[00:00:00] Speaker ?:
Thank you.

[00:00:00] Speaker 00:
So let's proceed with the first case for argument.

[00:00:04] Speaker 00:
Obsidian Solutions Group, LLC versus United States, 21-1836.

[00:00:09] Speaker 00:
Mr. Jones, I understand you reserve five minutes of time for rebuttal.

[00:00:16] Speaker 01:
Is that correct?

[00:00:17] Speaker 01:
Yes, sure.

[00:00:18] Speaker 00:
OK, you may proceed.

[00:00:19] Speaker 01:
Thank you, Your Honor.

[00:00:20] Speaker 01:
Good morning, and may it please the court.

[00:00:23] Speaker 01:
My name is Milton Johns, and I am arguing today on behalf of the Appellant Obsidian Solutions Group.

[00:00:31] Speaker 01:
This morning's case, in many ways, has one advantage for this decision making body in that the facts are largely agreed.

[00:00:43] Speaker 01:
The issue at hand is the interpretation of the effect of the Runway Extension Act.

[00:00:52] Speaker 03:
So let me just ask you this, then, hypothetically.

[00:00:55] Speaker 03:
And I know you disagree with this, but just run with hypothetical.

[00:00:59] Speaker 03:
Assuming SBA's, I think, what, nearly 20-year interpretation of the statute is right, and that's that, what is it, A to A and B are what apply to it,

[00:01:11] Speaker 03:
and C doesn't apply to it and applies to other federal agencies, even if Congress had intended to extend the period from three to five years in the REA, if it only amended a section that did not apply to the SBA, wouldn't that make its amendment ineffective?

[00:01:31] Speaker 01:
Well, Your Honor, I believe that certainly the Johnson case from 2000 from the Supreme Court

[00:01:39] Speaker 03:
uh... clearly establishes the federal's of that regular federal regulations that contradict federal judges are really really please with the hypothetical we're talking about the statute into the statute uh... the proper understanding such again hypothetical i know you don't agree with this but the proper understanding of the statute is a two a and b applied to the administrator a two c applies to all other agencies and so when congress amends c

[00:02:08] Speaker 03:
to extend the time period from three to five years, even if they meant that to apply to the SBA, it doesn't apply to the SBA, right?

[00:02:15] Speaker 03:
Because C only applies to other federal agencies under the hypothetical.

[00:02:19] Speaker 01:
Under that hypothetical, it would still affect the proposal in this case because the Department of Energy

[00:02:29] Speaker 01:
if indeed C applies to all other agencies besides SBA, the Department of Energy could not promulgate a size standard that was less than five years in the calculation.

[00:02:40] Speaker 03:
Well, but C is if the agencies promulgate their own size standards, not if they're using the SBA size standard.

[00:02:46] Speaker 03:
So I get it.

[00:02:48] Speaker 03:
I mean, I think you answered my hypothetical that if Congress had made, if it was clear that C only applied

[00:02:54] Speaker 03:
to, didn't apply to the SBA size requirements, only applied to special programs promulgated by other agencies, which is not an issue here, right?

[00:03:04] Speaker 03:
It's the SBA program.

[00:03:06] Speaker 01:
That's correct.

[00:03:06] Speaker 03:
Then Congress's amendment would be ineffective.

[00:03:10] Speaker 03:
And so what had to happen, which is what Congress later did, was clarify that its amendment by amending the language in C, making that directly applicable to the SBA.

[00:03:21] Speaker 03:
But the problem for you is your client's caught in the window between the first one, which may not have covered it, according to the court of federal claims, and the second one, which clearly does.

[00:03:32] Speaker 01:
That's correct, Your Honor.

[00:03:33] Speaker 01:
It is.

[00:03:34] Speaker 01:
The proposal was issued.

[00:03:36] Speaker 01:
The proposal was submitted in July of 2019.

[00:03:40] Speaker 01:
The law was changed in December of 2018.

[00:03:42] Speaker 01:
The regulation was updated in December 2019.

[00:03:50] Speaker 03:
Do you have any sense of how many possible solicitations throughout the government would be affected by this time gap?

[00:03:59] Speaker 01:
It would be a small number, Your Honor.

[00:04:03] Speaker 01:
Effectively, it's a narrow group.

[00:04:07] Speaker 01:
This was a small business set aside at the Department of Energy.

[00:04:13] Speaker 01:
And this particular size standard would be very limited.

[00:04:19] Speaker 03:
Can I just ask you one more question?

[00:04:23] Speaker 03:
Congress is presumed to act with knowledge of what the current law is, right?

[00:04:27] Speaker 03:
Does that include official agency interpretations in the Federal Register?

[00:04:33] Speaker 01:
Well, Congress is certainly assumed to understand the impact of their laws.

[00:04:40] Speaker 01:
That's not really answering my question.

[00:04:43] Speaker 03:
I mean, it was very specific.

[00:04:44] Speaker 03:
Is Congress supposed to know about official agency interpretations of statutes published in the Federal Register?

[00:04:52] Speaker 01:
I don't think Congress can know the agency's interpretation in advance.

[00:04:56] Speaker 03:
Well, they're published in the Federal Register for 20 years.

[00:05:01] Speaker 03:
The SBA's interpretation of the statute was published in the Federal Register.

[00:05:07] Speaker 03:
They're on notice of that, right?

[00:05:08] Speaker 03:
That's correct.

[00:05:09] Speaker 03:
So they knew SBA thought only parts A and B applied to it, and C did not apply to it.

[00:05:16] Speaker 01:
And I think that Congress's reaction in very clearly changing the annual runway from three to five indicated.

[00:05:26] Speaker 00:
This was known.

[00:05:27] Speaker 00:
If this was an agency practice,

[00:05:29] Speaker 00:
this interpretation that 632A to C, that those provisions do not apply to the SBA.

[00:05:40] Speaker 00:
Why wouldn't Congress fix this when they pass the runway?

[00:05:46] Speaker 01:
I suspect, Your Honor, that Congress intended to address a very specific need, a very specific change in this regulation.

[00:05:57] Speaker 01:
And that's why they made that very clear.

[00:06:00] Speaker 00:
That's true.

[00:06:00] Speaker 00:
Then this doesn't apply to you, right?

[00:06:02] Speaker 00:
I mean, you're out.

[00:06:03] Speaker 00:
I think you're arguing a losing line right there.

[00:06:07] Speaker 01:
Well, I think that if it only applies to the agencies under C, I don't think that Department of Energy could have continued with a three-year program.

[00:06:19] Speaker 00:
So the historical interpretation of the provisions under C have been that they don't apply to the SBA, correct?

[00:06:27] Speaker 01:
Those have been the SBA's interpretation.

[00:06:29] Speaker 00:
And that's been the practice.

[00:06:30] Speaker 00:
That's been the SBA practice.

[00:06:32] Speaker 01:
That's correct.

[00:06:33] Speaker 00:
It hasn't been interpreted by higher courts.

[00:06:37] Speaker 00:
Runway Act, why did they not take into account and fix it in the way that you wish?

[00:06:45] Speaker 00:
In other words, Congress knew what they were doing when they passed the act, and they did not extend the five-year provision to the SBA.

[00:06:53] Speaker 01:
Well, we certainly have a sense of Congress subsequent to the enactment

[00:07:02] Speaker 01:
with the House bill that indicated it, at least on the House side.

[00:07:07] Speaker 00:
This House bill was not voted.

[00:07:08] Speaker 00:
Is this one that you're talking about?

[00:07:10] Speaker 00:
It did not pass.

[00:07:12] Speaker 00:
It was not enacted into law.

[00:07:14] Speaker 01:
It wasn't fully enacted into law.

[00:07:16] Speaker 03:
But I think that the issue was that- I mean, we had the sense of Congress after the enactment, and then they did subsequently amend it to make clear that it applied to the SBA.

[00:07:27] Speaker 03:
Why isn't that an inference that it didn't originally apply to the SBA?

[00:07:32] Speaker 03:
Why isn't it a permissible inference?

[00:07:35] Speaker 03:
In fact, probably the most logical one, when Congress knew for 20 years

[00:07:40] Speaker 03:
SBA had said, you know, I think the number that was in the government's brief was close to 50 times in the federal register, A and B apply to us, C applies to other agencies.

[00:07:49] Speaker 03:
And when they enact a amendment that applies only to C, they only intended it to apply to the small business programs promulgated by other agencies under C.

[00:08:02] Speaker 03:
That's what we have to take, isn't it?

[00:08:04] Speaker 03:
And then when they realize, oh, maybe this should apply to the SBA, they enacted another amendment and put specifically in C that it applies to the administrator, right?

[00:08:15] Speaker 01:
Correct, Your Honor, but I think that was Congress's reaction to saying that the intent was not translated.

[00:08:25] Speaker 03:
OK.

[00:08:25] Speaker 03:
I mean, I get what you're saying.

[00:08:27] Speaker 03:
And who knows?

[00:08:27] Speaker 03:
Maybe that's what Congress intended to do.

[00:08:29] Speaker 03:
But that's why I asked you the hypothetical at the beginning, is Congress may have intended to do something

[00:08:34] Speaker 03:
But if it did it in a way that's not consistent with the plain language of the statute and longstanding interpretation of the statute, then its amendment's ineffective, right?

[00:08:44] Speaker 01:
Well, I think that Congress retains the authority to change that interpretation by passing a new statute.

[00:08:55] Speaker 03:
Which they did, ultimately, when they made it clear that C applies to the administrator.

[00:09:00] Speaker 03:
But their first amendment didn't do that.

[00:09:03] Speaker 01:
And I think that that arose because of the continuing interpretation by the agency.

[00:09:11] Speaker 00:
Which they knew of.

[00:09:13] Speaker 01:
Correct.

[00:09:14] Speaker 01:
And Congress has the- Congress knows how to override agency interpretations.

[00:09:21] Speaker 03:
It knows how to override court decisions.

[00:09:24] Speaker 03:
And it says so explicitly when it does so, where it makes the language explicit.

[00:09:29] Speaker 01:
But it didn't do that here.

[00:09:33] Speaker 01:
We believe that from the plain text that Congress's intent was clear in changing from three to five years because- How is that possible?

[00:09:46] Speaker 03:
How is it possible that just changing a part that the SBA and presumably the entire public contracting world knew of SBA's interpretation that C didn't apply to?

[00:09:57] Speaker 03:
How is it possible

[00:09:59] Speaker 03:
that Congress plainly intended by amending a portion of the statute that it didn't apply to the SBA to affect the SBA.

[00:10:08] Speaker 01:
Well, because Congress could have amended it to direct the SBA to consider.

[00:10:17] Speaker 03:
It could have, but they didn't until later.

[00:10:21] Speaker 01:
because the SBA's interpretation was not consistent with its intent.

[00:10:26] Speaker 01:
I think that's why they had to go back and direct that change, because SBA was not handling that, was not interpreting it consistent with their intent.

[00:10:37] Speaker 00:
OK.

[00:10:38] Speaker 00:
You're into your rebuttal time.

[00:10:39] Speaker 00:
Would you like to?

[00:10:41] Speaker 01:
I'll stop at this point, Your Honor.

[00:10:42] Speaker 01:
Thank you.

[00:10:43] Speaker 00:
Thank you, Mr. Johnson.

[00:10:46] Speaker 00:
Mr. Hogue?

[00:10:47] Speaker 00:
Is it Hogue or Hugh?

[00:10:49] Speaker 02:
Hogue, Your Honor.

[00:10:50] Speaker 00:
Hogue.

[00:10:51] Speaker 00:
Okay.

[00:10:53] Speaker 02:
May it please the Court.

[00:10:54] Speaker 02:
Stephen Hough for the United States.

[00:10:57] Speaker 02:
The SBA correctly determined that a city that is not small for purposes of the Department of Energy contracted issues.

[00:11:02] Speaker 03:
So can I ask you kind of the flip side of the hypothetical I was asking your friend?

[00:11:06] Speaker 03:
What if

[00:11:07] Speaker 03:
We have the same scenario.

[00:11:08] Speaker 03:
SBA took in this longstanding interpretation, seeded it and applied it in it.

[00:11:13] Speaker 03:
But in the legislative history, in the congressional record, in the proposed bill, everybody in Congress thought that they were changing this.

[00:11:23] Speaker 03:
So Congress, there's no doubt, their intent behind this change was to change the time period from three to five years for everybody.

[00:11:34] Speaker 03:
other agencies under C and the SBA under A and B.

[00:11:39] Speaker 03:
But all they did was what they did here, which was an act of change to Part C. So essentially, what happens if Congress intends to do something, but perhaps made a mistake in the way they did it?

[00:11:52] Speaker 02:
That would be a closer case, Your Honor, but the legislative history can't trump the contrary clear language of the statute.

[00:11:57] Speaker 03:
But answer my hypothetical.

[00:11:58] Speaker 03:
I tried to make your friend answer my hypothetical.

[00:12:00] Speaker 03:
You answer it, too.

[00:12:02] Speaker 03:
They made the same amendment here with the same regulatory history of the Federal Register.

[00:12:07] Speaker 03:
but there are statements throughout the legislative history that we intend for the time period for all small business contracts that you know the calculation to be extended from three to five years but yet the plain language of their amendment only applies to part sub c which they knew sba didn't apply to itself what happens if congress

[00:12:31] Speaker 03:
you know, makes an amendment that on its face doesn't affect its intent, but its intent is nevertheless clear.

[00:12:38] Speaker 02:
The plain language trumps the legislative history and the subjective intent of Congress, Your Honor.

[00:12:45] Speaker 02:
OK.

[00:12:46] Speaker 02:
Here, the obsidian's three-year average annual receipts were $21.75 million, and the applicable size standard at the time was $20.5 million.

[00:12:53] Speaker 02:
The SBA properly determined that obsidian was not small.

[00:12:56] Speaker 02:
The Court of Federal Claims appropriately upheld that determination.

[00:13:00] Speaker 03:
And this court... Do you have any sense of how many possible solicitations this... Because it's changed now, right?

[00:13:06] Speaker 03:
This five-year supply is SBA.

[00:13:08] Speaker 02:
That's correct, Your Honor.

[00:13:09] Speaker 03:
And it was a pretty short window.

[00:13:11] Speaker 03:
I mean, it's pretty clear Congress intended this because they enacted the amendment, the new amendment really quickly, but I get your plain language argument.

[00:13:18] Speaker 03:
Do you know how many possible solicitations this affects?

[00:13:22] Speaker 02:
My understanding is this is the last one, Your Honor, that there are eight potentially effective solicitations total, or at least eight that were litigated.

[00:13:29] Speaker 02:
There are 11 decisions issued across those eight cases.

[00:13:32] Speaker 02:
All of them have come out in favor of the SBA's position and against the challenging contractor's position.

[00:13:36] Speaker 03:
Are there any still pending or on appeal to us?

[00:13:40] Speaker 02:
My understanding is this is the last one, Your Honor.

[00:13:42] Speaker 03:
OK.

[00:13:42] Speaker 03:
What's the current status of this solicitation here?

[00:13:45] Speaker 02:
Yes, Your Honor.

[00:13:46] Speaker 02:
The contract was awarded to Ogunek in December 2020.

[00:13:49] Speaker 02:
They have been in full performance since May of 2021.

[00:13:51] Speaker 02:
The incumbent is no longer available, no longer on the contract, and it's no longer possible to revert to the incumbent prior contractor.

[00:14:00] Speaker 02:
If this contract award were now to be enjoined, it put the Department of Energy and, indeed, national security in a very bad situation.

[00:14:09] Speaker 02:
One of the services under this contract is to provide encryption audits for secure email that's used to transmit classified nuclear information.

[00:14:18] Speaker 02:
Bluntly, Your Honor, if this award were to be enjoined, the DOE would not be able to send those classified emails until they could go through and go through whatever steps were required by the injunctive relief.

[00:14:33] Speaker 02:
Notably, obsidian doesn't argue it was small under the applicable three-year average annuaries.

[00:14:37] Speaker 00:
Counselor, in your view, does the public notice and comment process that's enumerated in Section C of the Act, does it apply to the SBA?

[00:14:50] Speaker 00:
If the SBA wants to promulgate or something like here, change in there from three to five years, does it have to go through a public notice and comment period?

[00:15:02] Speaker 02:
The SBA is required to do public notice and comment, but it's under Section A6 of the Act, rather than A2C of the Act, which I believe Iran is referring to.

[00:15:10] Speaker 02:
At the time that's relevant in 2019, when Obsidian submitted its proposal, subsection C only applied to federal agencies other than the SBA.

[00:15:20] Speaker 02:
And therefore, the notice and comment obligation would not apply there to SBA.

[00:15:24] Speaker 02:
But again, under Section A6, the SBA would have the obligation to go through notice and comment.

[00:15:35] Speaker 02:
Notably, Obsidian has not challenged that it was small under the 2019 size standards at the time it submitted its proposal.

[00:15:41] Speaker 02:
Instead, it's arguing that it would have been small if instead a different rule had applied, if you look back five years rather than three.

[00:15:48] Speaker 02:
Notably, to possibly prevail here, Obsidian has to succeed in all three legal issues that it raised, which is the applicability of the Runway Extension Act to the SBA in subsection A and B rather than just C.

[00:16:00] Speaker 02:
The immediacy, that is, that it took effect immediately to effect not just promulgation of rules, but the enforcement of existing rules, and that it did not require notice of rulemaking.

[00:16:10] Speaker 02:
Each of those arguments is wrong for the reasons we addressed in our brief.

[00:16:13] Speaker 02:
But again, in order for the city to prevail, it must go three for three.

[00:16:17] Speaker 02:
If the court were to find the United States on just one of those three issues, it should then affirm the judgment below.

[00:16:23] Speaker 02:
And for those reasons, we respectfully request that the court affirm the judgment.

[00:16:26] Speaker 00:
OK, thank you.

[00:16:35] Speaker 00:
Mr. John, do you have a little over four minutes?

[00:16:38] Speaker 00:
Yeah, four minutes and 38 seconds.

[00:16:41] Speaker 01:
Thank you, honor.

[00:16:43] Speaker 01:
And very briefly, as I mentioned in my very opening, Obsidian has never argued that it was small under the three year

[00:16:56] Speaker 01:
standard.

[00:16:57] Speaker 01:
It was very close, but it was slightly over that three-year standard.

[00:17:05] Speaker 01:
So those facts aren't at issue, and that's why the five-year statute was determinative in this case.

[00:17:13] Speaker 01:
And I believe that the SBA in their original finding agreed that were the five-year, well, the facts that they found

[00:17:25] Speaker 01:
were consistent with Obsidian being a small business with the five-year runway application.

[00:17:32] Speaker 00:
So what exactly is the relief that you're seeking?

[00:17:38] Speaker 01:
Well, Your Honor, in this case, the relief would be the award of this contract.

[00:17:48] Speaker 01:
The contract was originally awarded to Obsidian.

[00:17:52] Speaker 01:
They were the winner of the competition.

[00:17:56] Speaker 01:
It was then unwound and awarded to Algunic.

[00:18:01] Speaker 01:
So in this case, the remedy is a new contract award to Obsidian to essentially revert that award.

[00:18:10] Speaker 01:
And the government has discussed the impact

[00:18:20] Speaker 01:
an injunction, but an injunction in this case wouldn't need to be of the type that would bring the contract support to a screeching halt.

[00:18:32] Speaker 01:
The injunction could be crafted so that there was no harm to the government and allowed.

[00:18:38] Speaker 00:
I don't recall.

[00:18:39] Speaker 00:
Can you point me where in your papers you set out the argument for an injunction?

[00:18:47] Speaker 01:
We, in our, frankly, in our reply brief, we address the issues that the government raised in their opposition.

[00:18:58] Speaker 01:
But we think that we can't get to the injunction argument until we get past the legal argument, the legal error of the application of the size standard.

[00:19:11] Speaker 00:
Seems to me you should have meant both arguments.

[00:19:14] Speaker 00:
One is the merits, and then the other, the relief, because this is a unique situation.

[00:19:21] Speaker 00:
And if you made your arguments pertaining to relief in your reply brief, that perhaps would have been too late.

[00:19:31] Speaker 01:
Well, again, we believe that certainly the judgment that came from the Court of Federal Claims that the error was

[00:19:43] Speaker 01:
The error that we specifically addressed was the interpretation of the impact of the Runway Extension Act.

[00:19:53] Speaker 00:
So we don't believe that the- Even if we were to find a near favor, we'd have to send it back down for additional fact-finding, correct?

[00:20:02] Speaker 01:
That's correct, Your Honor.

[00:20:03] Speaker 01:
And I believe that that could be accomplished at the Court of Public Plaintiffs.

[00:20:09] Speaker 01:
And unless the court has any other questions, I'll conclude my presentation.

[00:20:13] Speaker 00:
We thank you for your argument, counsel.

[00:20:16] Speaker 01:
Thank the court.