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

   The Acting Solicitor General, on behalf of the United States
Department of Transportation and the Federal Aviation Administration,
petitions for a writ of certiorari to review the judgment of the
United States Court of Appeals for the District of Columbia Circuit in
this case.

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

                       PARTIES TO THE PROCEEDING

   In addition to the United States Department of Transportation, the
respondents in the court of appeals included the Civil Aeronautics
Board and the Federal Aviation Administration.  The CAB ceased
operations on December 31, 1984, pursuant to the Airline Deregulation
Act of 1978, Pub. L. No. 95-504, 92 Stat. 1705 et seq., and the Civil
Aeronautics Board Sunset Act of 1984, Pub. L. No. 98-443, 98 Stat.
1703 et. seq.  See note 1, infra.  The Department of Transportation
assumed the CAB's functions under the Rehabilitation Act of 1973, and
it is the petitioner in this Court, along with its constituent agency,
the Federal Aviation Administration.

   In addition to Paralyzed Veterans of America, the petitioners in
the court of appeals included the American Coalition of Citizens with
Disabilities, Inc. and the American Council of the Blind.  All three
organizations are respondents in this Court.

            TABLE OF CONTENTS
   Question presented
   Parties to the proceedings
   Opinions below
   Jurisdiction
   Statute and regulations involved
   Statement
      A. The history of the CAB's regulations
      B. The court of appeals' decision
   Reasons for granting the petition
   Conclusion
   Appendix A
   Appendix B
   Appendix C
   Appendix D

                            OPINIONS BELOW

   The opinion of the court of appeals (App., infra, 1a-76a) is
reported at 752 F.2d 694.  The opinion dissenting from the denial of
rehearing en banc (App., infra, 80a-83a) is not reported.

                             JURISDICTION

   The judgment of the court of appeals was entered on January 18,
1985.  A petition for rehearing was denied on April 26, 1985 (App.,
infra, 77a).  On July 13, 1985, Justice White extended the time for
filing a petition for a writ of certiorari to and including August 26,
1985.  The jurisdiction of this Court is invoked under 28 U.S.C. 1254
(1).

                   STATUTE AND REGULATIONS INVOLVED

   1. Section 504 of the Rehabilitation Act of 1973, 29 U.S.C. 794,
provides in pertinent part as follows:

         No otherwise qualified handicapped individual in the United
      States, as defined in section 706 (7) of this title, shall,
      solely by reason of his handicap, be excluded from the
      participation in, be denied the benefits of, or be subjected to
      discrimination under any program or activity receiving Federal
      financial assistance or under any program or activity conducted
      by any Executive agency or by the United States Postal Service.

   2. Regulations promulgated by the Civil Aeronautics Board to
implement Section 504 of the Rehabilitation Act of 1973 were published
at 47 Fed. Reg. 25936 et seq. (1982), as amended by 47 Fed. Reg. 51857
et. seq. (1982), and codified at 14 C.F.R. Pt. 382.  Because the
issues in this case are limited to the question of the proper
jurisdictional reach of the regulations and do not involve the details
of the regulations themselves, only the preamble to the regulations
(47 Fed. Reg. 25936-25939 (1982)), setting forth the Board's legal
rationale for the scope of the regulations, is reproduced in the
appendix to this petition (App., infra, 84a-95a).

                          QUESTIONS PRESENTED

   1. Whether federal financial assistance to airport operators
renders Section 504 of the Rehabilitation Act of 1973, 29 U.S.C. 794,
applicable to the on-board activities of airlines using
federally-assisted airports.

   2. Whether the federally-operated air traffic control system
constitutes a form of federal financial assistance to airlines

                               STATEMENT

   Respondents, the Paralyzed Veterans of America and two other
organizations representing handicapped individuals brought this action
under Section 1006 of the Federal Aviation Act, 49 U.S.C. (1976 ed.)
1486, seeking review of regulations issued by the Civil Aeronautics
Board to implement Section 504 of the Rehabilitation Act of 1973, 29
U.S.C. 794.  Section 504 prohibits discrimination on the basis of
handicap in "any program or activity receiving Federal financial
assistance." In its final rulemaking, the Board determined, with the
approval of the Department of Justice, that only those airlines
receiving a subsidy from the Board under Section 406(b) or Section
419(a)(4) and (b)(5) of the Federal Aviation Act, 49 U.S.C. (1976 ed.
Supp. V) 1376(b) and 1389(a)(4) and (b)(5), were federally assisted
within the meaning of Section 504.

   The court of appeals disagreed, holding that the commercial
aviation activities of all certificated airlines constitute federally
assisted programs or activities because the airlines have the use of
federally assisted airports.  In addition, the court of appeals was of
the view that the federally-operated air traffic control system
constitutes federal financial assistance to the commercial aviation
activities of all airlines.  Accordingly, the court vacated the
Board's regulations insofar as they were limited in their application
to carriers receiving subsidies under Section 406 or 419 of the
Federal Aviation Act and instructed the CAB's successor agency, the
Department of Transportation, to promulgate new regulations applicable
to all commercial airlines.  /1/

   The History Of The CAB's Regulations

   1. Prior to the "sunset" of the CAB, federal regulation of aviation
was divided between the CAB and the Federal Aviation Administration.
/2/ The FAA was and is responsible for operating the air traffic
control system and ensuring the safety of airline operations.  See Air
Line Pilots Ass'n v. CAB, 667 F.2d 181 (D.C. Cir. 1981).  In addition,
the FAA has, since 1946, granted federal financial assistance to
airport operators (typically, municipalities or other units of local
government) for the construction and improvement of terminals,
runways, and airport safety equipment.  /3/

   The CAB, on the other hand, was responsible for the economic
regulation of the airline industry.  In that capacity, the Board
regulated airline routes, fares, and service under the authority of
the Federal Aviation Act, 49 U.S.C. (1976 ed. & Supp. V) 1301 et seq.
Of particular relevance to this case was the Board's administration of
subsidies to a few airlines pursuant to Sections 406(b) and 419(a)(4)
and (b)(5) of the Federal Aviation Act, 49 U.S.C. (1976 ed. Supp. V)
1376(b) and 1389(a)(4) and (b)(5).

   Until 1978, Section 406 was the Board's only subsidy program.
Designed to guarantee air service necessary to transport the mail to
small communities, the original statutory scheme provided that the
Postmaster General was to pay the airlines for the basic cost of
transporting mail, while the Board was to pay the airlines additional
amounts as subsidies if necessary to ensure the carriage of mail.  See
Section 406(b) and (c), 49 U.S.C. (1976 ed. Supp. V) 1376(b) and (c).
The Section 406 program was sharply curtailed in 1978, and it was
terminated entirely at the end of fiscal year 1982.  See Airline
Deregulation Act of 1978, Pub. L. No. 95-504, Section 24, 92 Stat.
1725;  Act of Oct. 2, 1982, Pub. L. No. 97-276, Section 130, 96 Stat.
1196-1197;  Department of Transportation and Related Agencies
Appropriations Act, 1983, Pub. L. No. 97-369, Tit. II, 96 Stat.
1778-1779.

   Also in 1978, the CAB began operating the "Section 419 program," in
order to subsidize "small community" and other essential air service
that would not otherwise be provided.  See Airline Deregulation Act of
1978, Pub. L. No. 95-504, Section 33, 92 Stat. 1732.  This program,
which is to operate through 1988, is unrelated to the provision of
mail service under Section 406.

   2. In 1964, Congress passed Title VI of the Civil Rights Act of
1964, 42 U.S.C. 2000d, prohibiting discrimination on the basis of
race, color, or national origin in federally assisted programs and
activities.  /4/ Both aviation agencies, the CAB and the FAA,
published regulations implementing Title VI on December 31, 1964.  The
only federally-assisted grant program administered by the Board at
that time was the Section 406 mail subsidy program, and the Board's
initial Title VI regulations, while leaving open the possibility of
Title VI coverage for unspecified, future programs, expressly applied
only to the activities of airlines receiving payments under the
Section 406 program (14 C.F.R. 379.2 (1965), 29 Fed. Reg. 19287
(1964)):

         This part applies to any program for which Federal financial
      assistance is authorized under a law administered by the Board,
      including the payment of compensation by the Board under section
      406 of the Federal Aviation Act of 1958 (49 U.S.C. 1376).  /5/

After 1978, the Board modified its Title VI regulations to include its
only other subsidy program, the newly-enacted Section 419 program. 14
C.F.R. 379.2, 379.3, 379.4, and 379.12, 44 Fed. Reg. 42175-42176
(1979).

   Meanwhile, the FAA, based on its administration of grants to
airport operators, proscribed discriminatory treatment by airport
operators and by lessees of airport operators who furnished services
at the airport;  the illustrative examples given in the FAA's Title VI
regulations make it clear that its regulatory authority extended to
the threshold of the planes but no farther.  /6/ After the FAA became
a part of the Department of Transportation (see note 2, supra), its
Title VI regulations were subsumed within DOT's own Title VI
regulations (35 Fed. Reg. 10080 et. seq. (1970)).  DOT's regulations
contained equivalent illustrative examples that, if anything, made it
even clearer that the regulatory jurisdiction conferred by virtue of
federal financial assistance to airport operators extended to services
provided at the airport, but not to the interior of aircraft.  /7/
Indeed, DOT's regulations prohibited airport administrators from
discriminating against aircraft operators because of the race of the
pilot (49 C.F.R. Pt. 21, App. C(a)(1)(iii) (1971), set forth at note
7, supra).  Significantly, however, the exhaustive list of examples
made no mention of passengers in airplanes;  the only provisions for
passengers related to the use of facilities at the airport and the use
of ground transportation to leave the airport. 49 C.F.R. Pt. 21, App.
C(a)(1)(vi) and (vii) (1971), set forth at note 7, supra).

   In sum, the regulatory agencies recognized from the very outset
that Title VI did not reach the onboard activities of commercial
airlines, except for those few airlines that received subsidies from
the CAB.  /8/

   3. Using their Title VI regulations as a model, DOT and the Board
divided regulatory jurisdiction under Section 504 in the same fashion,
with DOT taking responsibility for regulations covering activities at
airports and the Board ultimately assuming responsibility only for the
on-board activities of subsidized carriers.  Initially, however, both
agencies expected the CAB to be able to promulgate regulations
governing the on-board activities of all certificated airlines, using
authroity derived from the Federal Aviation Act to supplement its more
limited authority under Section 504.  Thus, on June 6, 1979, the CAB
published a Notice of Proposed Rulemaking in which it announced its
intention to promulgate regulations "to prohibit unlawful
discrimination against disabled travelers and to implement section 504
of the Rehabilitation Act of 1973." 44 Fed. Reg. 32401 (emphasis
added).  The Board's notice made clear its position that its
jurisdiction under Section 504 was limited to those few carriers to
which the Board extended federal subsidies. 44 Fed. Reg. 32402 (1979).
 /9/

   For that reason, the Board proposed to prohibit all carriers from
discriminating against handicapped air travellers not in reliance on
Section 504, but instead based on its authority under Section 404 of
the Federal Aviation Act, 49 U.S.C. (1976 ed. & Supp. V) 1374.  As the
Board explained (44 Fed. Reg. 32401-32402 (1979) (emphasis added)):

         (The proposed rules) would implement section 504 * * *, which
      prohibits discrimination against the handicapped in any program
      or activity receiving Federal financial assistance.  In
      addition, the proposed rules would emphasize that the
      handicapped are protected by the adequacy of service and
      antidiscrimination provisions of section 404 of the Federal
      Aviation Act * * *, which are applicable to all air carriers,
      whether or not receiving Federal financial assistance.

   Section 404 of the Federal Aviation Act, 49 U.S.C. (1976 ed. &
Supp. V) 1374, as it existed at the time of the Board's Notice of
Proposed Rulemaking, contained two provisions relevant to this case.
Section 404(a)(1), 49 U.S.C. (1976 ed. Supp. V) 1374(a)(1), contained
a "safe and adequate service" requirement, obligating all air carriers
to "provide safe and adequate service, equipment, and facilities in
connection with (interstate and overseas air) transportation." Section
404(b), 49 U.S.C. (1976 ed.) 1374(b), contained a general
"antidiscrimination" clause, prohibiting any carrier from
"subject(ing) any particular person, port, locality, or description of
traffic in air transportation to any unjust discrimination or any
undue or unreasonable prejudice or disadvantage in any respect
whatsoever."

   As set forth above, the Board was of the view that the "safe and
adequate service" and "antidiscrimination" provisions of Section 404,
taken together, gave the Board sufficient authority to require all
carriers to comply with regulations prohibiting discrimination against
handicapped air travellers, whether or not a particular carrier was
receiving federal financial assistance.  Pursuant to the Airline
Deregulation Act of 1978, Pub. L. No. 95-504, Section 40(a), 92 Stat.
1744 (to be codified at 49 U.S.C. 1551(a)(2)(B)), however, the
"antidiscrimination" clause of Section 404(b) lapsed as of January 1,
1983;  only the "safe and adequate service" requirement of Section
404(a), 49 U.S.C. (1976 ed. & Supp. V) 1374(a), remains in effect.

   This contraction of the Board's statutory authority required it to
reevaluate its jurisdiction to impose the proposed regulations on all
carriers.  After studying the numerous comments received and
consulting with the Department of Justice, /10/ the Board concluded
that the "safe and adequate service" clause of Section 404(a) might
support a general prohibition against discrimination on the basis of
handicap applicable to all carriers, but that it was too slender a
reed to justify the imposition of more specific regulations applicable
to the on-board activities of nonsubsidized carriers.  47 Fed. Reg.
25937-25938 (1982) (App., infra, 85a-91a).  In reaching this
conclusion, the Board carefully considered, but ultimately rejected,
the contention that all certificated carriers receive federal
financial assistance within the meaning of Section 504 by virtue of
their use of the federally-operated air traffic control system and
federally-assisted airports. 47 Fed. Reg. 25937 (1982) (App., infra,
88a).  Accordingly, the Board concluded that the on-board activities
of only those airlines receiving subsidies from the Board could be
regulated under Section 504.  47 Fed.Reg. 25937-25938 (1982) (App.,
infra, 85a-91a).

   The final regulations promulgated by the Board (14 C.F.R. Pt. 382,
47 Fed. Reg. 25948 et. seq. (1982)) contain three subparts.  Subpart A
is a general prohibition against discrimination in air transportation
against qualified handicapped persons.  Subpart B of the Board's final
rules sets forth specific requirements to be followed by each
regulated carrier in providing air transport service to the
handicapped.  /11/ Subpart C established compliance and enforcement
mechanisms.  By virtue of the "safe and adequate service" provision of
Section 404(a) of the Federal Aviation Act, the Subpart A prohibition
applies to all certificated carriers, whether or not they receive
federal financial assistance.  In recognition os the limited
jurisdictional reach of Section 504, however, Subparts B and C of the
final regulations apply only to those carriers receiving federal
subsidies under Section 406 or 419 of the Federal Aviation Act.  /12/
The attorney General approved the CAB's final regulations (see note
10, supra).

   b. The Court Of Appeals' Decision

   After setting forth the history of the rulemaking, the court of
appeals turned to respondents' contention that all commercial airlines
are subject to Section 504.  The court first rejected respondents'
arguments that operating certificates and preferential tax treatment
for airlines constitute "Federal financial assistance" to airlines
within the meaning of Section 504.  /13/ The court next considered
respondents' contention that the federally-operated air traffic
control system constitutes federal financial assistance to airlines
and concluded that it does (App., infra, 39a-40a, 43a (footnotes
omitted)):

         It cannot be seriously disputed that the safe and efficient
      operation of commercial air transportation depends in great
      measure (if not, as (respondents) assert, "entirely") upon "the
      proper functioning of the national air traffic control system,"
      * * * Moreover, this crucial assistance may reasonably be
      considered "financial." * * * Consequently, (respondents')
      argument that the federal air traffic control system is an
      "arrangement" that "provides or otherwise makes available
      assistance in the form of . . . services of Federal personnel"
      leads reasonably to the conclusion that the system does indeed
      constitute federal financial assistance to all commercial air
      carriers.  It follows, therefore, that any and all carriers
      making use of the federal air traffic control system should be
      subject to any regulations promulgated under section 504.

               * * * * *

         The fact is that the air traffic control system is
      indispensable to the very existence of modern commercial
      aviation, and that if it were not provided by the federal
      program now in place, it would have to be provided, and paid
      for, by the airlines themselves.

   Despite the court's conclusion that the air traffic control system
constitutes federal financial assistance to all commercial airlines,
the court declined to invalidate the Board's rules on that basis,
apparently because it found itself unable to define the "program or
activity" that is federally assisted by the air traffic control
system.  Taking note of this Court's decision in Grove City College v.
Bell, No. 82-792 (Feb. 28, 1984), the court observed that if the
assisted "program or activity" were deemed to be the federal air
traffic control system, then "only that particular system -- its
personnel practices and physical facilities, for example -- could be
regulated under section 504" (App., infra, 45a).  On the other hand,
the court reasoned that, if the assisted "program or activity" were
deemed to be that of "commercial air transportation as engaged in by
the air carriers," then Grove City's program-specific mandate would
not be violated by applying Section 504 to the on-board activities of
all commercial airlines (App., infra, 45a).

   The court then concluded that it need not resolve the "program or
activity" question in the context of the air traffic control system.
Instead, the court reasoned that the CAB "erred as a matter of law in
failing to apply its section 504 regulations to all commercial air
carriers" because of the federal government's funding of airports and
airways used by those carriers.  App., infra, 45a.  The court stated
(id. at 50a-51a (footnotes omitted)):

         Airports and airlines are inextricably intertwined.  The
      indissoluble nexus between them is the provision of commercial
      air transportation.  Although airports may lease space to gift
      shops and airlines may publish in-flight magazines or own a
      chain of resort hotels, when it comes to the "program or
      activity" of providing air transportation to the traveling
      public, the two entities are so functionally integrated that
      they become one.  While it may be the case * * * that the
      airline as a corporate entity does not become a
      federally-assisted "program" by virtue of its use of
      federally-assisted airports, its "program or activity" of
      providing commercial air transportation certainly does.

   Accordingly, the court vacated the CAB's regulations insofar as
they failed to apply to all commercial airlines and remanded the
regulations to the Department of Transportation (the CAB's successor)
for repromulgation in accordance with its opinion.  /14/

   The government's petition for rehearing and suggestion that
rehearing be en banc were denied.  Judges Bork, Scalia, and Starr
dissented from the denial of rehearing en banc.  In an opinion written
by Judge Bork, the dissenters expressed the view that the panel's
decision could not be squared with this Court's decisions in Grove
City and North Haven Bd. of Educ. v. Bell, 456 U.S. 512 (1982) (App.,
infra, 82a-83a (footnote omitted)):

         Under Grove City, the airlines here are clearly not
      "recipients" of federal funds.  The airports are, and the ground
      activities of the airlines integral to the operation of the
      airport may be, subject to section 504.  However, the
      non-airport activities of the airlines, such as in-flight
      procedures, are outside the scope of that section.

         The panel's attempts to distinguish this case from Grove City
      are wholly unpersuasive.  It would unduly extend this dissent,
      however, to deal with those contentions in detail.  The Supreme
      Court has been over this ground, and we ought to accept, rather
      than evade, its conclusion.

                   REASONS FOR GRANTING THE PETITION

   The court of appeals' decision that all commercial airlines, by
virtue of their use of federally assisted airports, are thereby
subject to regulation under Section 504 in their "program or activity"
of "providing commercial air transportation" completely ignores the
distinction between a "recipient" operating a federally assisted
"program or activity" and a "beneficiary" of that assistance;
disregards the "program specific" limitation on Section 504's coverage
required by this Court's decisions in Grove City College v. Bell, No.
82-792 (Feb. 28, 1984);  Consolidated Rail Corp. v. Darrone, No.
82-862 (Feb. 28, 1984), slip op. 11-12;  and North Haven Bd. of Educ.
v. Bell, 456 U.S. 512, 540 (1982);  and conflicts with the decision of
the Ninth Circuit in Jacobson v. Delta Airlines, Inc., 742 F.2d 1202
(1984).  Maintenance of the distinction between a "recipient"
operating a federally assisted 'program or activity" and a
"beneficiary" of that assistance, as well as the "program specific"
mandate contained in the language of Section 504, is essential if
Congress's expressed intent to impose some limits on the reach of the
statute is to be respected.  The court of appeals' decision, which
distorts longstanding administrative interpretations of the key
concepts at issue, requires the regulation of activities that the
administering agencies have consistently regarded as beyond the
purview of Section 504.  Moreover, the recipient/beneficiary dichotomy
and the program-specific limitation at issue in that case apply not
only to Section 504, but also to Title VI of the Civil Rights Act of
1964, 42 U.S.C. 2000d, Title IX of the Education Amendments of 1972,
20 U.S.C. 1681, and to a host of other general and specific revenue
sharing statues.  See, e.g., 31 U.S.C. 6716.  Accordingly, the court
of appeals' decision may well have substantial impacts beyond this
case.  Finally, the conflict within the circuits means that neither
the Department of Transportation nor the airlines can be certain of
their obligations under Section 504.  In these circumstances, review
by this Court is appropriate.

   1. a. The court of appeals' conclusion that commercial airlines are
"recipients" of federal financial assistance by virtue of their use of
federally assisted airports totally obliterates any distinction
between a "recipient" operating a federally assisted "program or
activity" and a "beneficiary." The two are not the same.  Section 504
prohibits those who receive federal financial assistance -- i.e.,
recipients -- from discriminating in the conduct of assisted programs
against the intended beneficiaries of that assistance.  Importantly,
however, the intended beneficiaries of the federal funding are not
themselves regulated by the statute.  See Bob Jones University v.
Johnson, 396 F. Supp. 597, 601 n.15 (D. S.C. 1974), aff'd, 529 F.2d
514(4th Cir. 1975) (Table).

   In this case, airport operators clearly are "recipients" of funds
extended under the Airport and Airway Improvement Act of 1982, Pub. L.
No. 97-248, Tit. V, 96 Stat. 671 et seq., and its predecessor statutes
(see note 3, supra).  Members of the travelling public, on the other
hand, are "beneficiaries" of federal grants to airport operators,
because the purpose of the federal grants is to benefit those who use
airports.  For the same reason, airlines using federally assisted
airports are beneficiaries of grants to airport operators, but they
are not, by virtue of use alone, "recipients" of federal financial
assistance.

   As Judge Bork recognized in his opinion dissenting from the denial
of rehearing en banc, the court of appeals' approach to the
"recipient" issue is boundlessly latitudinal (App., infra, 80a-81a):

         (The panel's) reading of section 504's statutory language
      would make every commercial enterprise a "recipient" of federal
      aid when it merely makes use of a service or facility that
      receives any federal assistance.  That idea has great potential.
       Trucking and bus companies use federally constructed and
      maintained highways, and their businesses are thus inextricably
      intertwined with a federally assisted program.  Many electric
      companies rely on dams constructed and maintained with federal
      funds.  Without the National Weather Service farmers would be
      unable to plan, protect, and cultivate their crops in an
      effective manner.  It ought surely to be true that federal
      funding of federal courts results in the regulation of law firms
      since courts are inextricably intertwined with and indispensable
      to lawyering.

   There is no merit, therefore, to the court of appeals' rationale
that an "indissoluble nexus" (App., infra, 50a) between airports and
airlines transforms the airlines into "recipients" of grants to
airport operators.  Virtually the same argument would apply with equal
force to all businesses that rely on air travel to sell goods and
services in a nationwide market.  Most if not all of the Nation's
major corporations require extensive air travel by their personnel.
Under the court of appeals' reasoning, those businesses, like the
airlines, all would have to be treated as "recipients" of federal
financial assistance.  Yet Congress clearly did not intend that all
those who rely on air travel be deemed "recipients" of federal
financial assistance to airports.

   b. The court of appeals also erred in holding that the services of
federal air traffic controllers constitute federal financial
assistance to airlines.  /15/ The legislative history of Title VI
makes it clear that federally conducted programs -- that is, programs
funded solely by federal money -- such as dams, harbors, or the air
traffic control system -- have only "beneficiaries";  there are no
intermediate "recipients." As then-Deputy Attorney General Katzenbach
explained (110 Cong. Reg. 13380 (1964) (footnote omitted)):

         Activities wholly carried out by the United States with
      Federal funds, such as river and harbor improvements and other
      public works, defense installations, veterans' hospitals, mail
      service, etc., are not included in the list (of federally
      assisted programs).  Such activities, being wholly owned by, and
      operated by or for, the United States, cannot fairly be
      described as receiving Federal "assistance." While they may
      result in general economic benefit to neighboring communities,
      such benefit is not considered to be financial assistance to a
      program or activity within the meaning of title VI.

   Stated differently, programs like the air traffic control system
fall in the general category of "public goods" -- goods and services
from which all citizens and businesses benefit.  The air traffic
control system helps to ensure "safe skies." Arguably, this public
benefit may "assist" airlines more directly than it assists other
enterprises, yet it also assists all enterprises that use the airlines
or fly private planes in the course of their business.  It also
protects those on the ground from plane crashes.  It does not,
however, constitute "Federal financial assistance" to anyone.

   The court of appeals was able to reach a contrary conclusion only
by distorting a consistent administrative interpretation of "Federal
financial assistance" that dates back to 1964.  The FAA's original
Title VI regulations included the "detail of Federal personnel" as an
example of "Federal financial assistance." 14 C.F.R. 15.23(3) (1965),
29 Fed. Reg. 19286 (1964) (emphasis added).  DOT's current Title VI
regulations continue the use of that phrase.  49 C.F.R. 21.23(c)(3).
Clearly, the operation of the air traffic control system does not
involve the "detail" of any federal personnel to the airlines.
Indeed, as earlier noted (see page 22, supra), the air traffic control
system is far more aptly described as a self-contained federally
conducted program.

   In 1978, the Department of Health, Education, and Welfare published
guidelines for other agencies to follow in promulgating regulations
under Section 504 (see note 10, supra).  HEW's guidelines substituted
the word "services" for "detail," so that "Federal financial
assistance" under Section 504 included the "(s)ervices of Federal
personnel." 43 Fed. Reg. 2137 (1978) (emphasis added).  It is clear,
however, that HEW did not intend by this change to work any
substantive alteration in the definition of "Federal financial
assistance" (43 Fed. Reg. 2132 (1978)):

         Despite some difference in the wording of the defintions of
      federal financial assistance in the regulations implementing
      section 504 and title VI, the substance of the two definitions
      does not differ.

   When the Department of Justice assumed oversight responsibility for
Section 504 (see note 10, supra), it retained HEW's definition of
"Federal financial assistance," including the "(s)ervices of Federal
personnel." 28 C.F.R. 41.3(e).  Again, however, there is nothing to
indicate that the term "services" of Federal personnel was to be
construed any differently than the "detail" of Federal personnel.  But
only by concluding that the "services" of Federal personnel means
something entirely different than the "detail" of Federal personnel
was the court of appeals able to hold that the federally-operated air
traffic control system constitutes federal financial assistance to
airlines (App., infra, 39a-40a).  The court clearly erred in
disregarding the longstanding and consistent administrative
interpretation of the agencies charged with administering Title VI and
Section 504.  See, e.g., Chevron U.S.A. Inc. v. NRDC, No. 82-1005
(June 25, 1984), slip op. 5-7;  Ford Motor Credit Co. v. Milhollin,
444 U.S. 555, 566 (1980).

   c. In Jacobson v. Delta Airlines, Inc., 742 F.2d 1202 (9th Cir.
1984), the court of appeals held that neither the use of
federally-assisted airports nor the air traffic control system
constitutes federal financial assistance to airlines within the
meaning of Section 504.  The court below did not discuss Jacobson, but
it is clear that the two decisions cannot be reconciled.  The result
of the conflict is that neither the airlines nor the Department of
Transportation can be certain of their obligations under Section 504.
Consistency in the administration of this nationwide program requires
resolution of the conflict.

   The plaintiff in Jacobson, who was confined to a wheelchair because
of cerebral palsy, challenged the airline's requirement that he sign a
statement, in advance of flight, acknowledging the airline's right to
refuse him passage or to remove him at any stop "if it becomes
necessary for the comfort and safety of other passengers" (742 F.2d at
1204).  The court of appeals agreed that the airline had subjected him
to unlawful discrimination, reasoning that the "antidiscrimination"
clause of the Federal Aviation Act, 49 U.S.C. (1976 ed.) 1374(b),
incorporated Section 504's basic prohibition against discrimination on
the basis of handicap (742 F.2d at 1205).  /16/

   Having prevailed on his basic claim, plaintiff then sought
attorney's fees.  The request for fees required the court of appeals
to determine whether plaintiff had stated a claim under Section 504
itself, because the Federal Aviation Act contains no fee-shifting
provision.  Considering arguments remarkably similar to those advanced
by respondents in this case, the Ninth Circuit held that plaintiff had
not stated a claim under Section 504 because the airline did not
receive federal financial assistance (742 F.2d at 1208).

   Although he apparently recognized that, in general, airlines, like
other corporations and persons, are simply beneficiaries of
government-supported services, the plaintiff in Jacobson argued that
airlines benefit so much more than others from the use of federally
assisted airports and the air traffic control system that they should
be treated as recipients of federal financial assistance (742 F.2d at
1213).  The court of appeals found it unnecessary to decide "whether a
person can become subject to the Rehabilitation Act by benefiting to a
substantially greater degree than the general public from services
provided primarily for the general public" (ibid.).  Instead, the
court concluded that "even though air carriers benefit from federal
airport grants and federal air traffic control * * * to a greater
degree than the general public, they also pay for those services, as
Congress intended them to, to a greater degree than the general public
does" (ibid.).  This was so, the court concluded, because the trust
fund from which grants to airport operators are made is supported in
large part by taxes on aviation fuel, airplane tires and tubes, and
other products used by the airlines (id. at 1213-1214).  Because
Congress established a user fee system under which the airlines were
to pay for services rendered, the Ninth Circuit concluded that
Congress could not simultaneously have intended that the airlines' use
of federally assisted airports and the air traffic control system
would constitute federal financial "assistance" (id. at 1215).  /17/
Accordingly, the court held that plaintiff had not stated a claim
under the Rehabilitation Act and that he could not recover attorney's
fees under that Act (ibid.).  /18/

   2. a. In deciding that the "program or activity" that is federally
assisted in this case is the "provi(sion of) commercial air
transportation" by all certificated carriers (App., infra, 50a), the
court of appeals seriously misapplied this Court's decision in Grove
City College v. Bell, No. 82-792 (Feb. 28, 1984).  In Grove City, the
Court reaffirmed the doctrine that where a statute prohibits
discrimination in a "program or activity" receiving "Federal financial
assistance," the reach of the statute is "program specific." See also
Consolidated Rail Corp. v. Darrone, No. 82-862 (Feb. 28, 1984), slip
op. 11-12;  and North Haven Bd. of Educ. v. Bell, 456 U.S. 512,
539-540 (1982).  Applying "program specific" reasoning to tuition
grants, the Court held in Grove City that Congress did not intend the
Department of Education (or the courts) to attempt to trace federal
money "from classroom to classroom, building to building, or activity
to activity." Grove City, slip op. 17.  The obvious purpose of tuition
grants, the Court found, was to assist a school's financial aid
program.  Ibid.  Accordingly, receipt by the school (or its students)
of tuition grants meant that only the school's financial aid program
was subject to regulation under Title IX.  Ibid.

   Thus, the clear teaching of Grove City is that the boundaries of a
federally assisted program or activity are defined by the underlying
grant statute.  Grants under the Airport and Airway Improvement Act
(and its predecessor statutes) are made to airport operators to
support "program(s) or activit(ies)" involved in running an airport.
/19/ The grant statute provides, in general terms, for the
construction and improvement of airports and associated ground
facilities;  it furnishes no funds whatever for the purpose of
transporting people from one place to another.  (It is undisputed in
this case that not one penny of federal funds is given to airlines
under the Airport and Airway Improvement Act or its predecessor
statutes.) Accordingly, it is clear that all federally assisted
activities at airports, including the ground operations (e.g.,
ticketing and baggage handling) of all airlines using such airports,
are indeed subject to Section 504.  See 49 C.F.R. Pt. 27, 44 Fed. Reg.
31442 et seq. (1979) (DOT's Section 504 regulations).  But it is
equally clear that Section 504's coverage cannot extend beyond the
program or activity conducted by or under the auspices of the grant
recipient.  Neither the agency granting funds to airport operators nor
the airport operators themselves have the authority under Section 504
to regulate an airline's practices on board its planes, because air
transport is simply not within the scope of the grant program.
Contrary to the court of appeals' view that it would be "nonsensical"
to distinguish between an airline's activities at the airport and its
activities on board its planes (App., infra, 47a), we submit that such
a distinction is the only interpretation consistent with the
program-specific limitation on coverage mandated by this Court's
decision in Grove City.  Simply stated, Section 504 is inapplicable to
the "program or activity" of "providing commercial air transportation"
(App., infra, 50a) unless and until Congress furnishes the airlines
with federal financial assistance for flying.

   b. As was the case with its analysis of the air traffic control
system (see pages 23-24, supra), the court of appeals was able to
conclude that the onboard activities of commercial airlines are a
federally assisted "program or activity" only by distorting two
decades of consistent administrative interpretation.  The history of
the Section 504 regulations, set forth at pages 4-13, supra,
demonstrates that the regulatory agencies never understood Title VI to
reach the on-board activities of airlines not receiving subsidies from
the CAB.  Regulation of such activities was to be accomplished,
however, under Section 404(b) of the Federal Aviation Act, which had
been judicially interpreted to prohibit racial discrimination in air
travel.  See note 8, supra.  It is true that both DOT and the Board
initially expected the Board to promulgate regulations prohibiting all
certificated carriers from discriminating against handicapped air
travellers;  this was to be accomplished, however, through renewed
reliance on Section 404(b), and not Section 504 alone.  But the
congressionally mandated "sunset" of Section 404(b) made it impossible
for the Board to carry out its original intent to write regulations
that would cover both subsidized and nonsubsidized carriers.  The
court of appeals erred in failing to acknowledge that, with the
expiration of Section 404(b), the Board lost the authority it intended
to invoke to issue the all-encompassing regulations mandated by the
court.  Neither DOT nor the Board ever expressed the view that Section
504 alone provided the Board with such sweeping authority, and the
court of appeals should have respected the agencies' determination of
their own jurisdiction.

                              CONCLUSION

   The petition for a writ of certiorari should be granted.

   Respectfully submitted.

   CHARLES FRIED

      Acting Solicitor General

   WM. BRADFORD REYNOLDS

      Assistant Attorney General

   CHARLES J. COOPER

   MARK R. DISLER

      Deputy Assistant Attorneys General

   KATHRYN A. OBERLY

      Assistant to the Solicitor General

   JESSICA DUNSAY SILVER

   MIRIAM R. EISENSTEIN

      Attorneys

   AUGUST 1985

   /1/ The CAB ceased operations on December 31, 1984.  See Airline
Deregulation Act of 1978, Pub. L. No. 95-504, 92 Stat. 1705 et seq.;
Civil Aeronautics Board Sunset Act of 1984, Pub. L. No. 98-443, 98
Stat. 1703 et seq.  Section 3(e) of the Sunset Act (98 Stat. 1704)
devolved all remaining authority of the CAB on the Department of
Transportation, unless otherwise provided.  Section 12(a) of the
Sunset Act (98 Stat. 1710) preserved all CAB rules and regulations in
effect at the time of transfer.

   /2/ The FAA became a component of the Department of Transportation
by virtue of Section 3(e)(1) of the Department of Transportation Act
of 1966, Pub. L. No. 89-670, 80 Stat. 932, recodified at 49 U.S.C.
106.

   /3/ See the Federal Airport Act, ch. 251, 60 Stat. 170 et seq.; the
Airport and Airway Development Act of 1970, Pub. L. No. 91-258, 84
Stat. 219 et seq.; and the Airport and Airway Improvement Act of 1982,
Pub. L. No. 97-248, Tit. V, 96 Stat. 671 et seq. (to be codified at 49
U.S.C. 2201 et seq.).

   /4/ Title VI is widely recognized as the congressional model for
subsequently-enacted statutes prohibiting discrimination in federally
assisted programs or activities, and case law interpreting Title VI is
generally applicable to issues arising under the later-enacted
statutes, including the Rehabilitation Act.  See Grove City College v.
Bell, No. 82-792 (Feb. 28, 1984), slip op. 10;  App., infra, 29a-30a &
nn. 86-88.  Accordingly, regulations issued by the FAA and the CAB to
implement Title VI form the critical backdrop for consideration of the
Board's Section 504 regulations at issue in this case.

   /5/ See also 14 C.F.R. 379.3(b) (1965), 29 Fed. Reg. 19287 (1964):

         Specific discriminatory actions prohibited.  No air carrier
      shall subject any person to discrimination on the ground of
      race, color, or national origin in connection with any air
      transportation for which such carrier is receiving or has
      claimed compensation payable by the Board under section 406 of
      the Federal Aviation Act of 1958.

   Similarly, the only definition the Board specified for the term
"Federal financial assistance" was "grants of Federal funds under
section 406 of the Federal Aviation Act of 1958." 14 C.F.R. 379.12
(1965), 29 Fed. Reg. 19289 (1964).

   /6/ The FAA's original Title VI regulations provided (14 C.F.R.
15.5(c) (1965), 29 Fed. Reg. 19283 (1964)):

         Examples.  The following examples illustrate the application
      of the non-discrimination provisions of Title VI of the Civil
      Rights Act and this part:

         (1) The operator of an airport who is the recipient of
      Federal financial assistance must give assurance that an
      entrepreneur who rents space at the airport and there operates a
      restaurant will not in any manner discriminate between patrons
      for reasons of race, color, or national origin.

         (2) The operator of an airport who is the recipient of
      Federal financial assistance is bound by the conditions and
      covenants in the conveyance that prohibit, among other things,
      discrimination for reason of color, race, or national origin in
      admission of the public to waiting rooms, sightseeing areas,
      sanitary facilities, and any other facilities under the control
      of the airport operator himself.

   /7/ Appendix C to DOT's Title VI regulations gave the following
pertinent examples of FAA programs subject to regulation (49 C.F.R.
Pt. 21, App. C(a)(1) (1971), 35 Fed. Reg. 10085 (1970)):

         Federal Aviation Administration.  (i) The airport sponsor or
      any of his lessees, concessionaires, or contractors may not
      differentiate between members of the public because of race,
      color, or national origin in furnishing, or admitting to,
      waiting rooms, passenger holding areas, aircraft tiedown areas,
      restaurant facilities, restrooms, or facilities operated under
      the compatible land use concept.

         (ii) The airport sponsor and any of his lessees,
      concessionaires, or contractors must offer to all members of the
      public the same degree and type of service without regard to
      race, color, or national origin.  This rule applies to fixed
      base operators, restaurants, snack bars, gift shops, ticket
      counters, baggage handlers, car rental agencies, limousines, and
      taxis franchised by the airport sponsor, insurance underwriters,
      and other businesses catering to the public at the airport.

         (iii) An aircraft operator may not be required to park his
      aircraft at a location that is less protected, or less
      accessible from the terminal facilities, than locations offered
      to others, because of his race, color, or national origin.

         (iv) The pilot of an aircraft may not be required to help
      more extensively in fueling operations, and may not be offered
      less incidental service (such as windshield wiping), than other
      pilots, because of his race, color, or national origin.

         (v) No pilot or crewmember eligible for access to a pilot's
      lounge or to unofficial communication facilities such as a
      UNICOM frequency may be restricted in that access because of his
      race, color, or national origin.

         (vi) Access to facilities maintained at the airport by air
      carriers or commercial operators for holders of first-class
      transportation tickets or frequent users of the carrier's or
      operator's services may not be restricted on the basis of race,
      color, or national origin.

         (vii) Passengers and crewmembers seeking ground
      transportation from the airport may not be assigned to different
      vehicles, or delayed or embarrassed in assignment to vehicles,
      by the airport sponsor or his lessees, concessionaires, or
      contractors, because of race, color, or national origin.

   /8/ Although Title VI was never construed to reach the on-board
activities of nonsubsidized air carriers, courts had early interpreted
the general "antidiscrimination" clause of Section 404(b) of the
Federal Aviation Act, 49 U.S.C. (1976 ed.) 1374(b), to prohibit racial
discrimination by all air carriers.  See Fitzgerald v. Pan American
World Airways, Inc., 229 F.2d 499 (2d Cir. 1956);  United States v.
City of Montgomery, 201 F. Supp. 590 (M.D. Ala. 1962).  As described
at pages 12-13, infra, however, Section 404(b) "lapsed" as part of the
phase-out of the CAB.

   /9/ That this was the Board's view is demonstrated by its
explanation for deciding not to regulate employment practices of the
airlines (44 Fed.Reg. 32402 (1979) (emphasis added)):

      In accordance with the Airline Deregulation Act of 1978, the
      Board will be phasing out its operations over the next 6 years.
      * * * Under the circumstances, it would be very difficult to
      develop a new program in an area where we have little experience
      or background, and then to allocate and train staff to implement
      it.  This use of resources would be particularly unwise because
      the benefits that would flow from Board regulation of employment
      would be small.  The Board extends direct Federal subsidies only
      to a small number of air carriers, so that the reach of our
      section 504 jurisdiction would not have a significant effect on
      industry employment.  While we can prevent discrimination in air
      transportation under section 404 of the Federal Aviation Act
      without clear section 504 jurisdiction, the same is not true of
      employment.  The Board would have no authority to regulate
      employment practices of unsubsidized carriers unless those
      practices somehow caused discrimination in transportation.

   Of course, the Board's statement was issued prior to this Court's
decision in North Haven Bd. of Educ. v. Bell, 456 U.S. 512 (1982), and
Consolidated Rail Corp. v. Darrone, No. 82-862 (Feb. 28, 1984).  But
those decisions, holding that Title IX of the Education Amendments of
1972, 20 U.S.C. 1681 et seq., and Section 504 encompass employment
discrimination, are not pertinent to the issue here, which is whether
nonsubsidized carriers receive "Federal financial assistance" that
would render their "program or activity" of transporting passengers
from one place to another subject to Section 504 at all.

   Contrary to the view of the court of appeals (see App., infra,
48a), it is also clear that DOT understood the Board's position with
respect to its Section 504 jurisdiction.  In the preamble of DOT's
final Section 504 regulations, the Department noted that "the CAB
determined that it had statutory authority to issue regulations
governing air transportation of handicapped persons, both under
section 504 of the Rehabilitation Act and under sections 404 and 411
of the Federal Aviation Act." 44 Fed.Reg. 31451 (1979) (emphasis
added).

   /10/ Pursuant to Executive Order No. 12,250, 3 C.F.R. 298 (1981),
the Attorney General was directed to coordinate the implementation and
enforcement by Executive agencies of the nondiscrimination provisions
contained in a number of civil rights statutes, including Section 504
of the Rehabilitation Act.  Previously, this coordinating function had
been exercised by the Secretary of Health, Education and Welfare (see
Executive Order No. 11,914, 3 C.F.R. 117-118 (1977)) and, later, by
the Secretary of Health and Human Services.

   /11/ Subpart B deals with such matters as the availability of
information for deaf persons, guide dogs, wheelchairs, special lifts
to help handicapped passengers board and deplane, and the carrying of
medically-needed oxygen on board the aircraft.

   /12/ The Board did, however, urge nonsubsidized carriers to look to
Subpart B of the Section 504 regulations for guidance in complying
with the general antidiscrimination provision of Subpart A applicable
by virtue of Section 404(a) alone.  47 Fed. Reg. 25938 (1982) (App.,
infra, 90a-91a).

   /13/ With respect to operating certificates, the court endorsed the
CAB's reliance (App., infra, 88a) on Gottfried v. FCC, 655 F.2d 297
(D.C. Cir. 1981), in which the court had held that broadcast licenses
issued by the FCC do not constitute federal financial assistance for
purposes of Section 504 (App., infra, 34a).  With respect to tax
credits, the court of appeals doubted that "Congress * * * intend(ed),
by granting a limited tax incentive to a particular industry or group,
to thereby encompass every such individual or group, or, for that
matter, individual within some ever-widening and potentially almost
limitless definition of 'federal financial assistance.'" Id. at 37a.
The court also noted the anomaly that would result from allowing the
airlines themselves to determine whether they wished to comply with
Section 504 simply by deciding whether or not to take advantage of tax
credits (App., infra, 37a-38a).

   /14/ Respondents also challenged two specific aspects of the
Board's final regulations -- the Board's definition of "qualified
handicapped person" and a requirement that handicapped persons who
require "extensive special assistance" notify the airlines 48 hours in
advance of flight.  These challenges were resolved in the Board's
favor (App., infra, 62a-72a), and they are not pertinent to the issues
before this Court.

   /15/ As previously noted (see page 16, supra), the court of appeals
did not base its ultimate holding on this conclusion.  Nevertheless,
we believe that the issue is properly before the Court.  The situation
is comparable to that presented by North Haven Bd. of Educ. v. Bell,
456 U.S. 512 (1982), in which the Court held that Title IX of the
Education Amendments of 1972, 20 U.S.C. 1681 et seq., encompasses
employment discrimination on the basis of gender, but declined to
define the federally-funded program at issue (456 U.S. at 540).  See
also Consolidated Rail Corp. v. Darrone, No. 82-862 (Feb. 28, 1984),
slip op. 11-12.  Here, too, the court of appeals held that the air
traffic control system constitutes federal financial assistance to all
airlines within the meaning of Section 504, but declined to define the
program or activity covered by that assistance.  Thus, if this Court
were to grant review and reverse only that part of the decision
holding that federal assistance to airports requires airlines to
comply with Section 504 in their "program or activity" of "providing
commercial air transportation" (App., infra, 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 define the relevant "program or
activity" in the first instance, it still would presumably be required
to repromulgate the challenged regulations in some fashion.  On the
other hand, a decision by this Court that the air traffic control
system is not federal financial assistance at all would obviate the
need for further administrative and judicial proceedings regarding the
scope of the "program or activity."

   /16/ There is no indication that either the Ninth Circuit or the
parties were aware of the fact that Section 404(b) of the Federal
Aviation Act expired on January 1, 1983.  See page 12, supra.  In any
event, the discrimination of which plaintiff complained occurred in
1980 (see 742 F.2d at 1204).

   /17/ The Ninth Circuit recognized that the airport trust fund is
supplemented as necessary with general tax revenues and that an FAA
study prepared in 1978 reported that the airlines were not
contributing to the trust fund to the same extent that they were
benefitting from federal services (742 F.2d at 1214).  For two
reasons, these facts did not alter the court of appeals' conclusion
that the airlines are not "recipients" of federal financial
assistance.  First, the court observed that "Congress might reasonably
have concluded that the services provided by the FAA confer benefits
on the general public over and above the benefits they confer on the
users of the system," thus making it reasonable for the general public
to bear some of the costs (ibid.).  Second, the court deemed it
irrelevant that, at any given point in time, airlines might be paying
less than their "fair share" as calculated under a strict user fee
system.  Any temporary distortions meant only that the user fee system
required fine-tuning to implemenet congressional intent;  they did not
suggest that Congress ever conceived of the airlines as "recipients"
of federal financial assistance (id. at 1214-1215).  Moreover, the
court thought it would be anomalous for the determination of
"recipient" status under Section 504 to vary from day to day,
depending on "whether the congressionally mandated system is operating
flawlessly or whether accountants' studies demonstrate that changes in
allocation formulas are required" (742 F.2d at 1215 (footnote
omitted)).

   /18/ We note that the Ninth Circuit's reasoning in Jacobson is by
no means the only route to a conclusion that a "beneficiary" of
federal services is not a "recipient" of federal financial assistance.
 Indeed, most beneficiaries of federal financial assistance are in
quite a different position than the airlines -- like the students
receiving tuition grants in Grove City, beneficiaries generally pay
little or nothing for the benefits they receive.  It does not follow,
however, that they should be treated as "recipients" of federal
financial assistance.  Stated simply, "beneficiaries" of federal
financial assistance are those that Congress intended to benefit;
they are not, however, those that Congress intended to regulate.
"Recipients," on the other hand, are the entities that are carrying on
an assisted "program or activity" with the help of federal aid, and it
is the receipt of that federal aid that subjects them to regulation in
the conduct of such a "program or activity."

   /19/ As the court of appeals recognized (App., infra, 46a (footnote
omitted)), the grants are used for such purposes as "airport land
acquisition, runway construction, passenger terminals, airport
lighting, airport access and service roads, electronic and visual
approach aids, taxiway construction, obstruction removal, and
fire/rescue equipment and buildings."

                               APPENDIX