Owens & Minor Distribution, Inc. v. United States ( 2021 )

In the United States Court of Federal Claims
No. 21-1341
Filed: June 22, 2021
OWENS & MINOR DISTRIBUTION,
INC.,
Plaintiff,
and
CONCORDANCE HEALTHCARE
SOLUTIONS, LLC
Intervenor-Plaintiff,
v.
THE UNITED STATES,
Defendant,
MEDLINE INDUSTRIES, INC.,
Intervenor-Defendant,
and
CARDINAL HEALTH 200, LLC,
Intervenor-Defendant.
Jonathan D. Shaffer, Smith Pachter McWhorter PLC, Tysons Corner, VA, for Plaintiff, Owens
& Minor Distribution, Inc.
Aron C. Beezley, with Patrick R. Quigley, Lisa A. Markman, Nathaniel J. Greeson, and Sarah S.
Osborne, Bradley Arant Boult Cummings LLP, Washington, D.C., for Intervenor-Plaintiff,
Concordance Healthcare Solutions.
Sarah E. Kramer, Trial Attorney, and Mollie Finnan, Senior Trial Attorney, Commercial
Litigation Branch, Civil Division, U.S. Department of Justice, Washington, D.C., with Jason
Fragoso, Department of Veterans Affairs, Gale Furman, and Katherine McCulloch, Defense
Logistics Agency, Of Counsel, for Defendant, the United States of America.
Kristen E. Ittig, with Nathaniel E. Castellano, and Aime JH Joo, Arnold & Porter Kaye Scholer,
LLP, Washington, D.C., for Intervenor-Defendant, Medline Industries, Inc.
Merle M. DeLancey, Jr., Blank Rome LLP, Washington, D.C., for Intervenor-Defendant,
Cardinal Health 200, LLC.
MEMORANDUM OPINION 1
TAPP, Judge.
Before the Court is an interlocutory issue regarding the United States’ proposed remand
and the scope of that remand. In this protest, Owens & Minor Distribution, Inc. (“O&M”)
challenges corrective action taken by the Department of Veterans Affairs (“VA”), particularly
the re-opening of price discussions with a successful offeror—Medline Industries, Inc.
(“Medline”)—and an unsuccessful offeror—Concordance Healthcare Solutions, LLC
(“Concordance”). O&M claims that the VA omitted it from those discussions in violation of
various Federal Acquisition Regulations (“FAR”). (Compl. at ¶¶ 42–47 (Count I), ECF No. 15).
O&M also complains that, based on a planned transfer of requirements from the VA to the
Defense Logistics Agency (“DLA”), the VA’s Request for Proposal (“RFP”) is materially
inaccurate as to the scope of the services required and thus the procurement violates provisions
of the FAR. (Id. at ¶¶ 48–58 (Count II)). Those issues are not yet fully briefed. O&M’s protest is
also directly related to another consolidated protest, Medline Industries, et al. v. United States et
al. (“Medline”), Consol. Case No. 21-1174. 2
In both protests, after Plaintiffs filed opening merits briefs, the United States moved for
remand. (E.g., USA Mot. to Remand, ECF No. 50). The United States admitted no error and
promised no corrective action. 3 In the O&M action, the United States also sought to limit the
scope of remand by excluding a single count of O&M’s Complaint. Lastly, only two days prior
to moving for remand, the United States proceeded to transfer one component of VA services to
1
On June 17, 2021, the Court issued orders denying the United States’ motions to remand in this
case and in Medline Industries, et al. v. United States et al. (“Medline”), Consol. Case No. 21-
1174. This Opinion explains the rationale for that decision.
2
Medline involves the same parties in different litigation postures and principally challenges the
transfer of the VA’s requirements for medical and surgical supplies to the DLA, where those
requirements will be filled by existing DLA contract awardees (O&M and Cardinal Health 200,
LLC). In Medline, O&M is a defendant-intervenor contending that the planned transfer is lawful.
3
Notably, it did so without discussions with the Plaintiffs despite having previously rebuked one
plaintiff for acting unilaterally. (Tr. of Oral Arg. at 31:1–3; USA Opp. to Mot. for TRO at 8–9,
ECF No. 56). In its response to a motion relating to injunctive relief, the United States grumbled
that the other unsuccessful bidder “could have informed the United States that it was about to file
a motion for preliminary injunction, and asked whether a motion for TRO would be necessary”
but “[i]t did not. As a litigation tactic, it favored the element of surprise instead. [The
unsuccessful bidder] should not now be heard to complain about the ramifications of its own
failures to act promptly and cooperatively.” (USA Opp. to Mot. for TRO at 8–9 (emphasis
added)).
2
the DLA (VISN 6) and then took the position that it would not rescind that transaction. (Id. at 3–
4).
Eschewing a cooperative approach (supra n. 3), the United States moved for remand on a
Friday afternoon preceding a three-day holiday weekend, mere days before the deadline to file its
own responses to the plaintiffs’ opening merits briefs. In other words, portions of the United
States actions appear to be calculated to disadvantage the plaintiffs and to garner indefinite delay
prior to its own merit responses. The timeliness of the United States’ maneuvers comes into play
again as described below.
Despite its contention that it was not confessing error, during a hearing on June 4, 2021,
the United States admitted that its merits position regarding the proposed transfer of VA
requirements to the DLA lacked support in the Administrative Record:
The Court: So just to be clear, the United States is making a judicial
admission today, a binding judicial admission, that if we move forward, if the
remand is not granted, the United States will not defend against the claim that
the transfer to DLA is unlawful?
[The United States]: We are conceding that there is not adequate support in
the record. . . . We are recognizing that part of this Court’s standard of review
is whether there is a rational basis for an agency’s action reflected in the
record. That rational basis is not there.
(Tr. of Oral Arg. at 19:10–25, Medline, Case No. 21-1174, ECF No. 81). After that admission,
the parties filed a joint status report on June 8, 2021. (JSR, ECF No. 56). Significantly, for the
first time, and with only an intervening weekend, the United States surprised the Court yet again
by informing the Court that “the [VA] has cancelled the planned transfer [of MSPV to the DLA],
and is reconsidering whether any future transfer will even occur, and if so on what grounds and
timeline[.]” (Id. at 5). The United States did not disclose the date this startling development
occurred.
Helpfully, the parties have identified three categories of claims currently present and
pending before the Court. (JSR at 2). “Category 1” includes the claims brought by Medline and
Concordance challenging the transition of the Medical/Surgical Prime Vendor (“MSPV”) 2.0
Program from the VA to the DLA. “Category 2” encompasses claims brought by Concordance
and O&M which allege that the VA’s MSPV 2.0 solicitation violates FAR § 15.206 because it
doesn’t reflect the current requirements of the VA. “Category 3” consists of a single claim—
O&M’s Count I protest that it should be included in the VA’s price discussions among offerors
for the latest MSPV 2.0 contract.
The United States seeks a remand of Categories 1 & 2, but requests that the Court sever
O&M’s lone claim in Category 3 and proceed with the merits briefing on that issue. (JSR at 3;
USA Mot. to Remand at 3). The United States has represented that the VA is not amenable to
imposing a voluntary stay of its MSPV 2.0 procurement, and that the United States intends to
defend that claim on the merits, but requests the Court stay all other litigation pending the
limited remand. (JSR at 3–6). The United States’ proposed limited remand excludes some
3
aspects of MSPV 2.0 and the transfer, specifically VISNs 6 and 20. The United States explains
that VISN 20 has been completely transferred to the DLA and that it went live on March 31,
2021. (USA Cross-MJAR at 13). The United States also explains that the VA has already
transferred several facilities in VISN 6 and that it plans to complete both the second and third
waves by July 21, 2021. (USA Cross-MJAR at 13–14, ECF No. 60). Medline provided MSPV
services to VISN 6 for the VA, but Cardinal Health 200, LLC (“Cardinal”) is currently
providing, and will continue to provide, those services through its DLA contract. 4 The United
States intends to continue with the transfer of those portions of MSPV 2.0 to the DLA regardless
of whether the Court grants or denies the remaining portions of the requested remand.
As if the other changes in the administrative and litigation positions of the United States
were not enough to delay an expeditious ruling on the remand issue, the United States took the
position in its Medline response and cross-MJAR (filed the same day as the Joint Status Report),
that despite its in-court statement, “[t]he agency has not confessed error here.” (Medline, Case
No. 21-1174, Def.’s Cross-MJAR at 18, ECF No. 84). The United States later repeated that
contention in its Cross-MJAR in this case, which was filed four days later. (USA Cross-MJAR at
31). The United States attempts to square that circle by offering a narrower definition of
“confession of error.” Without citation, the United States contends that it hasn’t confessed error,
it has merely conceded that “the record simply does not support the decision made, not because
the decision is inherently unlawful, but because it is not possible to discern the reasoning
supporting it to determine its lawfulness.” (Id.).
The Court is unable to see a meaningful difference. If the Court were to find that the
VA’s decision was “unsupported by the Administrative Record,” or “lacked a rational basis,”
then the United States loses. The United States has admitted that the agency violated the
Administrative Procedure Act by committing itself to an action unsupported by the
Administrative Record and thus was arbitrary and capricious and an abuse of discretion. 5 U.S.C.
§ 706; Star Fruits S.N.C. v. United States, 393 F.3d 1277, 1281 (Fed. Cir. 2005) (“An abuse of
discretion occurs where the decision is based on an erroneous interpretation of the law, on factual
findings that are not supported by substantial evidence, or represents an unreasonable judgment
in weighing relevant factors.”). The United States’ admission is binding. John McShain, Inc. v.
United States, 375 F.2d 829, 831 (Fed. Cir. 1967) (judicial admissions bind the party who made
them). The Court’s view, in light of the United States’ admissions, is that this transfer plan is
unsupported by the Administrative Record and therefore this transfer plan is unlawful, and
although now (apparently) abandoned, this transfer plan was conceived in error. The United
States has confessed that error in open court. Its attempt to retreat from that confession is
unavailing.
It is important for the Court to clarify this point because although the United States has
represented that the planned transfer “is cancelled,” that statement standing alone in the briefs is
inadequate to assuage the Court’s concerns. (USA Cross-MJAR at 37 (“the agency has cancelled
4
The United States asserts that reversing these transfers will be “unduly burdensome and unduly
prejudicial[.]” (Mot. for Remand at 3–4). Medline disagrees, pointing out that the transfers have
not been live for very long, and Medline has left the infrastructure in place to “immediately
transition VISN 6 back” to Medline. (Medline Resp. to Mot. to Remand at 2 n. 1, ECF No. 54).
4
the planned transfer, and is reconsidering whether any future transfer will even occur, and if so
on what grounds and timeline[.]”)). The Court does not doubt that counsel for the United States
has made that representation in good faith and to the best of her present knowledge. However,
the sands on which the United States builds its defense have shifted since the inception of this
action, leaving all to guess whether, after the next filing, the landscape will look the same
tomorrow as it does today. The United States attached several affidavits to its Cross-MJAR. (See
USA Cross-MJAR Exs. 1–3). Conspicuously absent in those declarations from VA and the DLA
officials is a statement regarding the current status of the transfer. Is it indeed “cancelled?” The
Court is left with some uncertainty.
In response to the United States, the parties have staked out a variety of positions that the
Court will attempt to abridge. First, Medline agrees that a remand is appropriate with respect to
Categories 1 & 2 but proposes specific objectives that it requests the Court order the agency to
consider on remand. These objectives relate to the erstwhile contemplated transfer; Medline
takes no position regarding a remand of the “Category 3” claim brought by O&M.
Second, Concordance’s position is primarily in opposition to remand, but Concordance
makes clear that it would support a remand that includes the objectives proposed by Medline
with respect to “Category 1.” Concordance, however, does not support a remand if, during the
remand, the VA was not inclined to reconsider whether the challenged MSPV 2.0 solicitation
reflected the current needs of the VA. Concordance would support a remand of Categories 2 and
3 if the VA announced a voluntary stay of the MSPV 2.0 procurement while it reconsidered that
solicitation.
Third, O&M is opposed to a “limited remand,” but has no objection to a remand that
includes reconsideration related to claims in Categories 2 & 3 and includes a voluntary stay of
the MSPV 2.0 procurement. In other words, O&M wants an “all or nothing” remand. O&M
suggests that the Court either continue briefing without any remand, or remand its claim in
Category 3 but set a briefing schedule so that O&M may move for a preliminary injunction
regarding the VA’s MSPV 2.0 procurement. Fourth and finally, Cardinal agrees with the United
States that Categories 1 & 2 should be remanded and takes no position on a remand of Category
3, but states its opposition to that claim on the merits.
A remand is often, but not always, appropriate when the agency has a “substantial and
legitimate” concern. SKF USA Inc. v. United States, 254 F.3d 1022, 1029 (Fed. Cir. 2001) (“[I]f
the agency's concern is substantial and legitimate, a remand is usually appropriate.”) (emphasis
added); see also Diversified Maint. Sys., Inc. v. United States, 74 Fed. Cl. 122, 127 (2006) (“The
circumstances found not to require remand have been rare indeed.”) (collecting cases); cf. Yang
v. I.N.S., 109 F.3d 1185, 1194 (7th Cir. 1997) (“[I]t is pointless to remand if it is clear what the
agency decision must be.”) (internal quotations omitted). But as the United States has pointed
out, “[t]his is a highly unique situation.” (Tr. of Oral Arg. at 39:16). And the decision whether a
remand is appropriate is within the trial court’s discretion. SKF USA, 254 F.3d at 1029 (“the
reviewing court has discretion over whether to remand.”).
In attempting to determine what constitutes a “substantial and legitimate” concern, the
Court finds the recent work of its colleagues persuasive. In Keltner v. United States, 148 Fed. Cl.
552 (2020), Judge Solomson recounted the history of voluntary remands, including the standards
5
articulated in SKF USA. Judge Solomson offered a test, crafted by the Court of International
Trade, which the Court finds useful here: An agency’s concerns are substantial and legitimate
where (1) the agency provides a compelling justification for its remand request; (2) the need for
finality does not outweigh the justification for voluntary remand presented by the agency; and (3)
the scope of the agency’s remand request is appropriate. Id. at 564; see also Ad Hoc Shrimp
Trade Action Comm. v. United States, 882 F. Supp. 2d 1377, 1381 (Ct. Int’l Trade 2013).
Following Judge Solomson’s decision in Keltner, Judge Hertling concluded that the Court must
engage with the record before it, and make a finding that the agency’s concerns are actually
substantial and legitimate, rather than simply crediting the United States’ litigation position:
[G]overnment motions for a voluntary remand to an agency for additional
consideration should not simply be granted in a perfunctory manner. Rather,
such motions should be treated as with any other motion affecting the
substantial rights of the plaintiff, by subjecting the government’s position to
careful analysis to ensure that the motion is properly supported and justified.
Rahman v. United States, 149 Fed. Cl. 685, 690 (2020). The Court finds that the United States
fails to carry its burden on all three elements of the Keltner test.
First, the agency has not provided a compelling justification for its remand request.
Counsel for the United States has made conclusory representations that the agency’s concerns
are substantial and legitimate and warranted as a member of the Bar of the Court of Federal
Claims, that those representations are made in good faith. However, as the Court noted during
the June 4 hearing, the United States’ motion contained no citations to the Administrative Record
and was not accompanied by an affidavit of either of the agencies involved in this protest. (Tr. of
Oral Arg. at 16:12–17:18). While the Court does not question the candor of the United States’
counsel, it cannot assume that every request for a remand is substantial and legitimate. See
Keltner, 148 Fed. Cl. at 566 (“Were this Court to hold differently, the government could always
seek a voluntary remand following a fully briefed [MJAR and oral argument], thereby seeking to
avoid a loss on the merits . . ..”). The Keltner test requires that the agency provide a compelling
justification, and here the United States failed to support its motion with, at the least, statements
from the agency representatives. This failure viewed in conjunction with the suspect timing of
the United States’ Motion prompts the Court to consider whether the United States’ request is
merely a litigation tactic. Consequently, its motion must fail.
But even if the United States’ Motion had been properly supported with the agencies’
alleged compelling justifications, the Court finds that remand is inappropriate at this stage
because the need for finality is overwhelming. As noted above, the United States repeatedly
confessed agency error in open court. It conceded that the agency lacked a rational basis for the
transfer of MSPV requirements from the VA to the DLA. This judicial admission removes that
fact from issue. Reliable Contracting Group, LLC v. Department of Veterans Affairs, 779 F.3d
1329, 1334 (Fed. Cir. 2015) (judicial admissions “have the effect of withdrawing a fact from
issue[.]”) (internal quotations omitted); B. D. Click Co., Inc. v. United States, 614 F.2d 748, 756
(Fed. Cir. 1980) (“Admissions made in the course of judicial proceedings are substitutes for, and
dispense with, the actual proof of facts.”). The Court sees no need to wait six (or more) months
for the agency to acknowledge this error itself, or worse yet, paper the current record to obscure
what is apparently obvious to the Department of Justice today: that there is not “adequate support
6
for the planned transfer” in the Administrative Record and thus “it is not appropriate for [the
United States] to continue to defend this action.” (Tr. of Oral Arg. at 17:19–18:8). The United
States also admits that either an adverse judgment or a remand would start the same processes at
the agency level. (Id. at 18:16–21 (“The agency is offering to do now what in a best-case world it
could do on day two after this Court issues a decision[.]”)). The Court sees no need to stay its
hand when the United States has admitted that a decision on the merits will spur such prompt
corrective action. A decision on the merits looms.
The United States admits that protestors are entitled to judgment on claims which
challenge the transfer under the Administrative Procedure Act’s arbitrary and capricious standard
of review. The Court can provide a remedy that grants finality (and clarity) to all parties in three
separate protests on the majority of their claims. It is difficult for the Court to imagine a set of
compelling agency justifications that—even if properly placed before the Court—would have
outweighed the overwhelming interests of the parties and the Court to impose finality on this
complex case. An “agency must examine the relevant data and articulate a satisfactory
explanation for its action including a ‘rational connection between the facts found and the choice
made.’” Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29,
43 (1983) (quoting Burlington Truck Lines v. United States, 371 U.S. 156, 168 (1962)). “When
an agency fails to comply with this minimum standard for agency action in the first instance —
but the record is otherwise complete and permits judicial review — a party may seek judicial
review and a court may order appropriate relief.” Keltner, 148 Fed. Cl. at 565–66. Like the
Keltner court, “[i]f the [agency] did not satisfy this minimum standard in the first instance, the
Court sees no reason to afford the [agency] a ‘second bite at the apple’ without first reaching the
merits[.]” Id. at 566. Because the need for finality outweighs the justification for remand, the
United States’ motion must be denied.
Even further supporting denial of the United States’ motion, the Court finds that the
scope of the remand requested is inadequate for two reasons. O&M has admitted that a remand
in which the VA reconsiders the scope of the MSPV 2.0 solicitation has the potential to moot its
Category 3 claim regarding its exclusion from price discussions. (JSR at 11). As these issues are
inextricably linked, a partial remand without a complete stay of agency action combined with
continued piecemeal litigation does not serve the interests of justice. But more importantly, the
United States has expressed its intent to continue with the transfer of VISN 6. (USA Mot. to
Remand at 3; JSR at 3). Neither Concordance, nor Medline, nor O&M object to VISN 6
remaining with the DLA. (Medline Resp. to Mot. to Remand at 2; JSR at 9 (“Concordance
presently takes no position on the issue of VISN 20 and VISN 6” but reserved its right to
object.); see O&M Resp., ECF No. 53 (no mention of VISN 6)). Nevertheless, the fact remains
that the United States is arguing for a remand that excludes reconsideration of a transfer it has
already conceded is unsupported by the Administrative Record. Without an expressed intent to
reconsider the price discussion issue, as well as the entirety of the transfer, the scope of the
United States’ proposed remand is inappropriate.
7
The Keltner test is conjunctive. If the United States had failed on any one element, the
Court would be justified in denying remand. But here, the United States fails on all three
elements. The agency has not provided a compelling justification for remand, the need for
finality dominates the United States’ interest in a remand, and the scope of the proposed remand
is inappropriate. Therefore, the Court’s conclusion is clear: remand must be denied.
IT IS SO ORDERED.
s/ David A. Tapp
DAVID A. TAPP, Judge
8