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In second case to raise the issue, ALJ finds subject matter jurisdiction lacking over contractor’s complaint seeking declaratory judgment that OFCCP violated its Fourth Amendment rights

December 13th, 2012  |  Cynthia L. Hackerott

For the second time this year, a federal contractor’s administrative complaint against the OFCCP, seeking declaratory judgment that the agency violated the contractor’s Fourth Amendment rights by subjecting it to numerous audits without probable cause, has been dismissed by a DOL administrative law judge (ALJ) for lack of subject matter jurisdiction (Entergy Services v OFCCP, November 17, 2012, Purcell, S).  For reasons similar to those cited in his September 17, 2012 ruling in U.S. Security Associates, Inc v OFCCP, ALJ Stephen Purcell determined that the contractor’s arguments asserting that the OALJ had subject matter jurisdiction over the action, pursuant to the Administrative Procedure Act (APA) and the regulations governing the adjudication of OFCCP matters before the OALJ, were unavailing.

On October 26, 2012, six subsidiaries of Entergy Corporation, including lead plaintiff Entergy Services, Inc (ESI), a Delaware corporation headquarted in New Orleans, filed an administrative complaint with the OALJ, seeking declaratory relief from compliance review searches scheduled by the OFCCP pursuant to Executive Order (EO) 11246, Sec. 503 of the Rehabilitation Act (Sec. 503) and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA).

U.S. Security Associates decision. As previously discussed in this blog, in U.S. Security Associates, the ALJ ruled that the OALJ obtains the regulatory authority to adjudicate an OFCCP dispute only upon the filing of an administrative complaint by the OFCCP through the Office of the Solicitor under 41 CFR Sec. 60-30.5, and therefore the OALJ did not have subject matter jurisdiction to entertain an administrative complaint filed by the target of an OFCCP compliance review seeking declaratory relief from that compliance review. The contractor’s appeal of that ruling is currently pending before the Administrative Review Board (ARB No 13-003). The Entergy plaintiffs are represented by the same law firm as plaintiffs in U.S. Security Associates.

Administrative Procedure Act. In the present case, the plaintiffs asserted that the APA permits agencies to issue declaratory orders in administrative adjudications. In particular, they argued that Congress specifically anticipated and recognized the obligation of federal agencies to entertain declaratory judgments in agency adjudications.

The APA section governing agency adjudications at 5 USC Sec. 554(e) provides that agencies may issue declaratory orders “to terminate a controversy or remove uncertainty.” However, this section only applies to “adjudications required by statute to be determined on the record after opportunity for an agency hearing,” the ALJ pointed out (ALJ’s emphasis). EO 11246 is not a statute, and neither Sec. 503 nor VEVRAA provide for on-the-record hearings. Accordingly, the ALJ found that Sec. 554(e) was not applicable to this case because that the OALJ’s jurisdiction over OFCCP administrative complaints is afforded by Executive Order and regulation rather than by statute.

Even assuming arguendo that Sec. 554(e) applies where the agency adjudication is being conducted by virtue of a regulation or Executive Order rather than a statutory requirement to provide an opportunity for an on-the-record hearing, the APA does not, in itself, afford the OALJ with subject matter jurisdiction, the ALJ found. The OALJ’s subject matter jurisdiction over OFCCP administrative complaints originates from EO 11246 and the OFCCP regulations implementing EO 11246, Sec. 503 and VEVRAA. These regulations contemplate that the OALJ obtains the regulatory authority to adjudicate an OFCCP dispute only upon the filing of an administrative complaint by the OFCCP through the Office of the Solicitor. Regulatory silence on the question of declaratory orders does not create authority, by default under Sec. 554(e) of the APA, for the OALJ to adjudicate an administrative complaint brought by the target of a compliance review seeking a declaratory order.

Moreover, Sec. 554(e) affords an agency the discretion to issue declaratory orders; thus, arguably, the Office of the Solicitor, upon referral of the matter from OFCCP, could file an administrative complaint with OALJ seeking a declaratory order concerning OFCCP’s authority to select certain targets for a compliance review. However, the OFCCP’s regulations do not authorize the initiation of a hearing before the OALJ by the filing an administrative complaint or other motion for relief by a contractor or subcontractor.

FRCP 57 inapplicable. The plaintiffs also argued that Federal Rule of Civil Procedure 57 (FRCP 57) was applicable to the complaint because the OFCCP’s rules of practice and procedure (i.e. the OFCCP’s regulations governing the OALJ adjudication of OFCCP matters) adopt the FRCP for situations not covered by the OFCCP’s rules. However, the ALJ concluded that it was “too big a jump” to find that cross reference to the FRCP in the OFCCP’s regulations, designed to fill procedural gaps, could give an ALJ authority reserved to Article III courts. As an example, the ALJ observed that although FRCP 38 and 39 address the right to trial by jury, the plaintiffs could not argue in good faith that the OFCCP regulations, through the cross reference to the FRCP, thereby created a right to a jury trial before an ALJ.

Likewise, FRCP 57 expressly governs procedures for obtaining a declaratory judgment under the Declaratory Judgment Act. As ALJ Purcell previously found in U.S. Security Associates, the Declaratory Judgment Act provides a mechanism for obtaining declaratory relief in federal district court, not the OALJ.