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State v. United States Marine Corps

United States District Court, D. Hawaii

May 11, 2018

UNITED STATES MARINE CORPS, by and through GENERAL ROBERT B. NELLER, Incumbent Commandant of the Marine Corps, in his official capacity, Defendant.


          Leslie E. Kobayashi United States District Judge.

         On April 17, 2018, Plaintiff State of Hawai'i, Department of Human Services, Division of Vocational Rehabilitation, Ho'opono - Services for the Blind (“Ho'opono”) filed its Motion for Temporary Restraining Order (“TRO Motion”). [Dkt. nos. 12 (Motion) & 13 (Mem. Supp. of Motion).[1] Defendant United States Marine Corps, by and through General Robert B. Neller, Incumbent Commandant of the Marine Corps, in his official capacity (“Marine Corps” or “Defendant”), filed its memorandum in opposition on April 26, 2018, and Ho'opono filed its reply on May 1, 2018. [Dkt. nos. 19, 27.] This matter came on for an evidentiary hearing on May 9, 2018. Hoopono's Motion is hereby granted for the reasons set forth below.


         On April 3, 2018, Ho'opono filed its: Complaint for Motion for Declaratory and Injunctive Relief (“Complaint”), pursuant to pursuant to the Randolph-Sheppard Vending Stand Act, 20 U.S.C. § 107, et seq. (“the RSA”);[2] and Motion for Declaratory and Injunctive Relief (“Injunction Motion”). [Dkt. nos. 1 (Complaint), 2 (Injunction Motion) & 3 (Mem. Supp. of Injunction Motion).] Ho'opono is the RSA SLA in Hawai'i. General Neller is the highest ranking officer in the Marine Corps, and he is responsible for all Marine Corps bases, including Marine Corps Base Hawai'i (“MCBH”). [Complaint at ¶¶ 30-31.]

         The facts of this case are largely undisputed and are established by the parties' exhibits[3] and the live testimony at the evidentiary hearing. For approximately five years, Hoopono's licensed blind vendor - Stanley Young, with teaming partner Blackstone Consulting, Inc. (“BCI”) - has successfully operated the MCBH food service facilities. Their services have consistently received satisfactory ratings, with one excellent rating. [Mem. in Supp. of Injunction Motion, Exh. 2 (Decl. of Lea Dias (“Dias Decl.”)) at ¶ 18;[4] Errata, filed 4/13/18 (dkt. no. 11), Exh. 3a (Decl. of Joseph Blackstone (“Blackstone Decl.”)) at ¶ 24, Exh. A (MCBH Contractor Performance Assessment Reporting System printout).[5] The Marine Corps states the current contract - which was designated “a competitive Section 8(a) set-aside[[6]] subject to a SLA having priority for award under the RSA” - was solicited in 2010, but the contract period did not start until March 1, 2013 because of multiple bid protests by the incumbent vendor. [Def.'s Exhibit List, filed 4/25/18 (dkt. no. 17), Exh. O (Decl. of Eileen Keating Carnaggio (“Carnaggio Decl.”)) at ¶ 5.[7]]

         After Ho'opono bid on the contract, the Marine Corps engaged in extensive negotiations with Ho'opono and BCI about staffing concerns.[8] The Marine Corps' concerns were ultimately satisfied, and it deemed Hoopono's proposed staffing to be fair and reasonable. The contract was worth approximately $14 million. [Dias Decl. at ¶ 23.]

         The contract ran through the end of February 2018, but the Marine Corps invoked the extension clause of the contract. The Marine Corps exercised its extension options through May 15, 2018, but has declined to exercise the remaining options, which would have run through the end of September, i.e., 180 days after the expiration of the contract's original term. [Id. at ¶¶ 46-47, 49.] The extension options were exercised based on findings that Hoopono's staffing, pricing, and past performance were fair and reasonable. [Id. at ¶ 46.]

         During the first four years of the contract, the Marine Corps did not express staffing concerns, but in the last year, it expressed that only United States citizens should be on staff. Ho'opono and BCI argued this discriminated against current employees who held Green Cards and previously received clearance to work on MCBH. After negotiations and modifications, such employees were allowed to remain on staff. However, the dispute raised deportation fears among some of the staff, and a few resigned before the modifications were finalized. [Blackstone Decl. at ¶¶ 25-26.] During the negotiations for the extension options, the Marine Corps initially only wanted Ho'opono to employ United States citizens, but it eventually agreed to allow the employment of persons who held Green Cards. All terms of the current contract govern the extension option period. Ho'opono and BCI therefore believed the Marine Corps did not have any concerns about the other terms. [Id. at ¶¶ 28-29.] As recently as September 2017, the Marine Corps deemed Hoopono's staffing - including number and job descriptions - to be fair, reasonable, and acceptable. [Id. at ¶ 33.]

         On September 11, 2017, RCO-HI posted a pre-solicitation notice (“Pre-Solicitation”), which noted the required services would be subject to the RSA. Ms. Carnaggio informed Ms. Dias about the Pre-Solicitation and provided her with milestone dates in a September 21, 2017 email. [Carnaggio Decl. at ¶ 8 (discussing Exhs. D (email chain between Ms. Carnaggio and Ms. Dias dated from 5/5/17 to 9/25/17) & E (Pre-Solicitation)).]

         On September 25, 2017, the Marine Corps issued Solicitation number M003-18-17-R-0003 for a new MCBH food services contract with a base term of one year, with four option years (“Solicitation”). [Dias Decl. at ¶ 31; Mem. in Supp. of Injunction Motion, Exh. 9 (Solicitation).] On October 24, 2017, the Marine Corps amended the Solicitation to add the requirement that the contractor staff the food service facilities with a minimum number of employees who fell within certain job descriptions (“Amendment 1”). [Dias Decl. at ¶ 33; Mem. in Supp. of Injunction Motion, Exh. 9a (Amendment 1).] Amendment 1 altered several portions of the Solicitation's Performance Work Statement (“PWS”) §§ 2.6 and 2.6.1, setting forth new minimum staffing requirements in multiple labor categories. [Carnaggio Decl. at ¶ 11.] Ho'opono and other vendors were informed of Amendment 1, and Ms. Dias signed an acknowledgment of receipt. [Id. at ¶ 12, Exh. H.] Ms. Carnaggio emphasizes that Ho'opono did not challenge the terms of the Solicitation, as amended, by submitting either an agency bid protest to the Marine Corps or a bid protest to the United States Governmental Accountability Office (“GAO”). Further, Ho'opono represented that its Proposal did not identify any exception to the Solicitation's terms. [Id. at ¶ 14, Exh. I (letter dated 11/6/17 to Ms. Carnaggio from Ms. Dias, with Exceptions/Assumptions page).]

         On November 8, 2017, the Marine Corps amended the Solicitation to: require that the contractor only employ United States citizens; make grammatical changes; and extend the due date for proposals to November 20, 2017 (“Amendment 2”). [Dias Decl. at ¶ 33; Complaint at ¶¶ 19-20.] Ho'opono asserts Amendment 2 is not relevant to the issues presented in this case. [Mem. in Supp. of TRO Motion at 12.] There was also a third amendment (“Amendment 3”), but Ho'opono asserts it is not relevant because it was only offered to bidders that were deemed to be in the competitive range, i.e., it was not offered to Ho'opono. [Complaint at ¶ 49.] The Marine Corps apparently agrees Amendment 2 and Amendment 3 are not relevant to the TRO Motion. See Carnaggio Decl. at ¶ 13 (noting the issuance of Amendments 2 and 3 but not discussing them).

         Ho'opono timely submitted its response to the Solicitation (“Proposal”) on November 17, 2017. [Dias Decl. at ¶ 34.] The Proposal “includes a list of employees and staff whose numbers exceed that of employees and staff in the current contract extension, and reflects the staffing requested by Defendant in past and current contracts.” [Blackstone Decl. at ¶ 34.] Ho'opono requested that, if the Marine Corps desired modifications to the staffing levels in the Proposal, it discuss them with Ho'opono in direct negotiations, but the Marine Corps has refused. [Id.] According to Ho'opono, the Proposal included the same staffing levels in its current contract and the extension option periods, with the minimum increase required by Amendment 1. Ho'opono argues its Proposal should have been deemed to be in the competitive range based on Hoopono's “technical capability, past performance and price, ” and it should have been afforded priority under the RSA. [Complaint at ¶ 54.]

         A Technical Evaluation Team (“TET”) reviewed all proposals submitted in response to the Solicitation and ranked them against the technical evaluation criteria from the Addendum to Federal Acquisition Regulation (“FAR”) 52.212-2 EVALUATION -Commercial Items (October 2014), which is included in the Solicitation. The TET members reviewed each of the proposals individually, without comparing it to the others. Each TET member documented each proposal's strengths, weaknesses, deficiencies, risks, and any items for future discussion. The TET leader and the TET evaluator reviewed the TET members' evaluations to determine a consensus rating for the technical factors.[9] The TET leader prepared a report setting forth the TET's collective opinion. [Carnaggio Decl. at ¶ 15.] The TET's consensus ratings for Hoopono's Proposal were: corporate experience - outstanding; management plan - acceptable; quality control plan - acceptable; food services operations plan - unacceptable; and staffing and transition plan - unacceptable. Because of the unacceptable ratings for food services operations and staffing/transition, Hoopono's overall technical rating was unacceptable, and its Proposal not “eligible for further evaluation or potential award.” [Id. at ¶ 16.] In other words, Hoopono's past performance and price were not considered.

         Once the RCO-HI completed its evaluation of all proposals, it prepared a Pre-Business Clearance Memorandum (“Clearance Memo”) which: summarized the evaluation of all proposals; recommended which proposals were to be placed in the competitive range;[10] identified questions to discuss with vendors in the competitive range; and sought authorization to begin those discussions. The Marine Corps' Marine Corps Acquisition Policy and Procedures (“MAPP”) required RCO-HI to obtain: approval of the Clearance Memo from the Marine Corps Installations Command Pacific regional contracting office in Japan; approval from the Marine Corps Installation Command contracting office in Washington D.C.; and legal clearance of the Clearance Memo. All required approvals and clearances were obtained, and Ms. Carnaggio then established the competitive range of vendors that her office would engage in discussions with under FAR 15.306. Hoopono's Proposal was not included in the competitive range because of its unacceptable overall rating for its technical elements. [Id. at ¶ 17.]

         In a letter dated February 13, 2018, sent to Ms. Dias by email, Ms. Carnaggio informed Ho'opono she deemed Hoopono's bid technically unacceptable (“2/13/18 Rejection Letter”). [Dias Decl. at ¶ 35, Exh. A (2/13/18 Rejection Letter).] On February 14, 2018, Ms. Dias requested a debriefing from Ms. Carnaggio, who sent a Pre-Award Debriefing report on February 15, 2018 (“2/15/18 Debriefing”). [Id. at ¶¶ 37-38, Exh. B (2/15/18 Debriefing).] On February 16, 2018, Ms. Dias sent Ms. Carnaggio an email response to the 2/15/18 Debriefing, and Ms. Carnaggio sent a response on February 21, 2018 (“2/21/18 Debriefing”). [Id. at ¶¶ 39, 41, Exh. C (2/21/18 Debriefing).]

         In the Debriefings, Ms. Carnaggio stated she was unwilling to engage in direct negotiations about the staffing issue and would not allow Ho'opono to submit clarification. She therefore removed Hoopono's Proposal from the competitive range without evaluating the entire Proposal. She did not apply the RSA's priority in rejecting the Proposal. [Id. at ¶ 42.]

         On April 10, 2018, a private vendor - The Severson Group, LLC (“Severson”) - was awarded the contract described in the Solicitation. The amount of the contract is $18, 419, 014.74.[11] [Mem. in Supp. of TRO Motion, Exh. 17 (printout from the Federal Business Opportunities website for Management and Mess (M&MA) Services award information for the Solicitation).] Severson is a SBA-certified “Section 8(a) Business, Small Disadvantaged Business, and Veterans Administration Certified Service-Disabled Veteran-Owned Small Business.” [Carnaggio Decl. at ¶ 18 & Exh. N (letter dated 4/6/18 to Ms. Carnaggio from Carlos Liu of the SBA, confirming Severson's eligibility for the 8(a) Program).] At the evidentiary hearing, Ms. Carnaggio testified the Marine Corps engaged in negotiations with Severson after Severson's proposal was determined to be in the competitive range, and Severson was allowed to submit a final proposal revision. Ms. Carnaggio interpreted the FARs as only allowing for negotiations with, and proposal revisions by, an offeror whose proposal is in the competitive range. However, she also acknowledged that, under FAR § 15.303, she had the discretion to elevate an unacceptable proposal into the competitive range, but she determined there was no compelling reason to do so with Hoopono's Proposal.

         Severson's contract was scheduled to begin April 15, 2018, with a thirty-day overlap of service for the transition from Hoopono's services to Severson's.[12] [Mem. in Supp. of Injunction Motion, Exh. 7 (email string between Steve Forjohn, Marine Corps' counsel, and Lori Wada, Esq., Hoopono's counsel, from 3/14/18 to 3/16/18).] Ms. Carnaggio testified Severson is scheduled to assume full services at MCBH on May 16, 2018.

         On March 22, 2018, Ho'opono requested arbitration pursuant to the RSA, 20 U.S.C. § 107d-1(b). [Complaint at ¶ 26 (citing Complaint, Exh. 6).] Ho'opono filed this action to obtain a court order requiring MCBH to maintain the status quo until there is a decision in the pending arbitration. [Id. at ¶¶ 27, 68.] Ho'opono filed the TRO Motion to preserve the status quo until this Court rules on the Injunction Motion, which seeks to preserve the status quo until the arbitration panel renders its decision.


         This Court has described the applicable standards as follows:

In general, the standard for a temporary restraining order or a preliminary injunction is as follows:
“[I]njunctive relief is an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7');">555 U.S. 7, 129 S.Ct. 365');">129 S.Ct. 365, 376, 172 L.Ed.2d 249 (2008). The standard for granting a preliminary injunction and the standard for granting a temporary restraining order are identical. See Haw. Cnty. Green Party v. Clinton, 980 F.Supp. 1160, 1164 (D. Haw. 1997); Fed.R.Civ.P. 65.

Sakala v. BAC Home Loans Servicing, LP, CV. No. 10-00578 DAE-LEK, 2011 WL 719482, at *4 (D. Hawai'i Feb. 22, 2011) (alteration in original).

A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest. Am. Trucking Ass'ns v. City of Los Angeles, 559 F.3d 1046, 1052 (9th Cir. 2009) (quoting Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7');">555 U.S. 7, 129 S.Ct. 365');">129 S.Ct. 365, 374, 172 L.Ed.2d 249 (2008)) (explaining that, “[t]o the extent that [the Ninth Circuit's] cases have suggested a lesser standard, they are no longer controlling, or even viable” (footnote omitted)); see also Winter, 129 S.Ct. at 374-76 (holding that, even where a likelihood of success on the merits is established, a mere “possibility” of irreparable injury is insufficient to warrant preliminary injunctive relief, because “[i]ssuing a preliminary injunction based only on a possibility of irreparable harm is inconsistent with [the Supreme Court's] characterization of injunctive relief as an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief”).
Painsolvers, Inc. v. State Farm Mut. Auto. Ins. Co., 685 F.Supp.2d 1123, 1128-29 (D. Hawai'i 2010) (footnote and some citations omitted) ...

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