Accordingly, contrary to Plaintiff’s contentions, its application to the VA
for SDVOSB verification was plainly not closed. Indeed, Plaintiff’s contention that no
application was pending before the VA in 2012 when it requested the size determination from
the SBA is flatly incorrect. The Court made as much clear when it stated that it was not
requiring Plaintiff to re-apply for certification. AR SBA 0102. Rather, the remand provided the
VA an opportunity to re-open the administrative record on the existing application and add
additional factual information based on current circumstances. Id. “Defendant remains free to
request updated information relevant to Defendant’s eligibility,” the Court stated. Id.
“Defendant may re-open the administrative record to collect evidence that speaks to current
circumstances.” Id. The Court was remanding not simply for additional “explanation” but rather
more broadly for additional “consideration” pursuant to which the VA could ultimately “reach
the same or a different ultimate conclusion.” CS-360, 846 F.Supp.2d 197 (emphasis added).
Accordingly, Plaintiff is incorrect in claiming that the remand was strictly circumscribed and
related back only to the 2009 and 2010 initial review of a since-closed application. This Court’s
8
remand Order did not send the parties back in time in order to conduct a more adequate review of
Plaintiff’s application. Rather than strictly retrospective and hypothetical, the remand was
explicitly prospective, permitting the VA to supplement the administrative record concerning
Plaintiff’s application with new information “that speaks to current circumstances.” AR SBA
0102. Accordingly, Plaintiff’s suggestion that the subsequent size determination should be
treated as though it occurred in the 2009-2010 period is unavailing. And in the absence of this
premise, Plaintiff can no longer argue that application of the current regulation represents a
retroactive application of the law.
Moreover, and crucially for the arbitrary and capricious analysis, OHA did not fail to
consider these arguments. Rather, after being presented with these arguments by Plaintiff, the
Administrative Law Judge correctly stated that “[w]hile Appellant argues that VA should have
referred this matter for a size determination in 2009 or 2010, the fact remains that the VA did not
do so.” AR SBA 0004. As the OHA concluded, the mere fact that the size determination should
have occurred in the 2009-2010 period does not lead to the conclusion that the size determination
must be treated as if it had occurred in this time frame. Indeed, Plaintiff provides no case law in
support of this proposition, either in this Court or in its filings before the OHA. Rather, because
all of the conduct relevant for application of the rule governing size determination appeals
occurred in 2012, well after the effective date for the revised 13 C.F.R. § 134.304(a), the OHA
applied the current version of the regulation and dismissed Plaintiff’s appeal as untimely. The
Court concludes that this decision was not arbitrary or capricious.
Furthermore, even assuming Plaintiff were correct that the size determination “relates
back” to the VA’s initial 2009-2010 consideration of its application – a proposition this Court
rejects – it would still grant summary judgment to Defendant. The principles underlying the
9
presumption against retroactive application of laws are not offended by the application of this
procedural rule here. In describing the basis for the presumption against retroactivity, the
Supreme Court has stated that, “[e]lementary considerations of fairness dictate that individuals
should have an opportunity to know what the law is and to conform their conduct accordingly . .
. .” Landgraf, 511 U.S. at 265. “The presumption against retroactivity exists to protect settled
expectations.” Cookeville Regional Medical Ctr., 531 F.3d at 847. “The aim of the presumption
is to avoid unnecessary post hoc changes to legal rules on which parties relied in shaping their
primary conduct.” Austria v. Altmann, 541 U.S. 677, 696, 124 S.Ct. 2240, 159 L.Ed.2d 1 (2004).
Courts considering whether application of a provision raises retroactivity concerns “should be
informed and guided by ‘familiar considerations of fair notice, reasonable reliance, and settled
expectations.’” Martin, 527 U.S. at 358 (quoting Landgraf, 511 U.S. at 270).
Consequently, in light of “the diminished reliance interests in matters of procedure”,
“[c]hanges in procedural rules may often be applied in suits arising before their enactment
without raising concerns about retroactivity.” Landgraf, 511 U.S. at 275. “Because rules of
procedure regulate secondary rather than primary conduct, the fact that a new procedural rule
was instituted after the conduct giving rise to the suit does not make application of the rule at
trial retroactive.” Id. at 275. While “the mere fact that a new rule is procedural does not mean
that it applies to every pending case”, id. at 275 n. 29, when it comes to rules that are “merely
procedural in a strict sense (say, setting deadlines for filing and disposition), the natural
expectation would be that [they] would apply to pending cases.” Lindh v. Murphy, 521 U.S. 320,
327, 117 S.Ct. 2059, 138 L.Ed.2d 481 (1997) (internal citations omitted). See also Moore v.
Agency for Intern. Development, 994 F.2d 874, 879 (D.C. Cir. 1993) (“Where a statute deals
only with procedure, prima facie it applies to all actions – to those which have accrued or are
10
pending, and to future actions.”) (quoting NORMAN J. SINGER, SUTHERLAND STATUTES AND
STATUTORY CONSTRUCTION § 41.04, at 349 (4th ed. 1986)).
In assessing the retroactive effect of procedural rules, the D.C. Circuit has emphasized
that “in the administrative context, a rule is retroactive if it takes away or impairs vested rights
acquired under existing law, or creates a new obligation, imposes a new duty, or attaches a new
disability in respect to transactions or considerations already past.” National Mining Ass’n v.
Dep’t of Labor, 292 F.3d 849, 859 (D.C. Cir. 2002) (internal citations and quotation marks
omitted). “The critical question is whether a challenged rule establishes an interpretation that
‘changes the legal landscape.’” Id. (quoting Nat’l Mining Ass’n v. Dep’t of Interior, 177 F.3d 1,
8 (D.C. Cir. 1999)). “Thus, where a rule ‘changes the law in a way that adversely affects [a
party’s] prospects for success on the merits of the claim,’ it may operate retroactively even if
designated ‘procedural.’” Id. at 860 (quoting Ibrahim v. District of Columbia, 208 F.3d 1032,
1036 (D.C. Cir. 2000).
Here, however, there is little concern with applying the revised version of 13 C.F.R. §
134.304(a) to Plaintiff. Indeed, this is a rule “setting deadlines for filing” – the sort of provision
the Supreme Court has identified as “procedural in a strict sense.” Lindh, 521 U.S. at 327.
Despite Plaintiff’s contentions, the shift from a thirty day to fifteen day deadline does not
“change[] the legal landscape” or “change the law in a way that adversely affects [Plaintiff’s]
prospects for success on the merits of [its] claim.” National Mining Ass’n, 292 F.3d at 859, 860.
The revised provision merely shifts the time limits for filing an appeal, with no effect on the
substance of Plaintiff’s claims. See Wilson v. Pena, 79 F.3d 154, 162 (D.C. Cir. 1996) (A
change in a limitations period for filing “does not alter the legal effect of any pre-amendment
event” but rather “attaches legal consequences only to actions taken after the effective date of the
11
amendment, namely to [plaintiff’s] filing or failing to file suit within a certain number of days . .
. .”). 2
Furthermore, in rejecting Plaintiff’s claim, the Court notes the especially weak nature of
Plaintiff’s reliance and fair notice interests – the concerns at stake in retroactive application of
laws. The underlying size determination from which Plaintiff appealed occurred more than a
year-and-a-half after the effective date of the revised regulation. This is not a case where
Plaintiff was blindsided by a new regulation of which it lacked proper notice. Rather, Plaintiff’s
appeal of the size determination could not have occurred prior to the enactment of the fifteen day
rule. Moreover, the Administrative Record reveals that prior to the time when its appeal was
due, Plaintiff was repeatedly informed that this provision governed the timeliness of its appeal.
See AR SBA 0077-78 (“Any person adversely affected by this decision has the right to file an
appeal petition with the SBA’s Office of Hearings and Appeals (OHA). The specific procedures
for filing an appeal are found at 13 CFR Part 134”); AR SBA 0098 (Court Order of October 8,
2012 repeating the same). In fact, in the letter advising it of the size determination, Plaintiff was
explicitly told that it had only fifteen days to file an appeal of the size determination. See AR
2
Plaintiff’s citation to New York Energy Research and Development Authority v. Federal Energy
Regulatory Commission, 746 F.2d 64, 66-69 (D.C. Cir. 1984) is unavailing. In that case, the
D.C. Circuit concluded that FERC’s decision to deny an appeal as untimely under a new agency
rule was arbitrary and capricious where the appeal would have been timely under the previous
rule. Id. at 68. However, the case involved an express regulatory proviso which allowed
application of the old rule to proceedings pending on the effective date, “where such use is
warranted ‘in the interest of justice.’” Id. Here, no such proviso exists. See id. at 69 (“our
holding rests upon the existence of a proviso that FERC put in place and thus obligated itself to
apply where application is called for.”). Plaintiff points to the fact that here the revised
regulation was noticed on February 2, 2011, but did not become effective until March 4, 2011 as
support for the position that “all size determinations appealed from prior to March 4, 2011 . . .
could be timely filed under the 30-day rule.” Pl.’s MSJ at 13. Yet the Court is unpersuaded that
a mere month-long gap between the date a procedural change is noticed and its effective date
compels the conclusion that the rule may not be applied to pending cases. This is particularly
true in light of the substantial precedent discussing the limited retroactivity concerns in applying
strictly procedural provisions to pending cases.
12
SBA 0062 (“To be timely, an appeal must be submitted to OHA in writing within 15 days of the
date of receipt of this letter.”). Accordingly, even if Plaintiff’s size determination “relates back”
to the initial review of its application, the principles underlying anti-retroactivity would not bar
the application of this procedural rule here.
IV. CONCLUSION
For the foregoing reasons, the Court concludes that Defendant’s [14] Motion for
Summary Judgment is GRANTED, and Plaintiff’s [15] Cross-Motion for Judgment on the
Record is DENIED. An appropriate Order accompanies this Memorandum Opinion.
Dated: November 11, 2013
____/s/________________________
COLLEEN KOLLAR-KOTELLY
United States District Judge
13