Arbitration Panel Decision Under the Randolph-Sheppard Act

DEPARTMENT OF EDUCATION

Arbitration Panel Decision Under the Randolph-Sheppard Act

AGENCY: Department of Education.

ACTION: Notice of Arbitration Panel Decision Under the Randolph-

Sheppard Act.

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SUMMARY: Notice is hereby given that on August 15, 1991, an arbitration

panel rendered a decision in the matter of Florida Department of

Education, Massachusetts Commission for the Blind, and Virginia

Department for the Blind and Visually Handicapped v. United States

Department of Defense, (Docket Nos. R-S/85-8, 87-1, and 87-4). This

panel was convened by the Secretary of the U. S. Department of

Education pursuant to 20 U.S.C. 107d-1(b). The Randolph-Sheppard Act

(the Act) creates a priority for blind vendors to operate vending

facilities on Federal property. Under this section of the Act, the

State licensing agency (SLA) may file a complaint with the Secretary if

the SLA determines that an agency managing or controlling Federal

property fails to comply with the Act or regulations implementing the

Act. The Secretary then is required to convene an arbitration panel to

resolve the dispute.

FOR FURTHER INFORMATION CONTACT: A copy of the full text of the

arbitration panel decision may be obtained from George F. Arsnow, U.S.

Department of Education, 600 Independence Avenue, S.W., Room 3230, Mary

E. Switzer Building, Washington, D.C. 20202-2738. Telephone: (202) 205-

9317. Individuals who use a telecommunications device for the deaf

(TDD) may call the TDD number at (202) 205-8298.

SUPPLEMENTARY INFORMATION: Pursuant to the Randolph-Sheppard Act (20

U.S.C. 107d-2(c)), the Secretary publishes a synopsis of arbitration

panel decisions affecting the administration of vending facilities on

Federal and other property. [[Page 4407]]

Background

In 1984 the Department of Defense, through its agents and officers,

solicited proposals for fast food hamburger operations. The Army and

Air Force Exchange Service (AAFES) and the Navy Resale and Services

Support Office (NAVRESSO) subsequently signed contracts with two

national fast food companies, McDonald's Corporation and Burger King

Corporation. By a contract dated August 7, 1984, the Navy awarded to

McDonald's Corporation exclusive rights to operate fast food hamburger

facilities on naval installations for a period of 10 years. The

contract signed by the Navy involved an exclusive franchise effort

consisting of the construction and operation of a minimum of 40 and a

maximum of 300 fast food facilities. These facilities would be owned

and operated by the McDonald's Corporation. On May 15, 1984, AAFES

purchased a franchise from the Burger King Corporation. The AAFES

contract involved the construction of 185 franchised facilities. Under

the terms of the AAFES contract, the Burger King facilities were to be

operated by AAFES, with a portion of the profits being remitted to

Burger King.

The SLAs in the four States initially protested the preceding fast

food contracts. They were in Florida, Massachusetts, Virginia, and

Kansas. The Kansas Department of Rehabilitative Services subsequently

withdrew its request for arbitration.

These SLAs, through representative organizations, brought two

actions in United States District Court for the District of Columbia

regarding the alleged violations of the Act by the Secretary of Defense

and the Secretaries of Navy, Army, and Air Force, along with NAVRESSO

and AAFES personnel. The SLAs requested the Court to terminate the

contracts with McDonald's and Burger King Corporations.

The Court held that the Act did not apply to the disputed

contracts. Randolph-Sheppard Vendors of America v. Weinberger, 602 F.

Supp. 1007 (D.D.C. 1985). On appeal, the United States Court of Appeals

for the District of Columbia Circuit held that plaintiffs were required

to first pursue and exhaust any available remedies under the Act before

seeking judicial relief. Randolph-Sheppard Vendors of America v.

Weinberger, 795 F.2d. 90 (D.C. Cir. 1986).

On April 5, 1985, the Florida Department of Education, the SLA,

requested the Secretary of Education to convene an arbitration panel

concerning the McDonald's contract with the Department of Navy. On

December 31, 1986, this request was amended to include the Burger King

Corporation contract. The SLA alleged that the Department of Defense

(DOD) failed to give notice to any SLA regarding the solicitation of

proposals for fast food service on Navy, Army, and Air Force

installations and that the awarding of the contracts to McDonald's and

Burger King Corporations without regard to the priority given to blind

vendors by Congress was a violation of the Act.

In addition, the Florida Department of Education alleged that the

McDonald's and Burger King franchises on military installations placed

a limitation upon the placement of blind vending facilities and that by

imposing such a limitation DOD failed to submit a justification in

writing to the Secretary of Education seeking a Secretarial

Determination pursuant to 20 U.S.C. 107(b).

On October 21, 1986, the Massachusetts Commission for the Blind

requested arbitration concerning McDonald's contract with the

Department of the Navy and on March 25, 1987, amended its request to

include the Burger King Corporation contract with AAFES. Similarly, on

November 28, 1986, the Virginia Department for the Blind and Visually

Handicapped requested arbitration concerning McDonald's Corporation

contract with the Department of Navy and on August 5, 1988, amended its

complaint to include the Burger King Corporation contract with AAFES.

By letter dated April 24, 1987, the arbitration complaints of

Florida, Massachusetts, and Virginia were consolidated into one

complaint, and hearings were held by the arbitration panel on July 20,

1988 and November 15, 1988 at the United States Department of Education

Headquarters Office in Washington, D.C.

Arbitration Panel Decision

In an Interim Award dated January 31, 1990, the arbitration panel

found that DOD violated the Randolph-Sheppard Act and applicable

regulations.

The panel concluded that DOD failed to notify the SLAs of its

intention to solicit bids for vending facilities. DOD contended that it

was not obligated to notify the SLAs. The panel ruled that the explicit

notice requirements established by Congress in 34 CFR 395.31(c) are

evidence of Congressional intent that SLAs be afforded adequate

opportunity to protect their interests by receiving advance

notification of the Federal Government's plans to purchase, lease,

renovate, or otherwise acquire property that might trigger an

obligation to provide priority for blind vendors.

Finally, the arbitration panel found that DOD failed to meet the

requirements of section 107b, which states in relevant part that ``Any

limitation on the placement or operation of a vending facility based on

a finding that such placement or operation would adversely affect the

interests of the United States shall be fully justified to the

Secretary, who shall determine whether such limitation is justified.''

The arbitration panel concluded that, whether or not DOD believed it

would gain approval from the Secretary of Education regarding its

limitation request, DOD was required to seek the Secretary's approval

pursuant to section 107b.

In dissent one panel member agreed with the District Court

interpretation of the statutory meaning of the words ``priority'' and

``limitation.'' That panel member stated that DOD's solicitation for

fast food operations does not come within the statutory or regulatory

definition of cafeteria and that, therefore, no violation of the Act

and regulations occurred.

The arbitration panel retained jurisdiction of the complaint for

the purpose of determining remedy and other remaining aspects of the

dispute. On August 15, 1991, the arbitration panel rendered its final

award and opinion on remedy.

The panel ruled that AAFES should contact the petitioner SLAs in

each State where a Burger King facility now exists and should establish

a procedure acceptable to the SLAs for identifying, training, and

installing blind vendors as managers of all current and future Burger

King operations conducted within their jurisdiction pursuant to the

disputed contract. Additionally, DOD should give the SLAs 120 days

written notice of any new Burger King operations to be established. The

SLA and DOD would arrange for remuneration of the blind vendor

consistent with custom and practice of other SLA-sponsored food

facilities under the Act. Any dislocation of persons currently managing

these facilities would be at the discretion of AAFES provided that the

management of the facility would be transferred to the blind vendor

upon successful completion of training.

Regarding the NAVRESSO contract with McDonald's Corporation, DOD

would provide to the appropriate SLA no less than 120 days notice of

any new McDonald's facility to be established. The SLA then would

determine whether it wished to exercise its priority and to

[[Page 4408]] provide funds to build and operate a new McDonald's

facility within its jurisdiction. If timely notice were delivered in

writing to DOD within 60 days after receipt by the SLA, a priority

right to operate the McDonald's franchise would be given to the SLA and

to a competent, qualified manager recommended by the SLA.

Further, NAVRESSO within 60 days must communicate to the SLAs

involved in the dispute a plan for establishing the priority of blind

vendors pursuant to the Act in the event that another McDonald's

restaurant would be established within the jurisdiction of these SLAs.

The parties also would draft procedures for communicating notice of

intent to operate McDonald's restaurants within the jurisdiction and

determine criteria for selecting competent blind managers.

Subsequently, concurrent court proceedings before the United States

District Court for the District of Columbia regarding this dispute have

been cancelled, and the case has been dismissed.

The views and opinions expressed by the panel do not necessarily

represent the views and opinions of the U.S. Department of Education.

Dated: January 11, 1995.

Judith E. Heumann,

Assistant Secretary for Special Education and Rehabilitative Services.

[FR Doc. 95-1578 Filed 1-20-95; 8:45 am]

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