NH v. Blind Vendors

2003 DNH 054

• Court: District Court, D. New Hampshire
• Decided: March 28, 2003
• Docket: CV-01-346-M
• Status: Published

Opinion

NH v. Blind Vendors CV-01-346-M 03/28/03 UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

State of New Hampshire, Petitioner

v. Civil No. 01-346-M Opinion No. 2003 DNH 054 United States Department of Education; and the New Hampshire Committee of Blind Vendors (David Ramsey, John Lovedav, John Toomev, Melinda Conrad, Wavne Aldrich, Norman Jitras, Michael Rossi, John Scarlotto and Martha York), Respondents

O R D E R

In these consolidated cases (01-346-M and 01-347-JD) , the

State of New Hampshire ("the State")1 and one of the respondents,

the New Hampshire Committee of Blind Vendors ("CBV"), appeal

different parts of a decision rendered by an arbitration panel

convened by the United States Department of Education. That

panel determined that the New Hampshire Department of

1 Originally, these two cases were brought by four different New Hampshire state agencies. As explained more fully below, the State of New Hampshire is now the sole petitioner. Except where necessary for clarity, this order attributes the actions of those agencies to the State collectively. Administrative Services violated CBV's rights under 23 U.S.C.

§ 111(b) (hereinafter "§ 111(b)"), by failing to give New

Hampshire's blind vendor program a priority to operate vending

machines at rest areas along interstate highways within the

state.

The State appeals the panel's decision,2 arguing that:

(1) the panel's decision was unlawful, arbitrary, and capricious

in several respects; (2) the panel's decision is incompatible

with constitutional principles of sovereign immunity and egual

protection; and (3) the panel acted beyond its statutory

jurisdiction. CBV, in turn, appeals: (1) the panel's calculation

of damages (which, incidentally, were made payable not to CBV,

but to the state agency that attempted to have the panel's

decision and award vacated (Civ. No. 01-347-JD)); and (2) the

panel's decision not to award CBV attorneys' fees.

2 While it would be conventional to think of the panel's decision as a decision against the State, in fact the arbitration panel's decision benefitted the state agency that provides services to the blind, albeit at the expense of other state agencies competing for the revenue derived from operating vending machines at interstate highway rest areas.

2 Before the court are: (1) CBV's Motion for Summary Judgment

on Enforcement of Arbitration Award (document no. 24), to which

the State objects; (2) CBV's Motion for Attorneys' Fees and Costs

(document no. 25), to which the State objects; and (3) the

State's Motion for Summary Judgment (document no. 26), with which

the federal Department of Education agrees in part and disagrees

in part, and to which CBV objects. For reasons given below, both

motions for summary judgment are granted in part and denied in

part. CBV's motion for attorneys' fees is necessarily denied.

Standard of Review

While two pending motions are styled as summary judgment

motions, the familiar summary judgment standard does not apply

because the underlying actions are in fact appeals brought under

the provisions of the federal Administrative Procedure Act

("APA"). See 20 U.S.C. § 107d-2(a) (decisions by Department of

Education arbitration panels "shall be subject to appeal and

review as a final agency action for purposes of chapter 7 of

. . . Title 5"); see also Lodge Tower Condo. Ass'n v. Lodge

Properties, Inc., 880 F. Supp. 1370, 1374 (D. Colo. 1995), aff'd ,

85 F.3d 476 (10th Cir. 1996) ("[b]ecause a district court's

3 function in reviewing administrative action is different from the

function it usually performs as a trier of fact . . . a motion

for summary judgment under rule 56 of the Federal Rules of Civil

Procedure . . . makes no sense when a district court is asked to

undertake judicial review of administrative action); Environment

Now! v. Espy, 877 F. Supp. 1397, 1421 (E.D. Cal. 1994) ("When the

court reviews an agency decision, the standard for summary

judgment is modified by 5 U.S.C. § 706(2). The guestion is not

whether there is a genuine issue of material fact, but rather

whether the agency action was arbitrary, capricious, an abuse of

discretion, not in accordance with law, or not supported by

substantial evidence on the record taken as a whole.") (citation

omitted).

Both parties agree that as an appeal of an agency's

administrative action, this matter is appropriate for resolution

without trial. The pertinent standard of review is found in the

APA, which provides, in relevant part:

To the extent necessary to decision and when presented, the reviewing court shall decide all relevant guestions of law, interpret constitutional and statutory provisions, and determine the meaning or

4 applicability of the terms of an agency action. The reviewing court shall-

(2 ) hold unlawful and set aside agency action, findings, and conclusions found to be- (A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; (B) contrary to constitutional right, power, privilege, or immunity; (C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right;

(E) unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute.

5 U.S.C. § 706 (1996).

Legal Background

A. Vending Machines on Interstate Highways

From the time Title 23 of the United States Code was

recodified in 1958 until 1983, 23 U.S.C. § 111 provided:

All agreements between the Secretary [of the United States Department of Transportation] and the State highway department for the construction of

5 projects on the Interstate System shall contain a clause providing that . . . the State will not permit automotive service stations or other commercial establishments for serving motor vehicle users to be constructed or located on the rights-of-way of the Interstate System.

Pub. L. No. 85-767, 72 Stat. 885, 895 (1958). In 1983, that

restriction was modified. The Surface Transportation Assistance

Act of 1982, Pub. L. No. 97-424, 96 Stat. 2097, 2106 (1983),

added the following provision to § 111:

Notwithstanding subsection (a), any State may permit the placement of vending machines in rest and recreation areas, and in safety rest areas, constructed or located on rights-of-way of the Interstate System in such State. . . . In permitting the placement of vending machines, the State shall give priority to vending machines which are operated through the State licensing agency designated pursuant to section 2(a) (5) of the Act of June 20, 1936, commonly known as the "Randolph-Sheppard Act" (20 U.S.C. 107a(a)(5)).

23 U.S.C. § 111(b) (emphasis supplied). While § 111(b) directs

states to give priority to "vending machines" operated "through

the State licensing agency" ("SLA"), neither that section nor the

remainder of chapter 1 of Title 23 details the procedure SLAs, or

those operating machines through the SLA, can use to vindicate

the rights created by § 111 (b) .

6 Shortly after Congress allowed states to place vending

machines in rest areas along interstate highways, the State of

New Hampshire enacted legislation designed to take advantage of

that opportunity. See N.H. R e v . S t a t . A n n . ("RSA") § 230:30-a

(Supp. 2002). However, the State did not have only the interests

of blind vendors at heart. New Hampshire's statute provides, in

part, that " [n]otwithstanding the provisions of RSA 186-B:9-15

[which gives blind persons the right to operate vending

facilities on state property], any bidder shall be eligible to

bid for this service. . . RSA 230:30-a, II (Supp. 2002).

When the statute was first enacted, it prohibited "the director

of plant and property management . . . [from] incur[ring] any

capital expense to the state of New Hampshire." RSA 230:30-a,

III (1993). The statute also directed that "the state's share of

the funds derived from the vending machine revenue shall be

deposited as unrestricted revenue in the general fund." RSA

230:30-a, V (1993) (emphasis added).

In 1998, the statute was amended to allow "[t]he

commissioner of the department of transportation [to] incur

capital expenses for the erection of new facilities to house

7 vending machines." RSA 230:30-a, Ill-a (Supp. 2000). The

amendment also provided that "[t]he state's share of the funds

derived from the vending machine revenue shall be apportioned as

follows: 75 percent to the general fund, and 25 percent to the

department of transportation beginning July 1, 1999." RSA

230:30-a, IV (Supp. 2002) (emphasis added). Missing from the

State's implementing legislation was any mention of the SLA, or

any mention of the priority federal law reguired to be given to

vending machines operated "through the SLA."

B. Vending Opportunities for the Blind

Since 1936, the Randolph-Sheppard Act has "provid[ed] blind

persons with remunerative employment, enlarg[ed] the economic

opportunities of the blind, and stimulat[ed] the blind to greater

efforts in striving to make themselves self-supporting" by

authorizing licensed blind persons "to operate vending facilities

on any Federal property." 20 U.S.C. § 107(a). Congress's

continuing efforts to strengthen Randolph-Sheppard have been

explained as follows:

The special solicitude shown by Congress for the blind has been so long, so constant, and so pointed that it must be seen as manifesting a congressional conviction that the federal government has, in the words of yet another statute, "special federal responsibilities" to the blind. See Vocational Rehabilitation Act of 1973, Title III, 87 Stat. 377. Within its general interest in preventing unemployment. Congress has a particular interest in providing for the employment of the blind.

Jacobsen v. U.S. Postal Serv., 812 F.2d 1151, 1153 (9th Cir.

1987) .

The Act establishes a joint federal/state program in which

voluntarily participating states are responsible for licensing

blind persons to operate vending facilities on federal property.

See 20 U.S.C. §§ 107a(a)(5) and 107a(b). That licensing

function, and a variety of other activities designed to benefit

blind persons, are performed by a participating state's SLA. See

20 U.S.C. §§ 107b and 107b-l. When a state chooses to

participate in the program, it undertakes to meet the following

reguirements:

A State agency for the blind or other State agency desiring to be designated as the licensing agency shall, with the approval of the chief executive of the State, make application to the Secretary [of the United States Department of Education] and agree-

(1) to cooperate with the Secretary in carrying out the purpose of this chapter; (6) to provide to any blind licensee dissatisfied with any action arising from the operation or administration of the vending facility program an opportunity for a fair hearing, and to agree to submit the grievances of any blind licensee not otherwise resolved by such hearing to arbitration as provided in section 107d-l of this title.

20 U.S.C. § 107b (emphasis added). In addition to providing

blind persons with an opportunity to operate vending facilities

on federal property, the Act also insures that, if vending

machines are operated on federal property by persons other than

blind licensees, the resulting "vending machine income . . .

shall accrue . . . to the State agency in whose State the Federal

property is located, for the uses designated in subsection (c) of

this section. . . ." 20 U.S.C. §107d-3(a).Those uses include

pension plans, health insurance, and payment for sick leave and

vacation time, as well as purchase, maintenance, and replacement

of eguipment, management services, and subsidies to assure a fair

minimum return for operations. See 28 U.S.C. § 107d-3(c) ;

107b (3) (A) - (D) .

10 In New Hampshire, blind persons enjoy not only the benefits

provided by the Randolph-Sheppard Act, but also analogous

benefits conferred by state law. RSA 186-B:9-15 (1999). In

essence, that statute affords blind persons vending opportunities

on state property similar to the opportunities afforded by

Randolph-Sheppard with respect to federal property.

C. The Interplay Between 23 U.S.C. § 111(b) and the Randolph- Sheppard Act

Shortly after the enactment of § 111(b), on March 11, 1983,

the Federal Highway Administration issued a memorandum "to

provide guidance in the implementation of Section 111 of the

Surface Transportation Assistance Act (STAA) of 1982 as it

relates to the installation of vending machines in Interstate

Highway System rest areas." That memorandum stated, in part:

3. The State highway agency need not operate the vending machines directly. It may enter into contracts with vendors for the installation, operation, and maintenance of such vending machines. All States, including those which are participating in the 1978 vending machine demonstration project, must give priority to vending machines operated through the State licensing agency designated pursuant to the Randolph-Sheppard Act. . . .

11 5. Documentation demonstrating a positive initiative to involve the designated Randolph-Sheppard Act State agency will be reguired before the State highway agency proposes alternate organizations or corporations to operate the vending machines. However, if the designated Randolph-Sheppard Act agency waives its rights in writing, the State highway agency is free to negotiate agreements described in "3" above with any organization or corporation.

(Respondent's Mem. of Law, Ex. M.) A follow-up memorandum, dated

March 13, 1984, provides as follows:

3. There has been some guestion as to the extent the Randolph-Shepard Act . . . reguirements apply to Section 111. The only application the [Act] has to Section 111 is to establish the licensing agency in each State that is to be given priority. With the [Randolph-Sheppard] exception of rest areas on Federal lands, which is discussed in the next paragraphs, none of the reguirements apply to vending machines in Interstate rest areas.

(Respondent's Mem. of Law, Ex. J.) The 1984 memorandum was

issued shortly after the Comptroller General of the United States

issued an opinion letter in which he concluded that "State income

derived from vending machines at rest areas along interstate

highways is not limited by 20 U.S.C. § 107d-3 of theRandolph-

Sheppard Act." (Respondent's Mem. of Law, Ex. K.)

12 Factual Background

New Hampshire participates in the program established by the

Randolph-Sheppard Act. The New Hampshire Department of

Education, Division of Vocational Rehabilitation, Bureau of Blind

Services serves as New Hampshire's SLA. Given the enactment of

23 U.S.C. § 111(b), the State chose to permit vending machines at

rest areas along interstate highways in New Hampshire. The New

Hampshire Department of Administrative Services is charged with

implementing that choice, and has selected vendors, using a

competitive bidding process. RSA 230:30-a, II. One of the key

criteria used to evaluate bids is the commission rate prospective

vendors are willing to pay the State to operate the machines.

The State purports to give vending machines operated "through the

SLA" a priority in the following way: if the two highest bids

received on a vending machine contract are identical, and one of

the two bidders is the SLA, then the SLA will be awarded the

contract.

In 1988, the Administrative Services Department invited bids

on a contract for vending machine services at the Hooksett rest

areas on Interstate 93. The contract term was seven years, with

13 an option for one five-year renewal. The SLA was given the

opportunity to bid on that contract, but declined to do so,

apparently because the contract specifications called for the

successful bidder to construct the shelters in which the vending

machines were to be housed, and state law precluded the SLA from

making capital expenditures,3 (Hr'g Tr., Jan. 11, 2001, at 102.)

The contract was eventually awarded to C.C. Vending, Inc. C.C.

Vending agreed to pay a commission to the State of 15.91 percent

of gross receipts. The contract's term ran from June 2, 1988,

through June 1, 2000, but was later extended through June 30,

2001.

On August 8, 1991, the State entered into a similar

agreement with C.C. Vending. Under that contract, C.C. Vending

constructed three vending facilities at rest areas along

Interstate 95 in Seabrook, Interstate 93 in Salem, and Interstate

89 in Springfield and will pay the State a commission of 17.76

percent of gross vending receipts through August 7, 2003. As

3 In a letter dated July 29, 1988, to the Commissioner of Administrative Services, the Vending Stand Program Coordinator (in the State Department of Education's Bureau of Blind Services) stated that he "would like to have seen Blind Services operate that vending service [at the Hooksett rest areas], but the bid specifications were more than we could handle."

14 with the Hooksett contract, the SLA did not bid, apparently for

the same reasons.

During the arbitration hearing, a witness employed by

Administrative Services, Michael Connor, testified that the SLA

had waived, in writing, its right to a priority at the

Springfield rest area. Another witness, Pamela Bartlett of the

SLA, recalled no such waiver. The written waiver to which Conner

referred does not appear to have been included in the

administrative record. It also appears from the testimony given

at the hearing that any waivers related to the Seabrook, Salem,

and Springfield contracts were given as a result of negotiations

between the SLA and Administrative Services. The SLA waived its

priority in exchange for a share of the commissions the State

received from the successful bidder.4

In 1997, Administrative Services invited bids on a two-year

contract for vending machine services at interstate highway rest

areas in Lebanon, Canterbury, Sanbornton, and Sutton. Unlike the

4 The Attorney General later determined that it would be unlawful, under state law, for a portion of the vending machine proceeds to be turned over to the SLA.

15 1988 and 1991 contracts, the specifications for the 1997 contract

did not require the successful bidder to construct vending

shelters, but only to undertake some relatively minor electrical

and plumbing work. The contract specifications called for "a

limited number of vending machines [to be] placed in the four

rest area buildings where space is available."

Five bids were submitted, including one from the SLA.

C.C. Vending offered to pay the highest commission - $3,500 per

month over the contract term, for a total of $84,000 - and was

awarded the contract. The term ran from March 19, 1997, through

March 31, 1999. The SLA's bid, second lowest of the five,

offered only $300 per month, for a total of $7,200.

In 1999, Administrative Services invited bids on a five-year

contract for vending services at the same four rest areas,

Lebanon, Canterbury, Sanbornton, and Sutton. Like the previous

contract, this one called for no construction by the successful

bidder. The specifications for vending facilities were as

follows:

16 Under the terms of the contract, a limited number of vending machines will be placed in the four existing rest area buildings from April 1, 1999 until October 31, 1999. On November 1, 1999, through March 31, 2004, the Contractor shall place and service a total of twenty four (24) vending machines in newly constructed vending facilities built by Department of Transportation.

Five bids were received (one of which was subseguently

withdrawn), including a bid from the SLA. The contract was

awarded to Good Morning Sales, Inc. Good Morning Sales offered

to pay the State $283,557 over the life of the contract, which

became effective on March 24, 1999, and runs through March 31,

2004. The SLA's bid, lowest of the four that were considered,

offered to pay only $32,650.

In 2001, Administrative Services invited bids for vending

machine services at the Hooksett rest areas, to be provided in

new shelters built by the Department of Transportation. After

selecting a vendor, presumably the high bidder, the State offered

the contract to the SLA on the same terms offered by the

successful bidder. The SLA, after consulting with CBV, declined

that opportunity.

17 Based upon the foregoing, it would appear that: (1) vending

services at the Hooksett rest areas are being provided under a

contract of unknown duration awarded in 2001; (2) vending

services at the Seabrook, Salem, and Springfield rest areas are

being provided by C.C. Vending under a contract due to expire on

August 7, 2003; and (3) vending services at the Lebanon,

Canterbury, Sanbornton, and Sutton rest areas are being provided

by Good Morning Sales under a contract due to expire on March 31,

2004 .

An affidavit by Michael Conner, submitted to the arbitration

panel by the State, suggests that the State was paid a total of

$906,725.29 in commissions by vendors operating machines at

interstate highway rest areas from October 28, 1998, through June

20, 2002.5 According to a table submitted by CBV, the State's

income from vending machines at interstate highway rest areas,

from 1989 through 2000, totals $ 1, 820, 718 .02 .6

5 That figure includes $15,525 in commissions earned from a rest area in Nashua, but because no interstate highway passes through Nashua, the Nashua rest area commissions are not relevant to this case.

6 The CBV table does not include commission income generated by vending machines at the Nashua rest area.

18 Procedural History

By complaint dated January 6 , 1998, CBV filed suit in this

court (Civ. No. 98-011-M), claiming that the State failed to give

a priority to vending machines operated through the SLA when it

awarded contracts for the operation of vending machines in rest

areas along interstate highways in New Hampshire. CBV sought "an

injunction ordering the State of New Hampshire to grant the right

to operate vending machines on Interstate Highways to Blind

Vendors licensed by the State licensing agency and that all

existing vending machine contracts are void as a matter of law."

Rather than defend on the merits, the State moved to dismiss

on grounds that: (1) this court lacked subject matter

jurisdiction, due to CBV's failure to exhaust available

administrative remedies; and (2) this court should stay or

dismiss the case, under the Colorado River abstention doctrine,

due to CBV's having simultaneously filed an identical action

against the State in the New Hampshire Superior Court.

19 With respect to its argument that CBV was required to

exhaust available administrative remedies, the State made its

position very plain:

Plaintiff has failed to exhaust its administrative remedies. Thus, Plaintiff's claim should be dismissed.

The right that Plaintiff seeks to enforce in this action arises under the Randolph-Sheppard Act by incorporation of a portion of the Randolph-Sheppard Act in 23 U.S.C. § 111 (b) .

The Randolph-Sheppard Act "sets forth a grievance procedure for blind vendors." Committee of Blind Vendors [v. District of Columbial, 28 F.3d [130,] 131 [(B.C. Cir. 1994)]. "Any blind licensee who is dissatisfied with any action arising from the operation or administration of the vending facility program" can request a full evidentiary hearing before his State Licensing Agency. 20 U.S.C. § 107d-l. If dissatisfied with the result of the hearing, the blind vendor can file a complaint with the Secretary of the United States Department of Education, who then convenes an ad hoc arbitration panel to address the grievance. Id. "The arbitration panel's decision is binding and subject to judicial review as final agency action under the Administrative Procedure Act." Committee of Blind Vendors, 28 F.3d at 131, 20 U.S.C. § [107d-2(a)].

Plaintiff has filed suit without having exhausted its administrative remedies. Plaintiff's claim should, accordingly, be dismissed under FRCP Rule 12(b) (1) for lack of subject matter jurisdiction.

20 (Mem. of Law in Support of State's Mot. to Dismiss in Civ. No.

98-011-M, at 2-3.) While arguing that CBV was obligated to

exhaust its administrative remedies before filing suit here,

DAS's motion to dismiss also contained the following footnote:

Defendant does not agree that the Randolph-Sheppard Act in general applies to the facts of this case nor that, to the extent that it does apply, that it gives Petitioner the rights claimed. However, for purposes of this Motion to Dismiss only, it is assumed that Petitioner's allegation that the Randolph-Sheppard Act applies will be accepted as true.7

(I d . at 3, n.l.) Finally, as part of its Colorado River

abstention discussion, the State argued:

Part of the relief which the Plaintiff seeks is termination of contractual rights between the State and third parties. The State has not and does not waive its immunity to suit in federal court under the Eleventh Amendment of the United States Constitution in regards to suits involving contractual rights. Therefore, only in the state court action can all of the issues raised by this pleading be addressed.

(I d . at 5 (emphasis added).) The State's exhaustion argument

proved successful; Civ. No. 98-011-M was dismissed, without

7 In fact, CBV did not assert that the Randolph-Sheppard Act applied to its claim - CBV insisted that its claims were firmly based on § 111 (b) .

21 prejudice, based upon CBV's failure to exhaust administrative

remedies.

As demanded by the State, CBV pursued the administrative

remedies outlined in the Randolph-Sheppard Act. By letter dated

March 30, 1998, CBV requested a full evidentiary hearing, under

the provisions of 20 U.S.C. § 107d-l (a). The State appeared and

fully participated, without invoking Eleventh Amendment immunity.

In a decision dated July 3, 1998, a New Hampshire Department of

Education Hearings Officer granted the State's motion to dismiss

CBV's administrative action, on grounds that the priority

extended by § 111(b) did not apply to land owned by the State and

that the rest areas at issue here are located on state land

rather than federal property. In essence, the Hearings Officer

granted the equivalent of a 12(b)(6) dismissal.

CBV then pursued the administrative process further, by

filing a complaint with the Secretary of the United States

Department of Education, also under the provisions of 20 U.S.C.

§ 107d-l(a).8 Pursuant to 20 U.S.C. § 107d-2(a) , the Secretary

8 The precise date of that complaint is somewhat illusive. It was dated October 19, 1998, by CBV's attorney, and date-

22 convened an arbitration panel. The arbitrators twice ruled in

CBV's favor, first by denying the State's motion to dismiss for

lack of jurisdiction,9 and then by granting CBV relief on the

merits. On the merits, the arbitration panel ruled that: (1) RSA

230:30-a, II, is pre-empted by 23 U.S.C. § 111(b), under the

Supremacy Clause, U.S. C o n s t , art. VI, cl.2; (2) under § 111(b),

the SLA is entitled to "receive an opportunity to operate vending

machines before any private vendor is even pursued" ; and (3) "the

Blind Vendors are entitled to damages in the amount of full

commissions payable, prospectively, from the time of asserting

this claim on October 28, 1998 . . . to the New Hampshire SLA for

the appropriate uses benefitting Blind Vendors." The arbitrators

denied CBV's reguest for attorneys' fees.10

stamped October 23, presumably by the federal Department of Education. In the first of two decisions rendered by the federal arbitration panel, the filing date of the complaint is given as October 20, 1998, while in its second decision, the panel awarded damages "from the time of asserting this claim on October 28, 1998."

9 The State argued that the arbitration panel had no jurisdiction over CBV's complaint because: (1) CBV's underlying grievance did not concern any act by the SLA; and (2) the Randolph-Sheppard Act is inapplicable because the rest areas in guestion are on state rather than federal land.

10 The panel's decision is supplemented by extensive findings of fact and rulings of law, in the administrative record.

23 Following the arbitrators' decision, two suits were filed in

this court. One was filed by the State Department of Education,

acting as the State's SLA (Civ. No. 01-347-JD). The other was

filed by three executive-branch state agencies: the Department of

Administrative Services, the Department of Transportation, and

the State Treasurer (Civ. No. 01-346-M). Both suits are brought

as appeals from the decision of the federal arbitration panel, as

authorized by 20 U.S.C. § 107d-2(a). As a conseguence, the

federal Department of Education is named as a respondent, along

with CBV, in both suits.11 By order dated January 16, 2002, the

suits were consolidated. By order dated May 16, 2002, the court

granted the federal respondent's motion to dismiss three of the

four original petitioners. Subseguently, the court granted the

State of New Hampshire's motion to be substituted as the real

party in interest.

In the complaint filed in Civ. No. 01-347-JD, the SLA

contended that the arbitration panel's decision was unlawful, see

11 In its Memorandum in Support of the State of New Hampshire's Motion for Summary Judgment, the federal Department of Education joins with the State in arguing that New Hampshire was protected from arbitration by the Eleventh Amendment, but fully supports CBV on all other points.

24 5 U.S.C. § 706(2)(A), because the panel: (1) erroneously

construed the term "priority" in 23 U.S.C. § 111(b) by holding

the State to requirements established under the Randolph-Sheppard

Act, which are inapplicable to interstate highway rest areas

located on state rather than federal land; (2) lacked

jurisdiction to decide the issues raised by CBV, because the

pertinent rest areas are located on state rather than federal

property; (3) wrongly decided that RSA 230:30-a, II, was

preempted by federal law, because there is no conflict between

state law and applicable federal statutes; and (4) had no

authority to award monetary relief.12

In the Petition for Declaratory Relief and [Interim]

Injunctive Relief from Final Agency Action filed in Civ. No. 01-

346-M, the State Administrative Services Department, Department

of Transportation, and State Treasurer contended that the

arbitration panel's decision was arbitrary, capricious, and

unlawful, see 5 U.S.C. § 706(2) (A), because the panel:

(1) misconstrued the term "priority" as it is used in § 111(b);

12 Interestingly, in its complaint. New Hampshire's SLA asked the court to vacate an arbitration award under which the SLA itself - rather than CBV - stood to recover at least several hundred thousand dollars.

25 (2) failed to recognize that rest areas on the F.E. Everett

Turnpike and the Blue Star Turnpike are not subject to 23 U.S.C.

§ 111(b); (3) misconstrued the term "right of first refusal;"

(4) erroneously concluded that RSA 230:30-a conflicts with 23

U.S.C. § 111(b); and (5) had no authority to award monetary

relief.

The petition further contended that the panel's decision was

unconstitutional, see 5 U.S.C. § 706(2) (B) , because: (1) the

Eleventh Amendment precludes both the jurisdiction of a federal

arbitration panel over the State and the award of money damages

against the State; and (2) the Fourteenth Amendment egual

protection clause prohibits the priority given to blind licensees

by both the Randolph-Sheppard Act and 23 U.S.C. § 111(b).

Finally, the State contended that the panel exceeded its

statutory authority, see 5 U.S.C. § 706(2) (C), because: (1) 23

U.S.C. § 111(b) does not (contrary to the State's earlier

position) incorporate the arbitration provisions of the Randolph-

Sheppard Act, thus the panel had no jurisdiction to hear CBV's

case; (2) federal arbitration panels have no authority to declare

state laws invalid; (3) the panel had no authority to: (a)

26 interpret 23 U.S.C. 111(b) (by reading parts of the Randolph-

Sheppard Act into that statute (as the State itself had done in

earlier litigation ) , or in any other way); or (b) decide a

grievance based upon state law; and (4) the panel had no

authority to award money damages, which may be available under

the Randolph-Sheppard Act, but are not available under 23 U.S.C.

§ 111 (b) .

For its part, CBV answered both the complaint in Civ. No.

01-347-JD and the petition in Civ. No. 01-346-M by denying the

State's claims and by asserting a four-count "counterclaim" that

included: (1) a "Notice to Modify Arbitration Order Insofar As

Date By Which Damages Are To Be Calculated," which claims January

6, 1998, rather than October 28, 1998, as the date on which it

initiated its action against the State; (2) an "Appeal of

Arbitration Award Regarding Damages," which reguested that

damages be awarded from 1985, when RSA 230:30-a was enacted;

(3) an "Appeal of Arbitration Award Regarding Attorneys' Fees;"

and (4) a reguest for confirmation of the arbitration award,

notwithstanding the modifications sought in Counts I, II, and

III.

27 Discussion

In its motion for summary judgment, the State argues that:

(1) the Eleventh Amendment immunizes it from claims brought under

23 U.S.C. § 111(b), whether brought before an arbitration panel

or in this court; (2) 23 U.S.C. § 111(b) does not preempt RSA

230:30-a; (3) the arbitration panel's award of damages was in

excess of the panel's statutory authority and unsupported by

substantial evidence; and (4) 23 U.S.C. § 111(b) violates the

Egual Protection Clause of the Fifth and Fourteenth Amendments to

the United States Constitution.

CBV, in its Motion for Summary Judgment on Enforcement of

Arbitration Award, argues that: (1) the arbitration panel

correctly construed the term "priority" as used in 23 U.S.C.

§ 111(b); (2) the State has waived any argument that § 111(b)

does not apply to turnpikes and toll roads, but even if that

argument has not been waived, § 111(b) applies to all rest areas

on the interstate highway system, including those portions of the

system on which the state collects tolls, even when those rest

areas are located on state property; (3) RSA 230:30-a is pre­

empted by § 111(b) because the competitive bidding process

28 required by the New Hampshire statute conflicts with the federal

statutory requirement that blind vendors be qiven a priority;

(4) abundant case law establishes that federal arbitration panels

convened under the Randolph-Sheppard Act have the authority to

award money damaqes, notwithstandinq the Eleventh Amendment;

(5) the State waived its claim to sovereiqn immunity by

voluntarily consentinq to suit under the Act and by voluntarily

invokinq federal court jurisdiction; and (6) CBV is entitled to

damaqes from January 6 , 1998, the date on which it first filed

suit aqainst the State, rather than October 28, 1998, the date on

which CBV filed its arbitration complaint with the federal

Department of Education.

For its part, the federal respondent aqrees that the State

is immune from liability on CBV's claims because Conqress did not

effectively abroqate its Eleventh Amendment immunity. But, the

federal respondent qoes on to say that if sovereiqn immunity does

not apply, then: (1) the arbitration panel correctly ruled that

the State violated § 111(b) by failing to give a priority to

vending machines operated through the SLA; (2) contrary to the

State's position, § 111(b) applies to all rest areas located on

29 the interstate highway system, not just those for which New

Hampshire has accepted federal funds; and (3) § 111(b) does not

violate the equal protection guarantees of the Fifth Amendment to

While this case has become remarkably complicated (due in no

small measure to the State's attempted change of position on the

issue of jurisdiction), there appear to be four principal issues:

(1) whether the State was subject to the Randolph-Sheppard Act

administrative remedies it insisted be followed; (2) whether the

State waived any Eleventh Amendment immunity it might have

enjoyed; (3) whether the arbitration panel properly defined

"priority" and calculated damages; and (4) whether the statutory

preference given blind vendors in 23 U.S.C. § 111(b) is

unconstitutional.

For reasons given extensively below, the court rules that:

(1) CBV's complaint was properly considered in the administrative

process established by 20 U.S.C. § 107d-l(a); (2) the State

waived its Eleventh Amendment immunity in this matter by its

litigation conduct; (3) the arbitration panel's construction of

30 the term "priority" is supportable, but it slightly miscalculated

the proper measure of damages; and (4) the State has forfeited

its egual protection challenge to § 111 (b), but even if it had

not done so, its egual protection argument is without merit.

A. Jurisdiction

According to the State, the State hearing examiner and the

federal arbitration panel had no jurisdiction over CBV's

complaint for at least two reasons: (1) all the interstate

highway rest areas at issue are located on state property; and

(2) CBV's underlying complaint was brought against the State

Department of Administrative Services, and not the SLA. The

State hearing examiner, of course, ruled in favor of the State,

dismissing CBV's complaint. On appeal, however, the arbitration

panel denied the State's motion to dismiss and reached the merits

of the complaint. Conseguently, the State appears to be asking

the court either to set aside the arbitration panel's denial of

its motion to dismiss, or set aside the arbitration panel's

decision on the merits. The State says that in denying its

motion to dismiss, and reaching the merits of CBV's complaint.

31 the arbitration panel acted "in excess of statutory jurisdiction

[and] authority." 5 U.S.C. § 706(2) (C) .

The problem with the State's position is that it ignores

this court's order on the motion to dismiss filed by the State in

Civ. No. 98-011-M. In that case, the State asserted - and the

court agreed - that CBV was precluded from filing suit before it

exhausted the administrative remedies available under 20 U.S.C.

§ 107d-l(a). The State not only insisted that the various

administrative decision-makers described in § 107d-l(a) had

jurisdiction to determine whether CBV was denied the priority it

claimed under 111(b), but it obtained a judgment to that effect -

and neither party appealed that judgment. The State certainly

understood, when it moved to dismiss Civ. No. 98-011-M for

failure to exhaust, that the rest areas in guestion were located

on state property and that CBV's complaint involved the State's

failure to extend the § 111 (b) priority. Yet, the State still

insisted that CBV was obligated to pursue the administrative

remedies provided for in 20 U.S.C. § 107d-l(a). The arbitration

panel did not exceed its statutory jurisdiction or authority by

reaching the merits of CBV's complaint, because this court - at

32 the State's request - construed 111(b) as incorporating the

administrative grievance procedures outlined in the Randolph-

Sheppard Act, at least as far as this dispute is concerned, and

both parties actively participated in that process. See Faigin

v. Kelly, 184 F.3d 67, 82 (1st Cir. 1999) (citations and internal

quotations marks omitted) (explaining that "the doctrine of

judicial estoppel precludes parties in civil litigation from

asserting legal or factual positions inconsistent with the

positions that they took in prior proceedings . . . when the

party to be estopped had succeeded previously with a position

directly inconsistent with the one [he] currently espouses").

B. Sovereiqn Immunity

The State insisted, in the earlier case, that blind vendors

dissatisfied with its administration of priority rights, required

by § 111(b) to be extended to vending machines operated "through"

the State licensing agency, must seek redress under the remedial

system established by the Randolph-Sheppard Act. It did so by

arguing that § 111(b) incorporated the dispute resolution

procedures outlined in Randolph-Sheppard, a proposition advanced

exclusively by the State and explicitly opposed by CBV. The

33 court accepted the State's analysis - that the § 111(b) priority

was intended by Congress to extend the scope of privileges

provided to licensed blind vendors under the Randolph-Sheppard

Act, by creating a comparable priority for blind vendors

operating "through" the State licensing agency with regard to any

vending machines the State might choose to operate at rest areas

adjacent to, and within the right-of-way of, the interstate

highway system.

Although the discrete legal point might have been argued

differently - i.e., the State might have argued plausibly that

the § 111(b) priority is free-standing, unrelated to Randolph-

Sheppard, not subject to enforcement through Randolph-Sheppard

administrative remedies, was not intended to provide blind

vendors with any private right of action should a state ignore

its mandate, and is enforceable, if at all, only through action

of the Secretary of Transportation against the State (i.e., by

withholding federal highway funds from New Hampshire) - the State

did not take such a position. To the contrary. New Hampshire

argued, successfully, that it thought the § 111 (b) priority

dispute was properly addressed only in the context of Randolph-

34 Sheppard's overall purposes and under its remedies. Given that

the specific description of the vending priority provided for in

§ 111(b) is one unmistakably intended to benefit "machines"

operated "through" the State licensing agency established under

Randolph-Sheppard, and that machines so operated either benefit

licensed blind vendors directly or indirectly benefit the blind

vending program, it was certainly reasonable for the State to

advance that construction of the legal interrelationship between

the § 111(b) priority and the Randolph-Sheppard Act.

In any event, the controlling issue in this case is not

whether the State's position in the earlier litigation was or was

not correct. The State's asserted legal theory prevailed, the

court ruled in its favor, and no appeal was taken by either the

CBV or the State from the final judgment entered in that case.

The parties, to the contrary, proceeded to comply with that

judgment by pursuing the Randolph-Sheppard Act administrative

remedies relative to CBV's complaints of non-compliance by the

State with the priority mandate of § 111 (b) .

35 During the initial administrative hearing, the State

appeared without reservation and participated fully, arguing that

CBV's complaint should be dismissed, on the somewhat dubious

proposition that the § 111(b) priority did not apply to vending

machines operated at rest areas adjacent to and within the

federal right-of-way of interstate highways where title to the

underlying real estate (the rest area property) was held in the

name of the State.

The Hearings Officer accepted that argument and dismissed

CBV's complaint. But, CBV took the next step available to it

under the administrative scheme, and appealed that decision to

the United States Department of Education. The Department

convened an arbitration panel to hear the appeal (as provided in

20 U.S.C. §§ 107d-l(a) and 107d-2).

Once again, at stage two of the administrative process, the

very process the State insisted upon, the State appeared and

participated fully. It did mention "sovereign immunity" before

the arbitration panel, but in a very limited context. It did not

argue that it was immune, under the Eleventh Amendment, from

36 being haled before the federal arbitration panel that it earlier

insisted upon, but suggested only that in enacting § 111(b),

Congress did not abrogate the State's sovereign immunity. And,

after suffering an adverse ruling by the arbitration panel, the

State voluntarily invoked the next step available under the

administrative scheme - it filed suit in this court, seeking an

appeal from the arbitration panel's adverse administrative

decision, as provided for in 20 U.S.C. § 107d-2(a).

Now the State argues, apparently, that it has all been a

rather large oversight; that it has never been subject to either

the federal administrative remedies provided for under Randolph-

Sheppard with regard to § 111 (b) claims, or to federal court

jurisdiction, because it is immune under the Eleventh

Amendment.13 The State argues that its Eleventh Amendment

13 Contrary to the State's current claim - that it "has repeatedly raised the defense of sovereign immunity" - it in fact has not invoked its Eleventh Amendment protection. The State has referenced sovereign immunity as follows. In Civ. No. 98-011-M, the State mentioned sovereign immunity in the context of arguing for Colorado River abstention. Before the New Hampshire Department of Education Hearings Officer, the State did not mention sovereign immunity at all. In a motion to dismiss for lack of jurisdiction, before the federal arbitration panel, the State devoted two sentences to sovereign immunity, arguing that Congressional enactment of § 111 (b) did not entail the abrogation of state sovereign immunity by Conqress. The State did not

37 immunity has never been abrogated by Congress, and that it has

never expressly or impliedly waived its Eleventh Amendment

immunity with regard to claims brought under the § 111(b)

priority provision. The Department of Justice agrees with the

State, on that point only, but guickly asserts that absent a

sovereign immunity defense, the State is certainly liable for

what amounts to stealing from the blind.

The State may or may not be correct in asserting that

Congress, in enacting the § 111 (b) priority reguirement, did not

intend to abrogate states' Eleventh Amendment protections. It

may well be that Congress did not intend to bring § 111(b) claims

within the immunity waiver associated with a state's

participation in the Randolph-Sheppard Act vending facility

program. See, e.g., Premo v. Martin, 119 F.3d 764, 771 (9th Cir.

1997) ("The evidence that Congress conditioned State

participation in the Randolph-Sheppard program on federal

mention sovereign immunity at all in its reguest for rulings of law submitted to the arbitration panel. In Count II of the petition the State filed to initiate this case, the State asserted that sovereign immunity precluded the arbitration panel's award of money damages and precluded the panel's jurisdiction over it - an argument never pressed before the panel itself.

38 judicial enforcement of compensatory awards is overwhelming.");

Del. Dep't of Health & Soc. Servs. v. U.S. Dep't of Educ., 7 72

F.2d 1123, 1137-38 (3rd Cir. 1985) ("Delaware, by applying to

participate in the Randolph-Sheppard program has agreed to the

remedies which that program reguires."). What little legislative

history the court has been able to find is inconclusive, and the

parties offer nothing more enlightening.

On the other hand, a plausible argument could be made that

by choosing to participate in the interstate highway rest area

vending machine program created by Congress, the State waived its

sovereign immunity with regard to the enforcement of the State's

obligation to give a priority to vending machines operated

through the SLA. A state may declare its intent to submit to the

jurisdiction of a federal forum by agreeing to participate in a

federal program under which Congress has "condition[ed]

participation . . . on a State's consent to waive its

constitutional immunity." Atascadero State Hosp. v. Scanlon, 473

U.S. 234, 247 (1985). To constitute a waiver of sovereign

immunity, participation must be something more than "the mere

receipt of federal funds." I d . at 246 (citations omitted).

39 Here, the State did not "merely" receive federal funds, because a

state cannot accept federal highway funds, as New Hampshire has,

without entering into an agreement with the Secretary of

Transportation. See 23 U.S.C. §§ 106 and 110. One of the

reguired provisions of any such agreement is a promise "to comply

with the applicable terms and conditions set forth in title 23,

U.S.C." 23 C.F.R. § 630.112(a). Plainly, giving a priority to

vending machines operated through an SLA is a term or condition

set forth in title 23. Moreover, the unambiguous reference to

Randolph-Sheppard in § 111(b), in conjunction with the State's

statutory and contractual obligation to give a priority, would

seem to provide the State adeguate notice that, by choosing to

place vending machines in interstate highway rest areas, it was

also agreeing to subject itself to the grievance-resolution

process set out in Randolph-Sheppard with respect to claims

seeking to enforce its obligation to give a priority. Which, of

course, is precisely the conclusion the State came to and argued

in the earlier case. See Premo, 119 F.3d at 770 (citation and

internal guotation marks omitted) (explaining that "waiver will

be found only where stated by the most express language or by

40 such overwhelming implication from the text as [will] leave no

room for any other reasonable construction").

However, the relationship between the § 111 (b) priority

requirement and the Randolph-Sheppard Act, and the subtle issues

that arise regarding availability of Randolph-Sheppard

administrative redress procedures to vindicate priority rights

established by § 111(b), are ones that need not be wrestled with

in this case. First the State is bound, at least as far as this

particular dispute is concerned, by the earlier judgment in its

favor, effectively holding, as the State argued, that Randolph-

Sheppard Act administrative remedies are applicable to disputes

about vending machine priorities created by § 111(b). Second,

the State unambiguously waived any protection it may have enjoyed

under the Eleventh Amendment in connection with this particular

claim by its conduct in this, as well as in the prior, related

litigation.

The law in this circuit is clear: "There is no question that

a state may waive its Eleventh Amendment immunity [citation

omitted], and it has long been established that a general

41 appearance may constitute such a waiver, e.g., Clark v. Barnard,

108 U.S. 436, 447 (1883)." Paul N. Howard Co. v. Puerto Rico

Aqueduct Sewer Auth., 744 F.2d 880, 886 (1st Cir. 1984)

(appearance in litigation and filing of counterclaim and third-

party complaint constituted a waiver of Eleventh Amendment

immunity). See also Parker v. Universidad de Puerto Rico, 225

F.3d 1, 9 (1st Cir. 2000) (remanding for district court to

determine, inter alia, whether the state effectively waived its

sovereign immunity defense through an appearance); Garritv v.

Sununu, 752 F.2d 727, 728 (1st Cir. 1984); Hill v. Blind Indus. &

Servs. of M d ., 179 F.3d 754, 759 (9th Cir. 1999) (state can waive

Eleventh Amendment immunity by litigation conduct that is

"incompatible with an assertion of Eleventh Amendment immunity").

Obviously, if the State could appear and participate in the

initial litigation, seek and obtain a ruling reguiring

arbitration of CBV's § 111(b) complaints, and participate fully

in the subseguent arbitration proceedings, accepting a favorable

arbitration decision, but avoiding an unfavorable decision by

interposing a late Eleventh Amendment immunity claim, justice

42 would hardly be served. That is what the State is trying to do

here. As noted by the Ninth Circuit in Hill, 179 F.3d at 756-57:

Such conduct undermines the integrity of the judicial system. It also wastes judicial resources, . . . burdens witnesses, and imposes substantial costs upon the litigants. . . . The integrity of the judicial process is undermined if a party, unhappy with the trial court's rulings or anticipating defeat, can unilaterally void the entire proceeding and begin anew in a different forum.

Similarly, the State's tactics in this case amount to an

uneguivocal waiver by conduct of its Eleventh Amendment immunity

claim - it got what it asked for, it participated fully until it

suffered an unfavorable result, and even now, it voluntarily

invokes the very statute it says cannot be applied to it, by

utilizing the appeal process set out in 28 U.S.C. § 107d-2(a).

Having determined that the State waived its sovereign

immunity with respect to the adjudication of CBV's § 111(b) claim

before a Randolph-Sheppard arbitration panel, the court is faced

with one additional issue: whether § 111(b) creates a private

right of action. In what has been an unfortunate, but consistent

style of pleading by the State, it tosses out what can only be

described as a fleeting claim to the effect that no private right

43 of action arises under § 111(b).14 The passing claim seems aimed

at supporting what appears to be its main point - that Congress

did not properly abrogate the State's Eleventh Amendment immunity

with respect to § 111(b) claims. The overall impression given is

that the State is simply offering up a point that might add

persuasive value to its position regarding Congress's failure to

abrogate its Eleventh Amendment immunity, and not that the State

seriously contends that no private rights enforceable by CBV

arise under § 111 (b) .

14 The State writes:

The TEA 21 [§ 111(b)] and its predecessors do not contain any provisions for a private right of action to enforce the terms of the statute. As Congress did not create a private right of action, there is no language whatsoever concerning the jurisdiction of any court over actions brought pursuant to the statute. Therefore the TEA 21 fails to demonstrate any intent to abrogate States' sovereign immunity. Indeed to the extent the TEA 21 discusses the Federal-State relationship it explicitly recognizes and preserves State sovereignty. 23 U.S.C. § 145.

(State's Memo, of Law in Support of Mot. for Sum. J. (document n o . 2 6).)

44 If, by chance, the State means to assert that no enforceable

rights are conferred by § 111(b), then the immediate problem it

faces is that it did not make that clear; did not develop its

argument; did not brief the issue; provided no analyses of the

applicable factors under the familiar Golden-State/Wilder/Suter/

Stowell/Albiston15 template, and, indeed, made reference to no

legal authorities whatsoever. Under these circumstances, the

court need not consider the casual line in the State's brief

mentioning the issue.16 See Higgins v. New Balance Athletic

15 See Golden-State Transit Corp. v. Los Angeles, 493 U.S. 103, 106 (1989); Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498, 509 (1990); Suter v. Artist M . , 503 U.S. 347 (1992); Stowell v. Ives, 967 F.2d 65 (1st Cir. 1992); Albiston v. Maine Comm'r of Human Servs., 7 F.3d 258 (1st Cir. 1993) .

16 Had the issue been properly joined, and briefed, it is likely that a right of action enforceable by CBV would have been found to arise from § 111(b) (enforceable under 42 U.S.C. § 1983 at a minimum, or, as determined in the earlier case - enforceable via the administrative process set out in Randolph-Sheppard). After all, § 111(b) unmistakably speaks to and places a clear obligation on the State (it "shall give priority to"); it is fully apparent that Congress intended to economically benefit blind vendors with respect to interstate highway rest areas when it reguired that a priority be given vending machines operated through the SLA; and, CBV's interest is not so vague and amorphous as to be beyond the competence of the judiciary to enforce - all CBV seeks is the priority right that its members have been denied, and damages arising from the State's usurpation of the economic opportunities Congress meant blind vendors to ha v e . Moreover, had the State not insisted on litigating CBV's § 111(b) claim under Randolph-Sheppard's administrative dispute-

45 Shoe, Inc., 194 F.3d 252, 260 (1st Cir. 1999) (citations omitted)

("The district court is free to disregard arguments that are not

adeguately developed."); Kauthar SDN BHD v. Sternberg, 149 F.3d

659, 658 (7th Cir. 1998) (citations omitted) ("It is not the

obligation of this court to research and construct the legal

arguments open to parties, especially when they are represented

by counsel.") .

C. The Merits

Having determined that the State waived, by its litigation

conduct, any Eleventh Amendment immunity it might have

interposed, the court now turns to the merits.

resolution process, and had the earlier case been pursued in this court, declaratory relief, and if necessary, injunctive relief, would likely have followed (against appropriate State officials) to preclude the State from failing to afford the priority reguired under federal law. See, e.g.. Ex parte Young, 209 U.S. 12 3 (1908); Idaho v. Coeur d'Alene Tribe of Idaho, 521 U.S. 261 (1997). In that event, the State would have been reguired to stop collecting vending revenue in the first place. Here, the arbitration panel directed the State to disgorge the revenue it should not have obtained (because either licensed blind vendors, or the SLA through sub-contracts, were entitled to that revenue). Accordingly, the arbitration panel's award of damages is merely another way of reaching the same result that would have been achieved had the State not prevailed in having the § 111 (b) claim resolved administratively.

46 1. Construction of the term "Priority"

The State argues that despite having no obligation to do so

(because § 111(b) does not apply to vending machines on "state

land " ) , it nevertheless did extend a priority to vending machines

operated through the SLA. The priority given was rooted in

Administrative Services' policy, under which vending machine

contracts were to be awarded to the SLA whenever the SLA either

submitted the highest bid, or a bid that tied for highest. CBV

disagrees that the State's claimed policy extended any "priority"

to vending machines operated through the SLA, as that term is

used in § 111(b). The arbitration panel agreed with CBV, ruling

as follows:

the State professes to afford Blind Vendors priority, as reguired by Randolph-Sheppard or the Transportation Eguity Act, 21st Century [§ 111(b)], pursuant to the State's interpretation of the meaning of "priority" as earlier noted, "high, or tie with high bid." This panel does not accept such interpretation, and is of the opinion that no real or realistic priority is afforded the Blind Vendors on the basis of breaking a tie bidding. Of course, the [SJtate's priority interpretation is not involved at all in the event there is a "highest bid." Accordingly, this panel agrees with the position of the Blind Vendors, that the purpose, and fair interpretation of "priority" within section 111(b) TEA-21 reguires the SLA to receive an opportunity to operate vending machines before any private vendor is even pursued . . .

47 Because the State has failed to show that the arbitration panel's

decision was based upon an unreasonable or irrational

construction of § 111(b), the court declines to set it aside.

The arbitration panel's construction of § 111(b), and, in

particular, its construction of the term "priority," presents a

question of law, subject to de novo review. Penobscot Air

Servs., Ltd. v. FAA, 164 F.3d 713, 718 (1st Cir. 1999) (citations

omitted); see also 5 U.S.C. § 706 ("the reviewing court shall

decide all relevant questions of law"). However, while the court

"review[s] de novo an agency's construction of a statute that it

administers, [it does so] subject to established principles of

deference." Griffiths v. INS, 243 F.3d 45, 49 (1st Cir. 2001)

(citing INS v. Aquirre-Aquirre, 526 U.S. 415, 424-25 (1999);

Herrera-Inirio v. INS, 208 F.3d 299, 304 (1st Cir. 2000)) .

Under those principles of deference, if the intent of Congress is clear, it must govern, but where the statute is silent or ambiguous on an issue, the question for the court is whether the agency's interpretation is based on a permissible construction of the statute. See Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43 (1984); Herrera-Inirio, 208 F.3d at 304.

Griffiths, 243 F.3d at 49 (parallel citations omitted).

48 A permissible construction is "one which is 'rational and

consistent with the statute.'" NLRB v. Hilliard Dev. Corp., 187

F.3d 133, 140 (1st Cir. 1999) (quoting NLRB v. Beverly Enters.-

M a s s ., Inc., 174 F.3d 13, 22 (1st Cir. 1999)). Under principles

articulated in Chevron, courts "have traditionally accorded the

[agency] deference with regard to its interpretation of the

[statute] as long as its interpretation is rational and

consistent with the statute." Penobscot, 164 F.3d at 719

(quoting NLRB v. United Food & Commercial Workers Union, Local

2 3 , 484 U.S. 112, 123 (1987)). Moreover, the requirement of

rationality and consistency applies not only to the construction

an agency gives a statutory term, but also to its explication of

the reasoning process that led to its construction. See

Penobscot, 164 F.3d at 719 (citations omitted).

As a preliminary matter, it should be noted that although

the arbitration panel was convened by the federal Department of

Education, and notwithstanding that § 111(b) is, literally, part

of a transportation statute, the arbitration panel's construction

of the term "priority," as used in § 111(b), is still entitled to

judicial deference. While Chevron deference applies to "an

49 agency's construction of a statute that it administers,"

Griffiths, 243 F.3d at 49 (citations omitted), and "[a]gency

regulations interpreting a statute that relates to matters

outside the agency's area of expertise are entitled to no special

deference," Dantran, Inc. v. U.S. Dep't of Labor, 246 F.3d 36, 48

(1st Cir. 2001) (citations omitted) (ruling that Department of

Labor interpretation of the Egual Access to Justice Act were

entitled to no deference), the arbitration panel's construction

of § 111(b) in this case is entitled to Chevron deference even

though the particular statutory provision at issue is not,

strictly speaking, part of the Randolph-Sheppard Act, which the

federal Department of Education is charged with implementing.

This is so for two reasons.

First, as already noted, the arbitration panel construed

§ 111(b) only after the State moved to dismiss Civ. No. 98-011-M

on grounds that CBV was obligated to pursue its § 111(b)

complaint through the grievance-resolution process established in

the Randolph-Sheppard Act. That is, the State itself construed

§ 111(b) claims as being subject, by incorporation, to the

dispute-resolution processes established in Randolph-Sheppard.

50 The State's view may or may not have been correct, but that issue

is for another day and another case. Having argued for and

having obtained that result in the prior related case, leading

directly to this case, the State can hardly be heard to argue

that the arbitration panel lacks the necessary expertise to

construe the term "priority."

Second, the meaning of "priority" as used in § 111 (b) i_s a

matter within the arbitration panel's area of expertise.

Congress recognized as much when it specifically referenced the

Randolph-Sheppard Act in § 111(b). Rather than direct the

federal Department of Transportation to determine what is or is

not a vending machine operated "through" an SLA, and, by

extension, what a priority might be. Congress no doubt

anticipated that the federal and state agencies whose job it is

to implement legislation providing opportunities for the blind

would determine those issues. As between the federal Departments

of Transportation and Education, it is plain that the Education

Department has the greater expertise and interest in implementing

statutory provisions designed to extend vending program

opportunities for the blind. The § 111 (b) priority originated in

51 and is codified in a transportation statute, but providing

vending opportunities to the blind in connection with federal, or

federally-controlled, property is a mission traditionally

delegated to the Education Department. The arbitration panel's

administrative construction of § 111(b) is entitled to deference

under Chevron.

The arbitration panel necessarily gave meaning to the term

"priority" because Congress did not define the term in § 111(b).

See Chevron, 467 U.S. at 843 ("if the statute is silent or

ambiguous with respect to the specific issue, the guestion for

the court is whether the agency's answer is based on a

permissible construction of the statute") (footnote omitted).

Turning, then, to the panel's construction, no grounds have been

presented that warrant setting aside that construction as

unreasonable or irrational. The arbitrators determined that:

(1) to meet the "priority" reguirement of § 111(b), a state must

approach its SLA, and the SLA must decline a vending opportunity,

before that opportunity may be offered to other vendors; and

52 (2) New Hampshire did not afford licensed blind vendors or the

SLA the vending priority to which they were statutorily entitled.

The deferential APA/Chevron standard of review requires the

court, on the record before it, to decline to set aside the

arbitration panel's construction of the term "priority" in this

case. See Chevron, 467 U.S. at 843 n.ll (explaining that "[t]he

court need not conclude that the agency construction was the only

one it permissibly could have adopted to uphold the construction,

or even the reading the court would have reached if the question

initially had arisen in a judicial proceeding.") (citations

omitted). A sufficient basis exists to affirm the arbitrators'

construction of the term "priority."

Affording an SLA the right to accept or decline a vending

opportunity, before that opportunity may be offered to other

vendors, does extend a priority, as intended by § 111 (b), to

vending machines operated through the SLA. As the panel noted in

its decision, the priority principle it adopted is also given

expression in New Hampshire's own Randolph-Sheppard Act

equivalent, which requires officials in charge of state property

53 to attempt to contract with the SLA for vending services and to

determine, in good faith, that the SLA is unwilling to operate a

facility before offering a vending concession to another vendor.

See RSA 186-B: 13, 1 .17

The system described by the State does not give a priority

to vending machines operated through the SLA because the guiding

principle behind the State's system is not the extension of

economic opportunities to licensed blind vendors, or to the SLA

itself, but is, instead, maximizing revenue from vending machine

operations for use by the State's Department of Transportation,

17 Not only does the New Hampshire Randolph-Sheppard Act eguivalent reguire first refusal by the SLA before any other vendor may be approached, but the Federal Highway Administration adopted that same principle in its memorandum of March 11, 1993. Because the arbitration panel did not cite that memorandum in its decision, but was presented with it at the hearing on January 11, 2001, it is unclear whether this court may rely upon it in affirming the panel's decision. See Penobscot, 164 F.3d at 720 (explaining that when a reviewing court examines agency action under APA's arbitrary and capricious standard, it "may not supply a reasoned basis for the agency's action that the agency itself has not given") (guoting Motor Vehicle Mfrs. Ass'n v. State Farm M u t . Auto. Ins. Co., 463 U.S. 29, 43 (1983)). Nonetheless, the fact remains that the meaning given by the arbitration panel to the term "priority" is entirely consistent with principles articulated previously in the blind vendor context. The State has identified no authority that has articulated or implemented its "high, or tie with high bid" interpretation of "priority" in this context.

54 and to enhance the State's general fund.18 In other words, while

the State claims to have a priority system, it is a system that

actually stands the priority required by § 111(b) on its head,

and virtually guarantees that, as a matter of economic reality,

private vendors will always prevail over blind vendors in the

18 The reported § 111 (b) decisions - as limited as that universe may be - do not address the question presented in this case: Whether the State may put its interest in generating revenue for itself from rest area vending machines ahead of blind vendors' priority right to operate those concessions. See Jacobsen v. Bonine, 123 F.3d 1272, 1273 (9th Cir. 1997) (in Arizona, vending machines at interstate highway rest areas are operated by "Arizona's Business Enterprise Program, Services for the Blind [which is] a unit of the Arizona Department of Economic Security, which is the state licensing agency [SLA] . . .); Jacobsen v. Howard, 109 F.3d 1268, 1271 n.3 (8th Cir. 1997) (South Dakota statutes ban commercial establishments on interstate highway rights-of-way, commercial activities in highway rest areas, and businesses that require customers to use highway rights of way during the transaction of business, but make an exception for "vending facilit[ies] vending soft drinks only operated for the benefit of visually impaired vendors licensed by the division of service to the visually impaired"); Sentinel Communications Co. v. Watts, 936 F.2d 1189, 1191-92 (11th Cir. 1991) (Florida "DOT planned to remodel the rest areas [on Interstate 4] and to build gift shops that would be staffed by the Division of Blind Services (DBS) of the Florida Department of Education (DOE). . . . The Florida DOE, which administers the DBS, is under contract with the DOT. Pursuant to this agreement, the DOT has delegated to the DBS the authority to install vending machines in interstate highway rest areas . . ."). In short, the statutory right CBV seeks to enforce in this case appears to be honored, as a matter of course, in other states. The court has found no reported decision in which a state has attempted to condition an SLA's statutory priority to operate vending machines on the SLA's ability to pay compensation to the State equivalent to what a private vendor would pay.

55 bidding process, and the State's general fund will be

substantially enriched, at the expense of blind vendors. It is

difficult to avoid the obvious intent behind the State's

usurpation of blind vendors' rights.

To conclude, because the arbitration panel provided an

adeguate, rational, non-arbitrary "'explication' of its

reasoning," Penobscot, 164 F.3d at 719 (guoting Allentown Mack

Sales & Serv., Inc. v. NLR B , 522 U.S. 359, 364 (1998)), there is

no basis upon which to set aside the panel's finding that the

State failed to afford a priority to vending machines operated

through the SLA, as it is obligated to do under § 111(b). Under

the panel's construction of the term priority, the State is

reguired to offer all interstate highway vending contracts to the

SLA before those contracts may be put out to general bid. If the

SLA is able to meet the contract specifications with respect to

the number and guality of vending machines, the guality and cost

of goods to be sold, housekeeping at the vending sites, and the

like, then the opportunity to operate interstate rest area

vending facilities belongs to the SLA. If the SLA or licensed

blind vendors are unable or unwilling to meet bid specifications.

56 then, in that event, the State may solicit bids from other

vendors, and award vending contracts on any basis it chooses,

including the revenue to be generated for the State. What has

occurred here is nothing less than the State's shunting aside the

disabled citizens Congress intended to benefit in order to

maximize its own general fund.

2. Scope of Damages

Both parties argue that the arbitration award is not

sustainable, albeit for different reasons.

According to the State, the panel's award is in excess of

its statutory authority, see 5 U.S.C. § 706(2)(C), and not

supported by substantial evidence, see 5 U.S.C. § 706(2)(E). The

State argues that: (1) because CBV's reguest for arbitration,

following this court's dismissal, did not constitute an appeal of

a decision by the SLA, the arbitration panel was without

authority to award damages; (2) because the Hooksett and Nashua

rest areas are located on toll roads, § 111 (b) does not apply to

them at all, and, therefore, the panel's damages award, to the

extent it is based upon contracts related to those rest areas.

57 was beyond the panel's statutory authority and was not supported

by the evidence; (3) because the SLA could not meet the

specifications of the 1988 Hooksett contract or the 1991 contract

for Seabrook, Salem, and Springfield, and expressly declined to

match the high bid on the 2001 Hooksett contract, substantial

evidence did not support an award of damages based upon those

contracts; and (4) the only contract on which damages could be

awarded at all is the contract for Lebanon, Canterbury,

Sanbornton, and Sutton, and, even if damages were to be awarded

based upon that contract, CBV's damages would have to be reduced

by the amount of capital expenditures and maintenance costs the

State incurred building and maintaining the vending facilities at

those rest areas.

CBV says the arbitration panel erred by: (1) awarding

damages from October 28, 1998, the date of its complaint (appeal)

to the federal Department of Education, rather than January 6,

1998, the date on the complaint it filed in this court in Civ.

58 No. 98-011-M;19 and (2) failing to award attorneys' fees and

costs.

a. Authority to Award Damages

The State argues that "any award of damages against the

State is prohibited as the Arbitration Panel had no authority to

award damages where the Blind Vendors were not seeking

determination of the validity of a SLA action." The State relies

on the proposition that a licensed blind vendor may use the

dispute resolution procedure outlined in Randolph-Sheppard Act

"only for grievances concerning actions by a state licensing

agency." G a . Dep't of Human Res, v. Nas h , 915 F.2d 1482, 1487

(11th Cir. 1990). CBV's grievance, the State points out, arises

from action taken by the Department of Administrative Services in

letting vending contracts, and not action taken by the SLA in

connection with Randolph-Sheppard Act obligations.

19 In Count II of its counterclaim here, CBV sought damages from 1985 onward, rather than from the date on which it filed suit in Civ. No. 98-011-M. But CBV appears to have dropped that particular reguest for relief; it is not mentioned in CBV's motion for summary judgment.

59 Nash, upon which the State relies, is distinguishable on a

factual basis. There, a blind vendor invoked the Randolph-

Sheppard Act grievance process in an effort to compel an SLA to

challenge a decision by a federal agency concerning vending

facilities on federal property. Id. at 1485.In that factual

setting, the court of appeals held that "the [Act] supports no

action for damages by a blind vendor against astate licensing

agency for failure to complain about a federal entity's action."

I d . at 1486. Here, by contrast, CBV is not challenging the SLA's

failure to take action against a federal agency on its behalf;

CBV is challenging the State's failure to give vending machines

operated through the SLA the priority they are due under federal

law .

In any event, the State's current argument - that CBV's case

was not properly before the arbitration panel - ignores the fact

that the State insisted, in Civ. No. 98-011-M, that CBV was

obligated to pursue its § 111 (b) claim against the State under

the Randolph-Sheppard grievance process; indeed the State argued

that CBV was reguired to exhaust those administrative remedies

before coming to court. The State's current position on the

60 applicability of the Randolph-Sheppard Act grievance procedure

directly contradicts the position on which it prevailed in Civ.

No. 98-011-M, and, because neither the State nor CBV appealed

that judgment, the State's argument is barred by the doctrine of

judicial estoppel. See Faigin, 184 F.3d at 82. Franco v.

Selective Ins. Co., 184 F.3d 4, 9 (1st Cir. 1999) (guoting

Patriot Cinemas, Inc. v. Gen. Cinema Corp., 834 F.2d 208, 212

(1st Cir. 1987)) ("the First Circuit rule is that judicial

estoppel 'should be employed when a litigant is "playing fast and

loose with the courts," and when "intentional self-contradiction

is being used as a means of obtaining unfair advantage."'") The

State has demonstrated more than enough "fast and loose play" in

this case to support application of the judicial estoppel

doctrine. Because the State successfully argued and obtained a

judgment, in Civ. No. 98-011-M, that CBV was barred from

initially seeking relief in this court because of both the

applicability and the availability of the Randolph-Sheppard Act

grievance process relative to CBV's § 111(b) claims - which

includes the arbitration step and subseguent appeal to this court

- the State is now estopped from conveniently making the exact

opposite argument, i.e., that the arbitration panel was without

61 authority to hear CBV's complaint or award damages, because

jurisdiction over CBV's complaint lies only in this court.

The State's second argument - that the arbitration panel

acted outside its authority - seems to be this. Because the

Hooksett and Nashua rest areas were not built with federal money,

and are located on toll roads, the priority reguirement imposed

by § 111(b), which is part of a federal highway funding statute,

does not apply to those rest areas. CBV counters that: (1) the

State is barred from raising that objection at this point as

well, because it failed to assert the argument before the

arbitration panel; and (2) the State's argument is wrong on the

merits. The State counters that because its argument goes to

jurisdiction, it may be raised at any time. Because the court

agrees with CBV on the merits, it does not consider CBV's waiver

argument.

The substantive issue is straightforward: What did Congress

intend when, in § 111(b) it granted states permission to place

vending machines "in rest and recreation areas, and in safety

rest areas, constructed or located on rights-of-way of the

62 Interstate System in such State"? According to CBV, the phrase

"rights-of-way of the Interstate System" refers to rights-of-way

associated with both freeways and toll roads, so long as those

rights-of-way are located along the interstate highway system.

According to the State, the phrase is intended to exclude rights-

of-way located along toll roads, and § 111 (b) is intended to

apply only to rest areas built with federal aid. Neither party

directs the court to relevant precedent, and, given the apparent

novelty of New Hampshire's approach to interstate highway vending

concessions, it is not at all likely that the guestion presented

has ever been litigated elsewhere.

The issue is one of statutory construction. First, if

Congress had intended the § 111 (b) reguirement to apply only to

rest areas constructed with federal aid, it could have said so,

but it did not. This court is "obligated to refrain from

embellishing statutes by inserting language that Congress opted

to omit." Root v. New Liberty Hosp. Dist., 209 F.3d 1068, 1070

(8th Cir. 2000) (citing Keene Corp. v. United States, 508 U.S.

200, 208 (1993)). Second, while the State makes a plausible

argument that § 111(b) does not apply to rest areas on toll roads

63 for which federal funding has not been used, the location of a

rest area on an interstate highway that is also a toll road does

not render § 111(b) inapplicable. Section 111(b) refers to rest

areas "constructed or located on rights-of-way of the Interstate

System." Up until 1991, 23 U.S.C. § 129(b) authorized the

Secretary of Transportation "to approve as part of the Interstate

System any toll road . . . now or hereafter constructed . . .

which meets the standards for . . . the Interstate System."

Thus, the mere fact that tolls are charged does not mean that a

roadway is not part of the interstate system. Therefore, the

fact that a rest area is located on a toll road does not render

§ 111(b) inapplicable, so long as that toll road is also part of

the interstate system. Here, the undisputed factual record

plainly shows that the Hooksett rest area is located along the

interstate system, while the Nashua rest area is not.

(Respondent's Ex. I.) Accordingly, only the rest area in Nashua

is beyond the reach of § 111 (b) .

Because the arbitration panel had the authority to award

damages both as a general matter20 and under the circumstances of

20 The general authority of a § 107d arbitration panel to award damages seems beyond dispute. See Premo, 119 F.3d at 770

64 this case, and because § 111 (b) applies to all rest areas located

along interstate highways in New Hampshire, the only guestions

remaining are whether the arbitration panel's award of damages,

and its decision not to award attorneys' fees, pass muster under

5 U.S.C. § 706.

b. The Amount of Damages

The arbitration panel's award of damages gualifies for

review under the "arbitrary and capricious" standard set out in

§ 706(2)(A). When applying that standard, a reviewing court

presumes the agency action to be valid. See Citizens to Preserve Overton Park [Inc.1 v. Volpe, 401 U.S. 402,

("while it is true that the Randolph-Sheppard Act does not refer expressly to compensatory relief and one circuit judge has concluded that the Act does not permit such relief . . . this view has been largely discredited") (citation omitted). In Premo, the court of appeals affirmed a district court decision upholding an arbitration panel's award of $379,025.05 in lost income and $70,898.65 in attorneys' fees and costs against the state of California. See i d . at 767. In Tennessee Department of Human Services v. United States Department of Education, 979 F.2d 1162, 1165 (6th Cir. 1992), the court of appeals reversed a district court decision vacating an arbitration panel's award consisting of eight years' vending machine income, interest, and attorneys' fees against the Tennessee SLA (while also ruling that the plaintiff could not enforce his arbitration award in the federal courts). In Delaware, the court of appeals reversed a district court decision vacating an arbitration panel's award of eighteen months' back pay and attorneys' fees. See 772 F.2d at 1134 .

65 415 (1971); Southern Cal. Edison Co. v. F.E.R.C., 770 F.2d 779, 782 (9th Cir. 1985) . Although the court's inquiry is to be searching and careful, the ultimate standard of review for this . . . category [of challenges to agency action] is a narrow one. See Overton Park, 401 U.S. at 416.

Ace Lobster Co. v. Evans, 165 F. Supp. 2d 148, 164 (D.R.I. 2001)

(parallel citations omitted), rev'd on other grounds, 311 F.3d

109 (1st Cir. 2002). Under this "highly deferential standard of

review," Airport Impact Relief, Inc. v. Wvkle, 192 F.3d 197, 203

(1st Cir. 1999) (citing Citizens Awareness Network, Inc. v. U.S.

Nuclear Reg. Comm'n, 59 F.3d 284, 290 (1st Cir. 1995)),

"[t]he task of a court reviewing agency action . . . is to determine whether the agency has examined the pertinent evidence, considered the relevant factors, and 'articulate[d] a satisfactory explanation for its action including a rational connection between the facts found and the choice made.'" Penobscot Air Servs., Ltd. v. Federal Aviation Admin., 164 F.3d 713, 719 (1st Cir. 1999) (citing Motor Vehicle Mars. Ass'n v. State Farm Mut. Auto. Ins. Co . , 463 U.S. 29, 43 (1983) (citation and internal quotation marks omitted)).

Airport Impact Relief, 192 F.3d at 202 (parallel citations

omitted). In sum, "[s]o long as the agency's determination is

'within the bounds of reasoned decisionmaking,' [the court] may

not set it aside, regardless of whether [it] may have reached an

66 opposite decision." M/V Cape Ann v. United States, 199 F.3d 61,

63-64 (1st Cir. 1999) (quoting Baltimore Gas & Elec. Co. v.

Natural Res. Def. Council, Inc., 462 U.S. 87, 105-06 (1983)).

Turning to the facts of this case, the arbitration panel's

award of damages included all commissions paid to the State by

all vending machine operators, at all interstate highway rest

areas, from October 28, 1998, forward. In addition to its

argument that § 111(b) does not apply to rest areas on parts of

the interstate system on which tolls are charged, which the court

has already rejected, the State also argues that CBV is not

entitled to commissions earned from: (1) contracts on which the

SLA did not bid (i.e., the first Hooksett contract and the

contract for Seabrook, Salem, and Springfield; and (2) the second

Hooksett contract, which the SLA declined. The State further

argues that CBV could not have met the bid specifications for the

two successive contracts for Canterbury, Lebanon, Sanbornton, and

Sutton and is entitled to no commissions at all based upon those

contracts or, at most, is entitled to the commissions earned by

the State less the State's capital and maintenance costs. CBV,

of course, argues that it is entitled to the full measure of

67 damages awarded by the arbitration panel, pushed back to the date

on which it filed its complaint in this court in Civ. No. 98-011-

M.

The State's argument that CBV is not entitled to commissions

obtained by the State under the first Hooksett contract and the

contract for Seabrook, Salem, and Springfield, has some facial

appeal, because the SLA did not bid on those contracts and was,

by all accounts, unable to meet the bid specifications, which

included construction of vending shelters. That position is

undercut, however, by the critical fact that the State did not,

as reguired, give SLA a priority. The State put the contracts

out to general bid without first obtaining an affirmative waiver

from the SLA. Moreover, even if the SLA was itself incapable of

meeting the bid specifications on those two contracts, the

arbitration panel found that "[t]he N.H. SLA could have taken

advantage of its priority under Section 111 (b) of TEA-21 by

either having licensed blind vendors operate and maintain

machines, or by subcontracting with private vendors to operate

and maintain the machines." Given that finding, it was neither

arbitrary, capricious, nor in any other way unlawful for the arbitration panel to grant CBV an award based upon commissions

the State obtained from the first Hooksett contract and the

contract for Seabrook, Salem, and Springfield.

Similarly, it was neither arbitrary nor capricious for the

arbitration panel to award damages based upon the commissions the

State obtained from the second Hooksett contract. Plainly, the

SLA declined to match the high bid submitted on that contract,

but, as explained above, being offered the chance to match a high

bid is hardly the same thing as being given a § 111(b) priority.

By declining to match the high bid on the second Hooksett

contract, when offered the opportunity after the State solicited

bids from other vendors, the SLA indicated its inability to both

meet the bid specifications and pay the same commission rate that

the high bidder agreed to pay. However, because revenue for the

State is not a permissible contract specification where the SLA

is entitled to a priority,21 the SLA's decision to decline the

contract did not amount to an effective waiver of its statutory

21 As the court has already explained, when the State makes the commission rate a bid specification, it gives itself a priority, rather than giving a priority to the SLA, as it is obligated to do under § 111(b).

69 priority.22 Because the SLA was not afforded a priority with

respect to the second Hooksett contract, and could not,

therefore, have waived its right to that priority, it was neither

arbitrary nor capricious for the arbitration panel to award

damages based upon the commissions the State collected under the

second Hooksett contract.

The rationale justifying an award of damages based upon the

second Hooksett contract also justifies an award of damages based

upon both contracts for Canterbury, Lebanon, Sanbornton, and

Sutton. The SLA was not given a priority, but was merely invited

to bid on both, and there is no indication in the record that the

SLA lost out on either of those contracts for any reason other

than the ability of other vendors to pay higher commissions to

the State.

Certainly, the arbitrators could have awarded damages on a

different basis -- e.g., based on the profits that a licensed

22 The SLA's decision to bid on the two contracts for Canterbury, Lebanon, Sanbornton, and Sutton, gave the arbitration panel a reasonable basis for believing that the SLA could also have met the non-commission specifications for the second Hooksett contract which, like the two contracts for Canterbury, Lebanon, Sanbornton, and Sutton, reguired no construction.

70 blind vendor or the SLA would have likely earned from operating

vending machines at the eight interstate highway rest areas,

while operating those vending facilities in accordance with the

non-commission-related contract specifications. However, the

commissions earned by the State are easily calculated, represent

income to which the State had no legitimate claim, and were

obtained only by ignoring its statutory obligations. Thus, for

the reasons given above, it was neither arbitrary nor capricious

for the panel to assess damages based upon the commission income

the State derived from commercial opportunities that rightfully

belonged to licensed blind vendors or the SLA acting in their

interest.

As noted above, the State contends that if it is liable to

pay damages in the form of commissions earned from vending

machines at the Canterbury, Lebanon, Sanbornton, and Sutton rest

areas, the proper measure of damages is not the total amount of

commissions it collected, but rather, its total commission income

reduced by the amount the State spent constructing and

maintaining vending shelters at those rest areas. The State's

position has merit. The arbitration panel's decision relative to

71 Canterbury, Lebanon, Sanbornton, and Sutton must be vacated, in

part.

There have been two successive contracts for vending

services at the Canterbury, Lebanon, Sanbornton, and Sutton rest

areas. The specifications for the first contract included no

construction, only minor electrical and plumbing work that was

performed by the successful bidder. Thus, it was neither

damages in the full amount of commissions obtained by the State

under that contract. However, part way through the second

contract's term, the vending contractor moved its vending

machines from the rest areas themselves into new shelters built

by the State, under the authority of RSA 230:30-a, ITI-a, which

had been recently enacted. Thus, the State incurred capital

costs that reduced its net gain from the vending revenue stream.

Because the State is entitled to reimbursement for its

capital expenses, see RSA 230:30-a, V, it was arbitrary and

capricious for the panel to award total commission revenues

obtained, without off-setting the cost of obtaining that revenue

72 stream. Conveniently, however, RSA 230:30-a, V, establishes the

manner in which the State recoups construction and maintenance

costs. The arbitration panel's decision is vacated to the extent

it awarded CBV one hundred percent, rather than seventy-five

percent, of the State's commission revenue from vending machines

located in newly constructed vending shelters at the Canterbury,

Lebanon, Sanbornton, and Sutton rest areas (the State is entitled

to retain twenty-five percent to cover construction and

maintenance costs) .

c. Starting Date for Damages

The arbitration panel awarded damages measured by

commissions obtained from October 28, 1998, forward. CBV

contends that damages should have been awarded from January 6,

1998, forward.

October 28, 1998, is, of course, the date upon which the

arbitration panel considered CBV's administrative complaint

(appeal) to have been filed with the federal Department of

Education. The panel was aware that CBV had filed its complaint

in this court in Civ. No. 98-011-M in January of 1998, and had

73 filed a request for hearing before the State Education Department

on March 30, 1998. Because the administrative complaint from CBV

could come to the federal arbitration panel only as an appeal

from a decision by a state hearings officer, see 20 U.S.C.

§ 107d-l(a), it was incorrect, as a matter of law, for the

arbitration panel to deem October 28 to be the date on which CBV

asserted its claim. Rather, that claim was properly asserted (at

least in the context of this case) no later than March 30, 1998,

the date on which CBV requested a hearing before the State

Education Department, thereby initiating the administrative

process the State insisted upon. It was not, however, either

legally incorrect, or arbitrary and capricious, for the panel not

to find January 6, 1998, to be the date on which CBV asserted its

claim. While CBV filed suit (Civ. No. 98-011-M) on January 6,

1998, the arbitration panel was aware that this court had

dismissed that case for failure to exhaust the administrative

remedies the State argued were available to CBV. Thus, for

purposes of this case, the claim was properly asserted in an

appropriate forum on March 30. The panel's decision is modified

to include damages, as allowed by the panel, for the period March

30 to October 28, 1998.

74 d. Attorneys' Fees

Finally, there is the question of attorneys' fees. The

issue arises in this case in two different ways. First, CBV

appeals the arbitration panel's decision not to award it

approximately $70,000 in attorneys' fees. In addition, CBV has

filed a motion for attorneys' fees in this court. In its motion,

CBV claims attorneys' fees totaling approximately $95,000 (the

difference being attributable to post-arbitration fees).

As noted above, the arbitration panel awarded no attorneys'

fees, and gave no explanation for its decision in the text of its

order dated July 11, 2001. The panel did, however, make several

relevant rulings of law. It determined that CBV was not entitled

to attorneys' fees under: (1) the precedent established by Nas h ,

915 F.2d 1482, and Tennessee, 979 F.2d 1162; (2) the rationale of

Natural Resources Defense Council, Inc. v. E P A , 484 F.2d 1331,

1338 (1st Cir. 1973) ("private attorney general" theory); (3) the

State's common law, e.g.. King v. Thomson, 119 N.H. 219, 222

(1979) (holding that "counsel fees and expenses of a State

official who defends a State interest must be paid by the

State"); (4) the plain meaning of the Randolph-Sheppard Act, as

75 construed by Nash, 915 F.2d 1482, and Maryland State Department

of Education v. United States Department of Veterans Affairs, 98

F.3d 165 (4th Cir. 1996); (5) the legislative history of the

Randolph-Sheppard Act, as interpreted by Delaware, 772 F.2d 1123;

or (6) the precedent established by Tennessee, 979 F.2d 1162, and

Premo, 119 F.3d 764.

CBV appeals the arbitration panel's decision not to award

fees, noting its failure to explain its decision. CBV argues

that under Delaware, Tennessee, Premo, and Almond v. Boyles, 7 92

F.2d 451 (4th Cir. 1986), Randolph-Sheppard Act arbitration

panels have the authority to award attorneys' fees; that this

litigation has been unnecessarily prolonged by the State's

obstinacy; and that it should be entitled to fees under the

common-benefit doctrine as set out in Mills v. Electric Auto-Lite

C o ., 396 U.S. 375, 393-94 (1970). The State counters that

although the Randolph-Sheppard Act provides that "[t]he Secretary

shall pay all reasonable costs of arbitration," 20 U.S.C. § 107d-

2 (d), attorneys' fees are not properly considered a cost of

arbitration. See McNabb v. Rilev, 29 F.3d 1303, 1304, 1306 (8th

Cir. 1994) .

76 The panel's decision is not incorrect as a matter of law.

It falls well within its broad discretion, and it is entirely

consistent with the "American rule," under which prevailing

litigants are not ordinarily entitled to recover attorneys' fees

from losing parties. See Alveska Pipeline Serv. Co. v.

Wilderness Soc'v, 421 U.S. 240, 247 (1975).

CBV persists - arguing that under Delaware, Tennessee,

Premo, and Almond, it is entitled to fees under three exceptions

to the American rule: (1) the exception based upon an opponent's

bad faith and vexatious litigation tactics; (2) the common-

benefit doctrine; and (3) New Hampshire's common-law rule, under

which attorneys' fees are available to "private attorneys

general."

"In the United States, the prevailing litigant is ordinarily

not entitled to collect a reasonable attorneys' fee from the

loser." Alveska, 421 U.S. at 247. There are, however, several

exceptions to the so-called American rule. First, "attorney's

fees may be granted . . . if the relevant statute provides for

such an award." Bercovitch v. Baldwin Sch., Inc., 191 F.3d 8, 10

77 (1st Cir. 1999) (citing Alveska, 421 U.S. at 247). Second, "a

district court [may] award attorney's fees to a prevailing party

when the losing party has 'acted in bad faith, vexatiously,

wantonly, or for oppressive reasons.'" Dubois v. U.S. Dep't of

Aqr i c ., 270 F.3d 77, 80 (1st Cir. 2001) (guoting Chambers v.

NASCO, Inc., 501 U.S. 32, 33 (1991)). Third, a district court

may "award expenses where a plaintiff has successfully maintained

a suit, usually on behalf of a class, that benefits a group of

others in the same manner as himself." Mills, 396 U.S. at 392

(citing Fleischmann Distilling Corp. v. Maier Brewing Co . , 386

U.S. 714, 718-19 (1967)).

First, there is no statutory basis for awarding fees to CBV.

Neither the Randolph-Sheppard Act nor § 111 (b) provides for the

recovery of attorneys' fees, and 20 U.S.C. § 107d-2(d) has been

authoritatively construed by the Department of Education as

excluding an award of attorneys' fees incurred pursuing

arbitration.23 In short, while Randolph-Sheppard arbitration

23 The only possible statutory basis for an award of attorneys' fees is found at 20 U.S.C. § 107d-2(d), which provides that "[t]he Secretary shall pay all reasonable costs of arbitration under this section in accordance with a schedule of fees and expenses he shall publish in the Federal Register." In Delaware, the court of appeals suggested, but did not hold, that

78 panels may award attorneys' fees, they are not obligated to do so

by the A c t .

CBV claims that the State has litigated this case

vexatiously. But, the arbitration panel considered that

reasonable costs of arbitration include "a blind vendor's attorney's fees for the arbitration proceeding if the blind licensee is unable to obtain the services of counsel without cost either through a local or State legal services program, or through an interested association or organization." See 772 F.2d at 1138 n.13 (internal guotation marks omitted); but see Schlank v. Williams, 572 A.2d 101, 110 n.17 (B.C. 1990) (pointing out that the Delaware court based its interpretation of § 107d-2(d) on a federal Department of Education policy statement that was never actually issued). Here, CBV did not rely upon § 107d-2(d) as authority for an award of fees before the arbitration panel; rather than citing Delaware for the seemingly erroneous dictum in footnote 13, CBV relied upon its holding - that a Randolph-Sheppard Act arbitration panel had discretion to award attorneys' fees under a contract damages theory. In any event, it is now clear that § 107d-2(d) does not provide for an attorneys' fees award. According to the schedule of fees and expenses published by the Secretary of Education:

Generally, the Secretary considers reasonable costs of arbitration to include the cost of preparing the official record of arbitration proceedings, professional fees for arbitration panel members, and food, travel, and lodging expenses of panel members and essential witnesses. The Secretary does not consider attorney's fees to be part of the reasonable costs of arbitration supported by the Secretary.

61 Fed. Reg. 16,700, 16,700 (Apr. 16, 1996); see also McNabb, 2 9 F .3d at 130 6-07.

79 argument, had before it all the evidence necessary to assess the

State's conduct for itself, yet declined to make an award. Thus,

the question here is whether the State's conduct since the

arbitration panel's decision warrants an award of fees.

It is within the court's discretion, under principles of

equity, "to award attorney's fees to a prevailing party when the

losing party has 'acted in bad faith, vexatiously, wantonly, or

for oppressive reasons.'" Dubois, 270 F.3d at 80.

To invoke this exception [to the American rule] under a claim of "vexatious" conduct, the moving party must demonstrate that the losing party's actions were "frivolous, unreasonable, or without foundation, even though not brought in subjective bad faith." Local 285 v. Nonotuck Resource Assocs., 64 F.3d 735, 737 (1st Cir. 1995).

Because of its potency, however, a "court's inherent power to shift attorney's fees 'should be used sparingly and reserved for egregious circumstances.'" Whitney Bros. Co. v. Sprafkin, 60 F.3d 8, 13 (1st Cir. 1995) (quoting Jones v. Winneoesaukee Realty, 990 F.2d 1, 4 (1st Cir. 1993)). Thus, the power to sanction must be used with great circumspection and restraint, employed only in compelling situations.

Dubois, 270 F.3d at 80.

80 The State has not litigated this case in a manner warranting

a fee award in favor of CBV. Plainly, the State had a statutory

right to appeal the arbitration panel's decision. See 107 U.S.C.

§ 107d-2(a). Furthermore, while CBV's journey back to this court

has been a long, and perhaps even an avoidable, one, the case has

not been dragged out by the kind of dilatory litigation activity

that justified an award of attorneys' fees in Jones, 990 F.2d at

2-3. The State's pattern of shifting positions on the guestion

of jurisdiction has unguestionably confused and complicated this

case, but has not necessarily prolonged it. And, because

colorable arguments may be made on either side of that issue -

and have, in fact, been made by the State - the State's

litigation strategy, while no doubt aggravating to CBV, does not

gualify as "vexatious," as that term is used in the context of

eguitable fee-shifting.

Finally, CBV is not entitled to fees under the common-

benef it doctrine.24 That doctrine "permit[s] reimbursement in

24 The arbitration panel was presented with, and rejected, CBV's argument for attorneys' fees based upon the common-benefit doctrine. An independent guestion remains as to whether that doctrine warrants an award of the $25,000 in attorneys' fees incurred after the arbitration panel's decision.

81 cases where the litigation has conferred a substantial benefit on

the members of an ascertainable class, and where the court's

jurisdiction over the subject matter of the suit makes possible

an award that will operate to spread the costs proportionately

among them." Mills, 396 U.S. at 393-94. As the Supreme Court

recently explained:

the "common fund exception[]" derives not from a court's power to control litigants, but from its historic eguity jurisdiction, see Sprague v. Ticonic National Bank, 307 U.S. 161, 164 (1939), and allows a court to award attorney's fees to a party whose litigation efforts directly benefit others. Alveska, 421 U.S., at 257-258.

Chambers, 501 U.S. at 45.

As the prevailing party, CBV has indeed secured a

substantial benefit, in the form of declaratory relief and an

award of damages that will benefit its members, an ascertainable

class. However, the third prong of the Mills test is not met in

this case because an award of attorneys' fees will not serve to

spread the costs of litigation among all those who will benefit.

Unlike Mills, in which a group of shareholders secured a benefit

for all shareholders, the plaintiff in this case, CBV, already

82 encompasses all who will be benefitted from the favorable outcome

of its litigation.25 In other words, on the facts presented to

the arbitration panel and to this court, CBV represents virtually

all licensed blind vendors. There are no "others" who have been

benefitted from this litigation, but are not sharing the burden.

And, absent beneficiaries who are strangers to the litigation -

free riders - an award of attorneys' fees would not serve to

spread the costs of litigation to persons who stand to benefit

from a common fund but who bore no costs associated with its

creation. In the language of Mills, this is a case in which the

ascertainable class of beneficiaries is not larger than, but is

identical to, the class of plaintiffs. Accordingly, the common-

benefit doctrine provides no basis for an award of attorneys'

fees in this case. The arbitrators' rejection of CBV's fee

reguest is confirmed, and this court declines to award fees.

To sum up, CBV is entitled to an award of damages "payable

to the SLA for the appropriate uses benefitting Blind Vendors,"

25 The arbitration panel granted a reguest for the following finding of fact: "The New Hampshire Committee of Blind Vendors represents all visually impaired individuals in the State of New Hampshire who seek to participate in any program to provide vending services at interstate highway rest areas."

83 comprised of: (1) one hundred percent of the commissions received

by the State from vending machines at: (a) the Hooksett rest

areas from March 30, 1998, through the present; (b) the Seabrook,

Salem, and Springfield rest areas from March 30, 1998, through

the present; and (c) the Canterbury, Lebanon, Sanbornton, and

Sutton rest areas from March 30, 1998, through October 31, 1999;

and (2) seventy-five percent of the commissions received by the

State from vending machines at the Canterbury, Lebanon,

Sanbornton, and Sutton rest areas from November 1, 1999, through

the present. CBV's award includes no attorneys' fees.

D. Equal Protection

In the complaint that initiated its appeal of the

arbitration panel's decision, the State raised, for the first

time, a constitutional challenge to § 111 (b) based upon the Egual

Protection Clause of the Fourteenth Amendment to the United

States Constitution.

The State argues that § 111(b): (1) is subject to heightened

scrutiny rather than rational basis review, because it impinges

upon the constitutional rights of potential vendors who are not

84 blind; (2) fails, under heightened scrutiny, due to the lack of

congressional findings demonstrating that: (a) the blind were in

need of assistance in 1983, when § 111(b) was enacted; or (b) the

blind were any more severely disadvantaged than those with other

disabilities; and (3) fails under rational basis review because:

(a) "there is no rational relationship between blindness and the

ability to operate a vending facility;" (b) the term "blind

vendors" and the statutory priority in their favor perpetuate an

invidious and demeaning view of the blind and their capabilities;

and (c) there has been no showing that any blind vendors would

actually choose to operate vending machines at interstate highway

rest areas if given a priority in the form of a right of first

refusal.

CBV counters that: (1) the State waived its egual protection

argument by failing to raise it before the arbitration panel; (2)

the State's argument is logically flawed and internally

inconsistent to the extent the State claims to give blind vendors

a priority while maintaining that to do so is unconstitutional;

and (3) § 111(b) is not subject to heightened scrutiny, but only

to rational basis review, which it meets.

85 In its memorandum of law in support of the State's motion

for summary judgment, the federal Department of Education points

out, correctly, that the Fourteenth Amendment does not apply to

the federal government, and that the State's Egual Protection

claim should have been made under the Due Process Clause of the

Fifth Amendment. The federal agency then goes on to argue that

the State: (1) waived its egual protection argument by failing to

raise it before the arbitration panel; (2) has no standing to

raise an egual protection argument; and (3) is wrong on the

merits because: (a) rational basis review applies; and (b) the

§ 111(b) priority easily passes rational basis scrutiny.

As a preliminary matter, the court notes that while the

State focuses its egual protection argument on § 111 (b), if it

were correct, that same argument would also support, if not

reguire, a determination that RSA § 186-B:9-15 is also

unconstitutional. Assuming, without deciding, that the State has

standing to challenge § 111 (b) on egual protection grounds, see

Cohen v. Brown Univ., 101 F.3d 155, 181 n.17 (1st Cir. 1996), the

State has either waived or forfeited26 its egual protection claim

26 There is, of course, a legal distinction between forfeiture and waiver. See United States v. Lopez, 300 F.3d 46,

86 and, even if not waived or forfeited, the claim would fail on its

merits.

The Randolph-Sheppard Act provides for judicial review of

arbitration panel decisions, 20 U.S.C. § 107d-2(a), but makes

clear that "the decision of such panel shall be final and binding

on the parties except as otherwise provided in this chapter,"

20 U.S.C. § 107d-l(a). Because the statute specifies that

arbitration panel decisions are "final and binding," subject to

the highly deferential form of review afforded by the APA -

rather than to de novo review by the district court, the State

had ample notice of its obligation to make all relevant arguments

before the arbitration panel. It is well-established in this

circuit that courts "will not consider issues which a petitioner

failed to present during the administrative process in accordance

59 (1st Cir. 2002) (citations and internal guotation marks omitted) (distinguishing between "forfeiture," as a "failure to timely assert a right," and "waiver," as "an intentional relinguishment or abandonment of a known right"). But, because the conseguences of forfeiture and waiver are identical under the circumstances of this case - mere forfeiture being adeguate to trigger the so-called raise-or-waive rule, see N.Y. State Dairy Foods, Inc. v. Northeast Dairy Compact Comm'n, 198 F.3d 1, 11 n.9 (1st Cir. 1999) - the court need not determine whether the State's actions in litigating this case constitute forfeiture or waiver.

87 with the relevant procedural requirements." Adams v. U.S. E P A ,

38 F.3d 43, 50 (1st Cir. 1994). The State did not raise the

issue before the arbitration panel, and the court need not

consider it.

Even absent waiver or forfeiture, the State would not

prevail on the merits. Under the appropriate standard of review

- rational basis - the classification employed in § 111 (b) is

constitutional, because it is rationally related to a legitimate

government interest. The priority given to vending machines

operated through state licensing agencies provides an economic

opportunity for people disadvantaged economically by virtue of

their blindness. The State does not seriously challenge the

legitimacy of the government's interest in assisting the blind,

and it would seem beyond argument that it is a proper function of

government to aid its disabled citizens.

The State also suggests that no legislative findings support

Congress's decision to favor the blind with vending

opportunities, but not persons with other forms of disability,

and that no rational basis exists for making that distinction. That argument fails for two reasons. First, as the Supreme Court

explained in Heller, a legislature "has no obligation to produce

evidence to sustain the rationality of a statutory

classification." 509 U.S. at 320. Second, even if persons with

disabilities other than blindness suffer economic hardships egual

to or greater than those suffered by the blind, the failure of

§ 111(b) to address the full range of economic hardships faced by

the generally disabled does not render the statute invalid on

egual protection grounds.

.The problem of legislative classification is a perennial one, admitting of no doctrinaire definition. Evils in the same field may be of different dimensions and proportions, reguiring different remedies. Or so the legislature may think. Or the reform may take one step at a time, addressing itself to the phase of the problem which seems most acute to the legislative mind The legislature may select one phase of one field and apply a remedy there, neglecting the others. The prohibition of the Egual Protection Clause goes no further than the invidious discrimination.

FCC v. Beach Communications, Inc., 508 U.S. 307, 316 (1993)

(guoting Williamson v. Lee Optical of Okla., Inc., 348 U.S. 483,

489 (1955)) (footnote omitted) With respect to the rationality of § lll(b),s priority, the

State contends that CBV has made no showing that any blind

vendors would actually benefit from the priority, if offered as

right of first refusal (as reguired by the arbitration panel).

That argument is belied by the fact that the SLA submitted bids

on the contract for the Canterbury, Lebanon, Sanbornton, and

Sutton rest areas each time it was put out to bid. If given a

priority, either a licensed blind vendor, or the SLA acting on

behalf of blind vendors, would have operated the machines. Thus

there is a rational relationship between the § 111 (b) priority

and Congress's legitimate interest in helping the blind.

Because the State has not negated "every conceivable basis

which might support" the classification in § 111(b), its egual

protection challenge would fail on the merits. Heller, 509 U.S.

at 320 (guoting Lehnhausen v. Lake Shore Auto Parts Co . , 410 U.S

356, 364 (1973)).

Conclusion

For the reasons given, the arbitration panel's decision is

affirmed, subject to the modifications noted above concerning damages. Accordingly: (1) CBV's motion for summary judgment

(document no. 24) is granted in part and denied in part; (2) the

State's motion for summary judgment (document no. 26) is granted

in part and denied in part; and (3) CBV's motion for attorneys'

fees (document no. 25) is denied. The Clerk of Court shall enter

judgment in accordance with this order and close the case.

SO ORDERED.

Steven J. McAuliffe United States District Judge

March 28, 2003

cc: Jack B. Middleton, Esg. Joshua Z. Rabinovitz, Esg. Robert R. Humphreys, Esg. Nancy J. Smith, Esg.