UNITED STATES DEPARTMENT OF TRANSPORTATION, ET AL., PETITIONERS V.
PARALYZED VETERANS OF AMERICA, ET AL.

   No. 85-289

   In the Supreme Court of the United States

   October Term, 1985

   On Writ of Certiorari to the United States Court of Appeals for the
District of Columbia Circuit

   Reply Brief for the Petitioners

   In our opening brief, we argued that the court of appeals erred in
requiring the Department of Transportation to promulgate regulations
under Section 504 of the Rehabilitation Act of 1973, 29 U.S.C. 794,
that would regulate the in-flight activities of commercial airlines.
We demonstrated that airport operators, and not the airlines, are the
"recipients" of the federal financial assistance granted under the
airport aid statutes, and we further demonstrated that the court of
appeals erred in creating a "program or activity" of "providing
commercial air transportation" pursuant to which the airlines are
deemed to be "indirect recipients" of federal aid to airport
operators.

   In reply, respondents advance two primary arguments not relied upon
by the court of appeals to support their contention that all
commercial airlines using federally assisted airports are "recipients"
of federal financial assistance;  we address these arguments below.
First and foremost, however, respondents argue that it is anomalous to
provide handicapped passengers with accommodations mandated by Section
504 with respect to services delivered at the airport, but not to
provide handicapped persons with protection against discrimination if
they wish to fly on a commercial airliner.  See, e.g., Resp. Br. 21.
Respondents fail to acknowledge that Section 504 specifically limits
the government's authority to extend regulatory coverage to the
"recipients" of federal financial assistance, and, what is more, the
statute reaches only the recipients' "programs or activities" that
actually receive federal financial assistance.  See, e.g., Grove City
College v. Bell, 465 U.S. 555 (1984).  Like the court of appeals,
respondents approach this case as if it should be decided in
accordance with respondents' notion of good public policy rather than
on the basis of a careful analysis of the legal constraints imposed by
Section 504 and this Court's decisions interpreting the statute's
"program specificity" limitation.  Whatever holes may be thought to
exist in the statutory scheme, therefore, cannot be filled through
judicial rulemaking.  /1/

   1.a. Respondents appear to argue that passengers on commercial
airlines are not only beneficiaries of the federal financial
assistance given to airport operators, but the sole beneficiaries of
that assistance.  See, e.g., Resp. Br. 30-37 & n.10.  The airlines,
respondents contend, are therefore necessarily "indirect recipients"
of federal aid to airport operators, serving as conduits for the flow
of aid from the government to the ultimate benefit of passengers
(Resp. Br. 29-40).  /2/ Respondents seek support for their position
both in the way Congress has determined to spend monies in the Airport
and Airway Trust Fund and in Congress's allocation of the Trust Fund
tax burdens among airport users (Resp. Br. 33-49).

   In their second and somewhat parallel argument, respondents contend
that commercial airlines are "recipients" of federal financial
assistance with respect to their in-flight activities because the
airlines, like colleges with discriminatory admissions policies, are
in a position to bar handicapped persons from receiving the benefits
Congress intended to confer on passengers through aid to airport
operators (Resp. Br. 63-70).  Relying on a regulation (49 C.F.R.
27.7(b)(1)) that requires "recipients" to ensure that intermediate
entities do not stand as an obstacle to the flow of benefits from the
recipients to the ultimate beneficiaries, respondents argue that the
airlines should be regarded as "indirect recipients" of federal
financial assistance.

   As we demonstrate below, neither of respondents' theories is
correct.  The history and specific provisions of the airport aid
statutes evidence a clear congressional intent to benefit interstate
commerce and aviation in general, not just commercial carriers or
their passengers.  It is for that reason that Congress has earmarked
most of the money in the Airport and Airway Trust Fund for runways,
taxiways, and safety devices, because those items benefit the
noncommercial as much as the commercial aircraft, and the cargo
carrier as much as the passenger carrier.  Similarly, Congress's
intent to benefit aviation and commerce in general is evidenced by its
decision to distribute the tax burden of aid to airport operators
among all airport users, whether they be airlines, operators of
private planes for business or pleasure, or travelling passengers.

   As for respondents' second argument, we will show that airlines are
in no sense conduits of money, goods, or services between the
government and passengers in flight.  Airlines neither deliver nor
prevent delivery of airport services to passengers.  The reality is
that it is the airport operator that is assisted and which therefore
has an obligation to be nondiscriminatory in its relations with all
who use it, including not only passengers but the airlines as well.
In the circumstances of this case, however, the obligations of airport
operators cannot be transformed into obligations of the airlines with
respect to their in-flight activities.

   b. We agree with respondents' contention (Br. 30-37) that airline
passengers are intended beneficiaries of statutes granting federal
financial assistance to airport operators for the purpose of carrying
out airport development and improvement projects.  Respondents are
plainly wrong, however, in their further contention that, if airline
passengers are beneficiaries, then all other entities that also
benefit from the same assistance must be "recipients" subject to
regulation under Section 504.  The fallacy in respondents' argument is
that the airport operator obviously is the recipient;  the airport
grant legislation treats all other entities that benefit from the
assistance, including passengers, alike, and all are "beneficiaries."

   The intend of Congress in passing the airport grant statutes and
Section 504 is determinative on the issue of "recipient" status.
Contrary to respondents' argument, however, Congress expressed no
special intent to benefit passengers as such when it enacted the
statutes providing assistance to airport operators.  Instead, its
purposes were much broader.  That this is so is clear from the
legislative history of the Airport and Airway Development Act of 1970,
Pub. L. No. 91-258, 84 Stat. 219 et seq. (formerly codified at 49
U.S.C. (1976 ed.) 1701 et seq.) (hereinafter cited as the 1970 Act).
As the House Committee on Interstate and Foreign Commerce explained
(H.R. Rep. 91-601, 91st Cong., 1st Sess. 6 (1969)):

         In addition to the actual users of the airport and airway
      system -- such as airline passengers, general aviation,
      including private and business aviation operations, air freight
      forwarders, individual corporate and private shippers, etc. --
      there are others who benefit substantially from aviation;
      primarily, perhaps, the military should be considered.  From a
      civilian standpoint those who benefit indirectly include the
      aircraft manufacturers and all of those whose employment is
      directly or indirectly related to aviation.  To illustrate, an
      aircraft or aircraft component manufacturer may employ thousands
      of persons who never fly, yet those persons' economic lives
      depend entirely on aviation.  More indirectly, but still to be
      considered, are those who make their livelihood by providing
      services for the manufacturers' employees.  The employees of
      such corporations indirectly support such nonaviation interests
      as real estate brokers and builders, doctors, dentists, school
      teachers, etc.  This is brought forth here to establish the fact
      that air transportation in a true sense touches every American
      home, whether those in the home ever fly or not.

   Thus, Congress determined that federal financial assistance to
airport operators was necessary not simply to benefit passengers, but
to take account of the tremendous impact of the aviation industry on
the nation's commerce.  In the 1970 Act, for example, Congress
explained that federal financial assistance to airports was necessary
because "substantial expansion and improvement of the airport and
airway system is required to meet the demands of interstate commerce,
the postal service, and the national defense." 84 Stat. 219.  The
Airport and Airway Improvement Act of 1982, 49 U.S.C. App. 2201(a)(2)
(hereinafter cited as the 1982 Act), contains a virtually identical
statement of congressional purpose.

   Moreover, the "current and projected growth in aviation" (84 Stat.
219) that concerned Congress in 1970 was by no means limited to
commercial air travel.  On the contrary, Congress recognized the need
to accommodate significant growth in five separate categories of civil
aviation:  air carriers and passengers, air cargo carriers, air taxis,
private business flying, and private recreational flying.  H.R. Rep.
91-601, supra, at 5.  Huge growth was predicted not only in commercial
aviation, but also in general aviation, which was expected to double
its volume by 1980 (id. at 6).  /3/ Two of the biggest problems
identified by the House Interstate and Foreign Commerce Committee were
safety in general and congestion at general aviation airports (id. at
5).  Similarly, the House Committee on Public Works and Transportation
in 1981 described the 1970 Act as follows (H.R. Rep. 97-24, 97th
Cong., 1st Sess. Pt. II, at 2):

         Under the 1970 Act, Trust Fund revenues were used to fund a
      variety of programs.  The Airport Development Program (ADAP)
      funded safety and capacity development at public airports of all
      sizes, both air carrier and general aviation airports.

   Additionally, a 1984 study prepared by Congress's Office of
Technology Assessment pointed out that general aviation activities
account for about one-half of all aircraft operations at FAA-towered
airports.  Office of Technology Assessment, Congress of the United
States, OTA-STI-231, Airport System Development 27.  Moreover, general
aviation airports use proportionately more federal money than
commercial airports (id. at 140-141).  Since 1970, the number of
general aviation aircraft in use has grown by 63% and the number of
hours flown by 67% (id. at 141):

         As a result, general aviation now exerts particular pressure
      on the runways, taxiways, and other airfield components of a
      number of major commercial airports, often accounting for more
      than half of all takeoffs and landings.

   In short, Congress determined to provide federal financial
assistance to airport operators for the benefit of all classes of
"users," not merely passengers.  Moreover, Congress intended all
"users" to have the same status with respect to each other;  all are
the intended beneficiaries of federal financial assistance to airport
operations.  /4/ It is nonsensical to suppose that Congress meant that
all "beneficiairies," including those who never even fly (see H.R.
Rep. 91-601, supra, at 6), are to be treated as "recipients" under
Section 504 when they use or benefit from an airport at which federal
aid was expended.  It is far more consistent with the legislative
scheme to treat all categories of aviation, as well as the public at
large, as beneficiaries of the assistance program, just as all sorts
of vehicles, commercial and private, are the beneficiaries of
federally assisted highways.

   c. That all entities using federally assisted airports are
beneficiaries rather than recipients is made clearer from the fact
that the "user" tax system that funds airport and airway development
includes not only passengers, but all classes of aviation.
Respondents stress (Br. 34-35) the high percentage of the Airport and
Airway Trust Fund that comes from taxes on tickets paid by travelling
passengers.  But this fact attests to nothing more than the reality
that there are enormous numbers of passengers, so that each pays
relatively little, yet collectively their payments constitute the
largest component of the Trust Fund.  What is far more significant is
that Congress intended all airport users to support the Trust Fund,
thus equating the status of the airlines and other users to that of
passengers.  See, e.g., H.R. Rep. 91-601, supra, at 41, 49-50
(expressly comparing Airport Trust Fund to the Highway Trust Fund);
see also id. at 40 (Congress specifically intended to require general
aviation to pay "a larger share of air user charges than at present").
 Congress reiterated its commitment to "user support" in the 1982
airport grant legislation.  See H.R. Rep. 97-24, supra, Pt. I, at
54-56 (letter from Secretary of Transportation Drew Lewis to Speaker
O'Neill).  What is more, both the Secretary's recommendation to
Congress and the legislation ultimately enacted in 1982 continued to
treat all "users," including passengers, alike, by subjecting each
category to the taxes necessary to support the grant program.  See 26
U.S.C. 9502.  /5/

   2. As part of their attempt to link airports and airlines in the
"indissoluble nexus" created by the court of appeals (Pet. App. 50a),
respondents argue (Br. 55) that the airlines have statutory
authorization to "veto" airport operators' receipt of federal
financial assistance.  Respondents' argument is incorrect.

   Section 511(c) of the 1982 Act, 49 U.S.C. App. 2210(c), provides
that, "(i)n making a decision to undertake any airport development
project * * * , each sponsor of an airport shall undertake reasonable
consultations with affected parties using the airport at which such
project is proposed." The FAA has interpreted this provision in
regulations and in a more detailed handbook, spelling out precisely
the type of consultation that is required.  Thus, pursuant to 14
C.F.R. 152.111(b)(10) and (11), an airport operator must consult with
the airlines if the airport serves carriers and with the fixed-base
operators (who rent space and furnish services, by subcontract or
sublease, to general aviation) if the airport serves general aviation.
 The FAA's handbook prepared in connection with the 1970 Act explained
that the scope of consultation

      will vary from airport to airport depending upon operational
      requirements, the relationship between the users and the sponsor
      and their financial commitments to each other.  As long as users
      are afforded a reasonable opportunity to provide input prior to
      any final decision on proposed airport development, the fact
      that such users choose not to do so, or nonconcur in the
      proposed development, will not have the effect of nullifying any
      final decision by the sponsor.  However, the project may not be
      approved unless the required consultation has been accomplished.

Federal Aviation Administration, Dep't of Transportation, Airport
Development Aid Program (ADAP) Handbook 74 (1979).  /6/ The
consultation process described in the FAA handbook hardly gives the
airlines a "veto" over the plans of airport operators.  /7/

   In any event, respondents' "veto" argument is not responsive to our
point (Gov't Br. 28) that Congress intended, in passing Title VI of
the Civil Rights Act of 1964 and Section 504, to regulate only those
entities that have control over whether they will receive federal
financial assistance.  Even if we assume that some airlines may
occasionally exercise a certain level of influence over airport
operators' receipt of federal funds, the airlines cannot change the
fact that, for all practical purposes, all major airports have
received federal funds for capital improvements.  The airlines cannot,
as a practical matter, detach themselves from the federally assisted
airport system that Congress established to serve the needs of
interstate commerce and the national defense.  Under these
circumstances, the airlines may not be deemed "recipients" of federal
financial assistance to airport operators.  Compare Grove City College
v. Bell, 465 U.S. 555, 565 n.13 (1984) (colleges "remain free to opt
out of the federal student assistance programs").

   3. Respondents erroneously contend (Br. 63-86) that regulations
promulgated by the Department of Transportation (49 C.F.R. 27.5 and
27.7), as well as case law, support their theory that, whether or not
the airlines are "recipients" of federal financial assistance within
the meaning of Section 504, the airport operators, who unquestionably
are "recipients," have a duty to ensure that the airlines also comply
with Section 504.  Respondents' argument begs the fundamental question
in this case, which is whether the in-flight activities of the
airlines constitute a federally assisted program or activity to which
Section 504 applies.  The regulations upon which respondents rely
place restrictions upon recipients in the conduct of their federally
assisted programs or activities.  Thus, an airport operator, as a
recipient, cannot deliver federally assisted airport services in a
discriminatory manner.  It cannot, for example, subcontract part of
its federall assisted work to entities that will discriminate, nor can
it deliver refreshment, refueling, or waiting room services through
third parties that will discriminate.

   To apply these regulations to aircraft in flight, however, one has
to begin with the premise that the federally assisted "program or
activity" includes flying.  But that would be beginning at the wrong
end.  The question presented in this case is whether flying is or is
not part of the assisted program or activity.  For the reasons
explained in our opening brief (at 29-32), we maintain that it is not.

   The differences, moreover, between the situation in this case and
the types of circumstances to which the regulations cited by
respondents properly apply is readily apparent from an examination of
the very cases upon which respondents rely.  In Frazier v. Bd. of
Trustees, 765 F.2d 1278 (5th Cir. 1985), a private firm contracted
with a hospital to perform the hospital's federally assisted
respiratory therapy services.  The firm discharged one of its
respiratory therapists, who then contended that her discharge was
related to her history of mental instability, that the contractor was
a "recipient" of the federal financial assistance (Medicare and
Medicaid payments) given to the hospital, and that the contractor's
action in dismissing her violated Section 504.  The court of appeals
agreed that the employee had stated a claim under Section 504, relying
on regulations (45 C.F.R. 84.3(f) and 84.4(b)(4)) that defined
"recipients" and required the hospital to ensure that no person was
subjected to discrimination in its federally assisted programs
"through contractual or other arrangements." Thus, the court of
appeals held that the hospital's contract was obligated under Section
504 to deliver respiratory therapy services free of discrimination,
just as if those services had been delivered by the hospital itself.

   By contrast, the in-flight activities of airlines are not a part of
an airport's assisted program that the airport has delegated to a
contractor.  To be sure, the airlines carry out some of their
functions in the airport, such as ticketing and baggage checking;  as
to these functions, Section 504 obligations apply.  But the airport
does not receive federal financial assistance for operating aircraft
in flight.  The hospital in Frazier, on the other hand, collected
federal funds for work done by the contractor.  This fundamental
distinction clearly shows that the regulations upon which respondents
rely do not impose Section 504 obligations either on the airlines
directly (with respect to in-flight activities) or upon the airport to
monitor the airlines' in-flight activities.  /8/

   Similarly, the airlines do not meet the definition of a "recipient"
that was employed in Bob Jones University v. Johnso, 396 F. Supp. 597,
601 n.15 (D.S.C. 1974), aff'd, 529 F.2d 514 (4th Cir. (1975) (Table).
The court there held that a "recipient" is "the intermediary entity
whose nondiscriminatory participation in the federally assisted
program is essential to the provision of benefits to the identified
class which the federal statute is designed to serve." Thus, the court
concluded that private sector colleges were entities whose
nondiscriminatory participation was essential to Congress' plan of
educational assistance for veterans.

   Respondents erroneously assume that the airlines in this case
occupy the same role in the statutory scheme as the college in Bob
Jones University.  As we have demonstrated above, however, fulfillment
of Congress's purposes in assisting airport operators requires the
nondiscriminatory participation of those operators in the delivery of
airport services to all who use or benefit from such services.  Thus,
it is the airport operators, and not the airlines, that parallel the
college in Bob Jones University and whose nondiscriminatory
participation in the federally assisted program is essential to the
provision of benefits to those Congress intended to serve.  The
airlines, on the other hand, simply cannot be equated with the college
in Bob Jones University when it comes to the delivery of airport
services -- the only federally assisted program involved in this case.

   We reiterate that the determination whether an entity is a
recipient or a beneficiary under any particular statutory scheme is
ultimately a question of congressional intent.  Congress's intent with
respect to the delivery of airport services was expressed in the 1970
and 1982 Acts, discussed at pages 6-9, supra.  We maintain that the
purpose of those acts was to create a network of federally assisted
airports.  To be sure, all "flying" is ultimately benefitted, as is
the public weal in general.  But if the "program or activity" language
of Section 504 is to mean anything at all, it must mean that the
"recipient" that is subject to federal regulation is something less
than every person or entity that ultimately benefits from the program
Congress enacted.

   Respondents also rely (Br. 77-78) on 49 C.F.R. 27.7(b)(1)(v)
(emphasis added), which prohibits recipients from "(a)id(ing) or
perpetuat(ing) discrimination against a qualified handicapped person
by providing financial or other assistance to an agency, organization,
or person that discriminates on the basis of handicap in providing any
aid, benefit, or service to beneficiaries of the recipient's program."
Such reliance is misplaced.  As before, respondents have reasoned
from, not to, their conclusion.

   The regulation prohibits discrimination against the beneficiaries
of the recipient's federally assisted program in that program.  Here,
the recipient's program is running an airport.  The beneficiaries of
that program, including the airlines themselves, are thus protected
against discrimination by the airport operator on the basis of
handicap (and, in the case of airlines, the handicap of any qualified
employee).  But the regulation itself does not cover in-flight
activities, because they are not part of the recipient's program or
activity.  Nor do the airlines' in-flight policies discriminate
against anyone in the use of airport services.  The regulation merely
assures that, if certain programs or activities are federally
assisted, the recipient may not provide its own assistance to others
who discriminate in those same programs, thereby paralleling the ban
(see pages 13-15, supra) on a recipient's permitting its contractors
to discriminate.  /9/

   4. Finally, respondents assert (Br. 62 n.25) that the court of
appeals did not reach the question whether the FAA's air traffic
control system contstituted federal financial assistance to the
airlines, and they contend that this Court need not consider the
issue.  We disagree.  First, respondents conveniently ignore the fact
that the Court granted the government's petition for a writ of
certiorari on that question (see Pet. I).  Second, as we pointed out
in the petition (at 21-22 & n.15), the court of appeals held that the
air traffic control system constitutes federal financial assistance to
all airlines within the meaning of Section 504 (Pet. App. 40a), but it
declined to define the program or activity covered by that assistance
(id. at 44a-45a).  Thus, if this Court were to reverse only that part
of the decision below holding that federal assistance to airports
requires airlines to comply with Section 504 in their "program or
activity" of "providing commercial air transportation" (Pet. App.
50a), the Department of Transportation still would be left with a
holding that all airlines receive federal financial assistance within
the meaning of Section 504 by virtue of their use of the air traffic
control system.  Although it would be open to the Department to
determine the relevant "program or activity" in the first instance,
the Department still would presumably be required to promulgate
regulations consistent with that determination.  On the other hand, a
decision by this Court that the air traffic control system is not
federal financial assistance to airlines at all would obviate the need
for further administrative and judicial proceedings regarding the
scope of the "program or activity."

   For the foregoing reasons, as well as those set forth in our
opening brief, the judgment of the court of appeals should be
reversed.

   Respectfully submitted.

   CHARLES FRIED

      Solicitor General

   MARCH 1986

   /1/ Similarly, it is irrelevant whether the Department of
Transportation's draft proposal to make the regulations mandated by
the court of appeals applicable to all commercial air carriers (see
Resp. Br. 17-20) represents good policy.  Respondents fail to
acknowledge that the proposal has no legal status whatever;  indeed,
it does not even have the minimal status of proposed regulations.
Instead, the proposal was transmitted to the Department of Justice
with a request that it be approved for issuance as a Notice of
Proposed Rulemaking.  That request was denied on August 2, 1985,
because the Department of Justice, acting pursuant to its Section 504
oversight authority (see Gov't Br. 12 n.10), concluded, as a legal
matter, that the proposal was inconsistent with the
program-specificity mandate of Section 504.  In these circumstances,
the proposal represents nothing more than interagency correspondence,
and it simply has no relevance to the legal issues before this Court.

   /2/ Respondents assert (Br. 29-30) that, contrary to this Court's
decision in Grove City v. Bell, supra, the CAB never considered the
posibility that the airlines might be recipients by virtue of the
receipt of "indirect aid," maintaining instead that only direct grants
constitute "Federal financial assistance" for purposes of Section 504.
 Respondents mischaracterize the CAB's position.

   The only assistance programs ever administered by the CAB were
direct subsidies to airlines.  The FAA, a part of the Department of
Transportation (see Gov't Br. 4 n.2), administered assistance to
airports.  As we explained in our opening brief (at 5-9), neither the
FAA nor DOT ever purported to have the authority to regulate the
in-flight activities of airlines under Title VI of the Civil Rights
Act on the basis of those grants.  Not surprisingly, therefore, the
CAB stated in the preamble to its final Section 504 regulations that
it had considered but rejected the contention that there were programs
other than direct subsidies that "assisted" the in-flight activities
of airlines.  Pet. App. 88a-89a.  The CAB had no occasion to, and did
not, contend that it is impossible for any entity to be an indirect
recipient of federal financial assistance.

   /3/ As used herein, the term "commercial aviation" refers to all
passenger carriers formerly certified by the CAB, and the term
"general aviation" refers to all other forms of civil aviation.

   /4/ If anything differentiates airlines from passengers as
beneficiaries, it is that airlines pay a fee to the airport in
exchange for using it.  That fact further militates against the notion
that the airlines are "recipients" of federal financial assistance to
airports.

   /5/ As we noted in our opening brief (at 27 n.17), there is nothing
in the legislative history of Title VI of the Civil Rights Act of
1964, 42 U.S.C. 2000d, or Section 504 to suggest that the relationship
between specific taxes and federal grants should be determinative of
the question whether an entity if a "recipient." As a general matter,
taxes should not be regarded as "user fees" any more than they should
be treated as "premiums" in the context of the Soecial Security
insurance program.  See Flemming v. Nestor, 363 U.S. 603 (1960).
Instead, the significance of the tax system in the case of the Airport
and Airway Trust Fund is that passengers are treated merely as one
class of "user."

   /6/ The FAA handbook was written to implement 49 U.S.C. (1976 ed.)
1718(b).  The House Committee on Public Works and Transportation, in
considering the 1982 Act, stated that the same type of consultation
described in the FAA handbook was to be continued under the 1982 Act.
H.R. Rep. 97-24, supra, Pt. II, at 14.

   /7/ The statutorily-required consultation with the airlines is not
to be confused with the so-called majority-in-interest clauses that
some airlines have negotiated with airports.  These clauses, pursuant
to which certain airlines exercise considerable power over airport
expansion that might open an airport to additional competitors and
cited by respondents (Br. 55-56 & n.10) as authority for the
proposition that airlines possess the authority to prevent airport
operators from receiving federal grants, have been criticized as
inconsistent with the pro-competition nature of airline deregulation.
Report and Recommendations of the Airport Access Task Force 60-61
(1983).  In any event, the clauses, which are entirely the product of
bargaining between the airlines and the airports, have nothing to do
with the matter at hand -- congressional intent in enacting the
airport aid statutes.

   It also bears noting that a number of agency Section 504
regulations require recipients to consult with certain beneficiaries
or their representatives, i.e., handicapped persons, with respect to
the recipients' federally assisted programs or activities.  See, e.g.,
7 C.F.R. 15b.8(c)(1) (Department of Agriculture).  Those who are
consulted, including participants in the federally assisted programs
or activities, have never been deemed "recipients" by virtue of such
consultation.

   /8/ Although it does not detract from the force of our position, we
note our disagreement with the court of appeals' conclusion in Frazier
that the contractor was a "recipient" of federal financial assistance.
 The contractor received payments from the hospital as the result of
an arms' length business transaction, and thus it was not in fact
receiving federal financial assistance, either directly or indirectly.
 In any event, what is relevant here is that aircraft in flight, in
relation to airports, are not comparable to the contractor in relation
to the recipient hospital:  the airlines simply are not contractors of
the airport operators performing services that the operators would
otherwise perform themselves.

   /9/ We note, moreover, that an "agency's authority under (Section
504) both to promulgate regulations and to terminate funds is subject
to the program-specific(ity) limitation (implicit in Section 504)."
North Haven Bd. of Educ. v. Bell, 456 U.S. 512, 538 (1982).  Thus, the
regulations cited by respondents must be read in light of the "program
specificity" limitations mandated by North Haven and Grove City.
Respondents' inability to demonstrate that "flying" is a federally
assisted program makes the regulations upon which they rely totally
inapplicable.