Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-09-01307/USCOURTS-caDC-09-01307-0/pdf.json

Parties Involved:
CSI Aviation Services, Inc.
Petitioner
Raymond L. LaHood
Respondent
United States Department of Transportation
Respondent

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 21, 2010 Decided April 1, 2011 

No. 09-1307 

CSI AVIATION SERVICES, INC., 

PETITIONER

v. 

UNITED STATES DEPARTMENT OF TRANSPORTATION AND 

RAYMOND L. LAHOOD, SECRETARY, 

RESPONDENTS

On Petition for Review of an Order 

of the Department of Transportation 

David M. Hernandez argued the cause and filed the 

briefs for petitioner. 

Mary F. Withum, Senior Trial Attorney, U.S. 

Department of Transportation, argued the cause for 

respondents. With her on the brief were Robert B. Nicholson

and Kristen C. Limarzi, Attorneys, U.S. Department of 

Justice, Paul M. Geier, Assistant General Counsel, U.S. 

Department of Transportation, and Peter J. Plocki, Deputy 

Assistant General Counsel. 

Before: SENTELLE, Chief Judge, TATEL and GRIFFITH, 

Circuit Judges. 

USCA Case #09-1307 Document #1301152 Filed: 04/01/2011 Page 1 of 14
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Opinion for the Court filed by Circuit Judge GRIFFITH. 

GRIFFITH, Circuit Judge: The Department of 

Transportation ordered CSI Aviation Services, Inc., to cease 

and desist from acting as a broker of air-charter services for 

the federal government. Because the agency failed to justify 

its authority to issue the order, we grant CSI’s petition for 

review. 

I 

Since 2003, CSI has been under contract with the General 

Services Administration (GSA) to broker air-charter service 

for various federal agencies. On March 10, 2009, CSI won a 

competitive bid to renew its status as a GSA contractor 

through 2014. A few days prior, on March 6, the Department 

of Transportation (DOT) sent CSI a letter requesting 

information to determine whether the company was engaging 

in “indirect air transportation” without the certificate of 

authority required by the Federal Aviation Act, 49 

U.S.C. § 41101(a). 

After the company provided the requested information, 

DOT sent another letter, stating that it had “review[ed] the 

information submitted by CSI” and “consult[ed] with GSA.” 

Letter from Samuel Podberesky, Assistant Gen. Counsel for 

Aviation Enforcement Proceedings, DOT, to David M. 

Hernandez, Counsel for CSI (Oct. 16, 2009) [hereinafter Oct. 

2009 Letter to CSI]. The letter then declared: 

Based on this information, CSI has been acting as an 

unauthorized indirect air carrier in violation of section 

41101 with respect to business transacted via its GSA 

schedule listing. Violations of section 41101 also 

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constitute unfair and deceptive practices and unfair 

methods of competition in violation of 49 U.S.C. 

§ 41712. 

Violations of these provisions subject CSI and its 

principals to the assessment of civil penalties . . . of up to 

$27,500 for each violation. Each day such violation 

continues is a separate violation. 

. . . . 

. . . Accordingly, CSI is warned to cease and desist from 

any further activity that would result in it engaging in 

indirect air transportation. If CSI immediately ceases 

from entering into new contracts pursuant to the GSA 

schedule, and ceases all its activities governed by existing 

GSA contracts within 180 days from the date of this 

letter, we will refrain from taking enforcement action 

regarding its past violations as discussed above. 

Id. 

Six other companies received similar letters. All six 

complied by terminating their status as contractors for GSA. 

CSI alone chose to challenge DOT’s determination, asking 

the agency to withdraw the cease-and-desist letter on the 

grounds that the Act requires a certificate of authority only for 

companies that operate “as a common carrier,” 49 U.S.C. 

§ 40102(a)(25), and that CSI’s charter flights for the federal 

government are not common carriage. Letter from David M. 

Hernandez, Counsel for CSI, to Samuel Podberesky, Assistant 

Gen. Counsel for Enforcement Proceedings, DOT (Nov. 19, 

2009). 

On November 25, 2009, seeking another way to avoid 

shutting down its operations, CSI also submitted a petition to 

DOT for an emergency exemption from the certification 

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requirement. In support of CSI’s petition, GSA wrote to DOT 

explaining at length why the Act’s certification requirements 

for common carriage make no sense for government 

contracts. “Acquisition [of air service] by the Federal 

Government . . . is distinct in several ways from acquisition in 

the private sector and does not present the consumer 

protection related concerns typically at issue in the private 

sector.” Letter from Kris E. Durmer, Gen. Counsel, GSA, to 

Robert S. Rivkin, Gen. Counsel, DOT (March 1, 2010). 

“There are a number of ways in which the Federal agencies 

that purchase air charter broker services . . . are protected 

from unscrupulous contractors.” Id. 

DOT granted CSI a temporary exemption that was 

scheduled to expire in April 2011. The exemption order, 

signed by the Assistant Secretary for Aviation and 

International Affairs, indicated that DOT “remain[ed] of the 

view that . . . the provision of air services for U.S. 

Government agencies through the GSA contracting system 

constitutes an engagement in air transportation, necessitating 

that brokers conducting such business hold economic 

authority from the Department to act as indirect air carriers.” 

Final Order, Docket No. OST-2009-0311, at 4 (Apr. 14, 2010) 

(DOT).1

 In the meantime, CSI has continued to provide air 

service for GSA. CSI timely filed this petition for review in 

December 2009. 

The central issue in this case is whether DOT properly 

concluded that air charter brokers that operate under GSA 

contract engage in indirect air transportation and so require 

 

1

 The agency has since issued a one-year extension of the original 

exemption, which is now scheduled to expire on April 14, 2012. 

See Final Order, Docket No. OST-2009-0311 (Mar. 3, 2011) 

(DOT). The extension order does not revise the agency’s position 

that GSA contractors require certification. 

USCA Case #09-1307 Document #1301152 Filed: 04/01/2011 Page 4 of 14
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certification from DOT despite the statutory provision that 

requires certification only for those who provide air 

transportation “as a common carrier.” Before reaching this 

issue, however, we must first consider whether DOT has 

taken a final legal position that is fit for judicial review and 

whether DOT’s grant of an exemption for CSI has rendered 

this case moot. 

II 

The Federal Aviation Act provides that “a person 

disclosing a substantial interest in an order issued [under the 

Act] . . . may apply for review of the order by filing a petition 

for review” in this court. 49 U.S.C. § 46110(a). To avoid 

premature intervention in the administrative process, our 

review of agency action “has been judicially restricted to 

review of final agency orders.” Puget Sound Traffic Ass’n v. 

Civil Aeronautics Bd., 536 F.2d 437, 438-39 (D.C. Cir. 1976). 

The Supreme Court set the standard for finality in Bennett v. 

Spear, 520 U.S. 154, 178 (1997). An agency action is final 

when it marks “the ‘consummation’ of the agency’s 

decisionmaking process” and is not merely of a “tentative or 

interlocutory nature.” Id. at 178 (citations omitted). The 

action must be one in which “rights or obligations have been 

determined” or “from which legal consequences will flow.” 

Id.

Bennett highlights the importance of avoiding disruption 

of the administrative decisionmaking process, but it does not 

foreclose all pre-enforcement challenges. Our most instructive 

case on this point is Ciba-Geigy Corp. v. EPA, 801 F.2d 430 

(D.C. Cir. 1986), which we have recently described as 

“complementary” to Bennett. Reckitt Benckiser, Inc. v. E.P.A., 

613 F.3d 1131, 1137 (D.C. Cir. 2010). In Ciba-Geigy, an EPA 

official sent letters to twenty private companies directing 

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them to modify their pesticide labels. The letters stated that if 

the companies refused, the EPA would consider the pesticides 

“misbranded,” leading to enforcement actions and penalties. 

Seventeen of the twenty companies complied but Ciba-Geigy 

resisted, claiming that the EPA was misreading its legal 

authority to allow it to bring a misbranding action before 

following the registration cancellation process required by 

statute. Facing the choice between costly compliance and the 

risk of prosecution, Ciba-Geigy filed a pre-enforcement 

lawsuit seeking injunctive and declaratory relief. 

Noting that “an agency may not avoid judicial review 

merely by choosing the form of a letter to express its 

definitive position on a general question of statutory 

interpretation,” Ciba-Geigy, 801 F.2d at 438 n.9, we held that 

the EPA’s assertion of its statutory authority was reviewable 

final agency action for three reasons. First, the agency had 

taken a “definitive” legal position concerning its statutory 

authority. Id. at 436. Second, the case presented “a purely 

legal” question of “statutory interpretation.” Id. at 435. In the 

absence of disputed facts that would bear on the statutory 

question, there was no benefit in waiting for the agency to 

develop a record before granting judicial review. And third, 

the agency’s letter imposed an immediate and significant 

practical burden on Ciba-Geigy, ordering the company to 

“conform to the new labeling requirement on pain of civil and 

criminal penalties.” Id. at 437. 

All three factors from Ciba-Geigy are present here. First, 

DOT has issued a “definitive” statement of the agency’s legal 

position. Its initial warning letter clearly took the position that 

air charter brokers under GSA contract require agency 

certification. The letter declared in no uncertain terms that 

“CSI has been acting as an unauthorized indirect air carrier in 

violation of section 41101.” Oct. 2009 Letter to CSI. After 

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CSI protested and explained why it believed DOT to be 

misreading its statutory authority, the agency refused to 

change its legal position. Instead it issued an order granting 

CSI a temporary exemption from the certification 

requirement. The exemption order reiterated DOT’s position 

that “the provision of air services for U.S. Government 

agencies through the GSA contracting system constitutes an 

engagement in air transportation, necessitating that brokers 

conducting such business hold economic authority from the 

Department to act as indirect air carriers.” Final Order, 

Docket No. OST-2009-0311, at 4 (Apr. 14, 2010) (DOT). The 

warning letter and the exemption order taken together amount 

to a definitive statement of DOT’s legal position. “Not only 

did the statement of position admit of no ambiguity, but it 

gave no indication that it was subject to further agency 

consideration or possible modification.” Ciba-Geigy, 801 

F.2d at 436-37. 

Second, this case presents a “purely legal” question of 

statutory interpretation—whether an air charter broker 

operating as a GSA contractor is engaged in the provision of 

air transportation “as a common carrier” and therefore 

requires a certificate of authority. 49 U.S.C. § 40102(a)(25). 

In the absence of any disputed facts that would bear on this 

question, our review of the agency’s legal position would not 

“benefit from a more concrete setting.” Ciba-Geigy, 801 F.2d 

at 435. The legal question we review concerns the meaning of 

the Federal Aviation Act, which is antecedent to and distinct 

from whether CSI itself has violated the law. 

And third, DOT has imposed an immediate and 

significant burden on CSI. The agency effectively declared 

the company’s operations unlawful and warned the company 

“to cease and desist from any further activity that would result 

in it engaging in indirect air transportation.” Oct. 2009 Letter 

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to CSI. At the very least, this cast a cloud of uncertainty over 

the viability of CSI’s ongoing business. It also put the 

company to the painful choice between costly compliance and 

the risk of prosecution at an uncertain point in the future—a 

conundrum that we described in Ciba-Geigy as “the very 

dilemma [the Supreme Court has found] sufficient to warrant 

judicial review.” 801 F.2d at 439. DOT’s legal 

pronouncement was sufficiently burdensome to make six 

other GSA contractors terminate their air charter operations 

for fear of prosecution. Having thus flexed its regulatory 

muscle, DOT cannot now evade judicial review. 

 

The government relies on FTC v. Standard Oil Co. of 

California, 449 U.S. 232 (1980), to argue that final agency 

action in a case like this one requires the completion of a full 

enforcement action. In light of Ciba-Geigy, however, this 

argument is mistaken. In Standard Oil, the FTC initiated an 

enforcement action upon finding “reason to believe” that 

Standard Oil’s quasi-monopoly violated the Federal Trade 

Commission Act. Id. at 234. In the midst of the FTC’s 

enforcement action, with key facts still in dispute, Standard 

Oil of California (Socal) filed a lawsuit arguing that the FTC 

lacked the requisite “reason to believe” the company had 

violated the law. The Court dismissed the case for lack of 

finality. Id. at 238. 

Standard Oil differs from the present case in three key 

respects. First, unlike in this case, the FTC in Standard Oil

did not definitively state its legal position. The FTC’s stated 

finding of a “reason to believe” that Socal had violated the 

law was only a “threshold determination that further inquiry 

[was] warranted and that a complaint should initiate 

proceedings.” Id. at 241. This contrasts sharply with DOT’s 

definitive statement that “the provision of air services for U.S. 

Government agencies through the GSA contracting system 

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constitutes an engagement in air transportation,” Final Order, 

Docket No. OST-2009-0311, at 4 (Apr. 14, 2010) (DOT), and 

that “CSI has been acting as an unauthorized indirect air 

carrier in violation of section 41101 with respect to business 

transacted via its GSA schedule listing,” Oct. 2009 Letter to 

CSI. 

Second, the petition in Standard Oil did not raise a purely 

legal question that was amenable to immediate judicial 

review. Whether Socal had violated the law—and whether 

there was a “reason to believe” it had—depended on a large 

body of unresolved facts, best sorted out by the FTC with its 

expertise and fact-finding capability. In the presence of 

disputed facts, the case did not present a fully crystallized 

“legal issue . . . fit for judicial resolution.” Standard Oil, 449 

U.S. at 239 (quoting Abbott Labs. v. Gardner, 387 U.S. 136, 

153 (1967)). Granting Socal’s petition for review would have 

been premature: it would have caused “interference with the 

proper functioning of the agency and [imposed] a burden [on] 

the courts.” Id. at 242. Here, by contrast, we face a clean 

question of statutory interpretation with no disputed facts. 

There is no need to withhold review pending further factual 

development that might clarify the issue. 

Third, the FTC’s enforcement action against Socal did 

not impose the same magnitude of hardship that DOT has 

imposed on CSI. As the Supreme Court explained, the FTC’s 

tentative determination that Socal might be violating the 

antitrust laws had no significant “effect upon [Socal’s] daily 

business.” Id. at 243. Here, however, DOT’s legal position 

cast a shadow over CSI’s customer relationships, tainted 

almost every aspect of its long-term planning, and impaired 

the company’s ability to fend off competitors. Indeed, the 

very purpose of DOT’s legal pronouncements, accomplished 

with six other companies, was to prompt CSI to shut down its 

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operations. Thus, whereas Socal had “the burden of 

responding to the charges made against it” in a formal 

hearing, id. at 242, CSI faced the more troubling question of 

whether it was willing to risk serious penalties in order to 

obtain such a hearing at all. 

It is clear from Standard Oil that courts should take care 

not to inject themselves into fact-bound agency proceedings 

that have yet to produce any definitive legal conclusions. But 

this is not such a case. DOT took a definitive legal position 

denying the right of GSA contractors to continue operating 

without certification from the agency. This order imposed a 

substantial burden on CSI, and the disputed statutory 

authority underlying the order is fully fit for judicial review 

without further factual development.2

III 

 

2

 Of course, whether an agency letter threatening enforcement 

action is subject to judicial review varies based on the 

circumstances. In Reliable Automatic Sprinkler Co. v. Consumer 

Product Safety Commission, 324 F.3d 726 (D.C. Cir. 2003), we 

found a lack of finality where the Commission sent a letter 

informing a sprinkler company that it “intended to make a 

preliminary determination that the [company’s] sprinkler heads 

present[ed] a ‘substantial product hazard.’” Id. at 729. That case is 

inapposite here because it lacked two key factors for reviewability. 

The letter was not definitive because the Commission had “yet to 

determine conclusively its jurisdiction to regulate; [] yet to 

determine whether the sprinkler heads present[ed] a ‘substantial 

product hazard’; and [] yet to issue any compliance orders.” Id. 

And, equally important, the question at issue there, whether 

sprinkler heads qualified as “consumer products” under the 

Consumer Product Safety Act, “clearly involve[d] the resolution of 

factual issues and the creation of a record,” as well as the exercise 

of “agency expertise” prior to court involvement. Id. at 734. 

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DOT argues that this case is moot for two reasons. First, 

the agency “plans to hold a rulemaking on this subject [that] 

will most likely change the legal landscape that gave rise to 

the warning letter.” Resp’t’s Br. 11-12. And second, the 

agency granted CSI a temporary exemption from the statutory 

certification requirement. In DOT’s view, this exemption 

“superseded the Department’s warning letter and completely 

resolved the controversy” before us. Id. at 10. 

We reject DOT’s mootness arguments. The agency’s 

promised rulemaking has yet to occur, and CSI’s exemption is 

merely temporary. Thus, DOT’s assurances provide nothing 

more than the mere possibility that the agency might allow 

CSI to continue operating. If the agency does not see fit to 

change its legal position or extend CSI’s exemption, the 

exemption will expire and the company will face the full force 

of the adverse legal determination that DOT has announced. 

This not only raises the specter of future harm to CSI, but 

actually harms the company now. CSI is in the business of 

bidding for air-travel contracts and arranging air-charter 

logistics, both of which require a substantial amount of 

advance planning. The daily difficulties of running such a 

business are amplified by the looming threat of a legal kibosh. 

IV 

We turn at last to the merits of CSI’s petition. The 

fundamental question in reviewing an agency action is 

whether the agency has acted reasonably and within its 

statutory authority. The agency must not only adopt a 

permissible reading of the authorizing statute, but must also 

avoid acting arbitrarily or capriciously in implementing its 

interpretation. See 5 U.S.C. § 706(2). Among other things, 

this requires the agency to “take whatever steps it needs to 

provide an explanation that will enable the court to evaluate 

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the agency’s rationale at the time of decision.” Pension 

Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633, 654 (1990). 

In this case, DOT failed to explain why the Federal 

Aviation Act requires a certificate of authority for air charter 

brokers operating under GSA contract. The Act states that “an 

air carrier may provide air transportation only if the air carrier 

holds a certificate issued under this chapter.” 49 U.S.C. § 

41101(a). The term “air carrier” means “a citizen of the 

United States undertaking by any means, directly or 

indirectly, to provide air transportation.” Id. § 40102(a)(2). 

DOT appears to have assumed that, as a broker of charter 

flights for the federal government, CSI was engaged in the 

indirect provision of “air transportation.” But this reading 

failed to engage with the special statutory definition of that 

term. Under the relevant part of the statute, “air 

transportation” is defined to include “interstate air 

transportation,” id. § 40102(a)(5), which in turn means the 

interstate “transportation of passengers or property by aircraft 

as a common carrier for compensation,” id. § 40102(a)(25) 

(emphasis added). 

 “Common carrier” is a well-known term that comes to us 

from the common law. See Try Scheidler v. Nat. Org. for 

Women, Inc., 537 U.S. 393, 402 (2003) (noting presumption 

in favor of following common law usage where Congress has 

employed a term with a well-settled common law meaning). 

The term refers to a commercial transportation enterprise that 

“holds itself out to the public” and is willing to take all 

comers who are willing to pay the fare, “without refusal.” 

BLACK’S LAW DICTIONARY 226 (8th ed. 2004). Some courts 

have allowed that holding out on an all-comers basis to a 

limited segment of the public might be enough to qualify as a 

common carrier. See Woolsey v. Nat’l Transp. Safety Bd., 993 

F.2d 516 (5th Cir. 1993) (concluding that an air carrier had 

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acted “as a common carrier” in offering services pursuant to 

negotiated contracts to members of the music industry 

because it had “held itself out to the public or to a definable 

segment of the public as being willing to transport for hire, 

indiscriminately”). But whatever the particular test, some type 

of holding out to the public is the sine qua non of the act of 

“provid[ing]” “transportation of passengers or property by 

aircraft as a common carrier.” 49 U.S.C. § 40102(a)(25), 

41101. 

In the present case, it appears that CSI has performed 

under its contract with the GSA as a dedicated service 

provider, not as a common carrier. Under the GSA contract, 

CSI provides charter service to government agencies only, not 

to all comers. Thus, within the scope of the contract, CSI does 

not appear to provide “transportation of passengers or 

property by aircraft as a common carrier.” Id. § 40102(a)(25). 

If CSI is not a common carrier under its GSA contract, then it 

does not engage in “air transportation” and its services for 

GSA do not fall within the certification requirement of the 

Federal Aviation Act. 

Perhaps one could argue that if a company is a common 

carrier in any aspect of its business, it necessarily acts “as a 

common carrier” in all aspects of its business. The more 

obvious reading of the statute, however, is that a company can 

segregate its operations, acting sometimes “as a common 

carrier” and sometimes not. Indeed, DOT itself has taken this 

approach in the past. In Advisory Circular No. 120-12A, 

“Private Carriage Versus Common Carriage of Persons or 

Property” (Apr. 24, 1986), the agency provided “guidelines 

for determining whether current or proposed transportation 

operations by air constitute private or common carriage,” 

noting that “this distinction determines whether or not the 

operator needs economic authority as an ‘air carrier’ from 

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[DOT],” id. ¶ 1. The circular acknowledges that “[p]ersons 

operating as common carriers in a certain field” may be 

providers of “transportation for hire which they perform in 

other fields,” as long as they can “show that the private 

carriage is clearly distinguishable from its common carriage 

business and outside the scope of its holding out.” Id. at ¶ 4.h. 

DOT failed to address this critical issue both in its ceaseand-desist order and in its brief to this court. This failure is all 

the more baffling because CSI twice informed DOT that it 

does not believe it is covered by the “air transportation” 

portion of the Federal Aviation Act—once in CSI’s letter to 

DOT dated November 19, 2009, and again in CSI’s brief 

before this court. Yet DOT’s brief inexplicably claims, “It is 

undisputed that CSI’s service is indirect air transportation.” 

Resp’t’s Br. at 13-14. Not only is this a disputed point, it is at 

the very heart of the present controversy. 

Given DOT’s complete failure to explain its reading of 

the statute, we find it impossible to conclude that the agency’s 

cease-and-desist order was anything other than arbitrary and 

capricious, and hence unlawful. Where we “cannot evaluate 

the challenged agency action on the basis of the record before 

[us], the proper course . . . is to remand to the agency for 

additional investigation or explanation.” Fla. Power & Light 

Co. v. Lorion, 470 U.S. 729, 744 (1985). It appears to us that 

the law cannot support DOT’s interpretation, but we leave 

open the possibility that the government may reasonably 

conclude otherwise in the future, after demonstrating a more 

adequate understanding of the statute. 

V 

For the foregoing reasons, the petition for review is 

Granted. 

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