[Federal Register Volume 77, Number 64 (Tuesday, April 3, 2012)]
[Notices]
[Pages 20012-20014]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-7994]


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DEPARTMENT OF EDUCATION


Arbitration Panel Decision Under the Randolph-Sheppard Act

AGENCY: Department of Education.

ACTION: Notice of decision.

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SUMMARY: The Department of Education (Department) gives notice that, on 
May 23, 2011, an arbitration panel rendered a decision in the matter of 
Carole Morris v. Kentucky Office for the Blind, Case No. R-S/09-5. This 
panel was convened by the Department under the Randolph-Sheppard Act 
(Act) after the Department received a complaint filed by Carole Morris 
(Complainant).

FOR FURTHER INFORMATION CONTACT: You may obtain a copy of the full text 
of the arbitration panel decision from Mary Yang, U.S. Department of 
Education, 400 Maryland Avenue SW., room 5162, Potomac Center Plaza, 
Washington, DC 20202-2800. Telephone: (202) 245-6327. If you use a 
telecommunications device for the deaf (TDD), call the Federal Relay 
Service (FRS), toll-free, at 1-800-877-8339.
    Individuals with disabilities can obtain this document in an 
accessible format (e.g., braille, large print, audiotape, or compact 
disc) on request to the contact person listed under FOR FURTHER 
INFORMATION CONTACT.

SUPPLEMENTARY INFORMATION: Under section 6(c) of the Act, 20 U.S.C. 
107d-2(c), the Secretary publishes in the Federal Register a synopsis 
of each arbitration panel decision affecting the administration of 
vending facilities on Federal and other property.

Background

    Complainant alleged that the Kentucky Office for the Blind, the 
State licensing agency (SLA), violated the Act and its implementing 
regulations in 34 CFR part 395. Complainant alleged that the SLA 
violated the Act, implementing regulations and State rules and

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regulations by improperly administering the policies and procedures of 
the Kentucky Randolph-Sheppard Vending Facility Program in 
Complainant's bid to manage the laundry services at the United States 
Penitentiary McCreary (McCreary Prison) at Pine Knot, Kentucky, 
administered by United States Department of Justice, Federal Bureau of 
Prisons.
    Complainant was licensed as a Randolph-Sheppard vendor on March 8, 
2004. In April 2004, the SLA was approached by McCreary Prison 
regarding the possibility of installing a laundry vending facility 
consisting of washer and dryer vending machines at McCreary Prison.
    The SLA informed staff at McCreary Prison that the SLA would 
provide the services or would work out an arrangement with a third-
party contractor. McCreary Prison informed the SLA that it would 
require a 15 percent commission on the gross sales up front. In May 
2005, the SLA agreed to McCreary Prison's terms and the SLA and 
McCreary Prison officials entered into an Intergovernmental Agreement 
(IGA) whereby the SLA would provide the laundry services at McCreary 
Prison.
    Following the signing of the IGA between the SLA and McCreary 
Prison officials, the SLA negotiated a contract with the third-party 
contractor to install, operate and repair the laundry vending machines 
for McCreary Prison. Additionally, the SLA developed a subcontract with 
the third-party contractor to pay 5 percent commission on laundry 
royalties to Complainant in exchange for the assignment of laundry 
vending rights.
    Thereafter, the laundry vending facility at McCreary Prison 
produced income and Complainant received commissions. The SLA also 
received 5 percent of the net proceeds of the laundry vending facility 
income as set aside fees from Complainant. The set aside fees were used 
to help pay for the health insurance costs of the vendors. On May 19, 
2006, McCreary Prison decided to terminate the laundry vending facility 
contract and requested that the SLA remove the laundry vending machines 
by July 1, 2006.
    On July 25, 2007, the third-party contractor filed a lawsuit 
against the SLA for alleged injuries suffered because of the contract 
termination. The third-party contractor also filed a lawsuit against 
Complainant for breach of contract since she received commissions from 
the sales at the laundry vending facility at McCreary Prison. On August 
8, 2007, Complainant contacted the SLA to request legal services or 
payment of legal fees. However, legal counsel for the SLA informed 
Complainant that the SLA would not pay her legal expenses since she was 
not an employee of the State. On March 25, 2008, Complainant filed a 
request for an evidentiary hearing with the SLA concerning its denial 
of her request for payment of legal fees.
    On September 30, 2008, Complainant filed an amended grievance with 
the SLA adding additional issues to her original evidentiary hearing 
request. The new issues alleged by Complainant were that: (1) The SLA 
had denied Complainant the opportunity to maximize her vocational 
potential; and, (2) as a result, Complainant could have realized a 
larger income with the appropriate training by the SLA to manage 
laundry equipment.
    On February 6, 2009, a hearing officer denied Complainant's request 
for payment of legal fees, reimbursement for lost profits and her claim 
that the SLA had not maximized her vocational potential. Complainant 
appealed this decision. On December 4, 2009, the same hearing officer 
ruled that the SLA must establish a training assistance program to help 
Complainant maximize her vocational potential. On March 1, 2010, the 
SLA denied Complainant's claims as final agency action. Complainant 
then requested the Department to convene a Federal arbitration panel to 
appeal her grievance.
    The Federal arbitration panel initially heard the following issues: 
(1) Whether Complainant's claim is barred under the doctrine of 
sovereign immunity as alleged by Respondent; and (2) whether 
Complainant's request for an evidentiary hearing is time-barred. The 
panel then determined that, if both of these issues were resolved in 
Complainant's favor, it must hear the following issues: (1) Whether the 
SLA allegedly failed to maximize Complainant's vocational potential in 
a timely manner; and (2) whether the SLA was responsible for the legal 
expenses of Complainant in the lawsuit brought against her by the 
third-party vendor. The panel then concluded that, if Complainant 
prevails on one or both of these claims, it must determine what remedy 
she should receive.

Arbitration Panel Decision

    After hearing testimony and reviewing all of the evidence, the 
panel majority denied the SLA's claim of sovereign immunity. 
Specifically, the panel majority found that, under the Eleventh 
Amendment, a State is free to waive its sovereign immunity rights. 
However, under the Kentucky constitution, the power to waive sovereign 
immunity is vested in the State legislature. The Kentucky legislature 
enacted a statute that states in relevant part that, ``Any person, firm 
or corporation, having a lawfully authorized written contract with the 
Commonwealth at the time of or after June 21, 1974, may bring an action 
against the Commonwealth on the contract, including but not limited to 
actions either for breach of contracts or enforcement of contracts or 
for both.''
    Accordingly, the panel majority ruled that both the SLA in 
negotiating the subcontract with the third-party contractor and 
Complainant receiving commissions from that contract constituted a 
contract agreement between the SLA and Complainant.
    Regarding the timeliness of Complainant's request for an 
evidentiary hearing, the panel majority concluded that Complainant's 
deadline to request an evidentiary hearing expired no later than the 
date the SLA signed the subcontract with the third-party contractor in 
2004. Therefore, Complainant's original request for an evidentiary 
hearing and her amended request were untimely.
    Also, the panel majority concluded that the subcontract with the 
third-party contractor was initiated by the SLA, including making all 
of the arrangements with the third-party contractor, drafting the 
subcontract, and having Complainant sign the subcontract. As a result, 
the panel majority ruled that Complainant was not provided guidance 
from the SLA regarding the ramifications for entering into a 
subcontract, nor did the SLA assist Complainant when McCreary Prison 
dissolved the subcontract and the third-party contractor sued 
Complainant.
    Accordingly, after consideration, the panel majority ruled that 
Complainant shall provide the SLA with evidence regarding the amount of 
legal expenses paid by her to be reimbursed by the SLA.
    One panel member concurred with the panel majority's decision 
regarding the issues of sovereign immunity, 15-day time limit for 
Complainant to request an evidentiary hearing and maximization of 
vocational potential.
    This panel member dissented from the panel majority's decision 
regarding Complainant's request for legal fees, stating that there was 
no evidence that Complainant pursued her rights diligently or that 
there were extraordinary circumstances that prevented a timely filing. 
The panel member also noted that, based on the evidence presented at 
the hearing, there did not appear to be official

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documentation or proof on file of the amount of legal fees and expenses 
paid by Complainant.
    The views and opinions expressed by the panel do not necessarily 
represent the views and opinions of the Department.
    Electronic Access to This Document: The Official version of this 
document is the document published in the Federal Register. Free 
Internet access to the official edition of the Federal Register and the 
Code of Federal Regulations is available via the Federal Digital System 
at: www.gpo.gov/fdsys. At this site you can view this document, as well 
as all other documents of this Department published in the Federal 
Register, in text or Adobe Portable Document Format (PDF). To use PDF 
you must have Adobe Acrobat Reader, which is available free at this 
site.
    You may also access documents of the Department published in the 
Federal Register by using the article search feature at: 
www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department.

    Dated: March 29, 2012.
Alexa Posny,
Assistant Secretary for Special Education and Rehabilitative Services.
[FR Doc. 2012-7994 Filed 4-2-12; 8:45 am]
BILLING CODE 4000-01-P