Victory at Last

Victory at Last

The Braille Monitor

_June 1997

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(contents)

Historic

Victory at Last

for the National Federation of the Blind

and Blind Vendors

by James Gashel

From the Editor: When the Randolph-Sheppard

Act was last amended in 1974, it was the National Federation of the Blind that

insisted upon having legal safeguards in the law to prevent violations by both

federal and state agencies. The principal safeguard is the right to arbitration

of disputes and the opportunity to take an unresolved violation into the federal

courts if the arbitration is not successful.

Although the entire process can become somewhat lengthy and expensive to all

parties, the case discussed here by James Gashel shows that justice can eventually

prevail. In his capacity as Director of Governmental Affairs for the National

Federation of the Blind, Mr. Gashel was asked to represent the State of Minnesota

and Dennis Groshel, a blind vendor when the dispute with the Department of Veterans

Affairs started at the arbitration stage several years ago.

Events surrounding this case, now known as the Dennis Groshel case, have been

recounted in the Braille Monitor on the occasion of each major decision

on the long path toward a final resolution. (See the January, 1989; February,

1993; and June, 1994, issues of the Braille Monitor.) The battleground

in this particular dispute has been a vending facility, consisting entirely

of vending machines, located at the Department of Veterans Affairs Medical Center

in St. Cloud, Minnesota. The question has been whether a blind vendor, by virtue

of the Randolph-Sheppard Act, should be

given a priority over commercial vendors in operating the vending machines as

a small business under the federal Randolph-Sheppard Act at that location.

While in one sense the immediate issue of a particular vending facility in St.

Cloud, Minnesota, should have been quite narrow, the implications for both the

Department of Veterans Affairs, on the one hand, and the entire national program

for blind vendors, on the other, are broad and substantial. This is why the

struggle and the litigation underlying it have been so contentious and protracted.

Under any other conditions a blind vendor, standing alone, would have been forced

to abandon the effort years ago. But Dennis Groshel has had the National Federation

of the Blind by his side all the way. It should also be recognized, however,

that we have benefitted greatly from the cooperative leadership of the state

licensing agency for blind vendors in Minnesota--the Minnesota Department of

Economic Security. This agency, the attorney general of Minnesota, and all of

the staff and officials involved deserve great credit for standing firm on behalf

of Dennis Groshel and all blind vendors in this instance. With that as a backdrop,

here is Mr. Gashel's explanation of the events in this case, followed by the

final and binding decision of the United States Court of Appeals for the Eighth

Circuit:

The federal Randolph-Sheppard Act directs that "priority" be given

to blind persons in the operation of vending facilities on federal property.

This mandate applies to all departments, agencies, and instrumentalities of

the United States. Nonetheless the Department of Veterans Affairs and its Veterans'

Canteen Service (VCS) have been particularly stubborn in refusing to abide by

the law. The Department operates 171 medical center facilities throughout the

country. Each state, with the exception of Alaska, has at least one of these

centers, and several states have many more.

In theory there should be no doubt about whether the veterans facilities are

subject to the Randolph-Sheppard Act, but for many years that has not stopped

the Department of Veterans Affairs from resisting the application of the priority

for blind vendors. The Department has contended that the VCS has the exclusive

right by law to serve patients, visitors, and others at the medical centers

which it operates. The National Federation of the Blind has held exactly the

opposite view.

Dennis Groshel is a licensed blind vendor in Minnesota. He is also a long-time

member of the National Federation of the Blind. Beginning in 1985, he was assigned

to a vending facility, consisting entirely of vending machines, at the Department

of Veterans Affairs Medical Center located in St. Cloud, Minnesota. These vending

machines had been serviced by a blind vendor since 1977. This was an exception

to the Department of Veterans Affairs' general rule.

The arrangement between the VCS and the Minnesota Department of Economic Security--the

licensing agency for blind vendors in Minnesota--was an ordinary commercial

vending contract. In agreeing to this arrangement, the VCS was not conceding

that the Randolph-Sheppard Act would have any applicability at the St. Cloud

medical center or at any similar site. From the VCS's point of view it was irrelevant

that the machines were being serviced by a blind vendor who was licensed under

the Randolph-Sheppard Act.

A commercial vending contract differs from an agreement under the Randolph-Sheppard

Act in at least two respects. First, a contract has a limited term, normally

three or five years, with two noncompetitive extensions allowed for satisfactory

performance. The Randolph-Sheppard agreement, technically referred to as a "permit,"

is for an indefinite period, subject to cancellation only in the event of non

performance. Second, commercial contracts require vending machine operators

to pay a commission fee based on sales. No commission is charged for sales made

by blind vendors under Randolph-Sheppard permits.

In 1985, when Dennis Groshel took over the St. Cloud medical center vending

machines, the contract was due to expire in 1987. It was uncertain whether he

would be awarded the contract after that time. Also Dennis was required to pay

an amount equal to 17 percent of his gross revenues directly to the VCS as a

sales commission. The contract required this payment. These conditions--the

periodic termination of the contract and the sales commission--were not imposed

upon other blind vendors in the state. The situation raised questions about

basic fairness and about the applicability of the law.

To its credit the Department of Economic Security concluded that Dennis Groshel

should be treated like all of the other vendors in its program. Therefore the

licensing agency asked the VCS to issue a normal Randolph-Sheppard permit for

the continued operation of the vending machines at the St. Cloud medical center

as the time for the contract to expire approached in 1987. The application for

a permit was filed in 1986, and soon thereafter the written response came back.

The VCS refused the state's request for a permanent agreement, or permit (rather

than a contract), with the stated reason that the medical center (and by implication

all of its other medical centers) are exempt from the priority provisions of

the Randolph-Sheppard Act.

At this point the battle was joined. The legal question was whether the priority

provisions of the Randolph-Sheppard Act apply to property served by the VCS

or whether that property is exempt from the Randolph-Sheppard Act. The Department

of Veterans Affairs correctly pointed out that vending machines on property

served by the VCS are exempt by law from the income-sharing provisions which

would otherwise apply. The Department then argued that, by extension, Congress

implicitly provided an exemption from the Act for all VCS activities. These

arguments are grist for the ongoing mill of the federal courts, but time was

running out for Dennis Groshel. The immediate concern was what would happen

to his vending facility in mid-1987 when the contract was scheduled to expire.

Under the Randolph-Sheppard Act a state licensing agency may file a complaint

with the Secretary of Education if it finds that a federal property-managing

Department, agency, or instrumentality is violating the law. An arbitration

panel is then appointed to conduct a hearing and decide whether the act has

been violated. The Minnesota agency filed its complaint early in 1987, but the

normal arbitration of such matters can take as long as two years. In order to

protect Dennis Groshel's business during this period, we advised the state to

seek a federal court injunction which would maintain the existing contract until

the legal dispute was resolved. Officials in Minnesota, including the attorney

general, agreed.

They sought and obtained an injunction, which placed Dennis's livelihood out

of harm's way while the legal proceedings moved back from the federal district

court to the arbitration panel. Panels appointed under the Randolph-Sheppard

Act are composed of three members--one chosen by the state licensing agency,

one chosen by the federal property-managing agency, and a third member who serves

as chairman and is appointed by the other two members. On this panel I served

on behalf of the State of Minnesota. That was, of course, the official, legal

designation; but I also served on behalf of Dennis Groshel and, in a broader

sense, on behalf of all blind vendors who might someday be affected by the decision

in this case.

It would be an understatement to say that the proceedings before this panel

were convoluted. The hearing record was more extensive than that developed in

any previous Randolph-Sheppard arbitration. Well over one hundred separate documents

were placed before the panel as evidence during the first of two hearings. As

matters evolved, the dispute was divided into three phases with a temporary

(initial) ruling made in 1988, a supplemental decision made in 1989, and a final

decision made in August of 1991. In all three rulings the panel unanimously

confirmed the view that the Randolph-Sheppard Act does apply to property served

by the VCS.

The purport of this decision was that the state of Minnesota and Dennis Groshel

must be given priority to provide vending machine services at the St. Cloud

medical center. The panel was divided, however, on several questions relating

to the terms of a continuing agreement between the VCS and the state which would

implement the statutory priority. The most pronounced disagreement revolved

around

money--would the VCS be entitled to receive a commission from sales made from

vending machines operated by a blind vendor?

In its initial ruling the panel unanimously declared that the commission fee

of 17 percent, which had been charged to Dennis Groshel based on his gross sales,

was "an inequity." The panel then ordered that no commission should

be charged by the VCS until all of the legal questions had been resolved. The

effect of this decision was an immediate doubling of Mr. Groshel's net income

from approximately $13,500 to about $27,000. The difference was the amount that

he had been paying to the VCS.

This is how the case stood until August 14, 1991, when the panel issued its

final decision and award. In a surprising turn of events, two members--a majority

of the panel--reversed themselves on the commission question and found that

a 17-percent commission rate would be acceptable at the St. Cloud medical center.

They expressed the view that this did not violate the Randolph-Sheppard Act.

I disagreed, arguing that the Randolph-Sheppard Act does not allow the VCS to

impose a charge for providing a vending facility opportunity to a blind vendor.

To permit a commission to be charged would be inconsistent with the panel's

firm opinion that the Randolph-Sheppard Act applies to property served by the

VCS just as it does to all other agencies. Still the vote was two to one.

Court action was then necessary to appeal the arbitration panel's final ruling.

In the fall of 1992 the

District Court upheld the panel's unanimous view that the Randolph-Sheppard

Act applies to the medical center and then reversed the panel majority on its

view that a commission could be charged. (See the February, 1993, issue of the

Braille Monitor for the text of this decision.) The Department of Veterans

Affairs appealed this ruling to the United States Court of Appeals for the Eighth

Circuit. Throughout these proceedings the National Federation of the Blind continued

to represent Dennis Groshel's interests by formally intervening in the case

on his behalf.

On March 11, 1994, the court of appeals ruling was handed down. It has stood

as the final decision in the issues raised in this dispute, at least to that

point. The Department of Veterans Affairs decided to abandon further appeals

over the questions of commissions or Randolph Sheppard priority. However, it

was pretty clear that the Department of Veterans Affairs had not undergone a

change of heart. The decision by the appeals court was binding throughout the

states covered by the Eighth Circuit-Arkansas, Iowa, Minnesota, Missouri, Nebraska,

North Dakota, and South Dakota--and was precedent-setting for the rest of the

country.

But it didn't take long to discover that the VCS and the Department of Veterans

Affairs had no intention of lying down and tamely giving in. As far back as

the arbitration panel's decision of 1991, the VCS had been told that it could

not install vending machines to compete with Dennis Groshel's operation at the

St. Cloud Center. But, ignoring this part of the arbitration ruling, the Department

of Veterans Affairs decided that a permit for Dennis Groshel to continue to

work at the St. Cloud facility would be granted only if VCS would also be allowed

to install vending machines to compete with Mr. Groshel's. The National Federation

of the Blind and Minnesota officials said no, and with that the parties were

back in district court, where our position was once again upheld.

The Department of Veterans Affairs is nothing if not stubborn, so, when it lost

that decision, it went back immediately to the Appeals Court for the Eighth

Circuit on October 23, 1996. The appeals court's decision was filed on February

26, 1997. It was a total victory for Dennis Groshel. The court ruled that the

VCS could not install vending machines unless the Secretary of Education made

an exception in the clear mandate given by Congress to Randolph-Sheppard vendors.

Because of its importance to all blind vendors, we are reprinting both the letter

to President Maurer from our attorney describing the decision and the decision

itself. Here are both documents:

Baltimore, Maryland

March 3, 1997

Mr. Marc Maurer, President

National Federation of the Blind

Baltimore, Maryland

Re: Minnesota v. Riley/Groshel v. Corley

Dear Mr. Maurer:

Victory! Enclosed is a copy of the 8th

Circuit's decision, which affirms the district court's finding that

VCS installation of competing vending machines would limit Dennis Groshel's

ability to earn a living and is therefore forbidden.

Potentially, the VCS could ask for an exemption from the Secretary of Education

or could petition the Supreme Court to review the case. I think both are unlikely,

and even less likely to be granted.

On the other hand, we will probably file a request to recover at least a portion

of the attorneys' fees and costs you have paid. The court reached this decision

in the appeal of the State's case (in which Dennis was also a party), and therefore

dismissed our separate case as moot, and I am not yet sure how that affects

our chances for fees. Also, because our opponent was the federal government,

the standard for recovering fees is not simply did we prevail, but was the government's

position substantially justified? The Eighth Circuit's description of VCS's

behavior as "stonewall[ing]" and a "scorched-earth campaign"

will help with that. The precedent should also help force other VA hospitals

to create facilities for blind vendors.

Whatever happens on fees, the bottom line is a very sweet victory and a guarantee

that Dennis will be able to continue to operate without competing machines.

I know he is grateful for the Federation's help, without which the VA would

long since have succeeded in driving him out of business. If you have any questions

about any of this, please call me.

Sincerely,

Andrew D. Freeman

__________

United States Court of Appeals

for the Eighth Circuit

No. 96-2477MN

Minnesota Department of Economic Security State Services for the Blind and Visually

Handicapped

Plaintiff-Appellee, Dennis Groshel, Intervenor Plaintiff-Appellee,

v.

Richard Riley, United States Secretary of Education United States Department

of Veterans Affairs; James B. Donahoe, in his official capacity as Director,

Veterans Canteen Service, Defendants-Appellants Appeal from the United States

District Court for the District of Minnesota

Submitted: October 23, 1996

Filed: February 26, 1997

Before Fagg, Bowman, and Hansen, Circuit Judges. Fagg, Circuit Judge.

The Randolph-Sheppard Vending Stand Act, 20 U.S.C. (Section Signs) 107-107f

(1994) (the Act), gives blind persons licensed by a state licensing agency priority

to operate vending facilities on federal property. This dispute began more than

ten years ago, when Minnesota's licensing agency, the Minnesota Department of

Economic Security (formerly the Minnesota Department of Jobs and Training) (Minnesota),

applied under the Act and its corresponding regulations for a vending permit

for the Veterans Affairs Medical Center in St. Cloud, Minnesota (VA Medical

Center). Minnesota's application was rejected by the Department of Veterans

Affairs and the Veterans' Canteen Service

(collectively VCS), which claimed to be exempt from the Act. Minnesota sought

arbitration, as the Act provides. See 20 U.S.C. (Section Sign) 107d-1(b). The

arbitration panel (the Panel) held the VCS was subject to the Act. The VCS and

Minnesota then jointly submitted five disputed issues for the Panel to resolve.

Only two are relevant to this appeal. The Panel decided Minnesota's licensed

blind vendor Dennis Groshel should pay the VCS a commission on vending sales,

and the VCS does not have the "right to install and operate its own vending

machines" at the VA Medical Center.

Minnesota sought judicial review in the district court, which decided commission

payments violate the Act. The VCS appealed to this court, and we affirmed. See

Minnesota Department of Jobs & Training v. Riley, 18 F.3d 606, 608 (8th

Cir. 1994). We held the Act applies to the VCS. See id. at 608-09. We also held

that commission payments, like any limitation on a blind vendor's operation,

are unlawful unless approved by the Secretary of Education. See id. at 609;

20 U.S.C. (Section Sign) 107(b). Although Riley paved the way for Minnesota

to receive its vending permit, the VCS continued and continues to stonewall

Minnesota and its blind licensee. Ignoring the Act, the Panel's decision, and

our opinion in Riley, the VCS offered Minnesota a permit, but only if Minnesota

agrees the VCS can install competing vending machines at the VA Medical Center.

Minnesota returned to the district court, which granted Minnesota's motion to

enforce the Panel's decision. In doing so, the district court recognized that

"installation of vending machines by the VCS is undoubtedly an attempt

to limit the income of the blind vendor which must be approved [by] the Secretary

of the [Department of Education] prior to

implementation." Although the district court characterized its enforcement

order as a preliminary injunction, we agree with the VCS that, for the purpose

of review, we should treat the order as a permanent injunction because Minnesota

and the VCS disagree only about the law, and nothing remains for the district

court to resolve. Likewise, we agree with the VCS that we review the disputed

questions of law de novo. See International Association of Machinists &

Aerospace Workers, Dist. Lodge No. 19 v. Soo Line R.R. Co., 850 F2d 368, 374

(8th Cir. 1988) (en banc). On appeal, the

VCS once again claims exemption from the Act. Our earlier opinion in Riley forecloses

this claim.

Echoing its argument in Riley, the VCS contends it need not comply with (Section

Sign) 107(b), which prohibits any limitation on a blind vendor's operation unless

approved by the Secretary of Education, because the Veterans' Canteen Service

Act independently authorizes the VCS to operate vending machines at the VA Medical

Center. See 38 U.S.C. (Section Sign) 7802. Further, the VCS asserts that when

it operates within the parameters of (Section Sign) 7802, neither an arbitration

panel convened under 20 U.S.C. (Section Sign) 107d-1(b) nor the district court

can hold the VCS answerable for violations of the Act. In Riley, however, we

held the VCS must comply with every provision of the Act, and that includes

(Section Signs) 107(b) and 107d-1(b). See 18 F.3d at 608-09. We have never questioned

the VCS's authority to operate canteens, install vending machines, or do anything

else the VCS's enabling legislation empowers it to do. But in Riley, we held

the Act precludes the VCS's

exercise of its statutory authority when that exercise would limit a blind vendor's

operation, unless the Secretary approves the limitation. See id. at 609-10.

Here, the VCS does not challenge the district court's finding that "competing

vending machines will...undermine or...destroy [the] blind vendor's ability

to obtain what is already a small income." No less than commission payments,

competing machines would limit the blind vendor's operation. Riley rules out

both, unless the Secretary decides otherwise.

In truth, the VCS has done far more than merely limit the blind vendor's operation

at the VA Medical Center. Congress assumed federal agencies would respect a

blind person's vending enterprise and willingly comply with the Act. See 20

U.S.C. (Section Sign) 107d-2(b) (2). Instead, the VCS has tried to drive the

blind vendor out of its domain. Testifying before the Panel in 1988, a VCS official

said:

Basically as long as this dispute lasts,

the guy who is going to suffer over it is going to be [the blind vendor] because

prices are going to continue to go up, and we are going to continue to hold

until this is resolved. The longer it goes on the less money he is going to

make.

Nine years later, the VCS is still at it, demanding the right to install machines

that would, as the district court found, destroy the blind vendor's livelihood.

It is time for the VCS's scorched-earth campaign to end. Although Minnesota,

in securing a permit, must work within the Act's regulatory scheme, Riley makes

clear--and we hold today--that unless the VCS gets the Secretary's approval,

the VCS may not insist Minnesota accept the presence of VCS vending machines

at the VA Medical Center as the price of Minnesota's permit.

Finally, the VCS raises two other issues. First, the VCS contends arbitration

panels convened under (Section Sign) 107d-1(b) have no authority to order remedies

for violations of the Act. See Maryland State Department of Educ. v. United

States Department of Veterans Affairs, 98 F3d 165, 169-71 (4th Cir. 1996); Georgia

Department of Human Resources v. Nash, 915 F.2d 1482, 1491-92 (11th Cir. 1990).

The VCS's argument is misplaced. The Panel never ordered the VCS to take any

remedial action but simply decided competing VCS vending machines at the VA

Medical Center would violate the Act. The Panel did exactly what the statute

authorizes. See 20 U.S.C. (Section Sign) 107d-2(b); Maryland State Department

of Education, 98 F.3d at 169-71; Nash, 915 F.2d at 1491-92. Indeed, by insisting

on a permit condition at odds with the Panel's decision, it is the VCS that

ignores its statutory responsibility to bring itself into compliance with the

Act. See Maryland State Department of Education, 98 F.3d at 171. Second, the

VCS questions whether the Panel's no-VCS-machines decision continues in force

because the Panel's reasoning interweaves that decision with its overturned

ruling on commission payments. If the two decisions were as mutually dependent

as the VCS now claims, it is surprising the VCS did not say so when the commissions

issue was before us in Riley. Nevertheless, the argument is without merit. The

VCS itself, together with Minnesota, asked the Panel to resolve two separate

disputed issues, commission payments and competing machines. In deciding

against the VCS's vending machines, the Panel took into consideration that the

VCS would receive commissions. The Panel never said, however, that if Minnesota

pays no commissions, the VCS may then go ahead and install its machines. Rather,

the Panel said yes to commissions and no to competing VCS vending machines.

The Panel's decision was the final word on what the VCS must do to comply with

the act. See (Section Sign) 107d-1(b).

The VCS is no different from any other steward of federal property. If the VCS

wants to impose limitations on a blind vendor's operation, it must get permission

from the Secretary of Education. Of course, if the Secretary approves installation

of the VCS's vending machines, the VCS need not share its income with the blind

vendor. See (Section Sign) 107d-3(d). We affirm the decision of the district

court.

A true copy

Attest: Clerk

U.S. Court of Appeals, Eighth Circuit

***********************************************************

You can create a gift annuity by transferring money or property to the National

Federation of the Blind. In turn, the NFB contracts to pay you income for life

or your spouse or loved ones after your death. How much you and your heirs receive

as income depends on the amount of the gift and your age when payments begin.

You will receive a tax deduction for the full amount of your contribution, less

the value of the income the NFB pays to you or your heirs.

You would be wise to consult an attorney or accountant when making such arrangements

so that he or she can assist you to calculate current IRS regulations and the

earning potential of your funds. The following example illustrates how a charitable

gift annuity can work to your advantage.

Mary Jones, age sixty-five, decides to set up a charitable gift annuity by transferring

$10,000 to the NFB. In return the NFB agrees to pay Mary a lifetime annuity

of $750 per year, of which $299 is tax-free. Mary is also allowed to claim a

tax deduction of $4,044 in the year the NFB receives the $10,000 contribution.

For more information about charitable gift annuities, contact the National Federation

of the Blind, Special Gifts, 1800 Johnson Street, Baltimore, Maryland 21230-4998,

(410) 659-9314, fax (410) 685-5653.