ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE (D.C. Civil Action No. 83-57)
Before GIBBONS and HIGGINBOTHAM, Circuit Judges and SAROKIN, District Judge*fn*
Robert Albanese, a blind vendor licensed under the Randolph-Sheppard Act, 20 U.S.C. § 107 et seq. (1982), to operate a vending site appeals from a summary judgment in favor of the Delaware Department of Health and Social Services, Division for the Visually Impaired (Delaware) vacating the award of an arbitration panel in his favor against Delaware. The appeal requires that we determine the scope of relief available against states participating in this unique, statutorily created program designed to assist blind persons to become self-sufficient. The arbitrators awarded Albanese retroactive monetary relief and attorneys' fees. The district court held that the Act did not authorize retroactive relief, and that the arbitration panel erred in awarding attorneys' fees. Thus it vacated the arbitrators' award. We reverse.
The Randolph-Sheppard Act first became law in 1936. Pub. L. No. 74-732, ch. 638, 49 Stat. 1559 et seq. (1936) (codified as amended at 20 U.S.C. §§ 107-107f (1982). As originally enacted, the Act provided in relevant part:
Be it enacted by Senate and House of Representative of the United States of America in Congress assembled, That for the purpose of providing blind persons with remunerative employment, enlarging the economic opportunities of the blind, and stimulating the blind to greater efforts in striving to make themselves self-supporting blind persons licensed under the provisions of this Act shall be authorized to operate vending stands in any Federal building where, in the discretion of the head of the department or agency in charge of the maintenance of the building, such vending stands may be properly and satisfactorily operated by blind persons.
SEC. 2. (a) The Office of Education in the Department of the Interior, subject to the direction of the Commissioner of Education and such rules and regulations as he may, with the approval of the Secretary of the Interior, prescribe, shall --
(4) Designate as provided in section 3 of this Act the State Commission for the blind in each State, or, in any State in which there is no such commission some other public agency to issue licenses to blind persons who are citizens of the United States and at least twenty-one years of age for the operating of vending stands in Federal and other buildings in such State for the vending of newspapers, periodicals, confections, tobacco products, and such other articles as may be approved for each building by the custodian thereof and the State licensing agency;
(b) The State licensing agency shall, in issuing each such license for the operation of a vending stand, give preference to blind persons who are in need of employment and have resided for at least one year in the State in which such stand is to be located. Each such license shall be issued for an indefinite period but may be terminated by the State licensing agency if it is satisfied that the stand is not being operated in accordance with the rules and regulations prescribed by such licensing agency. Each such license for the operation of a vending stand in a Federal building shall be subject to the approval of the Federal agency having charge of the building in which the stand is located. Such licenses shall be issued only to applicants who are blind within the meaning of the Act but are able, in spite of such infirmity, to operate such stands.
(c) The State licensing agency designated by the Office of Education is authorized, with the approval of the custodian having charge of the building in which the vending stand is to be located, to select a location for such stand and the type of stand to be provided.
SEC. 3. (a) A State commission for the blind or other State agency desiring to be designated as the agency for licensing blind persons for the operation of vending stands as provided in this Act shall, with the approval of the governor of the State, make application to the Commissioner of Education and agree --
(1) To cooperate with the Commissioner of Education and with the division of vocational rehabilitation of such State in training, placing, and supervising blind persons;
(2) To provide through loan, gift, or otherwise, for each blind person licensed to operate a stand, an adequate initial stock of suitable articles to be vended therefrom. . . .
49 Stat. at 1559-60. By its terms the Act afforded to state agencies responsible for rehabilitation of blind persons the opportunity to gain access to sites in federal buildings if the agencies were willing to cooperate with the federal Commissioner of Education in a rehabilitation program for such persons. Manifestation of a state's willingness to enter the program, which applied to both federal and "other buildings in [the] state," id section 2(a)(4), required that the state agency "make application to the Commissioner of Education and agree" to federal requirements. Id. section 3(a). Thus as first enacted the Randolph-Sheppard Act contemplated a contractual relationship between participating states and the federal government.
In the Vocational Rehabilitation Amendments of 1954, Pub. L. No. 83-565, ch. 655, 68 Stat. 663 (1954), section 3 of the Randolph-Sheppard Act was substantially amended,*fn1 to provide:
A State commission for the blind or other State agency desiring to be designated as the licensing agency shall, with the approval of the chief executive of the State, make application to the Secretary and agree --
"(1) to cooperate with the Secretary in carrying out the purpose of this Act: to provide for each licensed blind person such vending stand equipment, and adequate initial stock of suitable articles to be vended therefrom, as may be necessary: Provided, however, That such equipment and stock may be owned by the licensing agency for use of the blind, or by the blind individual to whom the license is issued: And provided further, That if ownership of such equipment is vested in the blind licensee, (A) the State licensing agency shall retain a first option to repurchase such equipment and (B) in the event such individual dies or for any other reason ceases to be licensee or transfers to another vending stand, ownership of such equipment shall become vested in the State licensing agency (for transfer to a successor licensee) subject to an obligation on the part of the State licensing agency to pay to such individual (or to his estate) the fair value of his interest therein as later determined in accordance with regulations of the State licensing agency and after opportunity for a fair hearing. that if any funds are set aside, or caused to be set aside, from the proceeds of the operation of the vending stands such funds shall be set aside, or caused to be set aside, only to the extent necessary for and may be used only for the purposes of (A) maintenance and replacement of equipment: (B) the purchase of new equipment: (C) management services: and (D) assuring a fair minimum return to operators of vending stands: Provided, however, That in no event shall the amount of such funds to be set aside from the proceeds of any vending stand exceed a reasonable amount which shall be determined by the Secretary: to make such reports in such form and containing such information as the Secretary may from time to time require and to comply with such provisions as he may from time to time find necessary to assure the correctness and verification of such reports; to issue such regulation, con-sistent with the provisions of this Act, as may be necessary for the operation of this program; to provide to any blind licensee dissatisfied with any action arising from the operation or administration of the vending stand program an opportunity for a fair hearing."
68 Stat. at 664. The 1954 amendment thus carried forward the contractual relationship feature of the original Act and added the foregoing requirement that the state agree that blind vendors have certain property interests in the businesses established pursuant to the Act. The blind vendors became, in effect, third party beneficiaries of the agreements between the participating states and the federal government. Moreover the states applying to participate in the program understood in section 3(6) to provide for blind licensees dissatisfied with the operation of the program "an opportunity for a fair hearing." The 1954 amendment did not, however, specify the nature of the hearing or the relief which should be afforded as a result of such a hearing. Nevertheless, it is clear that by authorizing the federal government to contract with the states on the terms specified in section 3, Congress intended to confer legally enforceable rights on the blind beneficiaries of the program. The term "fair hearing" cannot otherwise be understood than as an expression of the intention to require participating states to provide a mechanism of dispute resolution to effectively enforce those rights. States participating in the program after 1954 are so bound. In consideration of the states' undertakings, the federal government grants to state agencies the right to license federal sites to blind vendors.
Senator Jennings Randolph, the longtime chairman of the Subcommittee on Handicapped Workers of the Senate Committee on Labor and Public Welfare, dissatisfied with the working of the program, in 1969 proposed legislation which would require binding arbitration between grieving blind vendors and state agencies and between state agencies and the federal government. S. 2461, 91st Cong. 2d Sess. Hearings were held on S. 2461 in both the Senate and the House of Representatives, but the 91st Congress adjourned without considering it further. Senator Randolph introduced a similar bill, S. 2506, in the 92d Congress in September of 1971. A renamed Subcommittee on the Handicapped reported S. 2506 to the full committee, but agreed to a resolution directing a study of the program by the Comptroller General of the United States. That study, entitled Review of Vending Operations on Federally Controlled Property. No. B-176886, was presented to Congress in September 1973. Senator Randolph introduced S. 2581 which reflected some of the findings contained in the Comptroller General's report. S. 2581 was reported favorably by the Subcommittee on the Handicapped. A House Bill, H.R. 14225, substantially similar to S. 2581, was passed over a presidential veto and became law on November 21, 1974. Pub. L. No 93-651, 89 Stat. 2-3 (1974).*fn2 All versions proposed by Senator Randolph between 1969 and 1974 contained a provision for arbitration. The version enacted, amended section 3(6) to read:
to provide to any blind licensee dissatisfied with any action arising from the operation or administration of the vending facility program an opportunity for a fair hearing, and to agree to submit the grievances of any blind licensee not otherwise resolved by such hearing to arbitration as provided in section 5 of this Act [20 U.S.C. § 107d-1].
Pub. L. No. 93-651, 89 Stat. 2-3 at 2-10, codified at 20 U.S.C. § 107b(6) (1972). (emphasis supplied). The language of the 1936 and 1954 versions of section 3 providing that state desiring to participate must "make application to the Secretary and agree --" was not changed. Instead, Congress added to section (3)(6) the requirement that participating states "agree to submit the grievance of any blind licensee not otherwise resolved [in a fair hearing] to arbitration" as provided in a new section of the Act.
Section 5(a) of the 1974 Act provides:
Any blind licensee who is dissatisfied with any action arising from the operation or administration of the vending facility program may submit to a State licensing agency a request for a full evidentiary hearing, which shall be provided by such agency in accordance with section 3(6) of this Act. [20 U.S.C. § 107(b)(6)].
20 U.S.C. § 107d-1(a) (1982). This provision thus defines the "fair hearing" which the state must agree to provide as "a full evidentiary hearing." Section 5(a) continues:
If such blind licensee is dissatisfied with any action taken or decision rendered as a result of such hearing, he may file a complaint with the Secretary [of Health, Education, and Welfare] who shall convene a panel to arbitrate the dispute pursuant to section 6 of this Act [20 U.S.C. § 107d-2], and the decision of such panel shall be final and binding on the parties except as otherwise provided in this Act.
20 U.S.C. § 107d-1(a) (1982). Thus the arbitration to which a participating state agrees by virtue of the 1974 amendment to section 3 occurs, if requested, following an evidentiary hearing at the state agency level. The arbitration is conducted before a panel convened by the Secretary of Health, Education and Welfare. Section 6(b) of the 1974 Act specifies the makeup of the arbitration panel. 20 U.S.C. § 107d-2(b).
Section 6(a) of the 1974 Act provides in relevant part:
Such panel shall, in accordance with the provisions of subchapter II of chapter 5 of Title 5, give notice, conduct a hearing, and render its decision which shall be subject to appeal and review as a final agency action for purposes of chapter 7 of such Title 5.
20 U.S.C. § 107d-2(a) (1982). The cross references to Chapters 5 and 7 of Title 5 are to the administrative procedure and judicial review provisions of the Administrative Procedure Act. In this respect section 6(a) is unique, in that it provides for a scope of judicial review considerably broader than that available under the Federal Arbitration Act. 9 U.S.C. §§ 9, 10. Under that Act arbitrators' decisions on the merits are generally regarded as substantially unreviewable so long as the decisions draw their essence from the contractual undertaking to arbitrate. Ludwig Honold Manufacturing Co. v. Fletcher, 405 F.2d 1123, 1128 (3d Cir. 1969). By contrast, 5 U.S.C. § 706 (1982) permits the reviewing court to set aside agency adjudicative actions which are: arbitrary, capricious, an abuse of discretion or otherwise not in accordance to law, without observance of procedures required by law, or unsupported by substantial evidence.
A careful review of the evolution of this unique statutory review scheme suggests the reasons why it was chosen by Congress. Originally, in S. 2461 in 1969 and S. 2506 in 1971, Senator Randolph proposed merely to amend Section 3(6) dealing ...