Case: 21-1836 Document: 54 Page: 1 Filed: 12/08/2022
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`United States Court of Appeals
`for the Federal Circuit
`______________________
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`OBSIDIAN SOLUTIONS GROUP, LLC,
`Plaintiff-Appellant
`
`v.
`
`UNITED STATES,
`Defendant-Appellee
`______________________
`
`2021-1836
`______________________
`
`Appeal from the United States Court of Federal Claims
`in No. 1:20-cv-01602-RAH, Judge Richard A. Hertling.
`______________________
`
`Decided: December 8, 2022
`______________________
`
`MILTON C. JOHNS, Executive Law Partners, PLLC,
`Fairfax, VA, argued for plaintiff-appellant.
`
` STEVEN C. HOUGH, Commercial Litigation Branch,
`Civil Division, United States Department of Justice, Wash-
`ington, DC, argued for defendant-appellee. Also repre-
`sented by BRIAN M. BOYNTON, ERIC P. BRUSKIN, PATRICIA
`M. MCCARTHY.
`
`______________________
`
`Before REYNA, HUGHES, and CUNNINGHAM, Circuit Judges.
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`Case: 21-1836 Document: 54 Page: 2 Filed: 12/08/2022
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`OBSIDIAN SOLUTIONS GROUP, LLC v. US
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`HUGHES, Circuit Judge.
`Obsidian Solutions Group, LLC appeals a decision of
`the United States Court of Federal Claims granting judg-
`ment on the administrative record. The court held that the
`Office of Hearings and Appeals did not act arbitrarily or
`capriciously in determining Obsidian was not a small busi-
`ness. We affirm.
`
`I
`On April 19, 2019, the Department of Energy (DOE)
`issued a solicitation for Technical Security, Communica-
`tions Security, Cyber, Analysis and Security Administra-
`tion. The solicitation was designated as a small business
`set-aside, and the size limit for interested businesses was
`a maximum of $20.5 million in average annual receipts.
`Obsidian submitted a bid proposal on July 18, 2019. At the
`time, Obsidian self-certified as a small business based on
`its five-year average of annual receipts (roughly $17.5 mil-
`lion). On September 2, 2020, the DOE notified Obsidian
`that it was the apparent successful offeror but that the
`DOE would submit a request to the Small Business Admin-
`istration (SBA) to confirm Obsidian’s size status before
`making the award.
`On September 10, 2020, the SBA determined Obsidian
`did not qualify as a small business for the purposes of the
`solicitation. Rather than use the five-year average of re-
`ceipts, the SBA used Obsidian’s three-year average
`(roughly $21.8 million), which exceeded the $20.5 million
`limit. Because of the SBA’s adverse size determination, the
`DOE did not award the procurement to Obsidian.
`After the Office of Hearings and Appeals (OHA) af-
`firmed the SBA’s size determination, Obsidian filed a bid
`protest in the Court of Federal Claims under the Tucker
`Act, 28 U.S.C. § 1491(b). Obsidian argued that the size de-
`termination was “arbitrary, capricious, an abuse of discre-
`tion, or otherwise not in accordance with law” because the
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`Case: 21-1836 Document: 54 Page: 3 Filed: 12/08/2022
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`OBSIDIAN SOLUTIONS GROUP, LLC v. US
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`3
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`SBA was required to start using five years of annual re-
`ceipts on December 17, 2018, the effective date of the Run-
`way Extension Act (REA). Suppl. App. 25–26 (quoting
`5 U.S.C. § 706(2)(A)). In addition to bid preparation and
`proposal costs, Obsidian requested injunctive relief, includ-
`ing that the court set aside the size determination; declare
`that Obsidian is a small business; and reinstate Obsidian
`as the apparent awardee. Suppl. App. 29–30. The Court of
`Federal Claims granted the United States’ motion for judg-
`ment on the administrative record and denied Obsidian’s
`cross-motion because the REA clearly and unambiguously
`did not apply to the SBA. Obsidian Sols. Grp., LLC v.
`United States, 153 Fed. Cl. 334, 344–45 (2021). Because
`Obsidian did not succeed on the merits, the trial court de-
`nied Obsidian’s requested relief. Id. at 345.
`Obsidian appeals. We have
`jurisdiction under
`28 U.S.C. § 1295(a)(3).
`
`II
`We review judgment on the administrative record in a
`bid protest action de novo. Off. Design Grp. v. United
`States, 951 F.3d 1366, 1371 (Fed. Cir. 2020). We review de-
`nial of injunctive relief for abuse of discretion. Nichia Corp.
`v. Everlight Ams., Inc., 855 F.3d 1328, 1340 (Fed. Cir.
`2017).
`
`A
`At issue is whether the REA’s amendment to Sec-
`tion 3(a)(2) of the Small Business Act
`(15 U.S.C.
`§ 632(a)(2)), and in particular, its requirement to use a five-
`year average of receipts for purposes of size determina-
`tions, was immediately binding on the SBA. Before the
`REA was enacted in 2018, Section 3(a)(2) of the Small Busi-
`ness Act read, in relevant part:
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`OBSIDIAN SOLUTIONS GROUP, LLC v. US
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`(A) In general
`In addition to the criteria specified in paragraph
`(1), the [SBA] Administrator may specify detailed
`definitions or standards by which a business con-
`cern may be determined to be a small business con-
`cern for the purposes of this chapter or any other
`Act.
`(B) Additional criteria
`The standards described in paragraph (1) may uti-
`lize number of employees, dollar volume of busi-
`ness, net worth, net income, a combination thereof,
`or other appropriate factors.
`(C) Requirements
`Unless specifically authorized by statute, no Fed-
`eral department or agency may prescribe a size
`standard for categorizing a business concern as a
`small business concern, unless such proposed size
`standard—
`(i) is proposed after an opportunity for public notice
`and comment;
`(ii) provides for determining—
`. . .
`(II) the size of a business concern providing ser-
`vices on the basis of the annual average gross re-
`ceipts of the business concern over a period of not
`less than 3 years;
`. . .; [and]
`(iii) is approved by the [SBA] Administrator.
`15 U.S.C. § 632(a)(2)(A)–(C) (2018).
`The SBA has long interpreted subsection (C) as apply-
`ing to only non-SBA agency size standards—not to SBA
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`OBSIDIAN SOLUTIONS GROUP, LLC v. US
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`size standards promulgated under subsections (A) and (B).
`Small Business Size Standards: Calculation of Annual Av-
`erage Receipts, 84 Fed. Reg. 29399, 29399 (June 24, 2019).
`The SBA repeated this interpretation in the Federal Reg-
`ister more than 50 times in the two decades before the en-
`actment of the REA. 84 Fed. Reg. at 29400. Thus, although
`the SBA used a three-year average for size determinations,
`it did so pursuant to the authority granted in subsection
`(A), not the requirement in (C). E.g., 13 C.F.R. § 121 (1990)
`(citing 15 U.S.C. § 632(a) for its authority to set size stand-
`ards and using three years of annual receipts).
`B
`Effective December 17, 2018, Congress passed the
`REA, an amendment that made a single change to Section
`3(a)(2): it changed “3 years” in subsection (C)(ii)(II) to “5
`years.” Small Business Runway Extension Act of 2018,
`Pub. L. No. 115-324. The REA did not amend subsections
`(A) or (B) or any other language in subsection (C). Id.
`After the REA became effective, the SBA restated its
`longstanding interpretation that subsection (C) did not ap-
`ply to the SBA. 84 Fed. Reg. at 29399. Nonetheless, to pro-
`mote consistency between the SBA and non-SBA agencies,
`the SBA proposed a rule change on June 24, 2019. Id. at
`29400. The proposed rule would change the SBA’s existing
`three-year averaging period to a five-year period. Id. The
`SBA clarified that, because size is determined as of the
`date a firm certifies its size with its initial bid, the three-
`year period would continue to apply for all bids submitted
`before the effective date of the final rule. Id. at 29401. After
`a notice-and-comment period, the final rule took effect on
`January 6, 2020. Small Business Size Standards: Calcula-
`tion of Annual Average Receipts, 84 Fed. Reg. 66561 (Dec.
`5, 2019).
`The SBA’s proposed rule was not yet final when Obsid-
`ian submitted its proposal in July 2019. In making its size
`determination, the SBA explained that Obsidian’s size
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`OBSIDIAN SOLUTIONS GROUP, LLC v. US
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`must be calculated on a three-year basis rather than a five-
`year basis because the governing SBA regulation at the
`time of submission was the three-year rule.
`C
`Effective January 1, 2022, Congress amended Section
`3(a)(2) again, this time explicitly stating in subparagraph
`(C) that “no Federal department or agency (including the
`Administration when acting pursuant to subparagraph (A))
`may prescribe a size standard” inconsistent with the five-
`year averaging requirement. William M. (Mac) Thornberry
`National Defense Authorization Act for Fiscal Year 2021,
`Pub. L. No. 116-283, 134 Stat. 3388, 3784 (the “2022
`amendment”) (emphasis added). The amendment also ex-
`plicitly altered subsection (A), adding that the Administra-
`tor is “subject to the requirements specified under
`subparagraph (C).” Id. Congress made the 2022 amend-
`ment effective one year after the date of enactment and did
`not purport to apply this amendment retroactively. Id.
`III
`Obsidian relies on three arguments, all of which must
`be true for its bid protest to succeed: (1) the REA applied to
`the SBA, (2) the REA required a five-year rule to go into
`effect immediately upon the REA’s December 2018 effec-
`tive date, and (3) no notice-and-comment rulemaking was
`required for the SBA to start using the five-year rule. We
`need only address the first issue because it is dispositive.
`When tasked with interpreting a statute, we start by
`exhausting all traditional tools of interpretation to deter-
`mine its meaning. The starting point is the text itself.
`United States v. Hohri, 482 U.S. 64, 69 (1987). We do not
`look at the text in a vacuum, but rather, we must consider
`the words “in their context and with a view to their place
`in the overall statutory scheme.” King v. Burwell, 576 U.S.
`473, 486 (2015) (cleaned up).
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`OBSIDIAN SOLUTIONS GROUP, LLC v. US
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`The REA changed a single word in Section 3(a)(2). We
`consider that change in the overall structure of the entire
`provision, which includes three subsections. First, subsec-
`tion (A) authorized the SBA Administrator to “specify de-
`tailed definitions or standards” for determining size status.
`15 U.S.C. § 632(a)(2)(A) (2018). Second, subsection (B)
`granted discretion to the SBA—in exercising this author-
`ity—to use enumerated “or other appropriate factors” in es-
`tablishing size standards. Id. § 632(a)(2)(B). Third,
`subsection (C) made the broad authority of the first two
`subsections unique to the SBA by prohibiting any other de-
`partment or agency from prescribing its own size standards
`without first meeting more stringent requirements and
`getting approval from the SBA Administrator. The text of
`subsection (C) provided: “[u]nless specifically authorized by
`statute, no Federal department or agency may prescribe a
`size standard” unless it met the more stringent subsection
`(C) requirements and was “approved by the [SBA] Admin-
`istrator.” Id. § 632(a)(2)(C) (emphases added).
`The meaning of this language and structure is clear.
`Congress created not one but two subsections discussing
`size factors. The SBA was given its own, broader limita-
`tions on establishing size standards in subsection (B) than
`other agencies were given in subsection (C). Subsection (C)
`provided similar categories as subsection (B) but set more
`stringent requirements within those categories. If Con-
`gress had intended the SBA to be bound by the more strin-
`gent requirements applicable to other agencies, it could
`have created a single subsection outlining these categories.
`Instead, Congress made the broader authority of the SBA
`unique by making subsection (B) applicable to the SBA and
`by making other agencies subject to the stricter require-
`ments of subsection (C).
`Obsidian argues that the phrase “no Federal depart-
`ment or agency may prescribe a size standard” makes clear
`that subsection (C) applies to all agencies, including the
`SBA. But this argument reads out the rest of the text. First,
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`OBSIDIAN SOLUTIONS GROUP, LLC v. US
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`by including the text “[u]nless specifically authorized by
`statute,” Congress exempted the SBA from the group of
`Federal departments or agencies limited by subsection (C).
`The SBA was specifically authorized by statute in subsec-
`tion (A) to specify its own standards. Second, subsection (C)
`concluded with the additional requirement that any size
`standards prescribed by other agencies must be “approved
`by the [SBA] Administrator.” The natural reading of this
`text, absent language to the contrary, is that subsection (C)
`restricts any non-SBA agency from promulgating its own
`size standards without first getting approval from the SBA
`Administrator.
`The REA did not change any of this language. Nor did
`the REA change the structure of the provision. To the con-
`trary, the REA changed only a single word in subsec-
`tion (C)—a subsection Congress should have known did not
`apply to the SBA. “Congress is presumed to be aware of an
`administrative . . . interpretation of a statute and to adopt
`that interpretation when it re-enacts a statute without
`change.” Forest Grove Sch. Dist. v. T.A., 557 U.S. 230, 239–
`40 (2009) (quoting Lorillard v. Pons, 434 U.S. 575, 580
`(1978)). Prior to the enactment of the REA, the SBA pub-
`lished repeated and regular notices of its longstanding in-
`terpretation that subsection (C) did not apply to the SBA.
`84 Fed. Reg. at 29400. Despite being on notice of this inter-
`pretation, Congress chose not to extend subsection (C) in
`the REA.
`This is in stark contrast to Congress’s later amendment
`to the Small Business Act. Unlike the REA, the 2022
`amendment to subsections (A) and (C) did explicitly change
`the language of the statute to make subsection (C) applica-
`ble to the SBA. Pub. L. No. 116-283, 134 Stat. 3388, 3784
`(2021). Congress added a limitation on the SBA’s authority
`in subparagraph (A): “and subject to the requirements
`specified under subparagraph (C).” Id. Then, it amended
`subparagraph (C) to reflect that change: “(including the
`Administration when acting pursuant to subparagraph
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`OBSIDIAN SOLUTIONS GROUP, LLC v. US
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`(A)).” Id. When Congress amends a statute, it raises a pre-
`sumption that the legislature intended to substantively
`change, not simply clarify, the law. Ross v. Blake, 578 U.S.
`632, 641–42 (2016) (“When Congress amends legislation,
`courts must ‘presume it intends [the change] to have real
`and substantial effect.’” (alteration in original) (citation
`omitted)); Shambie Singer, Sutherland Statutes and Stat-
`utory Construction § 22.1 (7th ed. 2021). And that pre-
`sumption is strengthened here by the fact that Congress
`delayed the effective date by a year to January 1, 2022, and
`nowhere suggested that the amendment was retroactive.
`Thus, unlike the REA, the 2022 amendment made substan-
`tive changes to Section 3(a)(2) that prospectively applied
`subparagraph (C) to the SBA. The 2022 amendment there-
`fore further supports that Section 3(a)(2)(C) of the REA did
`not apply to the SBA.
`Finally, we are unpersuaded by Obsidian’s arguments
`that the legislative history dictates applying subsection (C)
`to the SBA. Although legislative history may be helpful for
`statutory interpretation, the history cited by Obsidian does
`not sway our decision. Obsidian relies on the fact that, after
`passing the REA, the House attempted to pass a clarifica-
`tion bill to make the REA applicable to the SBA. H.R. 2345,
`Clarifying The Small Business Runway Extension Act
`(July 15, 2019). But “subsequent legislative history . . . is a
`particularly dangerous ground on which to rest an inter-
`pretation of a prior statute when it concerns . . . a proposal
`that does not become law.” Pension Benefit Guar. Corp. v.
`LTV Corp., 496 U.S. 633, 650 (1990) (emphasis added). The
`clarification bill Obsidian relies on only ever passed in the
`House. It was not approved by the Senate and does not sug-
`gest Congress intended for the REA to apply to the SBA.
`The only relevant bill that did ultimately win the approval
`of both chambers of Congress was the 2022 amendment
`discussed above. Unlike the failed House bill, the 2022
`amendment made no mention of being a clarification and
`is, as explained above, presumed to have substantively
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`OBSIDIAN SOLUTIONS GROUP, LLC v. US
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`changed, not simply clarified, the prior meaning of Sec-
`tion 3(a)(2).
`Moreover, to the extent the REA congressional reports
`imply that the bill’s sponsors believed the REA would apply
`to the SBA, this does not change our analysis. See H. R.
`Rep. No. 115-939, at 2 (2018); S. Rep. 115-431, at 4 (2018).
`What a bill’s sponsors think an amendment will do, and
`what an amendment actually does, are two separate
`things. Here, such ambiguous evidence of the sponsoring
`legislators’ mindset does not negate the clear text, struc-
`ture, and other evidence that all suggest the REA did not
`apply to the SBA.
`
`IV
`Having agreed with the Court of Federal Claims that
`the SBA’s size determination was not arbitrary or capri-
`cious because the REA did not apply to the SBA, we also
`hold that the court did not abuse its discretion in denying
`injunctive relief. There can be no injunctive relief without
`a corresponding prevailing claim. Dell Fed. Sys., L.P. v.
`United States, 906 F.3d 982, 999 (Fed. Cir. 2018) (holding
`that “proving success on the merits is a necessary element
`for a permanent injunction”). Obsidian failed to succeed,
`and the Court of Federal Claims was correct to deny Obsid-
`ian’s requested relief.
`
`V
`We have considered Appellant’s other arguments and
`find them unpersuasive or unnecessary to reach. For the
`reasons above, we affirm.
`AFFIRMED
`COSTS
`
`No costs.
`
`