Obsidian Solutions Group, LLC v. United States

United States Court of Federal Claims·Decided April 29, 2021·No. 20-1602·Unpublished

Opinion

In the United States Court of Federal Claims No. 20-1602C Filed under seal: April 27, 2021 Reissued: April 29, 2021 * NOT FOR PUBLICATION

OBSIDIAN SOLUTIONS GROUP, LLC,

Plaintiff,

v.

UNITED STATES,

Defendant.

Milton Christopher Johns, Executive Law Partners, PLLC, Fairfax, VA, for the plaintiff.

Steven Charles Hough, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, Washington, D.C., for the defendant; Sabrina C. Daly, Small Business Administration, and Brighton Springer, Department of Energy, of counsel.

AMENDED MEMORANDUM OPINION AND ORDER

HERTLING, Judge

The plaintiff, Obsidian Solutions Group, LLC (“Obsidian”), moves pursuant to Rule 62 of the Rules of the Court of Federal Claims (“RCFC”) for a stay of the Court’s judgment. The parties in this bid protest cross-moved for judgment on the administrative record, and the Court granted the defendant’s motion and denied the plaintiff’s motion in a memorandum opinion on March 24, 2021. The Court entered final judgment rejecting Obsidian’s claim. Obsidian has filed a notice of appeal and now seeks to stay the effect of the Court’s jud gment. Obsidian’s motion for a stay pending appeal is denied.

The Court initially filed this opinion on April 22, 2021, denying the plaintiff’s motion to *

stay the Court’s judgment pending appeal. The Court amended and reissued the opinion under seal on April 27, 2021. The parties were directed to propose redactions of confidential or proprietary information by April 28, 2021. The parties did not propose any redactions. The Court hereby releases publicly the amended memorandum opinion and order of April 27 in full. I. BACKGROUND

The facts are recounted in detail in the Court’s opinion on the merits of this case, Obsidian Sols. Grp., LLC v. United States, No. 20-1602, 2021 WL 1309148 (Fed. Cl. Mar. 24, 2021). Briefly, Obsidian submitted a bid and was the presumptive awardee of a Department of Energy (“DOE”) contract set aside for a small business. The defendant, the United States, acting through the Small Business Administration (“SBA”), determined that Obsidian was not a small business for the purposes of the DOE procurement because its average annual receipts exceeded $20.5 million, the maximum qualifying size to be considered a small business for the North American Industry Classification System (NAICS) Code applicable to the procurement.

Obsidian filed this bid protest disputing the SBA’s calculation of its average annual receipts. Obsidian alleged that the SBA decision was premised on an incorrect application of the Small Business Runway Extension Act of 2018, Pub. L. No. 115-324, 132 Stat. 4444 (“REA”), amending 15 U.S.C. § 632(a)(2)(C). The REA amended this provision of the Small Business Act to obligate agencies to use a period of no less than five years, instead of the statute’s prior standard of three years, to average a small business concern’s receipts in order to determine its size. Obsidian alleged that had the SBA averaged its annual receipts on a five-year basis, as required by the REA, it would have been eligible for the award. The SBA, ho wever, used a three-year basis, rendering Obsidian ineligible for the DOE procurement.

In its bid protest, Obsidian argued that the REA applies to the SBA and was effective immediately upon enactment, so that the SBA’s delay in implementing the REA’s statu tory change was contrary to law. The defendant replied that the REA’s new methodology for making size determinations neither took effect immediately upon enactment of the REA nor applied to the SBA, but rather set guidelines for the promulgation by federal agencies other than the SBA of new size-standard regulations.

Notwithstanding the SBA’s own interpretation that the change made by the REA did not apply to it, in the wake of the REA’s enactment, the SBA proposed a new rule to reflect the statutory change made by the REA: “Small Business Size Standards: Calculation of Annual Average Receipts.” 84 Fed. Reg. 29,399 (June 24, 2019). The SBA “propose[d] to change its regulations on the calculation of annual average receipts for all receipts-based SBA size standards and other agencies’ proposed size standards . . . from a 3-year averaging period to a 5- year averaging period.” Id. The notice expressed the SBA’s position that the “SBA has long interpreted [15 U.S.C. § 632(a)(2)(C)] as not applying to SBA’s size standards issued under [15 U.S.C. § 632(a)(2)(A)].” Id. Despite its long-standing interpretation that the relevant statutory provision did not apply to it, the SBA determined that “to promote consistency government-wide on small business size standards,” it would “change its own size standards to provide for a 5-year averaging period for calculating annual average receipts for all receipts-based size standards.” Id. at 29,400. The SBA explained that its “proposed rule only would affect the application of SBA’s size standard rules after the effective date of a final rule.” Id. at 29,401. Until that time, the SBA would continue to apply the 3-year averaging period. Id.

On December 5, 2019, after the comment-period, the SBA issued a final rule to implement the five-year averaging period “for all of SBA’s receipts-based size standards, and for 2 other agencies’ proposed receipts-based size standards.” 84 Fed. Reg. 66,561, 66,561 (Dec. 5, 2019). The SBA reiterated that its new size standard would only apply after the rule’s effective date. Id. at 66,568. The new rule took effect on January 6, 2020, id. at 66,561, after the date when Obsidian’s size was calculated.

Obsidian challenged the SBA’s determination that the REA did not apply to it and, as a result, the statutory change requiring consideration of the average of five instead of three years of a firm’s receipts did not apply to the SBA immediately upon enactment of the REA. Specifically, Obsidian argued that, contrary to the SBA’s position, 15 U.S.C. § 632(a)(2)(C), as amended by the REA, applies to the SBA; the REA was effective immediately, requiring the SBA to begin to average annual receipts on a five-year basis immediately upon the REA’s enactment; and notice-and-comment rulemaking was not required for the SBA to implement the REA.

After briefing and oral argument, the Court determined that 15 U.S.C. § 632(a)(2)(C) does not apply to the SBA’s promulgation of size-standard regulations. Obsidian Sols. Grp., 2021 WL 1309148, at *9. Because the REA amended a provision of law inapplicable to the SBA, the change made by the REA does not apply to the SBA. As a result, the Court upheld the SBA’s decision to find that Obsidian was other than small for purposes of the DOE procurement. Having found that the REA was not applicable to the SBA, the Court did not reach the other issues presented by Obsidian. The Court entered final judgment against Obsidian on March 24, 2021. On April 5, 2021, Obsidian filed a notice of appeal of the Court’s judgment. On April 6, 2021, Obsidian filed this motion under RCFC 62.

II. RCFC 62

A final judgment in an action for an injunction is not subject to the automatic 30 -day stay of execution afforded to other actions by RCFC 62(a). RCFC 62(c)(1); Beard v. United States, 101 Fed. Cl. 100, 102 (2011) (interpreting RCFC 62(a) to mean that there is “no automatic stay if an appeal is taken in an action for an injunction”).

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