IN THE SUPREME COURT OF THE STATE OF HAWAI`I
Plaintiffs-appellees/cross-appellants Myles Tamashiro, Warren Toyama, Heather Farmer, Filo Tu, Jeanette Tu, Lynn Misaki, Clyde Ota, Miriam Onomura, and Yoshiko Nishihara [hereinafter, collectively, the plaintiffs], who are licensed blind vendors, sought declaratory, monetary, and equitable relief (including injunctive relief) against the State defendants and the City (3) for their alleged failure to, respectively, enforce and comply with the requirements of the Hawai`i RSA. The plaintiffs maintained that the State defendants were required to ensure that: (1) vending machine income generated from state and county operations be paid into the Randolph-Sheppard Revolving Account [hereinafter, the RSR Account]; and (2) those funds were reserved for the use and benefit of the State's blind vendors.
The State defendants appealed, and the plaintiffs cross appealed, from the August 22, 2001 final judgment of the Circuit Court of the First Circuit, the Honorable Eden E. Hifo presiding, finding in favor of the plaintiffs and against the State defendants. The trial court awarded the plaintiffs, inter alia, money damages in the amount of approximately $3.67 million.
The State defendants, on appeal, and the plaintiffs, on their cross appeal, challenged various pre-trial and post-judgment rulings made by the trial court. However, inasmuch as we hold that subject matter jurisdiction is lacking, we need not address the parties' challenge to these various pretrial and post-judgment rulings. Accordingly, we reverse the circuit court's August 22, 2001 final judgment.
A. Legal Background
1. The Randolph-Sheppard Vending Stand Act
Congress enacted the Randolph-Sheppard Vending Stand Act [hereinafter, the federal RSA] in 1936, amending the federal RSA twice, in 1954 and 1974. Pub. L. No. 74-732, §§ 1-7, 49 Stat. 1559, 1559-60 (1936); Pub. L. No. 83-565, § 13, 68 Stat. 652, 663-65 (1954); Pub. L. No. 93-516, §§ 200-11, 88 Stat. 1617, 1622-31 (1974); see also Pub. L. No. 93-651, §§ 200-11, 89 Stat. 2-3, 2-7 to 2-16 (1974) (codified as amended at 20 U.S.C. §§ 107 to 107f (2000)). The federal RSA establishes a cooperative federal-state program [hereinafter, the federal RSA program or the program] that "provid[es] blind persons with remunerative employment, enlarg[es] the economic opportunities of the blind, and stimulat[es] the blind to greater efforts in striving to make themselves self-supporting" by authorizing licensed blind persons "to operate vending facilities on any [f]ederal property" and granting them "priority" in such operation. 20 U.S.C. § 107(a)-(b).
Under the federal RSA, states can gain access to federal properties in their respective states to operate blind vending facilities by having one of its state agencies apply to the United States Department of Education (USDOE) to be designated as a "state licensing agency" (SLA), and, as discussed more fully infra, states must agree to a number of conditions. See New Hampshire v. Ramsey, 366 F.3d 1, 6 (1st Cir. 2004) ("States' participation in the program is voluntary."). The SLAs, in turn, license blind persons to operate vending facilities and match them with available contracts on federal property. 20 U.S.C. § 107b.
Examination of the evolution of this unique federal statutory scheme reveals that the original federal RSA was designed to create employment opportunities for the blind on federal property and for further federal rehabilitative efforts on behalf of the blind. H.R. Rep. No. 1094, 74th Cong., 1st Sess. 1, 2 (1936). As originally designed, no priority or preference was given to blind vendors to operate vending facilities on federal property. Id.; see also Pub. L. No. 74-732, §§ 1-7, 49 Stat. at 1559-60. The 1954 amendment, however, strengthened the federal RSA by, inter alia: (1) authorizing a preference, where feasible, to blind vendors to set up vending stands on federal property, Pub. L. No. 83-565, § 4, 68 Stat. at 663; see also 20 U.S.C. § 107a(b) (providing that SLAs "give preference to blind persons who are in need of employment"); and (2) requiring that participating states (i.e., SLAs) agree "to provide any blind licensee dissatisfied with any action arising from the operation or administration of the vending stand program an opportunity for a fair hearing," Pub. L. No. 83-565, § 4, 68 Stat. at 664. The 1954 amendment did not, however, specify the nature of the hearing or the relief which should be afforded as a result of such a hearing.
In 1969, Congress proposed additional amendments
because of the weak showing in the number of blind vendors operating on federal property, the growing trend toward installation of vending machines and the exclusive use of machines in some federal buildings, as well as increasing use of vending machine income by federal employees for recreation and welfare purposes. S. 2461 was designed to protect the blind preference established in the 1954 amendment[ ]. S. Rep. No. 1235, 91st Cong., 2d Sess. 2 (1970).
Texas State Comm'n for the Blind v. United States, 6 Cl. Ct. 730, 732 (1984) (footnote omitted), rev'd on other grounds, 796 F.2d 400 (Fed. Cir. 1986) (en banc), cert. denied, 479 U.S. 1030 (1987). Although hearings on Senate Bill No. 2461 were held in both the Senate and the House of Representatives, the 91st Congress adjourned without considering it further. See Delaware Dep't of Health & Soc. Servs. v. United States Dep't of Educ., 772 F.2d 1123, 1127 (3d Cir. 1985). In September 1971, a similar bill, Senate Bill No. 2506, was introduced in the 92d Congress. Id. However,Congress requested the General Accounting Office (GAO) to review vending operations on federally-controlled property and to determine if blind vendors were receiving preference as required by the 1954 amendment[ ]. . . .
Texas State Comm'n for the Blind, 6 Cl. Ct. at 732-33 (footnote omitted). Consequently, another bill, Senate Bill No. 2581, which reflected some of the findings contained in the GAO's report, was introduced. Delaware Dep't of Health & Soc. Servs., 772 F.2d at 1127 (citing S. 2581, 93d Cong., 1st Sess. (1973)). Eventually, House Resolution No. 14225, substantially similar to Senate Bill No. 2581, was passed and became law on November 21, 1974. Id. (citing Pub. L. No. 93-651, 89 Stat. 2-3 (1974) (4)).
The 1974 amendment expanded the statute to increase the fair treatment of blind vendors and to provide oversight of the federal RSA's application in the federal government, among other objectives. S. Rep. No. 937, 93rd Cong., 2d Sess. 9 (1974), reprinted in, 1974 U.S.C.C.A.N. 6417 [hereinafter, S. Rep. No. 93-937]; see also Pub. L. No. 93-651, §§ 200-11, 89 Stat. 2-3, 2-7 to 2-16 (1974). The 1974 amendment, in part, resulted in giving blind vendors priority (as opposed to preference) to operate vending facilities on federal property. 20 U.S.C. § 107(b). Thus, in sum and as more succinctly described by the United States Court of Appeals for the Sixth Circuit in Tennessee Department of Human Services v. United States Department of Education, 979 F.2d 1162 (6th Cir. 1992):
The [federal RSA] grants priority to those blind persons who desire to operate vending facilities on federal property. 20 U.S.C. § 107(b). The [federal RSA] divides responsibility for the blind vendor program between the state and federal agencies. The Secretary of Education [[hereinafter, the Secretary]], is responsible for interpreting and enforcing the [federal RSA's] provisions, and more specifically, for designating [SLAs]. 20 U.S.C. § 107a(a)(5), [§] 107b; 34 C.F.R. §§ 395.5, 395.8. A person seeking a position as a blind vendor applies to the designated state agency and is licensed by that agency. The state agency in turn applies to the federal government for the placement of the licensee on federal property. 20 U.S.C. § 107b. Once the state and the federal government have agreed on an appropriate location for the vending facility, the [SLA] is responsible for equipping the facility and furnishing the initial stock and inventory. 20 U.S.C. § 107b(2). The blind vendor thereafter operates as a sole proprietor who is entitled to the profits of the vending facility and who is responsible for the facility's losses.
Id. at 1163-64.The 1974 amendment also revised the remedial scheme for aggrieved blind vendors. See Pub. L. No. 93-561, §§ 204, 206, 89 Stat. at 2-10 to 2-11, codified at 20 U.S.C. §§ 107b(6) and 107d-1; S. Rep. No. 93-937. At that time, in addition to the 1954-requirement that participating states provide dissatisfied blind licensees "an opportunity for a fair hearing," Pub. L. No. 83-565, § 4, 68 Stat. at 664, codified at 20 U.S.C. § 107b(6), Congress imposed the additional requirement that participating states "agree to submit the grievances of any blind licensee not otherwise resolved by [the fair] hearing to arbitration as provided in section 5 of this Act [20 U.S.C. § 107d-1]." Pub. L. No. 93-651, § 204, 89 Stat. at 2-10, codified at 20 U.S.C. § 107b(6) (emphasis added). The term "fair hearing" was defined as "a full evidentiary hearing" in section 5(a) of the 1974 amendment, which states:
Any blind licensee who is dissatisfied with any action arising from the operation or administration of the vending facility program may submit to a [SLA] a request for a full evidentiary hearing, which shall be provided by such agency in accordance with section 3(6) of this Act [i.e., 20 U.S.C. § 107b(6)].
Pub. L. No. 93-651, § 206, 89 Stat. at 2-11, codified at 20 U.S.C. § 107d-1(a) (emphasis added). Additionally, Section 5(a) provides that:If such blind licensee is dissatisfied with any action taken or decision rendered as a result of such hearing, he may file a complaint with the Secretary who shall convene a panel to arbitrate the dispute pursuant to section 6 of this Act [i.e., 20 U.S.C. § 107d-2], and the decision of such panel shall be final and binding on the parties except as otherwise provided in this Act.
Id. (emphasis added). Section 6(a) of the 1974 amendment provides in relevant part:Such [arbitration] panel shall, in accordance with the provisions of subchapter II of chapter 5 of Title 5, give notice, conduct a hearing, and render its decision which shall be subject to appeal and review as such final agency action for purposes of chapter 7 of Title 5.
Id., codified at 20 U.S.C. § 107d-2(a) (emphasis added). The reference to chapters 5 and 7 of Title 5 are to the administrative procedures and judicial review provisions of the Administrative Procedure Act (APA). (5)
Thus, in sum, the remedial scheme mandated by the 1974 amendment include: (1) a full evidentiary hearing at the state level before the SLA; (2) an opportunity to appeal the SLA decision to the USDOE for review by an arbitration panel; and, finally, (3) judicial review of the USDOE's arbitration panel decision in the federal courts [hereinafter, collectively, the federal adjudication path]. Pub. L. No. 93-561, §§ 204, 206, 89 Stat. at 2-10 to 2-11, codified at 20 U.S.C. §§ 107b(6), 107d-1, and 107d-2(a).
As previously stated, the Hawai`i RSA, consisting of HRS §§ 102-14 and 347-12 and their implementing regulation, HAR § 17-402-17, is modeled after the federal RSA and applies to state and county properties. (6) HRS § 102-14 provides in relevant part:
§ 102-14 Use of public buildings by blind or visually handicapped persons. (a) For the purpose of providing blind or visually handicapped persons, as defined in sections 235-1, 347-1, and 347-2[,] with remunerative employment, enlarging their economic opportunities and stimulating them to greater efforts in striving to make themselves self-supporting, blind or visually handicapped persons registered by [DHS] under section 347-6 and issued permits under subsection (c) shall be authorized to operate vending facilities and machines in any state or county public building[.]
(b) [DHS], after consultation with authorities responsible for management of state or county public buildings, shall adopt rules in accordance with [C]hapter 91, necessary for the implementation of this section, including, but not limited to rules to assure that priority be given to registered blind or visually handicapped persons in the operation of vending facilities in state or county public buildings and to establish, whenever feasible, one or more vending facilities in all state and county public buildings.
(c) Assignments of vending facilities and space for vending machines shall be by permit issued by [DHS].
(d) No person shall advertise or otherwise solicit the sale of food or beverages for human consumption in any public building which is in competition with a vending facility or machines operated or maintained by a duly authorized blind or visually handicapped person . . . .
(e) After July 1, 1981, or upon the expiration of vending machine contracts in existence on June 10, 1981, no vending machines shall be placed in any state or county public building in which there is a vending facility or machine assigned by permit to a blind or visually handicapped person except pursuant to a permit issued by [DHS].
(Bold emphasis in original.) HRS § 347-12.5 states:[§ 347-12.5] Randolph-Sheppard revolving account. (a) There is established within the state treasury the [RSR] [A]ccount. The revolving account shall be used by [DHS] for:
(1) The provision of the following benefits for blind vendors:
(A) A retirement or pension plan;
(B) Health insurance; and
(C) Sick and vacation leave;
(2) The maintenance and replacement of equipment used in the blind vending program;
(3) The purchase of new equipment to be used in the blind vending program; and
(4) The provision of management services, which shall include, but not be limited to:
(A) The hiring of consultants;
(B) The sponsoring of training seminars;
(C) Transportation;
(D) Per diem for vendors to attend meetings of the state committee of blind vendors;
(E) Services for the state committee of blind vendors; and
(F) Other costs related to the blind vending program.
(b) Income from vending machines on federal, state, and county properties that are within reasonable proximity to, and in direct competition with, a blind vendor may be deposited into the account and then disbursed to the blind vendor.
(c) The revolving account shall consist of funds derived from:
(1) Vending machine income generated by federal, state, and county operations;
(2) Any other legally accepted source of income; and
(3) Donations.
(Bolded text in original.) HAR § 17-402-17(j) provides:(j) Evidentiary hearings and arbitration of vendor complaints shall be provided for in the following manner:
(2) Each vendor or a personal representative or next of kin shall be given an opportunity for a full and fair hearing if [the] vendor is dissatisfied with any action arising from the operation or administration of the vending facility program. Such requests for a hearing shall be submitted in writing to the director.
(4) The hearing shall be held in a place and time convenient to the vendor, personal representative or next of kin. There shall be notice to the vendor at least two weeks in advance, giving the date, time, and place of hearing.
(6) The hearing shall be held before the director or a designated agent. Authority to make the final decision based upon the record of the hearing shall be exercised by the department.
(8) The decision shall set forth the issue, principle, and relevant facts brought out at the hearing, the pertinent provisions in law, agency policy and the reasoning that led to the decision. The individual shall be forwarded a copy of the section or shall be advised in writing of the content.
(Bold emphasis in original.) (Underscored emphases added.)
Consequently, in Hawai`i, blind persons enjoy not only the benefits provided by the federal RSA, but also analogous benefits conferred by state law. In essence, the Hawai`i RSA affords blind persons vending opportunities on state and county properties similar to the opportunities afforded by its federal counterpart, 20 U.S.C. §§ 107 to 107f, with respect to federal properties, see HRS § 102-14(b), and provides a grievance procedure for vendor complaints, discussed infra. HAR § 17-402-12(j)(2) through (9). The Hawai`i RSA further establishes the RSR Account, in which income generated from vending machines on federal, state, and county properties within the state of Hawai`i that "are within reasonable proximity to, and in direct competition with, a blind vendor may be deposited" and "disbursed to the blind vendor." HRS § 347-12.5(b).
B. Factual and Procedural Background
The following undisputed facts and procedural history are relevant to our resolution of this appeal.
Sometime in or around March 1995, it came to the attention of the plaintiffs that the City was not making space in its public buildings for vending machines under the control of blind vendors, in violation of the Hawai`i RSA. Instead, the City had placed its own leased machines in such locations and kept the proceeds for its own use. DHS, serving as Hawaii's SLA, (8) sent written requests to county property managers to place blind vendor vending machines in county buildings on several occasions, but such requests were ignored, and DHS did nothing further.
Between mid-1995 to early 1996, plaintiffs and/or representatives on their behalf attempted to secure the City's voluntary compliance with the law by (1) making space available in its public buildings for blind vendor machines or (2) paying the State defendants, specifically, DHS, on behalf of the blind vendors, all the monies collected from the alleged unauthorized and illegal vending machines it controlled in its public buildings, but to no avail.Eventually, on February 13, 1996, the Hawai`i State Committee for Blind Vendors, on behalf of blind vendors, including the plaintiffs, filed with DHS a request for a declaratory ruling "as to whether HRS § 102-14 and its implementing regulations authorize [DHS] to place [vending] machines in buildings where the agency head or building manager objects." DHS did not respond.
2. Circuit Court Proceedings
On July 22, 1996, the plaintiffs filed the instant action against the State defendants and the City for their alleged failure to enforce and comply with the requirements of the Hawai`i RSA. On August 19, 1996, the State defendants filed their motion to dismiss the complaint or, in the alternative, to stay proceedings pending the disposition of the declaratory ruling from the DHS. On August 29, 1996, the City joined the State defendants' motion to dismiss. On November 7, 1996, the circuit court stayed the action to allow for administrative handling of the request for a declaratory ruling.
Thereafter, on June 6, 1997, then-DHS Director Susan Chandler, apparently without conducting a full evidentiary hearing, issued a decision and order, basically agreeing with the long-asserted position of the plaintiffs that, "[p]ursuant to sections 102-14 and 347-12.5, together with the implementing regulations, [DHS] has authority to control both the placement of vending machines in all state and county public buildings and the income derived therefrom." In other words, DHS has the authority to lawfully place vending machines on City property without the assent of the City. (9)
In June 1999, the plaintiffs entered a settlement with the City. (10) On July 15, 1999, the circuit court approved the settlement and granted the parties' request to maintain the action as a class action.
On August 2, 2000, a jury-waived trial commenced to determine two main issues: (1) the extent of loss and the amount of damages; and (2) declaratory and equitable relief. The trial lasted four days from August 2 through 4 and 8, 2000. On September 27, 2000, the trial court, inter alia, entered judgment in favor of the plaintiffs in the amount of $3,676,922.
3. The First Appeals
The State defendants and the plaintiffs both appealed the September 27, 2000 judgment, which appeals were docketed as appeal Nos. 23843 and 23997, respectively. This court, however, dismissed both appeals on February 5, 2001 and March 14, 2001, respectively, for lack of appellate jurisdiction because no dismissal or judgment of the plaintiffs' claims against the City had been filed.
4. Post-First Appeal Proceedings
On February 6, 2001, after their initial appeal had been dismissed, the State defendants filed a motion to dismiss at the trial level, asserting for the first time that the circuit court lacked subject matter jurisdiction. The State defendants argued that: (1) the terms and conditions of the State's consent to be sued define and restrict the court's jurisdiction; and (2) the court has no jurisdiction because the terms and conditions of the consent to suit require plaintiffs to pursue a full and fair evidentiary hearing, followed, if necessary, by arbitration under the auspices of the federal Secretary of Education, followed, if necessary, by an appeal, pursuant the federal APA, as mandated by HAR § 17-402-17(j). The plaintiffs, on the other hand, argued, inter alia, that this court, in Hawai`i Blind Vendors Association v. Department of Human Services, 71 Haw. 367, 791 P.2d 1261 (1990), had already determined that "concurrent original jurisdiction" vested authority in both the court and the agency, i.e., DHS. Id. at 371, 791 P.2d at 1264. The plaintiffs, therefore, asserted that "there is no question that the court has subject matter jurisdiction."A hearing on the motion to dismiss was held on March 27, 2001. At the hearing, the State defendants again argued that they "had to waive[ their] immunity the way the federal government told [them to in order] to be a participating state licensing agency and to receive federal money," i.e., by adopting the federal adjudication path in the HAR. The plaintiffs essentially contended that "the grievance procedures in the [federal RSA] were not intended to and do not control how [the] State administers [its] own State laws relating to vending facilities on state and county properties." On April 18, 2001, the circuit court denied the motion, ruling that the prior order denying the State defendants' motion for summary judgment on sovereign immunity grounds (11) is the law of this case "unless there exist cogent reasons to defer from it, and this [c]ourt does not find any such cogent reasons exist."
On August 22, 2001, the circuit court entered a final judgment. The August 22, 2001 final judgment essentially provides that: (1) as between the plaintiffs and the City, the July 15, 1999 order was entered in favor of the plaintiff and against the City in accord with the settlement agreement between them; (2) as between the plaintiff and the State defendants, judgment as to liability was entered in favor of the plaintiffs on March 14, 2000; and (3) the remaining non-liability issues were tried to the court in August 2000, in which the court entered its FOFs and COLs on September 27, 2000, adjudging that (a) the plaintiffs would be awarded $3,676,922.00 and (b) "declaratory and other equitable relief shall be entered." Consequently, "[a]ll claims as to all parties have been adjudicated." The circuit court also entered a separate Hawai`i Rules of Civil Procedure (HRCP) Rule 54(b) (2005) (12) judgment concerning the plaintiffs' previously undismissed claims against the City.
Thereafter, on September 19, 2001, the State defendants appealed from the August 22, 2001 judgment. On September 20, 2001, the plaintiffs cross-appealed from the final judgment.
A. Subject Matter Jurisdiction
The circuit court's authority to hear the instant matter and, in turn, this court's authority to review the circuit court's rulings are questions of subject matter jurisdiction. "Whether a court possesses subject matter jurisdiction is a question of law reviewable de novo." Hawai`i Mgmt. Alliance Ass'n v. Ins. Comm'r, 106 Hawai`i 21, 26, 100 P.3d 952, 957 (2004) (internal quotation marks and citation omitted); see also Int'l Bhd. of Painters & Allied Trades Local Union 1944 v. Befitel, 104 Hawai`i 275, 281, 88 P.3d 647, 653 (2004) ("Subject matter jurisdiction is concerned with whether the court has the power to hear a case." (Internal quotation marks and citation omitted.)). We further note that:
Chun v. Employees' Ret. Sys. of the State of Hawaii, 73 Haw. 9, 14, 828 P.2d 260, 263 (1992) (citation and internal quotation marks omitted). When reviewing a case to determine whether the circuit court has jurisdiction, we "retain[] jurisdiction, not on the merits, but for the purpose of correcting the error in jurisdiction." Amantiad v. Odum, 90 Hawai`i 152, 159, 977 P.2d 160, 167 (1999) (citation omitted).
B. Statutory Interpretation
"The standard of review for statutory construction is well-established. The interpretation of a statute is a question of law which this court reviews de novo. Where the language of the statute is plain and unambiguous, our only duty is to give effect to its plain and obvious meaning." Liberty Mut. Fire Ins. Co. v. Dennison, 108 Hawai`i 380, 384, 120 P.3d 1115, 1119 (2005) (quoting Labrador v. Liberty Mut. Group, 103 Hawai`i 206, 211, 81 P.3d 386, 391 (2003)) (internal quotation marks omitted). "Additionally, the general principles of construction which apply to statutes also apply to administrative rules." Brown v. Thompson, 91 Hawai`i 1, 9, 979 P.2d 586, 594 (1999) (citation and internal quotation marks omitted).
A. Subject Matter Jurisdiction
As a threshold matter, the State defendants argue that the circuit court lacked subject matter jurisdiction because the federal adjudication path -- i.e., a full and fair evidentiary hearing by the SLA, arbitration conducted by the USDOE panel, and appeal and final review by the federal courts -- was imported into the Hawai`i RSA through HAR § 17-402-17(j). The State defendants argue that "[t]he arbitration required by the [federal] [a]djudication [p]ath is the mandatory, exclusive, statutory arbitration provision required by the [federal] RSA and the HAR and is not subject to circumvention." (Some emphases added.) The State defendants, therefore, submit that the state judiciary does not have jurisdiction over this case. The plaintiffs, however, respond that the federal adjudication path has no application in this case because the remedial path is associated with the federal RSA, which involves solely "vending facilities on federal property." The plaintiffs further maintain that this court has subject matter jurisdiction over the instant case because this court asserted its jurisdiction in Hawai`i Blind Vendors Association v. Department of Human Services, 71 Haw. 367, 791 P.2d 1261 (1990), wherein this court specifically stated that DHS and the circuit court "have concurrent original jurisdiction." Id. at 371, 791 P.2d at 1264.
Inasmuch as we are guided by the principle that, "[i]f a court lacks jurisdiction over the subject matter of a proceeding, any judgment rendered in that proceeding is invalid [and that,] therefore, such a question is valid at any stage of the case," Bush v. Hawaiian Homes Comm'n, 76 Hawai`i 128, 133, 870 P.2d 1272, 1277 (1994) (citation, internal quotation marks and brackets omitted), this court is obliged to first insure that it has jurisdiction. Id.; see also HRCP Rule 12(h)(3) (2005) ("Whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action".). Accordingly, we must examine the overall scheme of the federal RSA and its relationship to the Hawai`i RSA to determine whether the federal adjudication path applies to state and county properties, thereby depriving the circuit court of jurisdiction.
1. The Federal RSA
We begin with the federal RSA. As previously stated, "the [federal RSA] provides the framework for a comprehensive regulatory scheme giving blind persons licensed by state agencies priority to operate vending facilities on all federal property." Minnesota, Dep't of Jobs & Training v. Riley, 18 F.3d 606, 608 (8th Cir. 1994) (citing 20 U.S.C. § 107(a)-(b)) (emphases added). "The blind vendors became, in effect, third party beneficiaries of the agreements between the participating states and the federal government." Delaware Dep't of Health & Soc. Servs., 772 F.2d at 1127.
States that choose to have their agencies become SLAs and participate in and administer the program must agree to several conditions enumerated in the federal RSA. Preliminarily, we note that, pursuant to 20 U.S.C. § 107a(a)(6)(B), the USDOE is mandated, "[t]hrough the Commission[er of the Rehabilitation Services Administration]," to "take such other steps, including the issuance of such rules and regulations, as may be necessary or desirable in carrying out the provisions of this chapter." Consequently, section 395 of Title 34 of the Code of Federal Regulations was promulgated and sets forth the requirements for states to become designated SLAs. Section 395.3, entitled "Application for designation as [SLA]; content," provides in pertinent part:
(a) An application for designation as a [SLA] under § 395.2[ (13)] shall indicate:
(1) The [SLA's] legal authority to administer the program, including its authority to promulgate rules and regulations to govern the program;
. . . .
(7) The policies and standards governing the relationship of the [SLA] to the vendors, including their selection, duties, supervision, transfer, promotion, financial participation, rights to a full evidentiary hearing concerning a [SLA] action, and, where necessary, rights for the submittal of complaint to an arbitration panel.
. . . .
(11) The assurance of the [SLA] that it will:
. . . .
(iii) Submit promptly to the Secretary for approval a description of any changes in the legal authority of the [SLA], its rules and regulations[;]
. . . .
(vii) Submit to an arbitration panel those grievance of any vendor unresolved after a full evidentiary hearing[.]
(Emphases added.) Section 395.4, in turn, obligates the SLAs to "promulate rules and regulations which have been approved by the Secretary and which shall be adequate to assure the effective conduct of the State's vending facility program (including State licensing agency procedures covering the conduct of full evidentiary hearings)[.]" Finally, Section 395.13 indicates, inter alia, that:(a) The [SLA] shall specify in writing and maintain procedures whereby such agency affords an opportunity for a full evidentiary hearing to each blind vendor . . . dissatisfied with any [SLA] action arising from the operation or administration of the vending facility program. When such blind vendor is dissatisfied with any action taken or decision rendered as a result of such hearing, he may file a complaint with the Secretary. . . .
Moreover, notwithstanding the above promulgated rules, Congress, in enacting the federal RSA, also included the following sections:§ 107b. Application for designation as [SLA]; cooperation with Secretary; furnishing initial stock.
. . . make application to the Secretary and agree -
. . . .
(5) to issue such regulations, consistent with the provisions of this chapter, as may be necessary for the operation of this program;
(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-1 of this title.
(Emphases added.) Section 107d-1(a) provides in relevant part:Any blind licensee who is dissatisfied with any action arising from the operation or administration of the vending facility program may submit to a[n SLA] a request for a full evidentiary hearing, which shall be provided by such agency in accordance with section 107b(6) of this title. If such blind licensee is dissatisfied with any action taken or decision rendered as a result of such hearing, he may file a complaint with the Secretary who shall convene a panel to arbitrate the dispute pursuant to section 107d-2 of this title, and 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-1(a) (emphases added). Section 107d-2, entitled "Arbitration," states in pertinent part:20 U.S.C.
§ 107d-2 (emphases added).
Accordingly,
taking into account the federal RSA and its
regulations, we believe that, although states are not required to
participate in the vending facility program, those that desire to gain
access to federal properties to establish vending
facilities for their blind vendors to operate must submit a state
vending facility plan that conforms with the requirements of
the federal RSA and its regulations. In turn, the language in each of
the above provisions is clear: for a state agency to
become an SLA and participate in the federal RSA program, it must agree
to the federal adjudication path in dealing with
blind licensees who are dissatisfied with the operation of the vending
program. See Comm. of Blind Vendors of the
Dist.
of Columbia v. Dist. of Columbia, 28 F.3d 130, 135 (D.C. Cir.
1994) ("The inclusion of a detailed grievance procedure to
resolve vendor disputes . . . is the strongest evidence of
Congressional intent" that aggrieved vendors pursue their
administrative remedies before resorting to judicial adjudication.); see also Randolph-Sheppard Vendors of
America v.
Weinberger, 795 F.2d 90, 103 (D.C. Cir. 1986). In consideration
of the states' agreements to subject themselves to the
federal adjudication path, the federal government grants to state
agencies the right to place licensed blind vendors on
federal sites and to receive federal funds, as discussed infra. See Ramsey, 366 F.3d at 6; Delaware Dep't of Health &
Soc.
Servs., 772 F.2d at 1127.
We fully recognize that the federal RSA, as previously
mentioned,
involves the operation of a "vending facility on any
[f]ederal property." 20 U.S.C. § 107(a) (emphasis
added). Thus, on its face, it appears that DHS is obligated to comply
with the federal adjudication path only with respect to claims relating
to its management of vending machines on federal
property. However, in our view, it is the overall scheme of the federal RSA
that dictates adherence to the federal
adjudication path even in those situations involving non-federal
property. See 34
C.F.R. § 395. As previously noted, section 107a(a)(5) authorizes the
Secretary to
designate to the state agency in each state the
responsibility of issuing "licenses to blind persons . . . for the
operating of vending facilities on Federal and other property
in such [s]tate[.]" 20 U.S.C. § 107a(a)(5) (emphasis added).
Although Congress clearly intended the RSA program to
apply to both federal and non-federal properties, see also supra note 4,
the phrase
"other property" is not defined anywhere
in the federal RSA, i.e.,
20 U.S.C. §§ 107 through 107f, including the pertinent
definition section, 20 U.S.C. § 107e. However, because Congress
has delegated to the Secretary the power to "prescribe regulations
designed to assure[, inter
alia,] that - (1) the
priority under this subsection is given to such licensed blind persons
(including assignment of vending
machine income pursuant to section 107d-3 of this title to achieve and
protect such priority)," 20 U.S.C § 107(b), "we must
defer to his regulatory interpretations of the Code so long as they are
reasonable." Cottage Sav.
Ass'n v. Comm'r of
Internal Revenue, 499 U.S. 554, 560-61 (1991) (citation
omitted). The term "other property" is specifically defined within
section 395 of the Code of Federal Regulations, entitled "Vending
Facility Program For the Blind on Federal and Other
Property," (emphasis added), as "property which is not [f]ederal
property and on which
vending facilities are established or
operated by the use of any funds derived in whole or in part, directly
or indirectly, from the operation of vending facilities
on any [f]ederal property." 34 C.F.R. § 395.1(n)
(emphasis added). We note that, although
Ramsey, 366 F.3d at 6
(emphasis added). Section 107d-3 expressly provides that
20 U.S.C.
§ 107d-3 (emphases added). Thus, if funds
derived from the operation of vending facilities on any federal
property are used to establish or operate a blind vendor facility on
non-federal property, the provisions of the federal RSA
apply. In other words, "[m]anifestation of a state's willingness to
enter the program, which applied to both federal and
'other buildings in [the] [s]tate,' required that the [SLA] 'make
application to the [Secretary] and agree' to federal
requirements." Delaware
Dep't of Health & Soc. Servs., 772 F.2d at 1126 (some
brackets in original and some added)
(quoting Pub. L. No. 74-732, 49 Stat. 1559). (15)
Based on the foregoing, we believe that the federal RSA mandates that the participating states, like Hawai`i, acknowledge and accept the federal adjudication path. Review of the Hawai`i RSA further confirms our conclusion. We, therefore, turn our attention to the Hawai`i RSA.
2. The Hawaii RSA
Preliminarily, we note that the legislature devoted
HRS chapter 347
to blind and visually handicapped persons, wherein it
generally authorizes DHS to
administer work with and for the blind, including the registry of the blind, vocational guidance, training, and placement in employment[.]
HRS
§ 347-3 (1993) (emphases added). Under this chapter,
DHS is specifically required to
HRS § 347-4
(1993) (emphases added). (16)
As indicated supra, Congress conditioned a state's participation in the federal RSA program upon, inter alia, adherence to the federal adjudication path. As mandated by section 107b(6), the state agency making application to the Secretary must agree to, inter alia,
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[.]
20 U.S.C.
§ 107b(6). DHS applied to the Secretary to
become an SLA on February 25, 1982. In so doing, DHS agreed to
the above condition as evinced by the "[r]ules [g]overning the
[v]ending [f]acility [p]rogram," i.e., inter alia, HAR
§ 17-402-17, which were attached to the application. See supra note 8.
Section 395.3 of the Code of Federal Regulations explicitly provides that a state's application for designation as an SLA must contain, inter alia:
(1) The [SLA's] legal authority to administer the program, including its authority to promulgate rules and regulations to govern the program;
(2) The [SLA's] organization for carrying out the program, including a description of the methods for coordinating the State's vending facility program and the State's vocational rehabilitation program[.]
34 C.F.R.
§ 395.3(a) (emphases added). The "legal
authority to administer the program" and "description of the methods
for coordinating the State's vending facility program" are found in HRS
§§ 102-14 and 347-12.5 and HAR § 17-402-17.
Further, as a condition to being licensed as SLAs, states must agree to
conduct full evidentiary hearings on any complaint
arising from the operation or administration of the blind vendor
program and to submit to arbitration before a USDOE
panel convened by the Secretary, if requested by a dissatisfied vendor.
See 20 U.S.C.
§§ 107b(6) and 107d-1(a); 34 C.F.R.
§ 395.3(a). Section 395.4 further provides that "[t]he [SLA]
shall promulgate rules and regulations which have been
approved by the Secretary and which shall be adequate to assure the
effective conduct of the State's vending facility
program (including [SLA] procedures covering the conduct of
full evidentiary hearings)[.]" (Emphases added.)
The "rules and regulations" referred to above are found in HAR § 17-402-17, promulgated pursuant to HRS § 102-14(b) (DHS "shall adopt rules in accordance with [C]hapter 91, necessary for the implementation of this section, including, but not limited to rules to assure that priority be given to registered blind [vendors]"). As previously quoted, HAR § 17-402-17(j) provides in pertinent part that:
Evidentiary hearings and arbitration of vendor complaints shall be provided for in the following manner:
(2) Each vendor or a personal representative or next of kin shall be given an opportunity for a full and fair hearing if [the] vendor is dissatisfied with any action arising from the operation or administration of the vending facility program. Such requests for a hearing shall be submitted in writing to the director.
. . . .(9) The vendor shall be informed of the right to request the [Secretary] to convene an ad hoc arbitration panel, if the vendor is dissatisfied with any action taken or decision as a result of the full evidentiary hearing.
(Emphases added.) By its plain language, the first step in the
Hawaii RSA's procedure for the resolution of disputes is an
informal administrative proceeding conducted pursuant to "the State's
vocational rehabilitation rules and standards." HAR
§ 17-402-17(j)(1). The vocational rehabilitation rule
concerning complaints and fair hearings under that program is found
in HAR § 17-400-4(d). (17)
The rule, however, provides in relevant part that:
The administrative review is not a prerequisite to the fair hearing process:
(1) Administrative review shall be an informal procedure which may include the applicant or client or representative, conducted by the [vocational rehabilitation and services for the blind] division's [[hereinafter, the division]] supervisory or administrative staff, or both,[ (18)] at the request of the applicant or client or their parent, guardian or representative. This request may be made orally or in writing.
(Emphasis added.)
The administrative review, therefore, is not a
precondition to a full evidentiary hearing before the SLA.
Consequently, the full and fair hearing set forth in HAR
§ 17-402-17(j)(2) is the initial mandatory procedure. "[I]f
the
vendor is dissatisfied with any action taken or decision as a result of
the full evidentiary hearing[,]" the administrative rule
requires that the SLA inform the complainant (i.e., vendor) of "the right
to request the [Secretary] to convene an ad hoc
arbitration panel[.]" HAR § 17-402-17(j)(9). Thus, the next
stage of the dispute resolution procedures under the Hawaii
RSA program is essentially an appeal to the Secretary, who, in turn,
convenes an ad hoc arbitration panel to review the
concerns raised by the dissatisfied vendor. (19)
By becoming an SLA and participating in the RSA program, Hawai`i -- like California -- agreed to comply with the federal adjudication path for its blind vendors' grievances. In a California case, reviewed by the United States Court of Appeals for the Ninth Circuit, the court was confronted with the issue of the enforceability of the USDOE arbitration panel's award against the state. Premo v. Martin, 119 F.3d 764, 766 (9th Cir. 1997), cert. denied, 522 U.S. 1147 (1998). Although the property involved is controlled by the federal government and the issue related to the enforcement of an arbitration award, the Ninth Circuit's analysis of the federal RSA as it relates to the California's RSA is relevant and instructive:
The State of California has not expressly consented to suit. Nor has California enacted a statute that provides for waiver. The California statute establishing the state counterpart to the federal [RSA] does provide that the decision of an arbitration panel "shall be final and binding on the parties except as otherwise provided in the act." Cal. Welf. & Inst. Code § 19635 (West 1991).[ (20)] While this statute clearly reflects California's intent to be bound by Randolph-Sheppard arbitral awards, it does not provide clear enough consent to suit in federal court to amount to an express statutory waiver of sovereign immunity.
However, the
evidence that Congress conditioned state participation in the
Randolph-Sheppard program on consent to federal judicial enforcement
of compensatory awards is overwhelming. The statute explicitly
requires participating states to agree to a number of conditions.
Specifically, each
state agency "shall . . . agree" to provide any dissatisfied blind
vendor with the opportunity for a fair hearing and "to submit the
grievances of any
blind licensee not otherwise resolved by such hearing to arbitration."
20 U.S.C. § 107b. The state further provides that arbitration
"shall be final
and binding on the parties." 20 U.S.C. § 107d-1(a)
(emphasis added). . . .
Id. at 770 (citations omitted) (emphases added). Like California, the State has incorporated the federal adjudication path into its RSA program and, in so doing, has acknowledged its obligation to the United States to conduct full evidentiary hearings at the agency level regarding blind vendor grievances and, thereafter, if requested, to submit to arbitration before a USDOE panel convened by the Secretary. Such acknowledgment is also consistent with the conditions for licensure as an SLA, discussed supra. In other words, by applying for and receiving the SLA designation and by issuing the regulations required by 20 U.S.C. § 107b(5), including the regulation providing the required remedies to dissatisfied vendors, i.e., HAR § 17-402-17(j)(2)-(9), the State, contrary to the dissent's contention, has implicitly surrendered its sovereign immunity to suits in federal courts -- not state courts -- via the federal adjudication path. See also Office of Hawaiian Affairs v. State, 110 Hawai`i 338, 360, 133 P.3d 767, 789 (2006) ("limits on the State's waiver of sovereign immunity . . . must be strictly construed and cannot [be] extend[ed]") (internal quotation marks omitted); Allied/Royal Parking L.P. v. United States, 166 F.3d 1000, 1003 (9th Cir. 1999) ("limitations and conditions of consent to suit must be strictly observed and exceptions thereto are not to be implied") (citation and internal quotation marks omitted). HAR § 17-402-17, therefore, does not contradict or contravene the legislative purpose behind the Hawai`i RSA nor the purpose behind the federal RSA. (21) See In re Waiola O Molokai, Inc., 103 Hawai`i 401, 425, 83 P.3d 664, 668 (2004) ("If an administrative rule's language is unambiguous, and its literal application is neither inconsistent with the policies of the statute the rule implements nor produces an absurd or unjust result, courts enforce the rule's plain meaning." (Citation omitted.)); see also State v. Kotis, 91 Hawai`i 319, 331, 984 P.2d 78, 90 (1999) ("Administrative rules, like statutes, have the force and effect of law." (Citations omitted.)).
The dissent, however, asserts that the legislature "vested jurisdiction in the circuit court for a claim arising under the Hawai`i RSA," dissenting op. at 40, because it mandated that rules be adopted in accordance with HRS chapter 91, which "specifically provides for judicial relief in the circuit court for persons aggrieved by an agency declaratory ruling or a decision in a contested case." Id. (citing HRS § 91-7(a) (1993)) (internal quotation marks omitted). We note that the provisions contained in HRS chapter 91 can essentially be divided into two parts that authorize (1) the promulgation of rules and (2) the establishment of adjudicatory procedures. The rule-making procedures provide for, inter alia: (1) the adoption of rules by agencies, HRS § 91-3 (Supp. 2005); (2) the filing and effectuating of rules, HRS § 91-4 (1993); and (3) the publication of rules, HRS § 91-5 (Supp. 2005). The provisions governing the establishment of adjudicatory procedures provide for, inter alia: (1) declaratory rulings by agencies, HRS § 91-8 (1993); (2) contested case hearings, HRS § 91-9 (1993 & Supp. 2005); and (3) judicial review of contested cases, HRS § 91-14 (Supp. 2005).
HRS § 102-14(b) specifically states that DHS "shall adopt rules in accordance with [C]hapter 91," which the dissent maintains includes the authority to establish adjudicatory procedures of Chapter 91. However, had the legislature intended that the adjudicatory provisions of Chapter 91 be followed, it would have expressly indicated such intent as it has done in other statutes on various subjects. For instance, in enacting HRS § 174C-8 (1993), relating to the State Water Code, the legislature provided that rules concerning water resources "shall be adopted in conformity with [C]hapter 91," (emphasis added), mandating further that:
All proceedings before the commission [on water resource management] concerning the enforcement or application of any provision of this chapter . . . or the issuance, modification, or revocation of any permit or license . . . shall be conducted in accordance with [C]hapter 91. . . .
Moreover, even when a statute's reference to Chapter 91 is silent as to the adoption of its adjudicatory provisions, it appears that the agency has the discretion to decide whether to adopt the adjudicatory provisions of HRS chapter 91 when promulgating its administrative rules. For example, although the Hawaiian Homes Commission Act (HHCA) -- specifically, HHCA § 222 (Supp. 2005) -- expressly indicates that the department of Hawaiian home lands "shall adopt rules and regulations and policies in accordance with [C]hapter 91," it is silent as to the adoption of the adjudicatory provisions. Nevertheless, the department adopted the adjudicatory provisions of Chapter 91. See HAR § 10-5-32. Similarly, HRS chapter 448B, concerning the licensure of dietitians, provides that the director of health shall "[a]dopt, amend, or repeal rules pursuant to [C]hapter 91 as the director finds necessary to carry out this chapter." HRS § 448B-3(2) (Supp. 2005). Yet, chapter 448B is silent as to the application of the adjudicatory provisions. Title 11, chapter 79 of the HAR, applicable to dietitians, however, clearly incorporated the adjudicatory provisions of Chapter 91 into its dispute resolution procedures. HAR § 11-79-13(f). Such is not the case here. HAR § 17-402-17 does not dictate that the grievance process is to be conducted in accordance with Chapter 91. In fact, HAR § 17-402-17 clearly establishes a procedure that is consistent with the purpose of the Hawai`i RSA and the federal RSA. As required by the federal RSA, HAR § 17-402-17 recognizes the federal adjudication path, a condition that the State must accept to become a designated SLA. Accordingly, we are unconvinced that the reference to the rule-making procedures of Chapter 91 in HRS § 102-14(b) mandates the adoption of the chapter's adjudicatory provisions.
We also note that HRS § 347-12.5 lends further support that jurisdiction lies with federal courts. Section 347-12.5, which establishes the RSR Account, provides that:
(a) . . . The [RSR A]ccount shall be used by [DHS] for:
(1) The provision of the following benefits for blind vendors:
(A) A retirement or pension plan;
(B) Health insurance; and
(C) Sick and vacation leave;
(2) The maintenance and replacement of equipment used in the blind vending program;
(3) The purchase of new equipment to be used in the blind vending program; and
(4) The provision of management services, which shall include, but not be limited to:
(A) The hiring of consultants;
(B) The sponsoring of training seminars;
(C) Transportation;
(D) Per diem for vendors to attend meetings of the state committee of blind vendors;
(E) Services for the state committee of blind vendors; and
(F) Other costs related to the blind vending program.
(b) Income from vending machines on federal, state, and county properties that are within reasonable proximity to, and in direct competition with, a blind vendor may be deposited into the account and then disbursed to the blind vendor.
(c) The revolving account shall consist of funds derived from:
(1) Vending machine income generated by federal, state, and county operations;
(2) Any other legally accepted source of income; and
(3) Donations.
Moreover, pursuant to the authority granted by the legislature to promulgate rules and regulations, DHS recognized the legislative intent that state and county properties are to be considered "other property" when it defined the phrase to mean "property which is not federally controlled property and on which vending stands are established or operated." HAR § 17-402-17(a). It also defined "vendor" as "a blind licensee who is operating a vending facility on federal or other property." HAR § 17-402-17(a) (emphasis added). Thus, under the Hawai`i RSA's rules and regulations, "other property" clearly includes state and county properties. (22)
If we were to accept the dissent's flawed-theory that the federal RSA applies to federal property and the Hawai`i RSA applies to state and county properties, there would have been no need for DHS to define the phrase "other property." In fact, if the dissent's theory is correct, the above stated definitions are nonsensical. For example, if the Hawai`i RSA applies only to state and county properties, as the dissent maintains, then "other property" must necessarily be defined as "federally controlled property" -- rather than "not federally controlled property." Likewise, a "vendor" must necessarily be defined as "a blind licensee who is operating a vending facility on [state and county property] or other property [(i.e., federally controlled property)]." The fact that DHS, in crafting its administrative rules pertaining to blind vendors adhered to the federal "viewpoint," clearly demonstrates its recognition of the relationship between the federal and the Hawai`i RSAs, including its incorporation of the federal adjudication path.
Our conclusion that the federal adjudication path prescribed in HAR § 17-402-17(j) is applicable to vending operations in all state, county, and federal properties in Hawaii is consistent with federal case law, where federal courts have reviewed decisions rendered by an ad hoc arbitration panel convened by the Secretary involving certain states' blind vendors' programs operating in state or county properties. For example:
a. Smith v. Rhode Island State Servs. for the Blind & Visually Handicapped, 581 F. Supp. 566 (D. R.I. 1984)
The U.S. district court expressly noted that:
Under the neoteric federal regulations, an application for designation as a state licensing agency must contain a plan outlining the rules and regulations applicable to the state's blind vendor program, including the rules relating to the transfer and promotion of licensees [at issued in this case]. 34 C.F.R. §§ 395.3, 395.5. In accordance with this requirement, the RISB conceived, incubated, nurtured and thereafter submitted an ichnographic masterpiece yclept "Baby Randolph" as an adjunct to RISB's application for redesignation as a[n SLA] during the winter of 1979-1980. The rule governing the method of selection, transfer and promotion of blind vendors is found in Attachment IX-A, Paragraph C.1 of that plan. That section provides in substance that the transfer and promotion of vendors shall be based upon senority, and outlines the method by which senority is to be calculated.
The SLA . . . with the active participation of the State Committee of Blind Vendors, hereby establishes a selection transfer and promotion system for vendors which will be uniformly applied to all vendor vacancies that develop or occur in the vending facilities program as outlined in Attachment IX-A.
In accordance with the standards as outlined in Paragraphs A and B, the selection, transfer and promotion of vendors shall be based upon seniority. The SLA shall establish and maintain a roster containing the name of each vendor, the date of his or her original licensing, any subsequent date(s) of relicensing and their vending facility address. Seniority, then, shall be calculated from the original date of licensing which shall be multiplied by the number of months during which the vendor was assigned and licensed to operate any vending facility which has been established by this SLA.
On appeal to the U.S. district court, the plaintiff pressed his claims for monetary damages and for modification of the seniority list to reflect what he asserted was his proper rank. Id. at 572. The court denied and dismissed the plaintiff's claims, holding that the arbitrator's finding with respect to the ambiguity of the language contained in the state's seniority rule was supported by the evidence and was neither arbitrary nor capricious. Id. at 573-74.
b. McNabb v. United States Dep't of Educ., 862 F.2d 681 (8th Cir. 1988)
McNabb is a blind person licensed under the [RSA] to operate a vending facility in Arkansas. On September 12, 1980, McNabb bid for three telephone company vending facilities. In violation of applicable laws and regulations, two of these facilities, which were more profitable than the stand McNabb then operated, were awarded to blind vendors with less seniority than McNabb.
McNabb then filed a complaint with the [USDOE], also pursuant to 20 U.S.C. § 107d-1(a), requesting that an arbitration panel be convened to decide his entitlement to one of the facilities he had been denied. He later amended his complaint to request specific relief: assignment to one of the stands with damages for the period he was denied a stand, as well as attorney's fees and costs.
arbitration panels convened pursuant to the [RSA] have the authority to award compensatory relief and attorney's fees. Without specifically discussing the issue of whether the eleventh amendment barred such awards, the district court stated that it chose to follow the Third Circuit's decision in [Delaware Department of Health and Social Services, Divison for the Visually Impaired v. United States Department of Education,] 772 F.2d 1123 (3d Cir. 1985). In Delaware, the Third Circuit, which is the only circuit that has considered this question, held that: (1) the [RSA] impliedly authorizes compensatory damage awards against state agencies; (2) states that choose to participate in this federally-created program for blind vendors thereby waive their eleventh amendment immunity; and (3) attorney's fees are an appropriate element of compensatory damages for breach of contract between a blind vendor and a state agency.
c. Delaware
Dep't of
Health & Soc. Servs., Div. for the Visually Impaired v. United
States Dep't of Educ., 772 F.2d 1123
(3d
Cir. 1985)
Albanese is . . . a blind vendor licensed by the Delaware Division of the Visually Impaired for participation in the Randolph-Sheppard program. . . . A federal regulation requires that [SLAs] establish in writing and maintain policies which govern transfer, promotion, and financial participation of vendors. 34 C.F.R. § 395.7(c) (1984). Delaware's rules set forth a comprehensive scheme for the distribution of funds generated to each blind vendor facility. Of particular significance to this case, is the state regulation which deals with transfer and promotion of blind vendors. . . .
. . . .
In August of 1979, the Delaware Division of Visually Impaired solicited applications for management of its food vending facility at the Paramount Poultry Company, in Georgetown, Delaware. Two applicants responded. Albanese claimed to be the most senior qualified applicant, but the Division of Visually Impaired in October, 1979 appointed the less senior applicant. Albanese, pursuant to the Delaware regulations, mandated by 20 U.S.C. § 107(b)(6) and 34 C.F.R. § 395.13(a) (1984), filed a grievance, which resulted in a full evidentiary hearing before a state hearing examiner on February 24, 1981.
The hearing examiner found that Albanese was the most senior qualified applicant, and ordered the Delaware Division of Visually Impaired to install him as manager of the Georgetown facility. Albanese commenced work there on April 1, 1981. The hearing examiner also ordered the state agency to pay a portion of Albanese's legal expenses. . . . The hearing examiner declined, however, to award Albanese the increased income he would have earned between the time he should have been appointed and April 1, 1998, when he commenced work.
The gist of their suit is that for many years the [defendant], acting without the consent of the blind vendors, has collected a higher percentage of gross sales than is "reasonable" under the [RSA] and has spent these funds for unauthorized purposes.
3. Hawaii Blind Vendor Ass'n v. Dep't of Human Servs., 71 Haw. 367, 791 P.2d 1261 (1990)
[u]nder the doctrine of primary jurisdiction, when a court and an agency have concurrent original jurisdiction to decide issues which have been placed within the special competence of an administrative agency, the judicial process is suspended pending referral of such issues to the administrative body for its views. Thus, the DHS agency process, if available, is the appropriate forum for an initial determination of the issues raised in this case.
B. The State Defendants' Appeal/Cross-Appeal and the Plaintiffs' Appeal/Cross-Appeal
In light of our holding today, we need not address any of the remaining contentions raised by the State defendants and the plaintiffs' in their respective appeals and cross-appeals.Based on the foregoing, we reverse the circuit court's August 22, 2001 final judgment for lack of subject matter jurisdiction.
On the briefs:
1. Pursuant to Hawai`i Rules of Appellate Procedure Rule 43(c) (2004), Stephen Teeter, Joe Cordova, and Lillian B. Koller were substituted as parties to the instant appeal.
2. The named individuals are sued in their official capacities of employment with the State. Lillian B. Koller is the Director of DHS; Joe Cordova is the Administrator of DHS's Division of Vocational Rehabilitation; Dave Eveland is the Administrator of DHS's Services to the Blind Branch; and Stephen Teeter is the Business Manager for the Blind in the branch of DHS known as "Ho`opono." See supra note 1.
3. As discussed infra, the plaintiffs settled with the City; therefore, the City is not a party to the instant appeal.
4. In the 1974 amendment, Congress specifically made the following findings:
5. Section 706 of 5 U.S.C. permits the reviewing court to set aside agency adjudicative actions which are, inter alia, "arbitrary, capricious, an abuse of discretion or otherwise not in accordance to law," or "unsupported by substantial evidence."
6. The Hawai`i RSA was originally enacted in 1937. 1937 Haw. Sess. L. Act 208, § 1. Prior to a 1981 amendment, the Hawai`i RSA, like the federal RSA, gave blind vendors a "preference" regarding the operation of vending facilities on state and county properties. In 1981, the statute was amended consistent with its federal counterpart to provide blind vendors "priority" status.
7. The current version of HAR § 17-402-17 (which recognizes the federal adjudication path) was adopted in 1981. The 1981 amendment replaced section 5, entitled "Fair Hearing," of Rule 9 of the "Department of Social Services Rules and Regulations for Vending Stand Program for the Blind on Federal and Other Property" that was originally promulgated in 1971. As originally promulgated, section 5 provided in relevant part:
(Emphasis added.) Inasmuch as the mandate to
adhere to the federal adjudication path was not established until 1974,
see Pub. L. No.
93-651, §§ 204, 206, 89 Stat. at 2-10, 2-11, section 5
of Rule 9 did not, obviously, contain any reference to
it.
8. As previously indicated in
supra note 7, the
adoption
of the federal adjudication path within HAR § 17-402-17(j)
was
made in 1981 after the federal RSA was amended to include such
requirement. DHS, thereafter, applied to the USDOE to
become an SLA on February 25, 1982. Its application contained, inter alia, the signature of
then-director of DHS, Franklin
Y.K. Sunn, and the chief executive of the State, George R. Ariyoshi,
along with an attachment of the rules and regulations,
as amended, for the USDOE's approval. On April 15, 1982, the USDOE
approved DHS's application for "redesignation as
the [SLA] under the [federal RSA] as amended." 9. Although not relevant to
the instant appeal,
the City, on July 9, 1997, filed a Notice of Appeal to the First
Circuit Court,
pursuant to HRS § 91-14 (1993), appealing the June 6, 1997
decision and order of Director Chandler. The case was
captioned City and County of
Honolulu v. Susan Chandler, Civil No. 97-2827-07. Shortly after,
the County of Hawai`i
filed a separate administrative appeal of the June 6, 1997 decision in
the Third Circuit Court, styled County of Hawai`i v.
Susan Chandler, Civil No. 97-3201. Upon the request of DHS, the
two administrative appeals were consolidated. Upon
the request of the plaintiffs, the consolidated administrative appeal
was ultimately consolidated with the plaintiffs' case on
October 21, 1997. 10. The City, inter alia, agreed to (1) remove
and replace all non-blind vendor vending machines on its properties,
(2) pay
the amount of $150,000, and (3) dismiss its administrative appeal.
Additionally, the parties agreed to obtain a commitment
from the County of Hawai`i to dismiss its administrative appeal. On
October 12, 1999, both administrative appeals were
dismissed. 11. On January 6, 2000, the
State defendants
had moved for summary judgment on the ground that they are immune from
suit under the doctrine of sovereign immunity, which was denied by the
court, the Honorable Linda K.C. Luke presiding,
on January 25, 2000.
12. HRCP Rule 54 provides in
relevant part:
(Emphasis in original.)
13. Section 395.2 provides
that:
(b) Such application shall be:
(1) Submitted in writing to the Secretary;
(2) Approved by the chief executive of the State; and
(3) Transmitted over the signature of the administrator of the State agency making application.
(Emphasis added.)
(A) one individual designated by the [SLA];
(B) one individual designated by the blind licensee; and
(C) one individual, not employed by the [SLA] or, where appropriate, its parent agency, who shall serve as chairman, jointly designated by the members appointed under subparagraphs (A) and (B).
15. The phrase "federal and other buildings" was amended to "federal and other property" in the 1954 amendment. Pub. L. No. 83-565, § 13, 68 Stat. at 663 (emphases added). The revision was made to allow blind vendors to establish vending stands in locations that "would not have been encompassed" under the phrase "federal and other buildings." See S. Rep. No. 93-937 at 6.
16. Vocational rehabilitation, accordingly to the federal VRA, includes, inter alia, "increas[ing] employment of individuals with disabilities."
17. HAR § 17-400-4 was promulgated pursuant to the authority provided in HRS § 348-6 (1993).
18.
DHS is "the sole state agency to administer the
vocational
rehabilitation program." HAR § 17-400-2; see
also HRS
§ 348-3. The division is "the designated administrative unit
of [DHS] to administer the vocational rehabilitation program
in the State[.]" HAR § 17-400-2.
19. As previously stated,
20 U.S.C.
§ 107d-2(a) provides that the decision rendered by the
arbitration panel "shall be
subject to appeal and review as a final agency action for purposes of
chapter 7 of such Title 5" by the federal courts. 20. Section 19635
specifically provides in
relevant part that:
21.
The dissent contends that "[n]either HRS
§ 102-14 nor
HRS § 347-12.5 can be read as delegating to the DHS the
authority to divest the circuit courts of their jurisdiction over
claims involving state law[,]" dissenting op. at 34; "such
application of the rule would violate state law and well-established
principles of agency law." Dissenting Op. at 38. Thus,
the dissent maintains that, "if HAR § 17-402-17(j) attempts
to divest the state courts of their jurisdiction, it is invalid."
Dissenting Op. at 39. The dissent, however, fails to recognize that the
Hawai`i Legislature delegated to the agencies the
authority to
HRS
§ 29-14 (1993) (emphases added). Specifically, with respect
to the blind or visually handicapped persons:
HRS § 347-5 (1993) (emphases added). Under the federal RSA, Congress mandated states to agree to certain conditions, including the acceptance of the federal adjudication path, in order to gain access to federal properties and to obtain federal funds, which are derived primarily in the form of vending machine income from non-blind vendors' machines on federal properties, 20 U.S.C. § 107d-3. See Davis v. Monroe County Bd. of Educ., 526 U.S. 629, 640 (1999) ("When Congress acts pursuant to its spending power, it generates legislation much in the nature of a contract: in return for federal funds, the States agree to comply with the federally imposed conditions." (Citation and internal quotation marks omitted.)); see alsoOffice of Hawaiian Affairs v. State, 96 Hawai`i 388, 397, 31 P.3d 901, 910 (2001). Clearly, DHS was given the authority to enter into a contractual relationship with the United States to participate in the program for the benefit of the State's blind and visually handicapped persons. In turn, DHS promulgated HAR § 17-402-17 and incorporated one of the federal conditions within its rules, that is, the federal adjudication path. We note further that the USDOE, in 34 C.F.R. § 395.2(b)(2), see supra note 13, obligates the chief executive of the State to approve DHS's application for designation as an SLA. Here, the chief executive of the State, George R. Ariyoshi, approved DHS's application.
22.
The dissent suggests that reliance upon "other
property" is
"without factual basis" because "there is absolutely no
evidence in the record to conclude that the City received funds from
federal property and used those funds to establish or
operate vending facilities on City property. It is also undisputed that
the State did not operate vending machines on [C]ity
property." Dissenting Op. at 23-24 (emphases omitted). It is undisputed
that the City violated the Hawai`i RSA by placing
its own leased machines in its public buildings, rather than providing
blind vendors those spaces for their vending
establishment. Had the City complied with the Hawai`i RSA, blind
vendors
would be given priority to place their vending
machines in the City's buildings. In turn, the funds held in the RSR
Account, i.e.,
"income [deriving] from vending
machines on federal, state, and county properties," HRS
§ 347-2.5(b), would be used for "the maintenance and
replacement
of equipment" and the "purchase of new equipment," HRS
§ 347-2.5(a), thereby, rendering the vending machines on the
City's properties as "other property." See also HAR
§ 17-402-17(m)(1) (DHS "shall furnish each vending stand with
adequate suitable equipment and adequate initial stock of merchandise
necessary for the establishment and operation of the
facility."). Accordingly, the lack of "evidence in the record" bears no
relevance to the determination as to whether the
county property would constitute "other property." As discussed supra, the state and county
properties clearly fall under
"other propert[ies]" of the federal RSA.
23.
The Garrahy Judicial Complex houses both state
and county
entities, such as the family court, district court, workers'
compensation court, traffic tribunal, county sheriff's office, and the
public defenders.
24.
As
discussed supra, the foregoing
cases involved disputes arising from the operation of vending machines
on state
properties or the administration of the state RSA program, which was
established pursuant to the federal RSA. However,
the dissent attempts to distinguish the above cases from the facts of
this case by contending that these cases "involved
federal claims brought
under the federal RSA where the federal adjudication path was
applicable." (Emphasis in original.) Dissenting Op. at 52. The dissent
takes such position because of its reliance upon its flawed bright-line
treatment of the
federal and Hawai`i RSAs. As previously discussed, the federal and
Hawai`i RSAs are closely intertwined in that the
participation of the federal RSA requires the creation of the Hawaii
RSA and acceptance of certain conditions set forth in
the federal RSA, such as the federal adjudication path.