The Braille Monitor                                                                                               _June 1997

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Historic Victory at Last
for the National Federation of the Blind
and Blind Vendors

by James Gashel

From the Editor: When the Randolph-Sheppard Act was last amended in 1974, it was the National Federation of the Blind that insisted upon having legal safeguards in the law to prevent violations by both federal and state agencies. The principal safeguard is the right to arbitration of disputes and the opportunity to take an unresolved violation into the federal courts if the arbitration is not successful.

Although the entire process can become somewhat lengthy and expensive to all parties, the case discussed here by James Gashel shows that justice can eventually prevail. In his capacity as Director of Governmental Affairs for the National Federation of the Blind, Mr. Gashel was asked to represent the State of Minnesota and Dennis Groshel, a blind vendor when the dispute with the Department of Veterans Affairs started at the arbitration stage several years ago.

Events surrounding this case, now known as the Dennis Groshel case, have been recounted in the Braille Monitor on the occasion of each major decision on the long path toward a final resolution. (See the January, 1989; February, 1993; and June, 1994, issues of the Braille Monitor.) The battleground in this particular dispute has been a vending facility, consisting entirely of vending machines, located at the Department of Veterans Affairs Medical Center in St. Cloud, Minnesota. The question has been whether a blind vendor, by virtue of the Randolph-Sheppard Act, should be
given a priority over commercial vendors in operating the vending machines as a small business under the federal Randolph-Sheppard Act at that location.

While in one sense the immediate issue of a particular vending facility in St. Cloud, Minnesota, should have been quite narrow, the implications for both the Department of Veterans Affairs, on the one hand, and the entire national program for blind vendors, on the other, are broad and substantial. This is why the struggle and the litigation underlying it have been so contentious and protracted.

Under any other conditions a blind vendor, standing alone, would have been forced to abandon the effort years ago. But Dennis Groshel has had the National Federation of the Blind by his side all the way. It should also be recognized, however, that we have benefitted greatly from the cooperative leadership of the state licensing agency for blind vendors in Minnesota--the Minnesota Department of
Economic Security. This agency, the attorney general of Minnesota, and all of the staff and officials involved deserve great credit for standing firm on behalf of Dennis Groshel and all blind vendors in this instance. With that as a backdrop, here is Mr. Gashel's explanation of the events in this case, followed by the final and binding decision of the United States Court of Appeals for the Eighth Circuit:

The federal Randolph-Sheppard Act directs that "priority" be given to blind persons in the operation of vending facilities on federal property. This mandate applies to all departments, agencies, and instrumentalities of the United States. Nonetheless the Department of Veterans Affairs and its Veterans' Canteen Service (VCS) have been particularly stubborn in refusing to abide by the law. The Department operates 171 medical center facilities throughout the country. Each state, with the exception of Alaska, has at least one of these centers, and several states have many more.

In theory there should be no doubt about whether the veterans facilities are subject to the Randolph-Sheppard Act, but for many years that has not stopped the Department of Veterans Affairs from resisting the application of the priority for blind vendors. The Department has contended that the VCS has the exclusive right by law to serve patients, visitors, and others at the medical centers which it operates. The National Federation of the Blind has held exactly the opposite view.

Dennis Groshel is a licensed blind vendor in Minnesota. He is also a long-time member of the National Federation of the Blind. Beginning in 1985, he was assigned to a vending facility, consisting entirely of vending machines, at the Department of Veterans Affairs Medical Center located in St. Cloud, Minnesota. These vending machines had been serviced by a blind vendor since 1977. This was an exception to the Department of Veterans Affairs' general rule.

The arrangement between the VCS and the Minnesota Department of Economic Security--the licensing agency for blind vendors in Minnesota--was an ordinary commercial vending contract. In agreeing to this arrangement, the VCS was not conceding that the Randolph-Sheppard Act would have any applicability at the St. Cloud medical center or at any similar site. From the VCS's point of view it was irrelevant that the machines were being serviced by a blind vendor who was licensed under the Randolph-Sheppard Act.

A commercial vending contract differs from an agreement under the Randolph-Sheppard Act in at least two respects. First, a contract has a limited term, normally three or five years, with two noncompetitive extensions allowed for satisfactory performance. The Randolph-Sheppard agreement, technically referred to as a "permit," is for an indefinite period, subject to cancellation only in the event of non performance. Second, commercial contracts require vending machine operators to pay a commission fee based on sales. No commission is charged for sales made by blind vendors under Randolph-Sheppard permits.

In 1985, when Dennis Groshel took over the St. Cloud medical center vending machines, the contract was due to expire in 1987. It was uncertain whether he would be awarded the contract after that time. Also Dennis was required to pay an amount equal to 17 percent of his gross revenues directly to the VCS as a sales commission. The contract required this payment. These conditions--the periodic termination of the contract and the sales commission--were not imposed upon other blind vendors in the state. The situation raised questions about basic fairness and about the applicability of the law.

To its credit the Department of Economic Security concluded that Dennis Groshel should be treated like all of the other vendors in its program. Therefore the licensing agency asked the VCS to issue a normal Randolph-Sheppard permit for the continued operation of the vending machines at the St. Cloud medical center as the time for the contract to expire approached in 1987. The application for a permit was filed in 1986, and soon thereafter the written response came back. The VCS refused the state's request for a permanent agreement, or permit (rather than a contract), with the stated reason that the medical center (and by implication all of its other medical centers) are exempt from the priority provisions of the Randolph-Sheppard Act.

At this point the battle was joined. The legal question was whether the priority provisions of the Randolph-Sheppard Act apply to property served by the VCS or whether that property is exempt from the Randolph-Sheppard Act. The Department of Veterans Affairs correctly pointed out that vending machines on property served by the VCS are exempt by law from the income-sharing provisions which would otherwise apply. The Department then argued that, by extension, Congress implicitly provided an exemption from the Act for all VCS activities. These arguments are grist for the ongoing mill of the federal courts, but time was running out for Dennis Groshel. The immediate concern was what would happen to his vending facility in mid-1987 when the contract was scheduled to expire.

Under the Randolph-Sheppard Act a state licensing agency may file a complaint with the Secretary of Education if it finds that a federal property-managing Department, agency, or instrumentality is violating the law. An arbitration panel is then appointed to conduct a hearing and decide whether the act has been violated. The Minnesota agency filed its complaint early in 1987, but the normal arbitration of such matters can take as long as two years. In order to protect Dennis Groshel's business during this period, we advised the state to seek a federal court injunction which would maintain the existing contract until the legal dispute was resolved. Officials in Minnesota, including the attorney general, agreed.

They sought and obtained an injunction, which placed Dennis's livelihood out of harm's way while the legal proceedings moved back from the federal district court to the arbitration panel. Panels appointed under the Randolph-Sheppard Act are composed of three members--one chosen by the state licensing agency, one chosen by the federal property-managing agency, and a third member who serves as chairman and is appointed by the other two members. On this panel I served on behalf of the State of Minnesota. That was, of course, the official, legal designation; but I also served on behalf of Dennis Groshel and, in a broader sense, on behalf of all blind vendors who might someday be affected by the decision in this case.

It would be an understatement to say that the proceedings before this panel were convoluted. The hearing record was more extensive than that developed in any previous Randolph-Sheppard arbitration. Well over one hundred separate documents were placed before the panel as evidence during the first of two hearings. As matters evolved, the dispute was divided into three phases with a temporary (initial) ruling made in 1988, a supplemental decision made in 1989, and a final decision made in August of 1991. In all three rulings the panel unanimously confirmed the view that the Randolph-Sheppard Act does apply to property served by the VCS.

The purport of this decision was that the state of Minnesota and Dennis Groshel must be given priority to provide vending machine services at the St. Cloud medical center. The panel was divided, however, on several questions relating to the terms of a continuing agreement between the VCS and the state which would implement the statutory priority. The most pronounced disagreement revolved around
money--would the VCS be entitled to receive a commission from sales made from vending machines operated by a blind vendor?

In its initial ruling the panel unanimously declared that the commission fee of 17 percent, which had been charged to Dennis Groshel based on his gross sales, was "an inequity." The panel then ordered that no commission should be charged by the VCS until all of the legal questions had been resolved. The effect of this decision was an immediate doubling of Mr. Groshel's net income from approximately $13,500 to about $27,000. The difference was the amount that he had been paying to the VCS.

This is how the case stood until August 14, 1991, when the panel issued its final decision and award. In a surprising turn of events, two members--a majority of the panel--reversed themselves on the commission question and found that a 17-percent commission rate would be acceptable at the St. Cloud medical center. They expressed the view that this did not violate the Randolph-Sheppard Act. I disagreed, arguing that the Randolph-Sheppard Act does not allow the VCS to impose a charge for providing a vending facility opportunity to a blind vendor. To permit a commission to be charged would be inconsistent with the panel's firm opinion that the Randolph-Sheppard Act applies to property served by the VCS just as it does to all other agencies. Still the vote was two to one.

Court action was then necessary to appeal the arbitration panel's final ruling. In the fall of 1992 the
District Court upheld the panel's unanimous view that the Randolph-Sheppard Act applies to the medical center and then reversed the panel majority on its view that a commission could be charged. (See the February, 1993, issue of the Braille Monitor for the text of this decision.) The Department of Veterans Affairs appealed this ruling to the United States Court of Appeals for the Eighth Circuit. Throughout these proceedings the National Federation of the Blind continued to represent Dennis Groshel's interests by formally intervening in the case on his behalf.

On March 11, 1994, the court of appeals ruling was handed down. It has stood as the final decision in the issues raised in this dispute, at least to that point. The Department of Veterans Affairs decided to abandon further appeals over the questions of commissions or Randolph Sheppard priority. However, it was pretty clear that the Department of Veterans Affairs had not undergone a change of heart. The decision by the appeals court was binding throughout the states covered by the Eighth Circuit-Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota--and was precedent-setting for the rest of the country.

But it didn't take long to discover that the VCS and the Department of Veterans Affairs had no intention of lying down and tamely giving in. As far back as the arbitration panel's decision of 1991, the VCS had been told that it could not install vending machines to compete with Dennis Groshel's operation at the St. Cloud Center. But, ignoring this part of the arbitration ruling, the Department of Veterans Affairs decided that a permit for Dennis Groshel to continue to work at the St. Cloud facility would be granted only if VCS would also be allowed to install vending machines to compete with Mr. Groshel's. The National Federation of the Blind and Minnesota officials said no, and with that the parties were back in district court, where our position was once again upheld.

The Department of Veterans Affairs is nothing if not stubborn, so, when it lost that decision, it went back immediately to the Appeals Court for the Eighth Circuit on October 23, 1996. The appeals court's decision was filed on February 26, 1997. It was a total victory for Dennis Groshel. The court ruled that the VCS could not install vending machines unless the Secretary of Education made an exception in the clear mandate given by Congress to Randolph-Sheppard vendors. Because of its importance to all blind vendors, we are reprinting both the letter to President Maurer from our attorney describing the decision and the decision itself. Here are both documents:

Baltimore, Maryland
March 3, 1997
Mr. Marc Maurer, President
National Federation of the Blind
Baltimore, Maryland

Re: Minnesota v. Riley/Groshel v. Corley

Dear Mr. Maurer:

Victory! Enclosed is a copy of the 8th Circuit's decision, which affirms the district court's finding that
VCS installation of competing vending machines would limit Dennis Groshel's ability to earn a living and is therefore forbidden.

Potentially, the VCS could ask for an exemption from the Secretary of Education or could petition the Supreme Court to review the case. I think both are unlikely, and even less likely to be granted.

On the other hand, we will probably file a request to recover at least a portion of the attorneys' fees and costs you have paid. The court reached this decision in the appeal of the State's case (in which Dennis was also a party), and therefore dismissed our separate case as moot, and I am not yet sure how that affects our chances for fees. Also, because our opponent was the federal government, the standard for recovering fees is not simply did we prevail, but was the government's position substantially justified? The Eighth Circuit's description of VCS's behavior as "stonewall[ing]" and a "scorched-earth campaign" will help with that. The precedent should also help force other VA hospitals to create facilities for blind vendors.

Whatever happens on fees, the bottom line is a very sweet victory and a guarantee that Dennis will be able to continue to operate without competing machines. I know he is grateful for the Federation's help, without which the VA would long since have succeeded in driving him out of business. If you have any questions about any of this, please call me.

Andrew D. Freeman
United States Court of Appeals
for the Eighth Circuit
No. 96-2477MN

Minnesota Department of Economic Security State Services for the Blind and Visually Handicapped
Plaintiff-Appellee, Dennis Groshel, Intervenor Plaintiff-Appellee,
Richard Riley, United States Secretary of Education United States Department of Veterans Affairs; James B. Donahoe, in his official capacity as Director, Veterans Canteen Service, Defendants-Appellants Appeal from the United States District Court for the District of Minnesota

Submitted: October 23, 1996
Filed: February 26, 1997
Before Fagg, Bowman, and Hansen, Circuit Judges. Fagg, Circuit Judge.

The Randolph-Sheppard Vending Stand Act, 20 U.S.C. (Section Signs) 107-107f (1994) (the Act), gives blind persons licensed by a state licensing agency priority to operate vending facilities on federal property. This dispute began more than ten years ago, when Minnesota's licensing agency, the Minnesota Department of Economic Security (formerly the Minnesota Department of Jobs and Training) (Minnesota), applied under the Act and its corresponding regulations for a vending permit for the Veterans Affairs Medical Center in St. Cloud, Minnesota (VA Medical Center). Minnesota's application was rejected by the Department of Veterans Affairs and the Veterans' Canteen Service
(collectively VCS), which claimed to be exempt from the Act. Minnesota sought arbitration, as the Act provides. See 20 U.S.C. (Section Sign) 107d-1(b). The arbitration panel (the Panel) held the VCS was subject to the Act. The VCS and Minnesota then jointly submitted five disputed issues for the Panel to resolve. Only two are relevant to this appeal. The Panel decided Minnesota's licensed blind vendor Dennis Groshel should pay the VCS a commission on vending sales, and the VCS does not have the "right to install and operate its own vending machines" at the VA Medical Center.

Minnesota sought judicial review in the district court, which decided commission payments violate the Act. The VCS appealed to this court, and we affirmed. See Minnesota Department of Jobs & Training v. Riley, 18 F.3d 606, 608 (8th Cir. 1994). We held the Act applies to the VCS. See id. at 608-09. We also held that commission payments, like any limitation on a blind vendor's operation, are unlawful unless approved by the Secretary of Education. See id. at 609; 20 U.S.C. (Section Sign) 107(b). Although Riley paved the way for Minnesota to receive its vending permit, the VCS continued and continues to stonewall Minnesota and its blind licensee. Ignoring the Act, the Panel's decision, and our opinion in Riley, the VCS offered Minnesota a permit, but only if Minnesota agrees the VCS can install competing vending machines at the VA Medical Center. Minnesota returned to the district court, which granted Minnesota's motion to enforce the Panel's decision. In doing so, the district court recognized that "installation of vending machines by the VCS is undoubtedly an attempt to limit the income of the blind vendor which must be approved [by] the Secretary of the [Department of Education] prior to
implementation." Although the district court characterized its enforcement order as a preliminary injunction, we agree with the VCS that, for the purpose of review, we should treat the order as a permanent injunction because Minnesota and the VCS disagree only about the law, and nothing remains for the district court to resolve. Likewise, we agree with the VCS that we review the disputed questions of law de novo. See International Association of Machinists & Aerospace Workers, Dist. Lodge No. 19 v. Soo Line R.R. Co., 850 F2d 368, 374 (8th Cir. 1988) (en banc). On appeal, the
VCS once again claims exemption from the Act. Our earlier opinion in Riley forecloses this claim.

Echoing its argument in Riley, the VCS contends it need not comply with (Section Sign) 107(b), which prohibits any limitation on a blind vendor's operation unless approved by the Secretary of Education, because the Veterans' Canteen Service Act independently authorizes the VCS to operate vending machines at the VA Medical Center. See 38 U.S.C. (Section Sign) 7802. Further, the VCS asserts that when it operates within the parameters of (Section Sign) 7802, neither an arbitration panel convened under 20 U.S.C. (Section Sign) 107d-1(b) nor the district court can hold the VCS answerable for violations of the Act. In Riley, however, we held the VCS must comply with every provision of the Act, and that includes (Section Signs) 107(b) and 107d-1(b). See 18 F.3d at 608-09. We have never questioned the VCS's authority to operate canteens, install vending machines, or do anything else the VCS's enabling legislation empowers it to do. But in Riley, we held the Act precludes the VCS's
exercise of its statutory authority when that exercise would limit a blind vendor's operation, unless the Secretary approves the limitation. See id. at 609-10. Here, the VCS does not challenge the district court's finding that "competing vending machines will...undermine or...destroy [the] blind vendor's ability to obtain what is already a small income." No less than commission payments, competing machines would limit the blind vendor's operation. Riley rules out both, unless the Secretary decides otherwise.

In truth, the VCS has done far more than merely limit the blind vendor's operation at the VA Medical Center. Congress assumed federal agencies would respect a blind person's vending enterprise and willingly comply with the Act. See 20 U.S.C. (Section Sign) 107d-2(b) (2). Instead, the VCS has tried to drive the blind vendor out of its domain. Testifying before the Panel in 1988, a VCS official said:

Basically as long as this dispute lasts, the guy who is going to suffer over it is going to be [the blind vendor] because prices are going to continue to go up, and we are going to continue to hold until this is resolved. The longer it goes on the less money he is going to make.

Nine years later, the VCS is still at it, demanding the right to install machines that would, as the district court found, destroy the blind vendor's livelihood. It is time for the VCS's scorched-earth campaign to end. Although Minnesota, in securing a permit, must work within the Act's regulatory scheme, Riley makes clear--and we hold today--that unless the VCS gets the Secretary's approval, the VCS may not insist Minnesota accept the presence of VCS vending machines at the VA Medical Center as the price of Minnesota's permit.

Finally, the VCS raises two other issues. First, the VCS contends arbitration panels convened under (Section Sign) 107d-1(b) have no authority to order remedies for violations of the Act. See Maryland State Department of Educ. v. United States Department of Veterans Affairs, 98 F3d 165, 169-71 (4th Cir. 1996); Georgia Department of Human Resources v. Nash, 915 F.2d 1482, 1491-92 (11th Cir. 1990). The VCS's argument is misplaced. The Panel never ordered the VCS to take any remedial action but simply decided competing VCS vending machines at the VA Medical Center would violate the Act. The Panel did exactly what the statute authorizes. See 20 U.S.C. (Section Sign) 107d-2(b); Maryland State Department of Education, 98 F.3d at 169-71; Nash, 915 F.2d at 1491-92. Indeed, by insisting on a permit condition at odds with the Panel's decision, it is the VCS that ignores its statutory responsibility to bring itself into compliance with the Act. See Maryland State Department of Education, 98 F.3d at 171. Second, the VCS questions whether the Panel's no-VCS-machines decision continues in force because the Panel's reasoning interweaves that decision with its overturned ruling on commission payments. If the two decisions were as mutually dependent as the VCS now claims, it is surprising the VCS did not say so when the commissions issue was before us in Riley. Nevertheless, the argument is without merit. The VCS itself, together with Minnesota, asked the Panel to resolve two separate disputed issues, commission payments and competing machines. In deciding
against the VCS's vending machines, the Panel took into consideration that the VCS would receive commissions. The Panel never said, however, that if Minnesota pays no commissions, the VCS may then go ahead and install its machines. Rather, the Panel said yes to commissions and no to competing VCS vending machines. The Panel's decision was the final word on what the VCS must do to comply with the act. See (Section Sign) 107d-1(b).

The VCS is no different from any other steward of federal property. If the VCS wants to impose limitations on a blind vendor's operation, it must get permission from the Secretary of Education. Of course, if the Secretary approves installation of the VCS's vending machines, the VCS need not share its income with the blind vendor. See (Section Sign) 107d-3(d). We affirm the decision of the district court.

A true copy
Attest: Clerk
U.S. Court of Appeals, Eighth Circuit

You can create a gift annuity by transferring money or property to the National Federation of the Blind. In turn, the NFB contracts to pay you income for life or your spouse or loved ones after your death. How much you and your heirs receive as income depends on the amount of the gift and your age when payments begin. You will receive a tax deduction for the full amount of your contribution, less the value of the income the NFB pays to you or your heirs.

You would be wise to consult an attorney or accountant when making such arrangements so that he or she can assist you to calculate current IRS regulations and the earning potential of your funds. The following example illustrates how a charitable gift annuity can work to your advantage.

Mary Jones, age sixty-five, decides to set up a charitable gift annuity by transferring $10,000 to the NFB. In return the NFB agrees to pay Mary a lifetime annuity of $750 per year, of which $299 is tax-free. Mary is also allowed to claim a tax deduction of $4,044 in the year the NFB receives the $10,000 contribution.

For more information about charitable gift annuities, contact the National Federation of the Blind, Special Gifts, 1800 Johnson Street, Baltimore, Maryland 21230-4998, (410) 659-9314, fax (410) 685-5653.