State of Wisconsin, Department v. Theresa Taylor ( 2020 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
Nos. 20-1016 & 20-1115
STATE OF WISCONSIN, DEPARTMENT OF WORKFORCE
DEVELOPMENT–DIVISION OF VOCATIONAL REHABILITATION,
Petitioner-Appellee,
v.
UNITED STATES DEPARTMENT OF EDUCATION and BETSY DEVOS,
in her official capacity as Secretary of Education,
Respondents-Appellees,
and
THERESA TAYLOR,
Respondent-Appellant.
____________________
Appeals from the United States District Court for the
Western District of Wisconsin.
No. 3:18-cv-00220-jdp — James D. Peterson, Chief Judge.
____________________
ARGUED SEPTEMBER 21, 2020 — DECIDED NOVEMBER 12, 2020
____________________
Before WOOD, BRENNAN, and SCUDDER, Circuit Judges.
2 Nos. 20-1016 & 20-1115
BRENNAN, Circuit Judge. The Randolph-Sheppard Act pro-
vides economic opportunities by granting blind persons
priority to operate vending facilities at certain government
properties. When a blind vendor, Jocelyn Belsha, was
awarded certain vending operations in Racine County, Wis-
consin, a different blind vendor, Theresa Taylor, became un-
happy and challenged the award.
The Act is a federal law administered by state licensing
agencies, so Taylor’s challenge traveled first through Wiscon-
sin’s regulatory process, and then through federal adminis-
trative proceedings. Eventually an arbitration panel, con-
vened to resolve Taylor’s federal grievance, awarded her
money damages and a permanent vending machine services
contract for a site in Racine. Federal courts review such an
award as a final action of a federal agency under the Admin-
istrative Procedure Act.
The district court vacated the arbitration panel’s decision,
ruling that there were no material deficiencies in the choice of
Belsha for the Racine site, the arbitration panel’s key factual
findings were not supported by substantial evidence, and the
arbitration panel’s ultimate conclusion was arbitrary and ca-
pricious. We agree with the district court and affirm its deci-
sion for the state licensing agency and against Taylor.
I
A. Regulatory Overview
The Randolph-Sheppard Act (the “Act”) “provid[es] blind
persons with remunerative employment, enlarg[es] the eco-
nomic opportunities of the blind, and stimulat[es] the blind to
greater efforts in striving to make themselves self-support-
ing[.]” 20 U.S.C. § 107(a). Under the Act, states license blind
Nos. 20-1016 & 20-1115 3
persons to operate vending facilities through state licensing
agencies. See 20 U.S.C. § 107(b). The federal government—
specifically, the U.S. Department of Education (“the Depart-
ment”)—does not directly administer this blind vendor pro-
gram. Instead, states do so through state licensing agencies.
Id.). Here, the Wisconsin Department of Workforce Develop-
ment, Division of Vocational Rehabilitation (“DWD”) admin-
isters the program. WIS. ADMIN. CODE DWD § 60.01.
This arrangement triggers both state and federal regula-
tory procedures. After vending operations at a site are
awarded, an unsuccessful applicant may challenge that deci-
sion and ask the state licensing agency to provide an eviden-
tiary hearing. 20 U.S.C. § 107d-1(a); WIS. ADMIN. CODE DWD
§ 60.05(3). That hearing occurs before a panel that makes a
recommendation to the administrator of the DWD, who then
decides the dispute. WIS. ADMIN. CODE DWD § 60.06(3). After
the state’s administrative procedure has been completed, a
vendor who wishes to challenge the state licensing agency’s
handling of an award may request that a federal arbitration
panel, convened by the Department, consider the grievance.
20 U.S.C. § 107d-1(a). Federal courts review that arbitration
panel’s decision as a final agency action under the Adminis-
trative Procedure Act (the “APA”). 20 U.S.C. § 107d-2; 5
U.S.C. § 701.
B. Factual Background
Back in October 2007, Respondent-Appellant Theresa Tay-
lor accepted the DWD’s invitation to run the vending ma-
chines at three southeastern Wisconsin correctional facilities
on an interim basis: the Racine Correctional Institution, the
4 Nos. 20-1016 & 20-1115
Sturtevant Transitional Facility,1 and the Racine Youthful Of-
fender Correctional Facility. The DWD considered the first
two a single “stand-alone” facility (“Racine/Sturtevant”) be-
cause together they provided full-time employment for a sin-
gle vending operator. The DWD considered the third site
(“Racine Youthful Offender”) an “add-on” to be run in addi-
tion to an operator’s existing sites. Taylor served as interim
operator of these three sites for four years, but DWD always
planned to bid out these sites on a permanent basis.
In July 2011, the DWD bid out the vending operations at
the Racine Youthful Offender site on a permanent basis. Tay-
lor and another licensed blind vendor, Jocelyn Belsha—who
initially trained Taylor—interviewed with the DWD. On the
interview questions, Taylor outscored Belsha, and the DWD
awarded operation of the vending at the Racine Youthful Of-
fender site to Taylor.
The central dispute in this case concerns the award of the
stand-alone site at Racine/Sturtevant. In August 2011, Taylor
and Belsha also interviewed to run the vending at that loca-
tion. An interview panel individually scored and graded each
candidate, although its objectivity was called into question
because the scores contained cross-outs and rewrites without
explanation. Belsha outscored Taylor, and the DWD awarded
the Racine/Sturtevant site to Belsha. Doubt also emerged
about the award process because Greg Feypel, who adminis-
tered the award of vending sites through the DWD’s business
enterprise program, had earlier called Taylor about the Ra-
cine/Sturtevant bid. The parties dispute what each said
1 Sturtevant is a village in Racine County, Wisconsin and is located near
the City of Racine.
Nos. 20-1016 & 20-1115 5
during the call: Feypel contends he and Taylor discussed the
distinction between “stand-alone” and “add-on” sites, while
Taylor asserts Feypel asked her to give a site to the struggling
Belsha so the DWD could “even out” things.
The award of the Racine/Sturtevant site to Belsha led Tay-
lor to file a grievance with the DWD. According to Taylor, the
DWD violated WIS. ADMIN. CODE DWD § 60.08(1), which re-
quires that it select “the licensee deemed to be best suited for
an available business enterprise[.]” The DWD held a hearing
on Taylor’s grievance, and its acting administrator denied it.
So in December 2011, Taylor requested a full evidentiary
hearing under 20 U.S.C. § 107d-1(a) and Wis. Stat. § 47.03.
That took place in May 2012, and the evidentiary hearing
panel found issues with the bidding process for the Ra-
cine/Sturtevant site. As a result, that panel made a number of
recommendations to the acting administrator of the DWD, in-
cluding that Belsha’s selection be set aside. Those recommen-
dations were largely adopted, but Belsha—not Taylor—was
allowed to continue as interim operator of the Racine/Sturte-
vant vending operations.
Notwithstanding this outcome on the state level, Taylor
shifted her challenge to the federal regulatory process. As
noted above, a dissatisfied applicant may file a complaint
with the Secretary of Education. 20 U.S.C. § 107d-1(a); see WIS.
ADMIN. CODE DWD § 60.05(4). Upon receipt of the complaint,
the Department convenes an arbitration panel to resolve the
dispute. 20 U.S.C. § 107d-1(a).2 In June 2012, Taylor filed such
2 The arbitration panel consists of three members: one designated by the
state licensing agency, one designated by the blind licensee, and the chair
selected by the other two members. 20 U.S.C. § 107d-2(b)(1). If either party
fails to designate an arbitration panel member, the Department must do
6 Nos. 20-1016 & 20-1115
a complaint alleging discrimination and retaliation in viola-
tion of the “best-suited” blind vendor provision. WIS. ADMIN.
CODE DWD § 60.08(1). She requested she be named the per-
manent operator of the Racine/Sturtevant vending site and re-
ceive financial compensation.
While Taylor’s federal complaint was pending, however,
the DWD issued new selection rules for stand-alone sites on
the state level. When doing so, the DWD sought and received
comments from a pool of blind vendors and a coordination
committee. Belsha served on that committee, and administra-
tor Feypal still worked for the business enterprise program
throughout that comment period. Meanwhile, the Depart-
ment acknowledged receipt of Taylor’s complaint and noti-
fied the acting administrator of the DWD that the complaint
was under review on the federal level.
In June 2013, under the new state selection rules, the DWD
invited the four applicants for the Racine/Sturtevant site to
reinterview, a process that unfolded parallel with Taylor’s
complaint to the Department. Taylor contacted the business
enterprise program director, Lorie Lange, and asked how the
reinterviews would be administered, and whether candidates
would be evaluated based on their business status as of the
so on the party’s behalf. Id. These independent members, selected on an
ad hoc basis, are not Department officials, and the Department has no con-
trol over them. See Sauer v. U.S. Dep’t of Educ., 668 F.3d 644, 650 (9th Cir.
2012) (noting that “an arbitration panel is composed of members ap-
pointed by the parties to the arbitration, not of Department of Education
officials”). Although we consider the arbitration panel’s decision as the
Department’s final agency action, that is more a “legal fiction” created for
purposes of federal review. See id.; 20 U.S.C. § 107d-2(a) (arbitration panel
decision “shall be subject to appeal and review as a final agency action”
under the APA).
Nos. 20-1016 & 20-1115 7
original 2011 Racine/Sturtevant interview. One of Lange’s
deputies ultimately told Taylor of the new selection proce-
dures, and informed her that the reinterview process would
use business data from 2013 rather than 2011.
Rather than participate in the reinterview process, Taylor
withdrew due to her pending federal complaint. She strongly
disagreed with the reinterview, arguing it ran contrary to the
decision rendered by the panel members at the evidentiary
hearing. Taylor also found it unacceptable to conduct a rein-
terview for a site bid out two years previously and based on
a vending operator’s current business status. The reinter-
views proceeded without Taylor, and the DWD again
awarded the Racine/Sturtevant site to Belsha.
In October 2013, Taylor filed an amended complaint with
the Department. She added in her objections to the reinter-
view process, including taking issue with the use of business
data from 2013 and not 2011. In July 2015, the Department no-
tified Taylor and the DWD that it planned to convene a three-
member arbitration panel to hear Taylor’s grievance. And in
September 2017, that arbitration finally took place.
The arbitration panel rendered its decision in February
2018, splitting 2-1 in favor of Taylor. That panel found that the
DWD “acted in an arbitrary, capricious and biased manner”
when it failed to award Taylor the Racine/Sturtevant site dur-
ing the two selection processes. According to the arbitration
panel, Taylor had proved her case “by substantial evidence,”
but in any event, she would have also prevailed under a “pre-
ponderance of the evidence” test.
As for the 2011 interviews, the arbitration panel concluded
that the DWD had violated its own policies and procedures,
8 Nos. 20-1016 & 20-1115
demonstrated bias during the 2011 selection process, and
failed to adequately justify its initial decision to award Ra-
cine/Sturtevant to Belsha. The arbitration panel fully agreed
with the evidentiary hearing panel’s decision to redo the in-
terview process. The arbitration panel also concluded that the
evidentiary hearing panel’s recommendations should have
been followed in their entirety as to the 2013 reinterviews.
Specifically, the arbitration panel found that after the eviden-
tiary hearing panel decision, Taylor, not Belsha, should have
been appointed interim operator of the Racine/Sturtevant site.
The arbitration panel also found that the DWD had put Taylor
at a disadvantage by using the 2013 business data, as Taylor
had been interim operator of Racine/Sturtevant in 2011 and
such prisons sites are more profitable. The arbitration panel
further found that the delay in scheduling the reinterviews
unfairly and inequitably harmed Taylor’s candidacy. The ar-
bitration panel also ruled on remedies, ordering that Taylor
become permanent operator of the Racine/Sturtevant site,
granting her compensatory relief for lost profits, and award-
ing her legal fees and costs.
C. District Court Proceedings
In 2018, in federal district court, the DWD filed a com-
plaint and petitioned for judicial review of the arbitration
panel’s decision favoring Taylor. Taylor also moved to con-
firm and to enforce the arbitration panel’s award. The Depart-
ment submitted the administrative record, and the district
court considered the parties’ cross-motions concerning the ar-
bitration award. The court denied Taylor’s motion to confirm
and enforce the arbitration award but granted the DWD’s re-
quest to vacate and reverse the arbitration panel’s decision,
identifying “foundational” and “substantive” problems with
Nos. 20-1016 & 20-1115 9
the arbitration panel’s decision. These problems included that
the arbitration panel applied the wrong burden of proof. The
district court also disagreed with the arbitration panel’s con-
clusion that the “DWD was relentlessly biased against Tay-
lor,” reading the entire record differently and concluding that
the 2013 reinterviews eliminated any bias against Taylor, as
Feypel did not participate. Belsha’s lack of participation in the
arbitration panel also presented a difficulty.
The district court further concluded that substantial evi-
dence did not support the arbitration panel’s findings of defi-
ciency, and that the arbitration panel acted arbitrarily and
capriciously in ruling for Taylor. As to remedies, the district
court set aside the compensatory damages, attorneys’ fees,
and costs based on Wisconsin’s sovereign immunity, adopt-
ing the reasoning from Wisconsin Dep’t of Workforce Dev., Di-
vision of Vocational Rehab. v. U. S. Dep’t of Educ., 667 F.Supp.2d
1007, 1012–13 (W.D. Wis. 2009).
Earlier this year, Taylor appealed to this court. Federal
question jurisdiction exists under 5 U.S.C. § 701 et seq., 20
U.S.C. § 107d-2(a),3 and 28 U.S.C. § 1331, and this court has
appellate jurisdiction under 28 U.S.C. §1291.
3 The Department’s role in this case, with one qualification, is nominal.
Besides submitting the administrative record, the Department convened
the arbitration panel (whose findings and opinions the district court re-
viewed), covered the cost of the arbitration, and has oversight and fund-
ing responsibility for administration of the Act. See 20 U.S.C. § 107d-1(a).
But the Department had no substantive involvement in the opinions and
orders issued by the panel, and the Department did not review, affirm,
reverse, or comment on the panel decision. This case names the Depart-
ment as a Respondent-Appellee because the Act makes the panel decision
10 Nos. 20-1016 & 20-1115
II
The Randolph-Sheppard Act directs federal courts to re-
view arbitration panel decisions under APA standards. See 20
U.S.C. § 107d-2(a). As relevant here, “[t]he reviewing court
shall … hold unlawful and set aside agency action, findings,
and conclusions found to be—(A) arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with law;
… (D) without observance of procedure required by law; [or]
(E) unsupported by substantial evidence in a case … .” 5
U.S.C. § 706(2)(A), (D), (E). “Those standards overlap.”
Orchard Hill Bldg. Co. v. U.S. Army Corps of Eng’rs, 893 F.3d
1017, 1024 (7th Cir. 2018).
A determination is arbitrary and capricious if it “runs
counter to the evidence before the agency, or is so implausible
that it could not be ascribed to a difference in view or the
product of agency expertise.” Zero Zone, Inc. v. U.S. Dep’t of
Energy, 832 F.3d 654, 668 (7th Cir. 2017). It “is unsupported by
substantial evidence when the record lacks evidence that ‘a
reasonable mind might accept as adequate to support the
a final agency action of the Department, 20 U.S.C. § 107d-2(a), but it is so
in name only as to the rights, claims, and remedies submitted for review.
The Department did take one procedural step worth noting. After the
DWD appealed, the district court vacated and reversed the panel decision.
The district court also remanded the case to the Department to affirm the
DWD’s award. Because the Department lacks authority to affirm the
DWD’s award—and that step was unnecessary in any event—the Depart-
ment filed in the district court an unopposed motion to amend the judg-
ment to remove the remand instruction, which the district court granted.
Other than that motion, the Department did not involve itself in the dis-
trict court case. On appeal the Department did not participate in briefing
or oral argument.
Nos. 20-1016 & 20-1115 11
conclusion.’” Orchard Hill Bldg. Co., 893 F.3d at 1024 (quoting
Zero Zone, 832 F.3d at 668). Under either standard, the scope
of review is “narrow and a court must not substitute its judg-
ment for that of the agency.” Abraham Lincoln Mem’l Hosp. v.
Sebelius, 698 F.3d 536, 547 (7th Cir. 2012). Still, the “APA re-
quires meaningful review.” Dickinson v. Zurko, 527 U.S. 150,
162 (1999). “A court, in other words, should deferentially ex-
amine an agency’s work, but not rubberstamp it.” Orchard
Hill, 893 F.3d at 1024 (footnoted omitted). And it “should not
attempt itself to make up for … deficiencies” in an agency’s
reasoning. Zero Zone, 832 F.3d at 668; see Motor Vehicle Mfrs.
Ass’n v. State Farm Mut. Ins. Co., 463 U.S. 29, 43 (1983).
Taylor defends the arbitration panel’s decisions to award
her the vending operations at the Racine/Sturtevant site as
well as damages. She contends the district court erred when
it found that the arbitration panel: (A) applied the incorrect
burden of proof; (B) lacked substantial evidence for its key
findings; and (C) arbitrarily and capriciously awarded reme-
dies.
A. Burden of Proof
Taylor argues the district court erred first when it ruled
that her burden of proof before the arbitration panel was pre-
ponderance of the evidence. She defends the arbitration
panel’s use of the more deferential substantial evidence
standard of review.
As an initial matter, the party seeking relief at an agency
evidentiary hearing bears the burden of proof. 5 U.S.C.
§ 556(d) (“Except as otherwise provided by statute, the pro-
ponent of a rule or order has the burden of proof.”) This stat-
ute means that preponderance of the evidence is the burden
12 Nos. 20-1016 & 20-1115
of proof on the party seeking an order at an agency hearing.
See Steadman v. SEC, 450 U.S. 91, 102 (1981) (holding that pro-
ponent of a rule or order under the predecessor to § 556(d)
had to meet its burden by preponderance of the evidence); see
also Metro. Stevedore Co. v. Rambo, 521 U.S. 121, 138–39 (1997)
(“5 U.S.C. § 556(d) … places the burden of persuasion on the
proponent of an order; when the evidence is evenly balanced,
the proponent loses.” (citations omitted)); Berron v. Illinois
Concealed Carry Licensing Review Bd., 825 F.3d 843, 847–48 (7th
Cir. 2016) (“As a matter of administrative law, the proponent
of a position bears the burden of showing entitlement by a
preponderance of the evidence.”); Mach Mining, LLC v. Sec’y
of Labor, Mine Safety & Health Admin., 728 F.3d 643, 647 & n.7
(7th Cir. 2013) (“Steadman … specifically held that section 7(c)
of the APA established a ‘traditional preponderance-of-the-
evidence standard.’ Section 7(c) of the APA was codified at
§ 556(d) … .” (citation omitted)).
So Taylor, as the proponent of a ruling that the DWD had
violated the law, bore the burden of proof before the arbitra-
tion panel to show that violation by a preponderance of the
evidence. Yet the arbitration panel, over the DWD’s objec-
tions, applied a standard of review, substantial evidence. The
arbitration panel cited Wisconsin Dep’t of Workforce Dev., Div.
of Vocational Rehab. v. U.S. Dep’t of Educ., 667 F. Supp. 2d 1007(W.D. 2009). But that decision applied the substantial evi-
dence standard of review in its APA assessment under 5
U.S.C. § 706(2) of the arbitration panel decision in that case.
Id. at 1017–18. The arbitration panel here mistakenly substi-
tuted the APA standard of review for the burden of proof of
the disappointed vendor.
Nos. 20-1016 & 20-1115 13
This application of the wrong burden of proof had dam-
aging consequences. It effectively and incorrectly shifted the
burden of proof to the DWD, as the district court rightly
noted. The arbitration panel’s consideration of those facts un-
der the incorrect burden of proof permeated its findings.
At one point, the arbitration panel hedges on this question,
stating “even assuming, arguendo, that the preponderance of
the evidence test should be used, the panel finds that Taylor
in any event has met that heavier burden.” But at other
points—such as when the arbitration panel cited to the
DWD’s failure to present evidence to explain its decisions—
the panel gave Taylor the benefit of the doubt, even though
Taylor had to show that these decisions were arbitrary and
capricious. As the district court noted, this confirmed the
panel’s application of the more deferential but incorrect
standard. And without explanation of how Taylor’s evidence
would have met the greater preponderance of the evidence
burden, the arbitration panel’s decision cannot be correct.
Before us, Taylor fails to cite any persuasive authority for
her reading of 5 U.S.C. § 556(d). Without any findings made
under the stricter preponderance of the evidence burden of
proof, the arbitration panel’s decision cannot stand. And un-
der the APA, a federal court may “hold unlawful and set aside
agency action, … found to be … without observance of proce-
dure required by law.” 5 U.S.C. § 706(2)(D). Because the arbi-
tration panel applied the wrong burden of proof, it did not
observe the required procedure for conducting an evidentiary
hearing. So the district court correctly concluded that the ar-
bitration panel fundamentally erred when it applied the in-
correct burden of proof.
14 Nos. 20-1016 & 20-1115
When finding facts, arbitration panels under the Act must
apply a preponderance of the evidence standard. Only on re-
view of an arbitration panel’s findings by a federal court does
the substantial evidence standard apply.
B. Substantial Evidence Review
Taylor endorses the arbitration panel’s findings on several
topics and disagrees with the district court’s conclusion that
those findings lack substantial evidence. Those findings by
the arbitration panel—all faulting the DWD—included:
1. the use of 2013 rather than 2011 business
data in the 2013 reinterviews;
2. the failure of the DWD administrator to ac-
cept letters of recommendation;
3. the decision to make Belsha and not Taylor
the interim operator of the Racine/Sturte-
vant site; and
4. the delay between the DWD administrator’s
decision and the 2013 reinterviews.
The district court concluded that these findings of fact are not
supported by substantial evidence. Review of the record con-
firms the district court’s decision.
First, the arbitration panel determined that in the 2013 re-
interviews the DWD should have evaluated Taylor based on
her 2011 profitability data, not 2013 data. Taylor testified that
prison sites such as Racine/Sturtevant are more profitable
than non-prison sites, and in 2011 Taylor served as the interim
operator at Racine-Sturtevant, but did not do so in 2013.
But substantial evidence does not support the arbitration
panel’s finding that the 2013 data disadvantaged Taylor. Only
Nos. 20-1016 & 20-1115 15
two questions in the 2013 selection criteria assessed profita-
bility data. And the arbitration hearing record does not con-
tain evidence of what Taylor’s and Belsha’s profitability
scores would have been using the 2013 data; indeed, Taylor
even chose not to reinterview in 2013. Further, the record ev-
idence does not support Taylor’s testimony that losing the Ra-
cine/Sturtevant site diminished her profitability, as her net
profit in 2011 at prison and non-prison sites was nearly iden-
tical.
Second, the arbitration panel found fault with the DWD’s
failure to accept letters of recommendation. Specifically, the
arbitration panel stated that accepting letters “would have
helped negate the internal bias [that the DWD] demonstrated
during the selection process in favor of selecting Belsha as
permanent operator [of Racine/Sturtevant.]” But substantial
evidence does not support such a finding of bias. For example,
Feypel scored Taylor and Belsha the same, and after the 2011
interviews the DWD awarded Taylor two other vending sites
outside of the normal bidding process. Regardless, Feypel did
not participate in the 2013 reinterviews, which also cleansed
the process from any anti-Taylor bias if any existed in the first
place.
The DWD explained why it did not accept recommenda-
tion letters: Taylor and Belsha were already incumbent ven-
dors well known to the business enterprise program. Even if
the DWD’s rationale for not accepting letters may have con-
travened Wisconsin privacy laws as confidential information
requiring informed consent for disclosure, WIS. ADMIN. CODE
DWD § 68.04, the letter for Taylor would not have made a dif-
ference. It was brief—only six sentences long—and generic in
its praise. So the arbitration panel finding that such a letter
16 Nos. 20-1016 & 20-1115
would have significantly affected the award process is not
well supported.
Third, the arbitration panel found that the DWD should
have followed the interim operator recommendation made by
the evidentiary hearing panel. After the evidentiary hearing
panel made its recommendations in favor of Taylor, the DWD
administrator still retained Belsha as the interim operator at
the Racine/Sturtevant site to minimize disruption. The arbi-
tration panel found that the DWD had offered no evidence to
support that decision. Yet the arbitration panel’s own finding
on this lacks substantial evidence.
This is because the evidentiary hearing panel did not say
who should serve as interim operator while a second inter-
view process was held. It made no recommendation on the
subject, which alone renders the arbitration panel’s finding
suspect. Moreover, as the DWD contended, leaving Belsha in
place until the reinterviews also limited further disruption. It
meant only one operational change at the site (if Taylor pre-
vailed, from Belsha to Taylor), or potentially no change (if Bel-
sha prevailed). If Taylor took over, that meant potentially two
changes (Taylor as interim operator, to Belsha as a result of
the initial award, then back to Taylor if there was a change in
interim operator, followed by Belsha again if Belsha prevailed
at the reinterviews). The district court correctly identified the
arbitration panel’s flawed factual finding here.
Fourth, the arbitration panel found that the delay between
the 2011 decision awarding the Racine/Sturtevant site to Bel-
sha and the 2013 reinterviews unfairly and severely harmed
Taylor. A twenty-month delay did occur between the inter-
views and the reinterviews. But abundant evidence supports
the DWD’s explanation for the delay, which lacks the malice
Nos. 20-1016 & 20-1115 17
presumed by the arbitration panel. Although Lange, the busi-
ness enterprise program director, did not learn of the need to
reinterview until May 2013, during this time frame the state
licensing agency had been working on developing new selec-
tion criteria with a committee of blind vendors, as required by
WIS. ADMIN. CODE DWD § 60.03(5)(a) (which establishes the
committee and requires its active participation in the agency’s
work). According to the record evidence bureaucracy, not bad
faith, caused the delay. And the delay did not necessarily
strengthen Belsha’s argument to be awarded the Ra-
cine/Sturtevant site because the record contains no evidence
of either Belsha’s or Taylor’s profitability in 2013. The arbitra-
tion panel also failed to detail why the delay harmed Taylor,
yet as noted above Taylor had the burden of proof. In sum-
mary, the arbitration panel improperly assumed, without ev-
idence, that the DWD both purposely designed the delay and
did so to favor Belsha.
This review of the evidence illustrates that the district
court correctly concluded that substantial evidence did not
support several material findings of fact by the arbitration
panel.
C. Arbitrary and Capricious Review
As for the remedy, the arbitration panel concluded that
Taylor was best suited to operate the Racine/Sturtevant site.
To the district court, that decision was arbitrary and capri-
cious as “counter to the evidence before the agency, or [] so
implausible that it could not be ascribed to a difference in
view or the product of agency expertise.” Orchard Hill, 893
F.3d at 1024.
18 Nos. 20-1016 & 20-1115
The district court gave two main reasons for overruling
the arbitration panel’s remedy. First, information about com-
peting vendors—particularly, Belsha—was not in the record,
so the panel could not reliably gauge the relative merits of
their applications. And second, Taylor must take responsibil-
ity for that omission, as in what must be deemed a strategic
error she chose unreasonably not to participate in the 2013 re-
interview process. If Taylor had reinterviewed, she would
have had a stronger case because record evidence would have
existed concerning her 2013 qualifications.
Taylor argues the DWD presented no evidence that Belsha
was better suited than her to operate the facilities at Ra-
cine/Sturtevant. But as described above, the DWD had no bur-
den to prove Belsha was the better candidate. Taylor had that
burden, and Belsha participated in the 2013 reinterview pro-
cess while Taylor did not. And if Taylor’s complaint is that the
DWD implemented an equitable policy, rather than one based
on merit, she could have offered that argument, but she did
not.
Taylor also complains that notwithstanding the eviden-
tiary hearing panel’s recommendation that Taylor be awarded
the Racine/Sturtevant site, the DWD kept Belsha on during
the reinterview process. But during that time Belsha remained
as interim operator. Only after the reinterviews were com-
plete did the DWD name Belsha the permanent operator of
the Racine/Sturtevant facility.
The district court correctly decided that the arbitration
panel acted arbitrarily and capriciously when it chose Taylor
as the best-suited operator for the Racine/Sturtevant site. As
previously noted, the arbitration panel could not dependably
assess the candidacies of competing applications because
Nos. 20-1016 & 20-1115 19
Taylor chose not to participate in the 2013 reinterviews. She
declined believing the use of the 2013 data was not fair, but
that decision meant she could not provide record evidence of
her 2013 profitability data. Taylor’s failure to take part pre-
cluded the arbitration panel from having a record upon which
it could compare and contrast the various applicants.4 So the
arbitration panel acted arbitrarily and capriciously in decid-
ing for Taylor.
A final note: Because we affirm the district court’s decision
for the DWD, we need not reach the question of sovereign im-
munity and relief or the arbitration panel’s various rulings
making Taylor the permanent operator at the Racine/Sturte-
vant site, awarding monetary damages, and attorneys’ fees
and costs. Each of these rulings remain vacated.
III
Taylor’s appointment to Racine/Sturtevant by the arbitra-
tion panel ran afoul of administrative procedure in several
ways. The arbitration panel misapprehended the burden of
proof, its key factual findings were not supported by substan-
tial evidence, and its decision for Taylor as the best operator
for the Racine/Sturtevant site is contrary to the evidence and
thus arbitrary and capricious. The district court correctly rec-
ognized these deficiencies and ordered judgment to the DWD
against Taylor vacating and reversing an award of money
damages and a permanent vending machine services contract
4 Taylor contends the DWD administrator’s final decision did not comply
with Wisconsin law because it did not contain findings of fact and conclu-
sions of law. She raises this argument for the first time on appeal, so she
has waived it. Henry v. Hulett, 969 F.3d 769, 785–86 (7th Cir. 2020) (en
banc).
20 Nos. 20-1016 & 20-1115
for the Racine/Sturtevant site. We AFFIRM the district court’s
decision.