Coalition Govt Proc v. Fed Prison Indust

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206 2 Coalition for Gov’t Procurement, et al. No. 01-2231

ELECTRONIC CITATION: 2004 FED App. 0101P (6th Cir.) v. Federal Prison Industries, Inc., et al.

File Name: 04a0101p.06

_________________

UNITED STATES COURT OF APPEALS COUNSEL

FOR THE SIXTH CIRCUIT ARGUED: Stephen M. Ryan, MANATT, PHELPS &

_________________ PHILLIPS, Washington, D.C., for Appellants. Charles R.

Gross, UNITED STATES ATTORNEY, Grand Rapids,

COALITION FOR GOVERNMENT X Michigan, for Appellees. ON BRIEF: Stephen M. Ryan,

PROCUREMENT , et al., - Michael T. Brown, MANATT, PHELPS & PHILLIPS,

Plaintiffs-Appellants, - Washington, D.C., for Appellants. Charles R. Gross,

- No. 01-2231 UNITED STATES ATTORNEY, Grand Rapids, Michigan,

- for Appellees. David T. Ralston, Jr., HOPKINS & SUTTER,

v. > Washington, D.C., Philip A. Nacke, FOLEY & LARDNER,

,

- Washington, D.C., for Amicus Curiae.

FEDERAL PRISON INDUSTRIES, -

ECONOMUS, D. J., delivered the opinion of the court, in

INC., et al., - which GILMAN, J., joined. GIBBONS, J., concurred in the

Defendants-Appellees. - judgment only.

-

N _________________

Appeal from the United States District Court

for the Western District of Michigan at Grand Rapids. OPINION

No. 99-00919—Robert Holmes Bell, Chief District Judge. _________________

Argued: February 6, 2003 PETER C. ECONOMUS, District Judge.

Decided and Filed: April 12, 2004 I. OVERVIEW

Before: GILMAN and GIBBONS, Circuit Judges; This appeal draws the court into the longstanding conflict

ECONOMUS, District Judge.* between the government’s policy of employing federal

inmates in the manufacture of goods and the challenges faced

by the private industries compelled to compete with inmate-

produced wares. Nearly seven decades ago, the United States

Supreme Court addressed the “evil” posed by “the sale of

convict-made goods in competition with the products of free

labor,” and opined, “[F]ree labor, properly compensated,

cannot compete successfully with the enforced and unpaid or

*

The Honorable Peter C. Economus, United States District Judge for underpaid convict labor of the prison.” Whitfield v. Ohio, 297

the Northern District of Ohio, sitting by designation.

1

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v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

U.S. 431, 439 (1936). Since Whitfield, the debate over the Constitution, U.S. CONST . amend. V.3 The Coalition asserts

use of inmate labor largely has been reserved for the that UNICOR violated the foregoing provisions from 1991-

policymakers operating in the other branches of government. 1995 when it significantly expanded its production of office

The role of the courts has been limited to examining whether furniture without initiating the public notice and comment

the terms and conditions of inmate employment comply with procedures required by section4 4122. The Coalition further

constitutional and statutory standards. See generally Hope v. asserts that the Board violated the organic statute and the

Pelzer, 536 U.S. 730 (2002) (examining liability of prison APA when it authorized UNICOR’s 1995-1996 requests to

officials pursuant to 42 U.S.C. § 1983 where said officials significantly expand production of office furniture. Finally,

disciplined an inmate for refusal to work on a “chain-gang”); the Coalition contends that UNICOR’s direct dealings with

Richardson v. McKnight, 521 U.S. 399, 405-06 (1999) private manufacturers and purchasers of office furniture

(acknowledging that privately-operated prisons may be held violate the organic statute and the APA.

liable for injuries suffered by inmates employed on “chain

gangs” and “work-farms”). This appeal requires, however, As the issues raised in this appeal are matters of first

that the court re-enter the conflict and examine whether the impression among the courts of appeals, we begin our

agency charged by Congress to manage inmate labor -- analysis with an extensive examination of the statutory and

Federal Prison Industries, Inc. – has acted within its regulatory framework governing UNICOR’s operations. We

administrative authority. thereafter address the specific assignments of error.

Specifically, the appellants-plaintiffs, the Coalition for

Government Procurement (“CGP”) – a non-profit trade

association representing manufacturers of office furniture --

and several CGP members,1 appeal the district court’s award

of summary judgment in favor of Federal Prison Industries,

Inc. (“FPI” or “UNICOR”),2 and its Board of Directors (the

“Board”), in this action brought pursuant to UNICOR’s

organic statute, 18 U.S.C. §§ 4121-4129 (2003), the judicial

3

review provisions of the Administrative Procedures Act The district court also awarded summary judgme nt to the appellees-

(“APA”), 5 U.S.C. §§ 701-706, and the Just Compensation defenda nts, Steve B. Schwalb (“Schwalb”), and the United States

Clause of the Fifth Amendment to the United States Attorney General. Schw alb is U NIC OR ’s Assistant Director and Chief

Operating Officer charged with supervising UNICO R’s day-to-day

operations. The Co alition brought suit against Schwalb in his official

capacity. It is well-settled that “[a] suit against a public emp loyee in his

1

or her official capacity is a suit against the agency itself.” Mitchell v.

Herman Miller, Inc. (“Herman Miller”), Haworth, Inc. (“Haworth”), Chapman, 343 F.3d 811, 822 (6th Cir. 2003). Accordingly, the

and Knoll, Inc. (“Knoll”). For ease of reference, the term “Coalition” as Coalition’s claims against Schwalb are actually claims against UNICOR.

used throughout this Opinion shall refer collectively to CGP and the Similarly, the Coalition’s official-capacity claims asserted against the

individual app ellants-plaintiffs. Attorney G eneral are claims against the United S tates.

2 4

“UNICOR” is the commercial or “trade” name of Federal Prison All references to the term “section” are to that of title 18 of the

Industries, Inc. See 29 C .F.R. § 345 .11(a) (20 03). United States Code, unless otherwise noted.

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v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

II. BACKGROUND As the use of inmate-labor increased throughout the

nineteenth and early-twentieth centuries, so too did the cries

A. The Historical Underpinnings of UNICOR’s from the private enterprises, trade associations and labor

Organic Statute unions that viewed such programs as threats to free markets

and employment. State legislatures responded by enacting

In the words of one leading scholar, “The history of the measures limiting the scope of inmate-manufactured products.

prison is in large measure a history of prison labor.”5 While See, e.g., Whitfield, 297 U.S. at 435-440 (examining an Ohio

the issues underlying the instant appeal are steeped in this statute barring the sale of inmate goods manufactured outside

lengthy history, we narrow our focus to the historical events of the state of Ohio). Similarly, Congress enacted a series of

giving rise to UNICOR. measures designed to curtail the interstate sale of inmate-

produced goods.9

1. Early Congressional Responses to Inmate-

Labor Programs Notwithstanding the apparent hostility exhibited by the

federal government to the states’ use of inmate labor,

The emergence of the penitentiary system at the end of the Congress promoted inmate-labor programs within the federal

eighteenth century resulted in the states taking custody of

large and restless inmate populations whose ward placed

considerable pressures on state treasuries.6 The states

responded with efforts designed to reduce “idle hands” among

the inmates while promoting the self-sufficiency of the the prison with materials and supervisors, and ultimately distributed the

penitentiary.7 Central to these efforts were inmate-labor finished product. Id. However, the state retained control and custody of

inmate laborers. Id. The piece-price system was a hybrid of the contract

programs.8 system, in that employers paid a stipulated price for each finished good

rather than paying daily wages. Id. The fourth -- the state-use system --

enabled the state to contro l the manufacture of products that, in turn, were

5 purchased by governm ent age ncies. Id.

Stephen P. G arvey, Freeing Prisoners’ Labor, 50 STAN . L. R EV .

339, 342 (199 8). Prof. Garvey’s article presents an insightful analysis of

9

inmate labor. The Hawes-Cooper Act, ch. 79, 45 Stat. 1084, divested inmate-

manufactured goods of their interstate character thereby subjecting such

6 goods to strict state regulatio n. See Hawes-Coop er Ac t, ch. 79, 45 Stat.

See id. at 340-70.

1084 (1929). The Ashurst-Sumners Act, ch. 412, 49 Stat. 494, enacted by

7 Congress in 1935, made it a federal crime to knowingly transport inmate-

See id. manufactured goods into a state that prohibited their sale. See Ashurst-

8

Sumners Act, ch. 412, 49 Stat. 494 (1935 ). Congress passed the Walsh-

State operated inmate-labor programs generally fell within four Healey Act, ch. 881, 49 Stat. 2036, in 1937 , that prevented the contracting

classifications -- lease, contract, piece-price, and state-use. See gen erally out of inmate labor for use in federal government contracts. See W alsh-

T H E O X F OR D H ISTORY OF THE P R IS O N : T HE P RACTICE OF P U N IS H M E N T IN Healey Act, ch. 881, § 1(d), 49 Stat. 2036, 2037 (1937) (codified as

W ESTERN S OCIETY (Norval Morris et al. eds., 1997 ); D A V ID J. R OTHMAN , amended at 41 U.S.C. §§ 35-45 ). Furthermore , Congress amended the

T H E D IS C O VE R Y O F T H E A S Y LU M 82-85 (1971). The lease system placed Ashurst-Sumners Act in 1 940 to fede rally pro scribe the interstate

inmates under the control of private-sector enterprises that compensated transportation and sale of inmate-made goods irrespective of state law.

the state for the prisoners’ services. Id. Under the contract-system, the See Act of Oct. 14, 1940, ch. 872, 54 Stat. 1132 (codified as amended at

private-sector contracted with the state for labor on a d aily basis, provided 18 U.S.C. §§ 1761-17 62).

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v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

penitentiary system. For instance, Congress authorized the providing that, “The several Federal departments and

Attorney General in 1918 independent establishments and all other Government

institutions of the United States shall purchase at not to

to establish, equip, maintain, and operate at the United exceed current market prices, such products of the industries

States Penitentiary in Atlanta, Georgia, a factory or herein authorized to be carried on their requirements and as

factories for the manufacture of cotton fabrics to supply may be available.” Act of May 27, 1930, ch. 340 § 7, 46 Stat.

the requirements of the War and Navy Departments, the at 392.

Shipping Corporation, cotton duck suitable for tents and

other army purposes and canvas for mail sacks and for Congress did not, however, authorize the unfettered use of

the manufacture of mail sacks and other similar mail- inmate labor. It directed the Attorney General to establish

carrying equipment for the use of the United States only those industries “as [would] give the inmates a

Government. maximum opportunity to acquire a knowledge and skill in

trades and occupations which w[ould] provide them with a

Act of July 10, 1918, ch. 144, § 1, 40 Stat. 896, 896. means of earning a livelihood upon release.” Act of May 27,

Similarly, Congress authorized a factory to be constructed at 1930, ch. 340 § 7, 46 Stat. at 392. Similarly, while the 1930

the Leavenworth, Kansas federal penitentiary for the Act “provide[d] employment for all physically fit inmates,”

“manufacture of shoes, brooms, and brushes.” Act of April 3, it did so only in such “diversified forms as [would] reduce to

1924, ch. 81, 43 Stat. 33, 44-45. a minimum competition with private industry or free labor.”

Act of May 27, 1930, ch. 340 § 1, 46 Stat. at 391. Moreover,

Congress thereafter expanded the use of inmate labor to all Congress explicitly directed that inmate-manufactured

federal penitentiaries. See Act of May 27, 1930, ch. 340 §1, products were “not for sale to the public in competition with

46 Stat. 391, 391 (hereinafter the “1930 Act”) (“[T]he private enterprise.” Act of May 27, 1930, ch. 340 § 3, 46

Attorney General shall provide employment for all physically Stat. at 391.

fit inmates in the United States penal and correctional

institutions.”). Congress expressly authorized the use of 2. The Creation of UNICOR

inmate labor in two areas. First, the Attorney General was “to

make available the services of United States prisoners” for Four years later, Congress charged the President “to create

use by federal agencies and departments in the “construction a body corporate of the District of Columbia to be known as

or repairing roads . . . ; clearing, maintaining, and reforesting ‘Federal Prison Industries.’” Act of June 23, 1934, ch. 736

public lands; building levees; and for constructing or § 1, 48 Stat. 1211, 1211 (hereinafter the “1934 legislation”).10

repairing any public ways or works.” Act of May 27, 1930, The 1934 legislation otherwise mirrored the 1930 Act with

ch. 340 § 2, 46 Stat. at 391. Secondly, the Attorney General

was “to establish such industries as w[ould] produce articles

and commodities for consumption in the United States penal 10

The President was “to transfer to [UNICOR] the duty of

and correctional institutions or for sale to the departments and determining in what manner and to what extent industrial operations shall

independent establishments of the Federal Government.” Act be carried on in the Federal penal and correctional institutions,” as well

of May 27, 1930, ch. 340 § 3, 46 Stat. at 391. The 1930 Act as to transfer “any part or all of the other powers or duties [then] vested

in the Attorney General” relating to inmate labor. Act of June 23, 1934,

also created a limited market for inmate-produced wares ch. 73 6 § 3 , 48 S tat. at 1211.

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v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

one significant addition: the creation of a board of directors Exec. Order No. 6917 ¶ 3. It further provided, “The heads of

(the “board”). Congress directed the President to appoint a the several executive departments, independent

five-member board of directors, with industry, labor, establishments and Government owned and Government

agriculture, retailers / consumers, and the Attorney General controlled corporations shall cooperate with [UNICOR] in

each represented by one member. See Act of June 23, 1934, carrying out its duties and shall purchase, at not to exceed

ch. 736 § 2, 48 Stat. at 1211. While Congress vested current market prices, the products or services of [UNICOR],

UNICOR with broad discretion to manage inmate-operations, to the extent required by law.” Exec. Order No. 6917 ¶ 9.

it empowered the board with the authority to balance such

operations with the need to protect private industries. See Act B. UNICOR’s Organic Statute

of June 23, 1934, ch. 736 § 3, 48 Stat. at 1211 (“It shall be the

duty of the board of directors to diversify so far as practicable 1. 18 U.S.C. §§ 4121-4129

prison industrial operations and so operate the prison shops

that no single private industry shall be forced to bear an undue Congress incorporated the provisions of the 1930 Act, the

burden of competition from the products of the prison 1934 legislation and the Executive Order as part of the

workshops.”). enactment of Title 18 of the United States Code.12 See Act of

June 25, 1948, Pub. L. No. 80-722, 62 Stat. 683, 851. With

On December 11, 1934, President Franklin D. Roosevelt limited exception, the current version of UNICOR’s organic

issued Executive Order 6917 (the “Executive Order”), see statute maintains its historical underpinnings.

(J.A. 983),11 creating UNICOR and appointing the board.

The Executive Order expressly provided: Title 18 of the United States Code, section 4121,

establishes UNICOR as a “government corporation of the

[UNICOR] shall have power to determine in what District of Columbia . . . administered by a Board of six

manner and to what extent industrial operations shall be directors, appointed by the President to serve at the will of the

carried on in the several penal and correctional President without compensation.13 18 U.S.C. § 4121 (2003).

institutions of the United States and shall, so far as

practicable, so diversify prison industrial operations that

no single private industry shall be forced to bear an

undue burden of competition with the products of prison

workshops. It shall also have power to do all things it is

authorized to do by said Act of June 23, 1934, and all

things incident to or necessary or proper in the exercise

of its functions. 12

The Eightieth Congress’s 1948 revision of the federal criminal

code is the statutory foreru nner o f UN ICO R’s organic statute. See Act of

June 25, 1 948 , Pub . L. No . 80-7 22, 6 2 Stat. at 851 .

11 13

Section 744 of the 1940 ed ition of the United States Code was the Congress expanded the board in 1948 to include a representative

first codification of the Executive O rder. See 18 U.S.C. § 744 (1940). See from the Secretary of Defense. See Act of June 29, 1948, Pub. Law. No.

also Garza v. Miller, 688 F.2d 480 , 485 (7th C ir. 198 2). 821 , § 3, 62 Stat. 110 0, 11 00.

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v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

Section 4122 (a)14 vests UNICOR with broad discretion to 18 U.S.C. § 4122 (b)(1).15

manage inmate operations, providing, in pertinent part:

Section 4123 of the organic statute mirrors the 1930 Act in

[UNICOR] shall determine in what manner and to that only those “forms of employment shall be provided as

what extent industrial operations shall be carried on in will give inmates . . . a maximum opportunity to acquire a

Federal penal and correctional institutions for the knowledge and skill in trades and occupations which will

production of commodities for consumption in such provide them with a means of earning a livelihood upon

institutions or for sale to the departments or agencies of release.” 18 U.S.C. § 4123. The section further limits

the United States, but not for sale to the public in UNICOR’s operations so as to “not curtail the production of

competition with private enterprise. any existing arsenal naval yard or other Government

workshop.” 18 U.S.C. § 4123.

18 U.S.C. § 4122 (a).

Section 4124 (a)16 enshrines the mandatory obligation of

Section 4122(b)(1) delineates the duties of the board. federal agencies and departments to purchase, “at not to

Similar to the 1934 legislation, this subsection provides: exceed current market prices, such products [manufactured by

UNICOR] as meet their requirements and may be available.”

Its board of directors shall provide employment for the 18 U.S.C. § 4124 (a). Subsection (b) creates a dispute

greatest number of those inmates in the United States resolution process whereby any “[d]isputes as to the price

penal and correctional institutions who are eligible to quality, character, or suitability of [UNICOR] products shall

work as is reasonably possible, diversify, so far as be arbitrated by a board consisting of the Attorney General,

practicable, prison industrial operations and so operate the Administrator of General Services, and the President, or

the prison shops that no single private industry shall be

forced to bear an undue burden of competition from the

products of the prison workshops, and to reduce to a

minimum competition with private industry or free labor.

15

During the 19 88 amendme nt process discussed infra, Congress

amended the earlier statute’s reference from “all physically fit inmates,”

to “the greatest number of those inmates . . . who are eligible to work as

is reasonably possible.” Com pare Act of June 25, 1948, Pub. L. No. 80-

14 722, 62 Stat. at 851 with 18 U .S.C. § 412 2 (b)(1).

Congress did not divide the 194 8 version of section 412 2 into

subse ctions. With minor modification, the current versions o f section 16

4122 (a) and (b)(1) are identical to the 194 8 version of 412 2. Com pare As with section 412 2, Congress did not divide the 1948 version of

Act of June 25, 1948, Pub. L. No. 80-722, 62 Stat. at 851 with 18 U.S.C. section 412 4 into su bsections. W ith minor modification, the current

§ 4122 (a), (b)(1). Subsections (c), (d) and (e) to the current version of versions of section 4124 (a) and (b) are identical to the former 4124.

section 4122 were enacted as p art of the 194 8-19 49 amendme nts Com pare Act of June 25, 1948, Pub. L. No. 80-722, 62 Stat. at 851 with

address ing inmates held by the Department of Defense and the 18 U.S.C. § 4124 (a), (b). Added in 1990, subsection (c) of the current

Commissioner of the District of Co lumbia. See Act of June 29, 1948, ch. section 4124 prescrib es the manner in which Fede ral agencies and

719 §§ 1 -2, 62 Stat. 110 0, 11 00; A ct of M ay 11, 194 8, ch. 2 76, 6 2 Stat. dep artments must report purchases of UN ICO R’s prod ucts, see 18 U.S.C.

230. These subsections are immaterial to our analysis. The remaining § 4124 (c), while subsection (d) requires UNICOR to publish a catalog of

subsections found in the current version of 4122 are discussed infra. its prod ucts, see 18 U.S.C. § 41 24 (d).

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v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

their representatives.”17 18 U.S.C. § 4124 (b). The decisions 2. The 1988 Amendments and the

of the dispute resolution board are “final and binding on all Comprehensive Advanced Review Process

parties.” Id. (“CARP”)

The current version of Section 4125, as in the 1930 Act, Guided by its organic statute, UNICOR operated for

empowers the Attorney General decades below the legislative radar. The 1980's witnessed,

however, a dramatic rise in the number of inmates confined

to make available to the heads of the several departments, to federal institutions.18 UNICOR therefore expanded its

the services of United States prisoners under terms, operations in order to provide employment “for the greatest

conditions, and rates mutually agreed upon, for number of those inmates . . . who [were] eligible to work as

construction or repairing roads, clearing, maintaining, [] reasonably possible.” 18 U.S.C. § 4122(b)(1). Echoing the

and reforesting public lands; building levees, and cries of a century earlier, this increased utilization of inmate

constructing or repairing any public ways or works labor drew calls from private industries seeking to curtail

financed wholly or in major part by funds appropriated UNICOR’s operations.

by Congress.

Congress responded in 1988 by passing a series of

18 U.S.C. § 4125 (a). amendments to UNICOR’s organic statute. See Anti-Drug

Abuse Act of 1988, 100 Pub. L. No. 690, §§ 7093- 7096, 102

The remaining provisions of the organic statute address Stat. 4181, 4411-14. Pertinent to the instant appeal, the

UNICOR’s financial and reporting requirements. Section amendments to section 4122 mandated that UNICOR

4126 requires UNICOR to place “monies” generated by its “conduct its operations so as to produce products on an

operations into the Treasury of the United States, see 18 economic basis, but avoid capturing more than a reasonable

U.S.C. § 4126 (a), and establishes accounting procedures share of the market among Federal departments, agencies, and

relating to UNICOR’s operations, see 18 U.S.C. § 4126 (b)- institutions for any specific product.” See Anti-Drug Abuse

(f). Section 4127 requires the board to submit an annual Act of 1988, 100 Pub. L. No. 690, § 7096, 102 Stat. at 4413

report to Congress detailing UNICOR’s operations. (codified at 18 U.S.C. § 4122(b)(2)). Additionally, the

amended section 4122 directed UNICOR to “concentrate on

providing to the Federal Government only those products

which permit employment of the greatest number of those

inmates who are eligible to work as is reasonably possible.”

Id. Furthermore, Congress instructed UNICOR to “diversify

its products so that its sales are distributed among its

17 industries as broadly as possible.” See Anti-Drug Abuse Act

The 194 8 version of section 412 4 provided that the dispute

resolution board was to be comprised of the “Comptroller General of the

United States, the Director of the Bureau of Federal Supply, Department

of Treasury, and the Director o f the Bureau of the B udge t, or their 18

representatives.” See Act of June 25, 1948, Pub. L. No. 80-7 22, 6 2 Stat. See A L FR E D B L UM S T EIN & A L LE N J. B ECK , P O P U LA T IO N G ROWTH

at 851. The section has been amended over the years to account for IN U.S. P R IS O N S , 1980-1996, 26 P R IS O N S : C R IM E A N D J USTICE – A REVIEW

changes within federal dep artments and agencies. OF R E S EA R C H 17 (199 9).

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v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

of 1988, 100 Pub. L. No. 690, § 7096, 102 Stat. at 4413 Anti-Drug Abuse Act of 1988, 100 Pub. L. No. 690, § 7096,

(codified at 18 U.S.C. § 4122(b)(3)). 102 Stat. at 4414 (codified at 18 U.S.C. § 4122(b)(4)(A)).

The CARP further required UNICOR to publicize the

The most sweeping provisions of the 1988 legislation were proposal within the affected sector, provide the

those limiting UNICOR’s discretion to increase production Comprehensive Impact Study to the public, and solicit

levels. Congress required that “[a]ny decision by [UNICOR] comments from the affected sector. See Anti-Drug Abuse Act

to produce a new product or to significantly expand the of 1988, 100 Pub. L. No. 690, § 7096, 102 Stat. at 4414

production of an existing product be made by the board.” See (codified at 18 U.S.C. § 4122(b)(4)(B)-(D)). Congress also

Anti-Drug Abuse Act of 1988, 100 Pub. L. No. 690, § 7096, afforded interested industry representatives with “a reasonable

102 Stat. at 4413 (codified at 18 U.S.C. § 4122(b)(4)). opportunity” to present comments directly to the board. See

Congress further required UNICOR and the board to initiate Anti-Drug Abuse Act of 1988, 100 Pub. L. No. 690, § 7096,

a notice and comment procedure prior to entering a new 102 Stat. at 4414 (codified at 18 U.S.C. § 4122(b)(4)(D)).

product area or significantly expanding UNICOR’s existing The last stage of the CARP directed UNICOR to publicize the

operations. See Anti-Drug Abuse Act of 1988, 100 Pub. L. board’s final decision “in a publication designed to most

No. 690, § 7096, 102 Stat. at 4414 (codified at 18 U.S.C. effectively provide notice to potentially affected private

§ 4122(b)(4)-(5)). vendors” of the affected product. See Anti-Drug Abuse Act

of 1988, 100 Pub. L. No. 690, § 7096, 102 Stat. at 4414

Congress’s newly minted notice and comment procedure -- (codified at 18 U.S.C. § 4122(b)(5)).

the comprehensive advanced review process (“CARP”)--

required the board to receive and consider a written analysis 3. The Guidelines

prepared by UNICOR detailing any proposed “significant

expansion’s”19 potential impact on the private sector (the Notwithstanding Congress’s detailed attention to the

“Comprehensive Impact Study” or “market study”)20. See CARP, the 1988 amendments did not define the term

“significantly expand.” Therefore, on December 4, 1989,

UNICOR published an interim definition of the term in

19 Commerce Business Daily (“CBD”). See (J.A., 179-81, 434-

W e limit our analysis to the provisions o f the organic statute

pertaining to “significant expansion,” as those are the issues raised by the 36, 667-669, 1097 ¶ 4, 1484 ¶ 36). Representatives from

parties to the instant app eal. private industry -- including CGP -- provided comments

20

regarding the interim definition. See (J.A., 1008-1024, 1813-

Congress required that the Comprehensive Impact Study provide, 15).

at the minimum , information regarding:

(i) the number of vendors currently meeting the requirements of

the Federal Governm ent for the product; (iv) the pro jected growth in the Federal Government demand for

(ii) the proportion of the Federal Government market for the the product; and

product currently served by sma ll businesses, small (v) the pro jected ability of the Federal G overnment market to

disadvantaged businesses, or businesses operating in labor sustain both Fed eral Prison Ind ustries and private ven dors.

surplus areas;

(iii) the size of the Federal Government and non-Federal See Anti-Drug Abuse Act of 1988, 100 Pub. L. No. 69 0, § 7 096 , 102 Stat.

Go vernm ent markets for the pro duct; at 4414 (codified at 18 U.S.C. § 41 22(b)(4)(A)(i)-(v)).

No. 01-2231 Coalition for Gov’t Procurement, et al. 17 18 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

On January 2, 1991, UNICOR published its final definition 5% - Less than 10 % 3%, provided it does not

of “significant expansion.” See (J.A., 182-84, 437-38, 670-71, cause FPI’s market share

1097 ¶ 5, 1639 ¶ 36). The final definition established a two- to exceed 10%

tiered approach (the “Guidelines”) for identifying whether a

planned increase in production required the initiation of the 10% - Less than 15% 2% provided it does not

CARP. The first tier directed UNICOR to monitor “proposed cause FPI’s market share

production increases . . . as part of [its] annual planning to exceed 15%

cycle,” under the two scenarios where a significant expansion

could arise: 15% - Less than 20% 1.5% provided it does not

cause FPI’s market share

1. The specific product will be produced at a new to exceed 20%

factory and not offset by a corresponding reduction in

production at another location; or 20% - Less than 25% 1% provided it does not

cause FPI’s market share

2. The specific product will be produced at an existing to exceed 25%

factory or factories, and will be accompanied by at

least a 10% increase in capacity resulting from Over 25% Any increase in market

expanding any of the following three inputs of share would be deemed

production: a) Plant size; b) Equipment capacity; c) “significant”

Inmate employment.

(J.A., 182-84, 437-38, 670-71, 1098 ¶ 8, 1485 ¶ 8.)

(J.A., 11-12, 182-84, 437-38, 670-71, 1097 ¶ 6, 1484-85 ¶ 6.)

C. The Board’s Significant Expansion Decisions

Where either of the above scenarios occurred, the second

tier of the Guidelines required UNICOR to examine the Following the promulgation of the Guidelines, UNICOR

federal government market for the specific product and pursued a policy of maintaining a relatively low market share

develop an estimate of FPI’s current and projected market in new product areas, rather than significantly expanding its

share. See (J.A.,182-84, 437-38, 670-71, 1098 ¶ 7, 1485 ¶ 7). existing operations. See (J.A., 351-52). Federal inmate

The Guidelines required UNICOR to pursue the CARP when populations continued, however, to increase throughout the

its current market share position exceeded its “allowable early 1990's.21 This increase compelled UNICOR to shift its

market share” in accordance with the following sliding scale: policy and request that the appellee-defendant, Board,

authorize several significant expansions. See (J.A., 351-52).

UN ICO R’s Current Mrkt. Share Allow able Mrkt. Share Incre ase

0% - Less than 5 % Any increase, provided it

does not cause FPI’s

market share to exceed 5%

21

See B L UM S T EIN & B ECK , supra at 17.

No. 01-2231 Coalition for Gov’t Procurement, et al. 19 20 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

1. UNICOR’s Significant Expansion of Dorm & data . . . is adequately collected.” (J.A., 1341.) With respect

Quarters Furniture Production to the second recommendation, the White Paper noted, “Over

the past year, formal direction has been given and a number

UNICOR first proposed to significantly expand its of steps have been taken, to correct this deficiency.” (J.A.,

production of dorm and quarters furniture (“D & Q furniture”) 1341.)

from approximately $20 million in annual sales in 1995 to

$35 million in annual sales by the year 2000 (hereinafter the On March 8, 1996, the Board partially authorized

“D & Q furniture expansion”). See Quarters Furniture Mfrs. UNICOR’s proposed significant expansion of D & Q

Ass’n v. Federal Prison Indus., No. 95-2237 (D. D.C. Mem. furniture. See QFMA, at 6. In its decision, the Board

Opinion filed Aug. 28, 1998) (hereinafter “QFMA”) at 6. acknowledged the violations chronicled in the White Paper.

Shortly after presenting the proposal to the Board, UNICOR Id. The Board determined, however, that it would have

discovered several irregularities regarding its past compliance approved these expansions had UNICOR presented the

with the Guidelines. Id. The Board responded by ordering an proposals in a timely manner. See QFMA, at 7. It further

internal investigation to determine the extent of these determined that UNICOR’s then-current market share, the

irregularities. Id. limited non-federal market for D & Q furniture, and the

industry’s domination by small businesses, required a lesser

On January 26, 1996, UNICOR issued a “White Paper” expansion than that sought by UNICOR. See QFMA, at 8-9.

detailing its historical production of D & Q furniture. See Accordingly, the Board approved a significant expansion to

(J.A., 1330-1341). The White Paper identified three $26 million in annual sales by the year 2000, rather than the

occasions throughout 1991-1993 where UNICOR was $35 million requested by UNICOR. See QFMA, at 8-9.

obliged, but failed, to initiate the CARP.22 UNICOR

explained that its failure to comply with the Guidelines was

the result of the inherent difficulties in monitoring inmate

employment levels, plant size, and equipment capacity, as

well as interpretative difficulties with the definition of

significant expansion. See (J.A., 1339-41). The White Paper

offered two recommendations. First, it advised that, “The

definition of Significant Expansions needs to be reviewed,

with input from the private sector, to make sure it is fair, clear

and practical in its application.” (J.A., 1341.) Secondly,

“[W]hatever factors are chosen as indicators of significant

expansion, mechanisms must be put in place so that necessary

22

The three instances were, as follows: (1) when FCI Sheridan began

manufacturing D & Q furniture in 1991; (2) when production increased

between 1991 and 1992; and (3) when production inc reased in 19 93. See

(J.A., 1334-1339).

No. 01-2231 Coalition for Gov’t Procurement, et al. 21 22 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

2. UNICOR’s Significant Expansion of Systems fifteen percent in 1995 to approximately twenty-four percent

Furniture Production in 2000. See (J.A., 203). As the Systems Furniture

Expansion triggered each tier of the Guidelines, the Board

UNICOR meanwhile proposed to significantly expand its initiated the CARP.

production of Office Furniture.23 Specifically, UNICOR

proposed to expand its existing systems furniture production UNICOR accordingly prepared a Comprehensive Impact

from $70.5 million in annual sales in 1995 to $150 million in Study regarding the potential impact of the Systems Furniture

annual sales by the year 2000 (hereinafter the “Systems Expansion on the private sector (the “Systems Impact

Furniture Expansion”). See (J.A., 203, 1102 ¶ 50). Study”). See (J.A., 200-49). It placed notice of the Systems

UNICOR’s initial estimates indicated that the Systems Furniture Expansion in the CBD, see (J.A., 198-99, 1101¶¶

Furniture Expansion would increase inmate employment by 37-39), and mailed notice to various vendors and trade

approximately eighty-six percent.24 See (J.A., 225). associations, including Herman Miller, see (J.A., 185-95,

UNICOR further estimated that the proposed expansion 1101 ¶ 38).

would require the activation of a new systems furniture

factory.25 See (J.A., 225). The market share analysis UNICOR thereafter provided the Systems Impact Study to

indicated that the Systems Furniture Expansion would requesting entities and received various comments. See (J.A.,

increase UNICOR’s federal market share from approximately 249-69, 337-40, 1101 ¶¶ 41-42). CGP requested that the

Board hold a public hearing on the proposed significant

expansion.26 See (J.A., 251-69, 336-37).

23

The term “Office Furniture” refers to the class of goods at issue in The Board held a public hearing on December 7, 1995

this app eal. Included in Office Furniture are three sub-classes of goo ds: where representatives from several trade associations – CGP,

(1) systems furniture; (2) office seating furniture; and (3) office case the Business Products Industry Association (“BPIA”),27 and

good s. Systems furniture are products that typically fit or attach together

to form multiple workstations such as panel systems, desking systems, as

the Business and Institutional Furniture Manufacturer’s

well as filing, storage, and shelving com ponents. See (J.A., 1476 ¶ 1). Association (“BIFMA”)28 – presented a coordinated

Office seating furniture are prod ucts such as office chairs, task chairs,

stools, sofas, and modular seating. See (J.A., 1477 ¶ 2). Office case

goods are products typically associated with an individual user and 26

include desks, crede nzas, corner unit work surfaces, desk extensions, and In preparation for the hearing, UNICOR issued a final version of

storage units. See (J.A., 1477 ¶ 3). the Systems Impact Study in October, 1995 (the “Final Systems Impact

Study”) that, inter alia, incorp orated and addressed the comments

24 submitted by the private-sector. See (J.A., 287-3 35); see also (J.A., 270-

UNICOR determined that its systems furniture operations

employed 940 inmates in 199 5. See (J.A., 225). UN ICOR ’s preliminary 86).

projections revealed that the proposed expansion required an additional 27

810 emp loyees. See (J.A., 225). BP IA is a trade association representing 175 office furniture

manufacture rs and 625 office furniture dealers. See (J.A., 372).

25

UNICOR proposed to close its system furniture factory at FPC 28

Duluth and tra nsfer those 10 7 inmate jobs to a newly constructed factory B IFM A is a nonprofit trade association consisting of over 250

at FCC Coleman. See (J.A., 225). It estimated that the factory at FCC manufacturers of business, office and institutional furniture and their

Coleman wou ld employ 6 00 inmates. See (J.A., 225). supp liers. See (J.A., 583).

No. 01-2231 Coalition for Gov’t Procurement, et al. 23 24 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

opposition to the proposed significant expansion. See (J.A., (4) UNICOR’s alternative methods to address increased

346-419). inmate populations (i.e., subcontracting, vertical

integration, recycling, and sales to charitable

On February 6, 1996, the Board authorized the Systems organizations) failed to achieve UNICOR’s statutory

Furniture Expansion. See (J.A., 420-22). The Board mandate to employ the maximum number of

determined: inmates. See (J.A., 422).

FPI has proposed that the corporation increase The Board authorized annual sales in the amount of $130

production of systems and ADP furniture to $150 million million by the year 2000, rather than the $150 million

annually by FY 2000. After analyzing the material requested by UNICOR. See (J.A.,420-21). It “encouraged

submitted, and reviewing the testimony heard on this FPI to pursue partnerships with members of the systems and

matter, it is the finding of the Board of Directors that a ADP furniture industry in the effort to lessen FPI’s impact on

somewhat reduced expansion is appropriate and would the private sector.” (J.A., 422). The Board explained: “Since

not result in FPI capturing more than a reasonable share [we have] determined that an FPI sales level less than

of the market or constitute an undue burden on the requested is appropriate, [we] do[] so with the expectation

systems and ADP furniture industry. that resulting partnerships should be substantial, in order to

absorb significant FPI employment.” (J.A., 422.)

(J.A.,420). With regard to its further judgment that “the sales

levels authorized . . . [would] not place an undue burden upon 3. UNICOR’s Significant Expansion of Office

the systems and ADP furniture industry nor free labor,” (J.A., Seating Furniture Production and the

421), the Board emphasized four factors: Board’s Retroactive Authorization of the

1991-1992 Unauthorized Expansions

(1) The majority of the firms in the industry were “not

heavily involved in the Federal market for systems UNICOR further proposed to expand office seating

and ADP furniture” (J.A., 421.) Indeed, “[f]or most furniture production from $54.4 million in annual sales in

of the companies listed on the GSA schedules for 1995 to $110 million in annual sales by 2001 (the “Office

systems and ADP furniture, less than 4% of their Seating Expansion”). See (J.A., 470). UNICOR’s initial

total sales [went] to the Federal government.” (J.A., estimates indicated that the Office Seating Expansion would

421.) increase inmate employment between eighty-five to one

hundred percent.29 See (J.A., 496). UNICOR further

(2) The total domestic market for systems furniture was estimated that the proposed expansion would require the

large and projected to grow throughout the

expansion thereby offsetting UNICOR’s increased

sales. See (J.A., 421).

(3) The industry was dominated by a small number of 29

UNICOR determined that its office seating furniture processes

large firms. See (J.A., 421-22). employed 790 inmates in 1995. See (J.A., 496). UNICO R’s preliminary

projections revealed that the proposed expansion required an additional

600 -800 emp loyees. See (J.A., 496).

No. 01-2231 Coalition for Gov’t Procurement, et al. 25 26 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

activation of three new office seating furniture factories.30 indicating its expected decline in market share during 1991.31

See (J.A., 496). Pursuant to the Guidelines, UNICOR See (J.A., 514).

conducted a market share analysis indicating that the Office

Seating Expansion would increase UNICOR’s federal market With respect to the 1992 increase in inmate employment,

share from approximately twenty-one percent in 1995 to UNICOR conceded that the increase, coupled with its

approximately thirty-four percent in 2001. See (J.A., 496). expected market share of 10.89%, required the initiation of

Consequently, the Board initiated the CARP. the CARP. See (J.A., 476). UNICOR repeated the

explanation that it failed to “track the level of inmate

UNICOR prepared a Comprehensive Impact Study employees for each product.” (J.A., 476.) It reasoned,

regarding the potential impact of the Office Seating however, that “It [was] likely that had an examination of

Expansion on the private sector (the “Office Seating Impact FPI’s [office] seating production taken place, FPI would have

Study”). See (J.A., 467-526). While preparing the Office initiated the guidelines process at this time.” (J.A., 476.)

Seating Impact Study, UNICOR again discovered that it Therefore, “[i]n light of the fact that FPI failed to initiate the

failed to comply with the Guidelines, this time in 1991 and industry involvement guidelines process in response to its

1992. See (J.A., 470, 475-76, 1497 ¶¶ 106-08). Specifically, expansion of production in FY 1992,” (J.A., 477), UNICOR

inmate employment levels increased more than ten percent in requested the Board to “[R]atify the Corporation’s expansion

each year, but UNICOR did not conduct a market share of office seating during that time, taking into consideration

analysis. UNICOR explained its failure in regard to the 1991 the relevant data for that point in time,” (J.A., 477).

increase:

UNICOR then pursued all of the relevant procedures under

[A]t the time, FPI focused most of its guidelines [sic] the CARP for the purposes of obtaining: (1) the Board’s

vigilance and analysis on the opening of new factories, ratification of the 1991 and 1992 expansions; and (2) the

and did not maintain an accurate tracking of inmates Board’s authorization of the proposed Office Seating

employed producing office seating. Furthermore, it was Expansion. See (J.A., 439-567, 1107 ¶¶ 91-92). CGP and

the belief of FPI staff that the corporation’s share of the Knoll received versions of the Office Seating Impact Study,

Federal market for office furniture was decreasing, due see (J.A., 527-28, 531); however, they declined to respond

to a sharp increase in Federal procurements. Thus, the with any comments. BIFMA, a member of the CGP’s board

public involvement guideline process [the CARP] would of directors, provided extensive written comments, as well as

not be required since there was no growth in FPI’s requested a hearing. See (J.A., 553-54, 561-63, 1108 ¶¶ 98-

market share. 99); (App. to Br. of Defs.-Appellees).

(J.A., 476.) In support of this explanation, UNICOR attached In July, 1996, the Board held a public hearing regarding the

to the Office Seating Impact Study a chart from 1990 Office Seating Expansion. See (J.A., 572-646).

30 31

UN ICOR estimated that the Office Seating Expansion required the The chart indicated that UNICO R had an estimated 10.06% market

activation of factories at FCI Beckley, FCI Edgefield, and FCI Victorville. share in 1990 and an expected market share of 8.86% in 199 1. See (J.A.,

See (J.A., 496). 514 ).

No. 01-2231 Coalition for Gov’t Procurement, et al. 27 28 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

Representatives from, inter alia, BIFMA, Herman Miller, Turning to the proposed Office Seating Expansion, the

Haworth, and Knoll attended the hearing and jointly presented Board authorized the proposal, resting its decision on four

statements in opposition to the proposed significant bases: (1) the federal office seating market was slightly over

expansion. See (J.A., 572-646, 1108 ¶¶ 101-103). $1 billion, rather than the smaller figure advanced by BIFMA;

(2) the federal market was projected to expand during the

In September, 1996, the Board issued its decision: pertinent period, thereby minimizing UNICOR’s increased

(1) retroactively ratifying the 1991-1992 unauthorized market share; (3) the domestic office seating market was

expansions; and (2) authorizing the proposed Office Seating expected to expand, thereby increasing sales for the private

Expansion. See (J.A., 654-59). With respect to the sector manufacturers; and (4) UNICOR’s proposed expansion

unauthorized expansions, the Board reasoned: would not affect private-sector employment as the impact of

UNICOR’s expansion would be dispersed throughout

In connection with another earlier instance of numerous manufacturers in the industry. See (J.A., 657-58).

unauthorized expansion, the Board has undertaken a

review of expansion in all FPI product lines since 4. UNICOR’s Significant Expansion of Office

implementation of the guidelines, being conducted by Case Goods Production

independent auditors.

UNICOR also proposed to significantly expand its

.... production of office case goods from $30.3 million in annual

sales in 1995 to $80 million in annual sales by 2001 (the

The question, now, however, is how to deal with this “Office Case Goods Expansion”). See (J.A., 681). Similar to

situation in the context of office seating. Any analysis the prior proposed expansions of systems furniture and office

and decision must begin with FPI’s statute, which seating, UNICOR projected that the Office Goods Expansion

provides that FPI should have no unreasonable share of would result in an approximately fifty percent increase in

the market, and should not unduly impact on any single inmate employment and require the activation of three new

private industry. Any remedial action will be predicated factories.32 See (J.A., 703). UNICOR further projected that

on what extent, if any, the statute has been violated in its market share would increase from approximately thirteen

these two very important aspects. percent in 1995 to approximately thirty percent in 2001. See

(J.A., 703). Therefore, the Board initiated the CARP.

(J.A., 655.) The Board accordingly examined UNICOR’s

federal market share from1990-1994, as well as the private UNICOR prepared a Comprehensive Impact Study

sector sales of office seating. The Board concluded, “[B]ased regarding the potential impact of the Office Case Goods

on market performance since 1991 the industry has not been Expansion on the private sector (the “Office Case Goods

adversely affected, and that UNICOR’s market share is

reasonable. The Board therefore approves FPI’s request to

ratify its sales levels achieved, subsequent to and as a result

32

of is expanded capacity during 1991 and 1992.” (J.A. 656.) UNICOR estimated that the Office Case Goods Exp ansion wou ld

employ an additional 500-750 inmates and require the activation of

factories at Forrest City, A R, a high security prison in the mid -Atlantic

region, as well as at a future site. See (J.A., 703).

No. 01-2231 Coalition for Gov’t Procurement, et al. 29 30 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

Impact Study”). See (J.A., 678-722). UNICOR proceeded D. Quarters Furniture Mfrs. Ass’n v. Federal Prison

with the CARP, and the Coalition submitted comments on the Indus.

proposed expansion. See (J.A., 723-94, 1111 ¶¶ 139-40).

Shortly following the Board’s 1996 significant expansions

The Board held a hearing on October 8, 1996 whereby decisions, the Quarters Furniture Manufacturers’ Association

BIFMA and others presented statements in opposition to the (“QFMA”) – an industry association comprised of private

Office Case Goods Expansion. See (J. A. 796-890, 1111 manufacturers of D & Q furniture – filed a complaint in the

¶ 142). United States District Court for the District of Columbia

challenging the D & Q furniture significant expansion. See

On December 17, 1996, the Board issued its decision QFMA, at 1-27. Principally relying on the White Paper,

authorizing the Office Case Goods Expansion. See (J.A., QFMA alleged that UNICOR and the Board violated the APA

891-896). The Board rested its decision on the projected by failing to initiate the CARP from 1992-1995. See QFMA,

growth of the federal market, as well as the projected growth at 2. QFMA alternatively alleged that in the event the

in the domestic market for sales of office case goods. The Guidelines allowed for such unauthorized expansions, the

Board acknowledged, however, the large discrepancy between Guidelines themselves violated section 4122 and the APA.

UNICOR’s estimate regarding the size of the federal market Id. QFMA’s complaint requested declaratory relief, as well

and the private-sector’s significantly lower estimate.33 See as an injunction “prohibiting the defendants from continuing

(J.A., 893). In an effort to account for the discrepancy, the to violate the statute, and directing [UNICOR] to return to

Board authorized less than UNICOR’s full expansion request appropriate levels of production.” Id.

– authorizing a growth to $70 million by 2001. See (J.A.,

892-93). Additionally, the Board directed UNICOR to UNICOR conceded that it violated the Guidelines during

convene an independent panel of experts to review its 1992-1995, but asserted that “[T]he Board’s March 1996

methodology for calculating the federal market, and agreed to decision [authorizing the significant expansion of D & Q

consider any request to modify the expansion decision in the Furniture] superceded and effectively moot[ed] plaintiff’s

event the panel uncovered errors in UNICOR’s methodology. case.” See QFMA, at 10.

See (J.A., 893-96).

The court partially concurred in UNICOR’s contention,

opining that the failure on the part of QFMA to challenge

UNICOR’s current production levels precluded equitable

relief in the form of a “roll-back” of current production. See

QFMA, at 12-13. The court reasoned, however, that

“[W]here the agency wholly fails to comply with its

regulations, and provides no record for its decision, the court

should conclude that the agency acted unlawfully, and should

vacate the decision with a remand to the agency.” QFMA, at

33 16 (citations omitted). The court then acknowledged that “[I]t

The Board indicated that UNICOR estimated the size of the Federal could order the Board to adjust the future levels of FPI’s

office ca se goods market at $2 21.3 million, wherea s the private industry

estimate pro jected a market of $169 .4 million. See (J. A., 893).

production to return to the market that portion of the share

No. 01-2231 Coalition for Gov’t Procurement, et al. 31 32 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

that the Board decides crossed the line from reasonable to furniture34 violated the APA and organic statute (Count VIII).

unreasonable.” QFMA, at 12 (citation omitted). Accordingly, The second claim alleged that UNICOR’s practice of selling

the court remanded the matter to the Board “with directions Office Furniture directly to private subcontractors employed

that the Board must illicit [sic] comments with respect to the on federal projects violated the express prohibition of section

increases in FY 1991 to 1995 . . . make specific findings as to 4121, as well as the APA (Count IX).

whether FPI obtained more than a reasonable share of the

market . . . and ascertain what percent of the share was Following lengthy discovery, the parties filed cross-

unreasonable.” See QFMA, at 25. motions for summary judgment. By order dated August 8,

2001, the district granted the defendants’ motion in its

E. The Underlying Action entirety, while denying the Coalition’s motion. See 154 F.

Supp. 2d at 1156.

More than a year later, the Coalition filed the underlying

action challenging UNICOR’s significant expansions in The instant appeal ensued.

Office Furniture production. See Coalition for Gov’t

Procurement v. Federal Prison Indus., 154 F. Supp. 2d 1140 III. STANDARD OF REVIEW

(W.D. Mich 2001). The complaint specifically alleged seven

classes of claims. The first class of claims (Counts I-III) This Court reviews the grant of summary judgment de

alleged that UNICOR engaged in unauthorized significant novo. See Brooks v. American Broadcasting Cos., 932 F.2d

expansions of systems furniture, office seating, and office 495, 500 (6th Cir. 1991). Summary judgment is proper “if the

case goods throughout 1991-1995 (hereinafter the pleadings, depositions, answers to interrogatories, and

“unauthorized significant expansions”) in violation of section admissions on file, together with the affidavits, if any, show

4122 and the APA. The second class (Count IV) alleged that that there is no genuine issue as to any material fact and that

the Board’s retroactive authorization of the 1991 and 1992 the moving party is entitled to a judgment as a matter of law.”

unauthorized expansions in office seating (hereinafter the FED . R. CIV . P. 56 (c). When confronted with a properly

“retroactive authorization”) violated the APA and the organic supported motion for summary judgment, the nonmoving

statute. The third class (Count V) sought relief arising from party must set forth specific facts showing that there is a

the Board’s purported violations of the organic statute and the genuine issue for trial. A genuine issue for trial exists “if the

APA in authorizing UNICOR’s 1995-1996 requests to

significantly expand its production of systems furniture,

office seating, and office case goods (hereinafter the “1996 34

significant expansion decisions”). The fourth class (Count “Pass through” furniture was furniture sold by UNICO R that was

manufactured by non-prison ers. UN ICO R ackno wledged its use of “pass

VI) presented a facial challenge to the Guidelines, whereas through” furniture in rare circumstances where it accepted an order and

the fifth class (Count VII) alleged that UNICOR’s was unable to meet the federal agency’s delivery requirements because of

unauthorized significant expansions in 1991-1995 constituted “fires, inmate, lockdowns, work stoppages, adverse weather including

a compensable taking in violation of the Fifth Amendment. fog, tooling problems within an internal facto ry, or as a result of a

The final class of claims challenged two of UNICOR’s customer accelerated due date.” (J.A., 1070.) In such cases, UNICOR

purchased the pro duct from a private sector manu facturer with who m it

practices with respect to the private sector. The first alleged had a prior contractual relationship, and then re-sold the product to the

that UNICOR’s practice of promoting “pass through” federal agency. See (J.A., 1117 ).

No. 01-2231 Coalition for Gov’t Procurement, et al. 33 34 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

evidence is such that a reasonable jury could return a verdict Council, Inc. v. Sec. & Exch. Comm’n, 606 F.2d 1031, 1045,

for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 1048-49 (D.C. Cir. 1979). While de novo, we tailor our

477 U.S. 242, 248 (1986). review to determine whether “statutorily prescribed

procedures have been followed.” Id. at 1045.

The Coalition advances its claims (with the exception of the

takings claim) pursuant to UNICOR’s organic statute and the IV. THE CLAIMS CHALLENGING THE

APA. It is well-settled that UNICOR’s organic statute does UNAUTHORIZED SIGNIFICANT

not authorize a private right of action. See Galvan v. Fed. EXPANSIONS, THE 1996 SIGNIFICANT

Prison Indus., 199 F.3d 461, 465 (D.C. Cir. 1999) (“Congress EXPANSION DECISIONS, AND THE

purposefully kept FPI out of the commercial world and BOARD’S RETROACTIVE AUTHORIZATION

limited its exposure to the courts.”). However, the APA

provides for judicial review of agency action.35 See 5 U.S.C. The Coalition’s first three classes of claims – those

§§ 701-706. challenging the unauthorized significant expansions, the 1996

significant expansion decisions, and the Board’s retroactive

When reviewing an administrative agency’s final decision authorization (hereinafter collectively, the significant

under the APA, we review the district court’s summary expansion claims) – share common issues of fact and law.36

judgment decision de novo, while reviewing the agency’s Accordingly, we initially address these claims in their

decision under the arbitrary and capricious standard. See entirety.

Sierra Club v. Slater, 120 F.3d 623, 632 (6th Cir. 1997)

(citation omitted). Thus, the agency’s decision will be set

aside “only if it is arbitrary, capricious, an abuse of discretion,

or otherwise not in accordance with the law.” Slater, 120

F.3d at 632 (citations omitted). Alternatively, when the issue

is whether the agency followed the requisite legal procedure,

our review is limited, but exacting. See Natural Res. Def.

35

Section 70 2 of the APA provides, in pertinent part:

A person suffering legal wrong because of agency action, or

adversely affected or aggrieved by agency action within the

meaning of a relevant statute, is entitled to judicial review

thereof. An action in a court of the United States seeking relief 36

other than money damages and stating a claim that an agency or The Coalition’s facial challenge to the Guidelines (Count VI) also

an officer or employee thereof acted or failed to act in an official shares commo n issues of fact and law with the significant expansion

capacity or under color of legal authority shall not be dismissed claims. The district court determined, however, that U NIC OR ’s

nor relief therein be denied on the ground that it is against the promulgation of new guidelines in 1997 effectively mooted Count VI.

United States or that the United States is an ind ispensable party. See 154 F. Sup p. 2d at 1152. Cf. Product De velopment and Prod uction:

Pub lic Involvement Procedures, 62 F ED . R EG . 11 46 5 (M ar. 12, 1997).

5 U.S.C. § 702 . The Co alition does not appeal this determinatio n.

No. 01-2231 Coalition for Gov’t Procurement, et al. 35 36 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

A. Jurisdictional and Procedural Challenges Scientology of California v. United States, 506 U.S. 9, 12

(1992) (quotation omitted).

1. Mootness

Amicus asserts that the significant expansion claims are

The defendants, through amicus curiae, Correctional moot because UNICOR has completed the challenged activity

Vendors Association (“CVA”),37 assert that the significant -- that is, all of the alleged unlawful increases in production

expansion claims are moot. We review questions of mootness have occurred and the sales have been consummated.

de novo. See Craft v. United States, 233 F.3d 358, 373 (6th However, completion of activity is not the hallmark of

Cir. 2000). The heavy burden of demonstrating mootness mootness. Rather, a case is moot only where no effective

rests on the party claiming mootness. See Friends of the relief for the alleged violation can be given. See McPherson,

Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 119 F.3d at 458.

167, 189 (2000).

The mootness question therefore turns on whether this court

Article III of the United States Constitution vests this court can award the Coalition “any effectual relief.” Church of

with jurisdiction to address actual cases and controversies. Scientology, 506 U.S. at 12. Our analysis begins with an

See U.S. CONST . art. III, § 2. Under the “case or controversy” examination of the relief requested.

requirement, we lack authority to issue a decision that does

not affect the rights of the litigants. See Southwest Amicus construes the relief sought by the Coalition as

Williamson County Cmty. Assoc. v. Slater, 243 F.3d 270, 276 follows: (1) a declaration that the defendants violated section

(6th Cir. 2001). Indeed, we have a “continuing obligation” to 4122 and the APA by repeatedly failing to initiate CARP

enquire whether there is a present controversy as to which during 1991-1995; (2) a declaration that the Board’s 1996

effective relief can be granted. Id. at 276 (citing McPherson significant expansion decisions violated the organic statute

v. Mich. High Sch. Athletic Ass’n, Inc., 119 F.3d 453, 458 and the APA; (3) an order rescinding the 1996 significant

(6th Cir.1997)). expansion decisions; and (4) a declaration that the Board’s

retroactive authorization violated the organic statute and the

“‘The test for mootness is whether the relief sought would, APA. See (Br. of Amicus Curiae Correctional Vendors Ass’n

if granted, make a difference to the legal interests of the Supporting Appellee and Dismissal at 5-6).

parties.’” Bowman v. Corr. Corp. of Am, 350 F.3d 537, 550

(6th Cir. 2003) (quoting McPherson, 119 F.3d at 458). An The Coalition’s multiple requests for declaratory relief

appeal becomes moot if events have taken place during the warrant caution. We previously have recognized that

pendency of the appeal that make it “impossible for the court declaratory judgment actions often require courts to face the

to grant any effectual relief whatever . . . .” Church of difficult task of distinguishing “between actual controversies

and attempts to obtain advisory opinions on the basis of

hypothetical controversies.” Kardules v. City of Columbus,

37

95 F.3d 1335, 1343-44 (6th Cir. 1996) (citation omitted); see

CVA is a non-p rofit trade association incorporated in W ashington, also Brennan v. Rhodes, 423 F.2d 706, 706-07 (6th Cir. 1970)

D.C. that represents over twenty-five ven dors who sell products to (stating that the Declaratory Judgment Act, 28 U.S.C.

UNICOR. More than ha lf of CV A’s me mbe rs pro vide U NIC OR with §§ 2201-2202,“does not broaden the jurisdiction granted to

components used in the manufacture of Office Furniture.

No. 01-2231 Coalition for Gov’t Procurement, et al. 37 38 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

the federal courts by the Constitution and statutes enacted decisions . . . were arbitrary and capricious for three reasons.

pursuant thereto,” and that, consequently, “there still must be First, the Board failed to consider the fundamental question

a case or controversy before a federal court can assume of whether FPI’s previously expanded Office Furniture

jurisdiction and reach the merits of a [declaratory judgment production complied with its Guidelines and was

action]”). Thus, the Supreme Court has held that when appropriate.”); (Br. of Amicus Curiae Correctional Vendors

considering the potential mootness of a claim for declaratory Ass’n Supporting Appellee and Dismissal at 5) (“Plaintiffs

relief, “the question is ‘whether the facts alleged, under all the posit that the earlier purported unauthorized significant

circumstances, show that there is a substantial controversy, expansions taint these subsequent expansions.”); see also 154

between parties having adverse legal interests, of sufficient F. Supp. 2d at 1151 (“Plaintiffs also argue that the Board’s

immediacy and reality to warrant the issuance of a declaratory decision on future increases failed to consider whether the

judgment.’” Super Tire Eng’g Co. v. McCorkle, 416 U.S. 115, then current production levels during 1996 were even legal.”).

122 (1974) (quoting Maryland Cas. Co. v. Pacific Coal & Oil As it is undisputed that the Board has authorized UNICOR’s

Co., 312 U.S. 270, 275 (1941)). current production levels through the 1996 significant

expansion decisions, see (J.A., 1198-1202), and the 1996

The potential mootness of the claims challenging the decisions, in turn, rest on UNICOR’s allegedly unlawful

unauthorized significant expansions production throughout 1991-1995, claims challenging the

unauthorized significant expansions potentially impact

At first blush, the Coalition’s request for an order declaring UNICOR’s current production levels. The Coalition

that UNICOR engaged in unauthorized significant expansions transforms potential into an immediate reality by requesting

during 1991-1995 appears to lack the “sufficient immediacy this court to issue an order (1)“directing FPI to roll back

and reality” necessary to escape the mootness doctrine. production to the levels authorized before the violations

Standing alone, an order from this court declaring that occurred”; (2) “giv[ing] back those sales FPI unlawfully

UNICOR violated the organic statute and, or, the APA nearly took”; or (3) “capping FPI’s production at current levels and

a decade ago, would have little, if any, impact on the current requiring FPI’s Board to fully account for the agency’s past

legal interests of the parties. See City of Los Angeles v. violations before undertaking future expansion proceedings.”

Lyons, 461 U.S. 95 (1983); cf. Reeve Aleutian Airways, Inc. (Reply Br. of Pls.-Appellants at 27.)

v. United States, 889 F.2d 1139, 1142 (D.C. Cir. 1989) (“Past

exposure to illegal conduct fails to establish a present The proposed relief sought demonstrates that the Coalition

controversy . . . without a showing of present adverse seeks more than a declaration that UNICOR unlawfully and

effects.”). significantly expanded from 1991-1995. The Coalition has

argued throughout the litigation that the unauthorized

A more searching review of the record reveals, however, significant expansions resulted in its loss of $450 million in

that the Coalition has forged the requisite link between sales. See, e.g., (J.A., 28, 1410-11). As a remedy for this

UNICOR’s past practices and the current interests of the purported loss, the Coalition persistently has sought an order

parties. Specifically, the Coalition contends that the Board restoring the lost sales to the current market -- a result the

predicated the 1996 significant expansion decisions on data Coalition terms an “equitable volume sales replacement

reflecting UNICOR’s purportedly unlawful production from

1991-1995. See (Br. of Pls.-Appellants at 53) (“The 1996

No. 01-2231 Coalition for Gov’t Procurement, et al. 39 40 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

remedy,” see (J.A., 1471).38 While amicus interprets this Northwest Envtl. Def. Ctr. v. Gordon, 849 F.2d 1241, 1245

requested relief as relating exclusively to the takings claim (9th Cir. 1988) (determining that claims asserted against

discussed infra, the Coalition conclusively has demonstrated federal agencies alleging that the agencies unlawfully

that its “equitable volume sales replacement remedy” pertains authorized the overfishing of coho salmon during the 1986

to the unauthorized significant expansion claims. season were not moot because the court could award

awarding injunctive relief in the form of “higher escapement

Having discerned the thrust of the relief requested, we must provisions and lower quotas in 1989”).

now consider whether this court has the authority to award

such relief. It is well-established that federal courts possess We conclude, therefore, that this court has the broad

broad discretion to fashion equitable remedies. See United discretionary authority to award relief in a manner akin to the

States v. R.W. Meyer, Inc., 932 F.2d 568, 572-73 (6th Cir. “equitable volume sales replacement remedy” proposed by

1991) (observing the “principle of equity that the chancellor the Coalition. We neither must determine at this stage of the

has broad discretion to frame a decree”). It also is established proceedings whether the Coalition ultimately is entitled to

that we may craft declaratory and injunctive relief designed such relief, nor must we define the specific parameters of the

to preclude a federal agency from acting in contravention of relief. As we repeatedly have stated, the determinative factor

its statutory and regulatory authority. See Howard v. Pierce, in the mootness inquiry is whether the court possesses the

738 F.2d 722, 730 (6th Cir. 1984) (holding that the court may authority to afford the Coalition any effectual relief. Because

award declaratory and injunctive relief in order to ensure that the response to this query is in the affirmative, the Coalition’s

the Department of Housing and Urban Development adopted claims challenging the unauthorized significant expansions

regulations consistent with its enabling statute). Furthermore, present actual cases or controversies.

the court may require an agency to modify its current or

future practices in order to account for past violations of its The potential mootness of the claim challenging the 1996

statutes or regulations. See Charter Township of Huron, significant expansion decisions

Michigan v. City of Dearborn, Michigan, 997 F.2d 1168,1175

(acknowledging the court’s authority to issue an injunction The Coalition’s claim challenging the 1996 significant

requiring the agency to conduct an environmental assessment expansion decisions also presents a justiciable case or

notwithstanding the implementation of the completed action); controversy. As discussed supra, the production levels

approved by the Board in 1996 are manifested in UNICOR’s

current production levels. It follows a fortiori that in the

38

event the Board authorized the 1996 significant expansions in

For example, the complaint requested “injunctive relief to stop FPI contravention of the organic statute and the APA, any

from continuing its violation of the Constitution, the AP A, FP I’s organic equitable remedy for these violations necessarily would

statute, and its own regulations, and directing FPI to return to the

competitive market sales equal to in excess of $450 million, the amount impact UNICOR’s current production levels.

inapp ropriately taken.” (J.A., 27-2 8.) Similarly, the Coalition requested

in its motion for sum mary judgm ent that the “[c]ourt, at this time, order Amicus attempts to escape this result by emphasizing that

FPI to reduce its planned Office Furniture sales volume, from FY 2002 the Coalition’s complaint did not request the “equitable

through FY 2004 or any other period the [c]ourt deems reasonable, that volume sales replacement remedy” in regard to the 1996

FPI Office Furniture sales in FY 19 90 through FY 1 995 exceed ed the significant expansion decisions. See (Br. of Amicus Curiae

appropriate FY 1 989 levels.” (J.A., 1474.)

No. 01-2231 Coalition for Gov’t Procurement, et al. 41 42 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

Correctional Vendors Ass’n Supporting Appellee and The potential mootness of the claim challenging the

Dismissal at 5). Indeed, the complaint requested: (1) a retroactive authorization

declaration that the 1996 significant expansion decisions

violated the organic statute and the APA; and (2) an Our conclusions as to the justiciable nature of the

injunction rescinding those decisions. Amicus contends that unauthorized significant expansion and 1996 significant

because the sales authorized by the 1996 significant expansion claims apply with equal force to the claim

expansion have been completed, any proposed recission of challenging the Board’s retroactive authorization. Simply, in

such sales is beyond this court’s authority. See (Br. of the event we determine that the Board lacked the authority to

Amicus Curiae Correctional Vendors Ass’n Supporting retroactively authorize a significant expansion occurring in

Appellee and Dismissal at 17) (“Rescinding already 1991-1992, the inescapable conclusion is that UNICOR

accomplished expansions and consummated sales is not engaged in unauthorized significant expansions during those

feasible.”) (Citation omitted). years. The potential remedy for the Board’s unlawful conduct

would be the “equitable sales volume replacement remedy”

While it is beyond cavil that the Coalition initially suitable for all other unauthorized significant expansions

requested a recission of the 1996 significant expansion during the 1991-1995 period. Therefore, the Coalition’s

decisions, the manner of relief requested before the district claim challenging the retroactive authorization is not moot.

court, while relevant, is not determinative in examining

whether the claim is moot on appeal.39 Rather, the 2. Issue Exhaustion

dispositive issue is whether this court possesses the authority

to award any effectual relief. Church of Scientology, 506 Notwithstanding the existence of justiciable cases or

U.S. at 12. The foregoing analysis reveals that the court has controversies, the defendants assert that the administrative

the authority to order a “roll-back” or “capping” of waiver doctrine bars judicial review of the unauthorized

UNICOR’s production. We may draw on this remedy in the significant expansion and the retroactive authorization claims.

event the Board unlawfully authorized the 1996 significant The administrative waiver doctrine, commonly referred to as

expansions that, in turn, impacted UNICOR’s current issue exhaustion, provides that it is inappropriate for courts

production levels. Accordingly, the Coalition’s claim reviewing agency decisions to consider arguments not raised

challenging the 1996 significant expansion presents a before the administrative agency involved. See United States

justiciable case or controversy. v. L.A. Tucker Truck Lines, Inc., 344 U.S. 33, 37 (1952)

(“Simple fairness . . . requires as a general rule that courts

should not topple over administrative decisions unless the

administrative body not only has erred but has erred against

objection made at the time appropriate under its practice.”);

see also Michigan Dep’t of Envtl. Quality v. Browner, 230

F.3d 181, 183 n.1 (6th Cir. 2000) (concluding that issues not

39

raised during the agency’s notice and comment period were

In any even t, the Co alition requested that the district court grant waived for purposes of appellate review); Cellnet

“any other such relief as necessary to establish a status quo in Federal Communications, Inc. v. FCC, 149 F.3d 429, 442 (6th Cir.

Office Furniture sales and ensure that FPI no longer engages in illegal

practices.” (J.A., 1411.)

1998) (ruling that the plaintiff’s claim for judicial review was

No. 01-2231 Coalition for Gov’t Procurement, et al. 43 44 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

barred because it had not followed the Environmental United States Court of Appeals for the Fifth Circuit thereafter

Protection Agency’s administrative review procedures). declined to address arguments that the petitioner had not

Courts decline to consider issues not raised before an agency raised in her request for review by the Appeals Council. See

because to do otherwise would “deprive the [agency] of an 200 F.3d 229, 230 (5th Cir. 1998). The Supreme Court

opportunity to consider the matter, make its ruling, and state reversed, holding that the inquisitorial nature of the Social

the reasons for its action.” Unemployment Comp. Comm’n v. Security proceedings precluded the application of an issue

Aragon, 329 U.S. 143, 155 (1946). exhaustion requirement. See Sims, 530 U.S. at 112.

The district court determined that the Coalition waived the In reaching its decision, the Court identified three scenarios

unauthorized significant expansion and the retroactive giving rise to issue exhaustion. First, the Court observed that

authorization claims because it did not raise these challenges issue exhaustion requirements are “largely creatures of

during the hearings before the Board. The district court statute,” and determined that a party’s failure to comply with

opined: a statutorily-imposed issue exhaustion requirement precluded

the assertion of federal jurisdiction. Sims, 530 U.S. at 107

Procedural objections like those Plaintiffs bring in this (citing Woelke & Romero Framing, Inc. v. NLRB, 456 U.S.

case are precisely the type of issues appropriately raised 645 (1982)). The Court alternatively observed that an

before the Board during its comment period, and thus agency’s regulations may impose the issue exhaustion

subject to waiver if not raised. requirement. See Sims, 530 U.S. at 108. “And when

regulations do so, courts reviewing agency action regularly

The Board of FPI provided an opportunity for Plaintiffs ensure against the bypassing of that requirement by refusing

and other interested parties to raise the issue of to consider unexhausted issues.” Id.

procedural violations during three separate meetings of

the Board during 1996. Plaintiffs were not only aware of The Court went on to recognize a third scenario -- a

the proceedings, but were aware of the issues to be raised judicially-imposed issue exhaustion requirement – which it

at the hearings, and fully participated in the hearings. analogized “to the rule that appellate courts will not consider

arguments not raised before trial courts.” Sims, 530 U.S. at

154 F. Supp. 2d at 1147 (citations omitted). 108-09. The Court reasoned that the degree to which such an

analogy applies depends on whether the particular

Notably, the district court did not rely on Sims v. Apfel, 530 administrative proceeding is similar to traditional litigation --

U.S. 103 (2000), where the Supreme Court set forth the that is, whether the proceeding before the administrative

contours of the issue exhaustion doctrine. The Court agency is sufficiently “adversarial,” as opposed to

specifically confronted a scenario where the Social Security “inquisitorial.” Sims, 530 U.S. at 109-110 (“[T]he desirability

Administration (“SSA”) denied the petitioner’s claims for of a court imposing a requirement of issue exhaustion

benefits, and the petitioner sought review before the Social depends on the degree to which the analogy to normal

Security Appeals Council (“Appeals Council”). See Sims, adversarial litigation applies in a particular administrative

530 U.S. at 105. The Appeals Council denied review, and the proceeding.”) (Citations omitted). Therefore, where no

petitioner filed suit in district court, which rejected all of the statutory or regulatory requirement exists, a judicially-

petitioner’s claims. See Sims, 530 U.S. at 105-06. The imposed requirement of issue exhaustion is based on the

No. 01-2231 Coalition for Gov’t Procurement, et al. 45 46 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

extent to which the particular administrative proceeding is 530 U.S. at 111 (citing Richardson v. Perales, 402 U.S. 389,

analogous to “normal adversarial litigation.” Sims, 530 U.S. 400-01(1971)). The plurality further emphasized that no

at 109. representative went before the ALJ on behalf of the Social

Security Commissioner to oppose the claim for benefits, and

In considering whether the district court properly imposed there was “no indication that the Commissioner oppose[d]

an issue exhaustion requirement in the case sub judice, we claimants before the Appeals Council.” Id. The plurality also

initially observe that such a requirement exists in neither noted that the agency’s regulations expressly directed the

UNICOR’s organic statute nor its regulations. Accordingly, Appeals Council to conduct the review process “in an

this court must determine whether the significant expansion informal and non-adversarial manner.” Id. (citing 20 C.F.R.

hearings before the Board were sufficiently adversarial as to § 404.900(b)). Indeed, the parties were permitted, but were

warrant the imposition of an issue exhaustion requirement. not required, to file briefs with the Appeals Council. See

Sims, 530 U.S. at 113-14 (O’Connor, J., concurring) (citing

While no court has addressed the precise issue at bar, we 20 C.F.R. § 404.975). The form on which the claimant

observe that the Sims plurality40 found several factors requested review of her case provided only three lines for the

relevant in determining that the Social Security proceedings claimant to state the details of her request for review. See

possessed an inquisitorial character. The plurality gave great Sims, 530 U.S. at 112 (citing 20 C.F.R. § 422.205(a)). An

weight to the responsibility vested in the Administrative Law accompanying notice stated that the form should only take ten

Judge (“ALJ”) and the Appeals Council -- rather than the minutes for the claimant to complete.41 Id. Finally, the

claimant -- for investigating the facts and developing Appeals Council possessed the authority to review any new

arguments both for and against granting benefits. See Sims, material evidence outside of the record promulgated by the

parties, and its plenary power vested it with authority to

review cases without the applicant’s approval. See Sims, 530

40

The Court unanimously agreed in the aspects of Justice T hom as’s U.S. at 111 (citing 20 C.F.R. § 404.976(a)). The co-existence

majo rity decision delineating the issue exhaustion doctrine. See Sims, 530 of the foregoing factors – the broad investigatory authority

U.S. at 115-16 (Breyer, J., d issenting) (“[The ma jority] points out that the vested to the decision-maker, the unilateral nature of the

ordinary waiver rule as applied to administrative agencies ‘is an analogy

to the rule that appellate court will not consider arguments not raised proceedings, and the express informality of the administrative

before trial courts.’ And the plurality argues that the agency proceedings process -- led the plurality to conclude that “[T]he general

here at issue, unlike those before trial courts, are not adversarial rule of issue exhaustion makes little sense in this particular

proceedings. Although I agree with both propositions, I do not see how context.” See Sims, 530 U.S. at 112 (quotation and citation

they lead to the plurality’s conclusions.”) (Citations omitted). The Court omitted).

reached different conclusions in the applicatio n of the d octrine to Social

Security proceedings at issue. Com pare Sims, 530 U.S. at 113

(O’Connor, J., concurring) (“I write separately because, in my view, the In contrast, this court has identified, albeit in a different

agency’s failure to notify claimants of an issue exhaustion requirement in context, the relevant factors when considering whether a

this context is a sufficient basis for our decision.”) with 530 U.S. at 118-

19 (Breyer, J., d issenting) (“Th e Social Security Ad ministratio n says that

it does not apply its waiver rule where the claimant is not represented. 41

And I ca nnot say it is ‘arbitrary capricious, or an ab use of discretion,’ to This fact led Justice O’Connor to conclude that the Ap peals

app ly the waiver rule when a claimant was represented before the App eals Council discouraged parties from providing reasons and proceeded

Council, as was petitioner, by an attorney.”) (Citations om itted). without them. See Sims, 530 U.S. at 113-14 (O ’Connor, J., concurring).

No. 01-2231 Coalition for Gov’t Procurement, et al. 47 48 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

proceeding is sufficiently adversarial. In Detroit Free Press submit post-hearing briefs. See Delta Found., 303 F.3d at

v. Ashcroft, 303 F.3d 681 (6th Cir. 2002), a panel of this court 561 (citations omitted). The court concluded, “[U]nlike the

held that “[a] deportation proceeding, although SSA proceedings in which the Appeals Council itself, and not

administrative, is an adversarial, adjudicative process.” the claimant, ha[d] the responsibility for identifying the

Detroit Free Press, 303 F.3d at 696. The panel emphasized claims and developing arguments, the parties appear before

that “[c]onsistent with the adversarial nature of judicial the DAB as adversaries, charged with presenting their

proceedings, a deportation proceeding is commenced with a arguments and supporting witnesses and effectively

‘Notice to Appear,’ a charging document or complaint-like discrediting opposing parties through cross-examination.”

pleading which vests jurisdiction with the immigration See Delta Found., 303 F.3d at 561-62.

court.”42 Detroit Free Press, 303 F.3d at 698 (citations

omitted). Additionally, an evidentiary standard governed the With these principles in mind, we find that the Board’s

deportation proceedings (i.e., the government was required to significant expansion hearings do not give rise to an issue

prove its allegations by clear and convincing evidence), and exhaustion requirement. As with the proceedings before the

the agency’s decision was to be predicated on “reasonable, Appeals Council, the rules governing the significant

substantial, and probative evidence.” See Detroit Free Press, expansion hearings vest full fact-finding authority with the

303 F.3d at 698 (citations omitted). Furthermore, all Board. For example, the rules provide:

interested parties had the right to appear and be heard during

the deportation proceedings, and the presiding immigration The record before the Board is limited to the market

judge maintained an impartial role. See Detroit Free Press, study, comments and materials submitted in response to

303 F.3d at 698-99 (citations omitted). the market study (including the trade association’s

comments), corporate management recommendations,

Similarly, the United States Court of Appeals for the Fifth and material submitted by commenters in response to

Circuit placed similar emphasis on procedural elements in corporate management’s recommendations. No new

determining that proceedings before the Health and Human documentation or arguments from commenters will be

Services Departmental Appeals Board (“DAB”) were of a received or heard at the presentation that have not been

sufficient adversarial character to require exhaustion of issues. submitted in compliance with these rules, unless

See Delta Found., Inc. v. United States, 303 F.3d 551, 561-62 permitted by the Board.

(5th Cir. 2002). In reaching its conclusion, the Fifth Circuit

found four factors relevant: (1) the aggrieved party and the ....

agency’s representative appeared before the DAB; (2) each

party participated in developing an appeal file; (3) each party The Board members may direct questions to a

could make oral presentations, submit briefs, and cross- commenter to elicit further information, and may request

examine witnesses; and (4) each party was afforded leave to that additional material be provided for the record.

(J.A., 176-77, 431-432, 664-65.) The Board has explained its

42

fact-finding role as follows:

The “Notice to Appear” provided notice to the non-citizen of the

charges asserted and was served in acco rdance w ith applicable rules. See

Detroit Free Press, 303 F.3d at 698 (citatio ns om itted).

No. 01-2231 Coalition for Gov’t Procurement, et al. 49 50 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

The process is that upon hearing your [private 3. Laches

industry’s] information here, we’ll take everything that

you have to say. If there is something that is not clear, if The defendants nevertheless assert that the equitable

there’s a comment which you make that doesn’t jive with doctrine of laches precludes judicial review of the Coalition’s

the record as we know it, or is new information that we significant expansion claims.43

are hearing for the first time, then what we will do

following this hearing is to ask [UNICOR] to provide us “Laches is the ‘negligent and unintentional failure to

more information or go outside [UNICOR] to gather protect one’s rights.’” Nartron Corp. v. STMicroelectronics,

information ourselves. 305 F.3d 397, 408 (6th Cir. 2002) (quoting Elvis Presley

Enter., Inc. v. Elvisly Yours, Inc., 936 F.2d 889, 894 (6th Cir.

(J.A., 577.) 1991)). “Laches consists of two elements: (1) unreasonable

delay in asserting one’s rights; and (2) a resulting prejudice to

Furthermore, the Board has the exclusive authority to the defending party.” Brown-Graves Co. v. Central States,

solicit information and question the “commenters.” In the Southeast & Southwest Areas Pension Fund, 206 F.3d 680,

words of the Board’s chairman during the Office Case Goods 684 (6th Cir. 2000).

hearing, “[This] is not a process that is a give-and -take where

you ask questions of the board and we’re in a position to With respect to the first element, there is a strong

respond. What we basically do here is listen to your presumption that a plaintiff’s delay in bringing suit is

presentation and then consider that material, plus all the reasonable as long as the analogous statute of limitations has

material that is on the record, and make a decision.” (J.A., not lapsed. See Herman Miller, Inc. v. Palazzetti Imp. & Ex.,

803.) The broad discretion vested in the Board is of particular Inc., 270 F.3d 298, 321 (6th Cir. 2001) (citing Tandy Corp. v.

import in that UNICOR does not present any proposal to the Malone & Hyde, Inc., 769 F.2d 362, 365-66 (6th Cir. 1985)).

Board during the hearings. The significant expansion “Only rarely should laches bar a case before the analogous

hearings are limited to presentations made by “commenters,” statute has run.” Tandy Corp., 769 F.2d at 366.

not including the agency, and there lacks any cross-

examination, counter-arguments, or any type of discussion It is undisputed that the six-year statute of limitations for

that reasonably can be defined as “adversarial.” Therefore, bringing civil actions against the United States governs this

the significant expansion hearings bear the hallmarks of action. See 28 U.S.C. § 2401(a) (“Every civil action

inquisitorial proceedings in that the Board dominates the fact- commenced against the United States shall be barred unless

finding process and the agency is not present during the the complaint is filed within six years after the right of action

proceedings. Consequently, the Board’s significant

expansion hearings are not adversarial and do not warrant a

judicially-imposed issue exhaustion requirement. 43

The defendant raised the laches defense in the ir Answer and fully

briefed the issue on summary judgment. See (J.A., 160, 940-47). The

Accordingly, the district court erred in determining that the district court did no t address the issu e given its finding with respect to

Coalition waived judicial review of the unauthorized issue exhaustion. See 154 F. Supp. 2d at 1151. W e may consider,

significant expansion and the retroactive authorization claims. however, this issue as p art of our de novo review. See Abercrombie &

Fitch Stores, Inc. v. Am. Eagle Outfitters, Inc., 280 F.3d 61 9, 629 (6th Cir.

200 2).

No. 01-2231 Coalition for Gov’t Procurement, et al. 51 52 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

first accrues.”). It is further undisputed that the statute of Furniture production. The defendants’ laches defense

limitations commenced upon the Board’s issuance of the 1996 therefore fails as a matter of law.

significant expansion decisions.44 Accordingly, the earliest

date upon which the limitations period expired was February B. The Coalition’s Unauthorized Significant

6, 2002 -- six years following the issuance of the Board’s Expansion Claims

system furniture significant expansion decision.

Having traversed the jurisdictional and procedural

The Coalition filed its complaint well within the limitations hinterlands, we arrive at the substantive allegations presented

period; therefore, a strong presumption arises that the claims in the unauthorized significant expansion claims. The

were filed within a reasonable time. In an attempt to Coalition alleges that “From 1991-1995, [UNICOR]

overcome this presumption, the defendants direct the court to repeatedly violated its statute by significantly expanding

the close ties between CGP and QMFA during the litigation Office Furniture production without prior Board review and

challenging the D & Q furniture significant expansion. The approval.” See (Br. of Pls.-Appellants at 12). It further

defendants emphasize that CGP partially incurred the expense alleges that UNICOR “[R]epeatedly violated the Guidelines

of the QFMA litigation. See (Br. of the Defs.- Appellees at by failing to undertake the required data collection internal

41-42); (J.A., 1004). Apparently, the defendants suggest that analysis.” See (Br. of Pls.-Appellants at 12).

CGP had a concomitant obligation to file an action at the time

of the QFMA litigation challenging the significant As a threshold matter, we note that UNICOR cannot escape

expansions of Office Furniture. liability by asserting that the Guidelines establish a higher

standard than that imposed by Congress in section 4122. It is

Even considering CGP’s role, if any, in the QFMA a fundamental tenet of administrative law that “an executive

litigation, the defendants fail to overcome the strong agency must be rigorously held to the standards by which it

presumption of reasonable delay. See, e.g., (J.A., 1004). The professes its action to be judged.” Vitarelli v. Seaton, 359

defendants fail to acknowledge that several Coalition U.S. 535, 546 (1959) (Frankfurter, J., concurring in part and

members, including Knoll, did not manufacture D & Q dissenting in part). Thus, “it is incumbent upon agencies to

furniture and were unaware of the QFMA litigation. See follow their own procedures . . . even where the internal

(J.A., 1585 ¶¶ 9, 12,15). Of greater pertinence, the Coalition procedures are possibly more rigorous than otherwise would

contends that it was the factual information produced through be required.” Morton v. Ruiz, 415 U.S. 199, 235 (1974)

the QFMA litigation that alerted it that UNICOR’s (citations omitted); see also Vitarelli, 359 U.S. at 546-47

purportedly unlawful activities extended to Office Furniture. (Frankfurter, J., concurring in part and dissenting in part)

Accordingly, the Coalition cannot be said to have (“[I]f [agency action] is based on a defined procedure, even

unreasonably delayed in filing suit as it was unaware of though generous beyond the requirements that bind such

UNICOR’s potentially unlawful activities in regard to Office agency, that procedure must be scrupulously observed . . . .

He that takes the procedural sword shall perish with that

sword.”).

44

The defendants argued before the district court that claims arising The unauthorized significant expansion claims arise from

before November 24, 1993 were barred as a matter of law. See (J.A., UNICOR’s purported violations of the Guidelines.

945 ). The defendants have aban doned the argum ent on appeal.

No. 01-2231 Coalition for Gov’t Procurement, et al. 53 54 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

Specifically, the Coalition avers that UNICOR violated the asserting error to demonstrate prejudice from the error.” Air

Guidelines on eighty-two occasions throughout 1991-1995. Canada v. Dep’t of Trans., 148 F.3d 1142, 1156 (D.C. Cir.

See (J.A., 1422). However, the record reveals that the vast 1998).

majority of these violations are the cumulative and annual

effects of ten core violations. We consider the core violations The Coalition is unable to demonstrate prejudice arising

seriatim. from the opening of the systems furniture factory at FCI

Schuykill. Simply, had UNICOR conducted the market share

1. The purported core violations occurring in analysis in 1991 (when the Board authorized the opening of

UNICOR’s systems furniture production the Schuykill factory), UNICOR would have discovered an

during 1991-1995 increase within the allowable market share from 10.8% to

11.6%. See (J.A., 926, 1099 ¶¶ 18, 20). UNICOR therefore

The Coalition contends that two core violations occurred was not required to initiate the CARP and no discernible

during UNICOR’s production of systems furniture from prejudice was sustained by the Coalition as a result of

1991-1995. The first violation occurred in 1991 when the UNICOR’s violation of the Guidelines.

Board authorized the start-up of a new systems furniture

factory to be located at FCI Schuykill without performing the We need not draw on the prejudicial error rule in

requisite market share analysis. See (J.A., 912-13). addressing the second purported core violation arising from

UNICOR’s production of systems furniture. Similar to the

UNICOR concedes that it was required to perform the claim challenging the opening of the Schuykill factory, the

market share analysis. See (J.A., 1100 ¶ 25, 1266-67, 1492 Coalition alleges that the Board’s 1994 authorization of a new

¶¶ 77-78, 1643 ¶¶ 77-78). UNICOR asserts, however, that it systems furniture factory at FCC Coleman violated the

was not required to initiate the CARP because a subsequent Guidelines because UNICOR neither conducted the market

review of market share revealed an allowable increase from share analysis nor initiated the CARP.

10.8% in 1991 to 11.60% in 1992. See (J.A., 926, 1100 ¶¶

18, 20). The district court rejected this claim, concluding:

The plain text of the APA supports UNICOR’s position. It is true that FPI’s increase in market share from 9.6%

The APA instructs reviewing courts to take “due account . . . [in 1994] to 14.3% [in 1995] was over the [G]uidelines

of the rule of prejudicial error.” 5 U.S.C. § 706. “[T]his limit, even taking into account the prior years’ market

court applies a prejudicial error rule to APA cases, such that shares. The trigger prong, however, is not satisfied.

a mistake that has no bearing on the ultimate decision or Plaintiffs rely upon the fact that FPI was planning on

causes no prejudice shall not be the basis for reversing an increased capacity in a new factory at the Federal

agency’s determination.” Slater, 120 F.3d at 637 (citation Corrections Facility in Coleman to satisfy the trigger

omitted). The rule eliminates the necessity of remand requirement. That factory was not activated until

following judicial review when the error that the agency has February of 1996. No offsetting reduction in capacity,

made was not prejudicial and did not impinge on fundamental therefore, was necessary in FY 1994, and consequently

rights. See N.Y. Pub. Interest Research Group v. Whitman, the trigger prong was not met. When the Coleman

321 F.3d 316, 333 (2d Cir. 2003). It “requires the party factory was activated, FPI was under the increased

No. 01-2231 Coalition for Gov’t Procurement, et al. 55 56 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

production levels approved by the Board on February 6, Board authorized an increase in employment levels from 888

1996. Therefore, there was no unauthorized increase in employees in 1992 to 983 employees in 1993; (2) when the

systems furniture. Board authorized the activation of new factories at FCI

Seagoville and FCI Three Rivers in 1991; (3) when the Board

154 F. Supp. 2d at 1148.45 authorized the activation of new factories at FCI Bastrop and

FCI Florence in 1993; and (4) when the D & Q furniture

The record supports the district court’s well-reasoned factory at USP Leavenworth manufactured a special order of

conclusion. While UNICOR initially intended to commence office seating furniture in 1995.

production at FCC Coleman in June, 1995, it continually

delayed opening the factory until 1996.46 As indicated supra, The district court correctly rejected these claims, again

the Systems Impact Study included the activation of FCC relying on its analysis that in each instance the Coalition had

Coleman among the proposals ultimately approved by the failed to demonstrate that each tier of the Guidelines had been

Board. See (J.A., 225). As the 1995 Systems Furniture triggered. See 154 F. Supp. 2d at 1148-49.

Expansion disclosed the planned activation of FCC Coleman,

UNICOR opened the Coleman factory in accordance with the For example, UNICOR offset the $44,545 in 1995 sales at

Guidelines and section 4122. the Leavenworth factory with a corresponding decrease of

$1.8 million in sales at four factories.47 Therefore, the first

2. The purported core violations occurring in tier of the Guidelines was not triggered in 1995. UNICOR

UNICOR’s office seating furniture also offset the opening of office seating factories at FCI

production during 1991-1995 Bastrop and FCI Florence in 1993 with decreases in

production at five factories.48 Notwithstanding this

A similar fate befalls the four core violations occurring diminished capacity, UNICOR actually increased its sales in

within UNICOR’s office seating furniture production during 1993 by $48,788 from the previous year. However,

1991-1995. The Coalition alleges that UNICOR failed to UNICOR’s operating plan for 1993 estimated a $14 million

conduct the requisite market share analysis: (1) when the

47

45

UNICOR ceased production at the Texarkana factory and reduced

Notwithstanding its holding in regard to issue exhaustion, the production at its factories in Bastrop, Marianna and T hree R ivers. See

district court went on to consider the substantive allegations of the (J.A., 512).

unauthorized significant expansion claims. See 154 F. Supp. 2d at 1147-

51. 48

The Bastrop and Florence factories produced approximately $3

46

million in aggregates sales in 1993 and approximately $1 2 million in

UNICOR’s FY 1994 Operating Plan indicated an expected aggregate sales in 199 4. See (J.A., 512). UNICOR decreased production

June,1995 “Activation Date” for the systems furniture factory at FCC in 1993 at its Allenwood, La Tuna, Sheridan, Tallahassee and Three

Coleman. See (J.A., 902-03). The 1995 Operating Plan indicated a Rivers office seating factories by an aggregated $ 4.9 million in sa les. See

Decemb er, 1995 Activation D ate. See (J.A., 905-11). The Systems (J.A., 512). UNICOR continued to decrease production at those five

Impact Study discussed in detail the transfer of equipment from the factories in 199 4, as we ll as decreased production at its Ashland,

Duluth systems furniture factory to the new factory at FCC Coleman, to Marianna, and Texarkana factories, for a com bined decrease of $14

be opened in 1 996 . See (J.A., 225). million in sales. See (J.A., 512).

No. 01-2231 Coalition for Gov’t Procurement, et al. 57 58 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

decrease from 1992 sales. Because the Guidelines required 3. The purported core violation occurring in

UNICOR to review only “proposed production increases,” UNICOR’s office case goods furniture

UNICOR was not required to perform the market share production during 1991-1995

analysis. See (J.A., 1646 ¶ 108). Similarly, despite

UNICOR’s planned increase in inmate employment from 888 The seventh alleged core violation arose during UNICOR’s

employees in 1992 to 983 employees in 1993, see (J.A., 900, production of office case goods during 1991-1992. During

1497 ¶ 108, 1646 ¶ 108), UNICOR was not required to this period, the number of inmates employed in the

conduct the market share analysis because of the planned production of office case goods increased from 1,066 in 1991

decrease in its 1993 production.49 Therefore, the opening of to 1,358 in 1992. See (J.A., 774, 1110 ¶¶ 117, 120).

the new factories and the increases in employment in 1993 Meanwhile, UNICOR’s share of the federal market increased

did not trigger the first tier Guidelines. Thus, UNICOR was from 12.9% to 15.2%. See (J.A., 1504 ¶ 147, 1651 ¶ 147).

not required to conduct a market share analysis.

Faced with this apparent unauthorized significant

UNICOR’s activation of new factories at FCI Seagoville expansion, the district court concluded:

and FCI Three Rivers in 1991, furthermore, did not result in

prejudice to the Coalition. As with the authorization of the The office case goods increase in FY 1992 was not a

Schuykill systems furniture factory in 1991, the activation of significant increase. Between FY 1991 and 1992 there

the Seagonville and Three Rivers office seating factories did was an inmate employment increase of over 10% (the

not cause UNICOR to exceed its allowable market share. As trigger), and an increase in market share of 2.3%. These

discussed in the Office Seating Impact Study, UNICOR increases would normally be considered a significant

estimated it having a 8.86% market share in 1991 – a planned increase. Plaintiffs fail to consider, however, that the

decrease from its 10.06% market share in 1990. See (J.A., [G]uidelines also require that “the prior three years of

514). While UNICOR’s actual market share increased from production will be reviewed, to ensure that usual and/or

13.99% in 1990 to 14.6% in 1991, see (J.A., 1500 ¶¶ 124-25, abnormal fluctuations are taken into account and

1649 ¶¶ 124-25), this actual increase fell within the allowable normalized.” Inmate employment was 1,243 in 1990,

market share. Accordingly, UNICOR was not required to 1,066 in 1991, and 1,358 in 1992. By 1995, inmate

initiate the CARP. employment was 1,462. Taking the prior years into

account, the Court finds that the spike in 1992 in inmate

employment was a result of a low point of employment

in 1991 rather than a significant increase by itself.

154 F. Supp. 2d at 1148-49 (citation omitted).

The Coalition does not specifically challenge the district

court’s conclusion on appeal, and we find the reasoning of the

49

district court well-supported by the facts and law.

In any event, UNICOR actually decreased by 110 the number of Accordingly, no violation occurred with respect to

employees employed in the production o f office seating during 19 93. See

(J.A., 1 106 ¶ 77).

No. 01-2231 Coalition for Gov’t Procurement, et al. 59 60 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

UNICOR’s production of office case good furniture from “[f]or the most part, [UNICOR] ha[d] made minimal

1991-1995. purchases of additional production equipment,” (J.A., 1338).

While it is recognized that the White Paper examined

4. The core violation arising from UNICOR’s UNICOR’s production of D & Q furniture, rather than Office

failure “to undertake the required data Furniture, the conclusions remain pertinent because a

collection internal analysis.” significant number of factories that produced D & Q furniture

also produced Office Furniture.50

The Coalition attempts to salvage the unauthorized

significant expansion claims by relying on UNICOR’s failure The record further demonstrates that prejudice did not

to collect data regarding plant size and equipment capacity result from UNICOR’s failure to track plant size and

throughout 1991-1995. UNICOR concedes that it did not equipment capacity. Specifically, the foregoing analysis

collect information regarding plant size and equipment reveals that, in this case, the Coalition suffered prejudice only

capacity as required by the Guidelines. It nevertheless asserts where plant size or equipment capacity exceeded a ten percent

that the deficient data collection did not result in any increase and UNICOR’s market share increased beyond the

prejudice to the Coalition. allowable threshold. The Coalition’s claims necessarily are

limited to the four occasions during 1991-1995 where

While we do not readily concur in an agency’s failure to UNICOR’s market share increased beyond the allowable

adhere to its own promulgated procedures, the limited facts of limits: (1) the 1995 increase in systems furniture production

this case compel the conclusion that there is a lack of any from a 9.6% market share in 1994 to a 14.3% share in 1995;

prejudice suffered by the Coalition as a result of UNICOR’s (2) the 1992 increase in office seating production from a

omissions. The Coalition has not presented any supporting 14.6% market share in 1991 to a 18.5% share in 1992; (3) the

evidence from which an inference can be drawn that either 1993 increase in office seating production from the 18.5%

plant size or equipment capacity increased beyond the ten market share in 1992 to a 20.5% share in 1993; and (4) the

percent threshold in any given year. We acknowledge that the 1992 increase in office case goods production from a 12.9%

Guidelines place an affirmative duty on UNICOR to produce market share in 1991 to a 15.2% share in 1992.

such evidence and that the agency should bear the

consequences of not generating the requisite data. However, However, these four increases in Office Furniture

we cannot turn a blind eye to the uncontroverted and production are attributable to identifiable factors other than

overwhelming evidence in the record demonstrating that the increases in plant size or equipment capacity. For instance,

Coalition did not sustain any prejudice as a result of the parties acknowledge that the 1992 increases in office

UNICOR’s violations. seating and office case goods production derive from

For example, the White Paper examined UNICOR’s failure

to monitor plant size and equipment capacity and presented

50

several conclusions indicating that UNICOR did not expand The White Paper indicated: “[I]n most instances, the factories

these inputs of production beyond the ten percent threshold. produced other lines in addition to D & Q. As a result, the same

Indeed, the White Paper concluded that “[T]he amount of production space used to manufacture D & Q furniture was also used to

production space [] decreased by over 40%,” (J.A., 1335), and produce FP I’s Centurion office furniture line or FPI’s metal racking and

shelving, depending on the factory.” (J.A., 1335.)

No. 01-2231 Coalition for Gov’t Procurement, et al. 61 62 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

dramatic increases in inmate employment during that year.51 C. The Claim Challenging the Retroactive

Similarly, the 1995 market share increase in systems furniture Authorization

was the result of a decrease in the size of the federal market

and a dramatic drop in production in 1994.52 Consequently, The claim challenging the Board’s retroactive authorization

UNICOR’s systems furniture production was at abnormally parallels the foregoing claims in that the Coalition asserts that

depressed levels in 1994, which in turn, exacerbated the data UNICOR significantly expanded its production of office

for 1995. With respect to the 1993 increases in office seating, seating furniture in 1991 and 1992 without initiating the

assuming arguendo that an inference could be gleaned from CARP (the ninth and tenth core violations). The Coalition

the record that equipment capacity or plant size increased by goes on to assert that the Board lacked the authority to

ten percent or more during that year, as discussed supra, the retroactively authorize these purported significant expansions.

planned decrease in production rendered the Guidelines

inapplicable. Addressing the first issue – whether UNICOR significantly

expanded its production of office seating furniture in 1991

The lack of any evidence proffered by the Coalition, the and 1992 – the foregoing analysis reveals that the 1991

direct evidence found in the White Paper showing that neither expansion was not significant under the Guidelines. While

equipment capacity nor plant size increased from 1991-1995, inmate employment increased more than ten percent,

and the uncontroverted evidence demonstrating that increases UNICOR estimated it having a 8.86% market share in 1991

in UNICOR’s production were caused by other factors, all – a planned decrease from its 10.06% market share in 1990.

compel the finding that the Coalition suffered no prejudice as See (J.A., 514). UNICOR’s actual market share increased

a result of UNICOR’s failure to collect data regarding plant from 13.99% in 1990 to 14.6% in 1991. See (J.A., 1500

and equipment capacity. Thus, the unauthorized significant ¶¶ 124-25, 1649 ¶¶ 124-25). This actual increase also fell

expansion claims fail as a matter of law. within the allowable market share. Accordingly, UNICOR

was not required to initiate the CARP prior to expanding its

production of office seating in 1991.

UNICOR did concede in the Office Seating Impact Study

that it significantly expanded its production of office seating

furniture in 1992. See (J.A., 476-77). The issue before the

Court, therefore, is whether the Board possessed the authority

51 to retroactively authorize the 1992 significant expansion.

Inmate employment in office seating production increased from

739 employees in 1991 to a high of 888 during 1992. See (J.A., 1105-06

17 74,77). Additionally, the “spike” in the number of inmates producing Our analysis is governed by the familiar standards

office case good s was the result of abnormally low levels of employment established in Chevron U.S.A. Inc. v. Natural Resources

in 1991. See 154 F. Supp. 2d at 1148-49. Defense Council, Inc., 467 U.S. 837 (1984). Under Chevron,

52

we first determine “whether Congress has directly spoken to

The federal systems market declined from a record high of $4 52.2 the precise question at issue,” id. at 842; if it has not, we

million in 199 3 to $ 433 .6 in 19 94. See (J.A., 208). Meanwhile, enquire “whether the agency’s answer is based on a

UN ICO R’s production decreased from $52,601,756 in sales in 1993 to permissible construction of the statute,” id. at 843.

$41 ,424 ,737 in 199 4. See (J.A., 1100 1126 , 28).

No. 01-2231 Coalition for Gov’t Procurement, et al. 63 64 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

The plain text of the organic statute is unequivocally remanded the matter to the Board “with directions that the

prospective in nature. For instance, section 4122 requires the Board must illicit [sic] comments with respect to the increases

initiation of the CARP “[b]efore the board of directors makes in FY 1991 to 1995 . . . make specific findings as to whether

a final decision.” 18 U.S.C. § 4122(b)(4). Furthermore, the FPI obtained more than a reasonable share of the market . . .

section repeatedly refers to “plans” and “proposals” for and ascertain what percent of the share was unreasonable.”

significant expansions. 18 U.S.C. § 4122(b)(4)(B), (C). A See QFMA, at 25.

construction of the statute that allows for retroactive

authorization renders nugatory these multiple provisions It is well-settled that when an agency makes an error of law

delineating the prospective application of the CARP. Thus, in its administrative proceedings, a reviewing court should

it is with little hesitation that we determine that the Board remand the case to the agency so that the agency may take

lacks the authority to retroactively authorize prior significant further action consistent with the correct legal standards. See

expansions.53 South Prairie Constr. Co. v. Local No. 627, Int’l Union of

Operating Eng’rs, 425 U.S. 800, 806 (1976) (per curiam).

As a remedy for the unlawful significant expansion, the However, an exception to this general rule exists where it is

Coalition urges this court to adopt the approach utilized in “crystal-clear [that the] Board error renders a remand an

QFMA.54 As discussed supra, the district court in that case unnecessary formality.” NLRB v. Food Store Employees

Union, 417 U.S. 1, 8 (1974).

53 A critical distinction exists between QFMA and the case at

W e pause to no te that the p rejud icial erro r rule of the APA is

inapp licable to UNICOR and the Board’s violation of section 412 2. As

bar that renders a remand “an unnecessary formality.” In

the United States Co urt of Appe als for the Seco nd C ircuit recen tly QFMA, the district court emphasized that the Board had not

observed, “The rule of p rejud icial erro r inform s our re view of an agency’s provided prior notice of its intent to retroactively authorize

adherence to its statute and regulations; it has never b een used to the significant expansions in D & Q furniture production. See

introduce discretion into actions mad e mandatory by C ongress.” QFMA, at 17 (“[I]t appears . . . that the 1996 notice,

Whitman, 321 F.3d at 334.

comment, and approval by the Board solicited information

54 and comments on future production levels, not the prior

As discussed during our analysis of the mootness question supra,

the Coalition requested the equitable volume sales replacement remedy

production levels.”). This lack of notice led the district court

and declaratory relief in relation to the retroactive authorization claims. to conclude:

W ith respect to declaratory relief, it is acknowledged that UNICO R and

the Board violated section 4122 by not initiating the CARP prior to the [T]o the extent the [d]efendants rely on the White

1992 significant expansion in office seating. However, for the reasons Paper and the March 1996 decision in support of their

discussed supra, the request for declaratory relief is moot. We further earlier decisions, these documents are nothing more than

conclude that the retroactive authorization claim does not fall within the

well-defined “capable of repetition, yet evading review” exception to the

moo tness doctrine. See Suster v. M arshall, 149 F.3d 523, 527 (6th Cir.

1998). This exception applies where “(1) the challenged action [is] in its necessarily is too short in d uration “to be fully litigated prior to

duration too short to be fully litigated prior to cessation or expiration, and cessation.” Id. However, the underlying facts of this appeal do not

(2) there [is] a reasonable expectation that the same com plaining party support the conclusion that the C oalition will likely be subjec t to this

[will] be subject to the same action again.” Spencer v. Kemna, 523 U.S. same action again. Our analysis focuses, therefore, on the equitable

1, 17 (1998) (quotation omitted). Retroactive decision-making volum e sale replace ment remedy.

No. 01-2231 Coalition for Gov’t Procurement, et al. 65 66 Coalition for Gov’t Procurement, et al. No. 01-2231

v. Federal Prison Industries, Inc., et al. v. Federal Prison Industries, Inc., et al.

post hoc rationalizations for their earlier decisions . . . Plaintiffs had proper notice of the Board’s intent to

The difficulty with relying on post hoc decisions is that consider retroactive approval of the significant increases

it ignores the fact that the agency may not have made the in office seating production, as well as an opportunity to

same decision had it received timely comments . . . comment at that administrative hearing. Therefore the

Furthermore, as noted above, it is not clear from the Board was within its authority to consider and decided

record whether [p]laintiff was notified in 1995-1996 that the issue and in so doing did not violate the

the Board, in 1996, would be considering the past Administrative Procedures Act.

violations, and would entertain comments regarding the

past violations. In the absence of evidence supporting 154 F. Supp. 2d at 1150-51 (citations omitted).

the decision at the time it was made, the court must

conclude that the decision was issued without observance While we disagree with the district court’s conclusion that

of proper procedures, and therefore violated the APA. the “Board was within its authority” to retroactively authorize

the 1992 significant expansion for the reasons previously

QFMA, at 18 (citations and footnote omitted). discussed, the notice provided to the Coalition, as well as the

manner in which the Board authorized the prior significant

In contrast, it is uncontroverted in the instant case that expansion, weigh strongly against remanding this matter to

UNICOR disclosed the 1992 (as well as the purported 1991) the Board. Were we to remand the matter in accordance with

significant expansions and publically requested the Board for QFMA, we would likely do so with instructions to “illicit [sic]

retroactive authorization. The private sector responded by comments” with respect to

This text is long and has been trimmed here. Open the source document for the complete record.