Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-10-01418/USCOURTS-caDC-10-01418-0/pdf.json

Parties Involved:
American Airlines, Inc.
Petitioner
John S. Pistole
Respondent
Transportation Security Administration
Respondent

Document Text:

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~nit£b j&tat£s QIourt of ~pp£als 

FOR THE DISTRICT OF COLUMBIA CIRCUIT 

Argued October 11, 2011 Decided December 6, 2011 

No. 10-1418 

AMERICAN AIRLINES, INc., 

PETITIONER 

v. 

TRANSPORTATION SECURITY ADMINISTRATION AND JOHN S. 

PISTOLE, IN HIS OFFICIAL CAPACITY AS ADMINISTRATOR OF 

THE TRANSPORTATION SECURITY ADMINISTRATION, 

RESPONDENTS 

On Petition for Review of a Decision of 

the Transportation Security Administration 

Lawrence D. Rosenberg argued the cause for petitioner. 

With him on the briefs were Andrew B. Steinberg and 

Christopher S. Perry. 

Lindsey Powell, Attorney, U.S. Department of Justice, 

argued the cause for respondents. With her on the brief were 

Tony West, Assistant Attorney General, Ronald C. Machen Jr., 

U.S. Attorney, and Douglas N. Letter, Attorney. 

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Before: SENTELLE, Chief Judge, GINSBURG} , Circuit Judge, 

and WILLIAMS, Senior Circuit Judge. 

Opinion for the Court filed by Chief Judge SENTELLE. 

SENTELLE, Chief Judge: 2 In 2002, American Airlines 

("American") agreed, at the urging of the Transportation 

Security Administration ("TSA"), to incorporate an "in-line" 

baggage-screening system into its new terminal at John F. 

Kennedy International Airport, instead of a cheaper system in 

which luggage would be screened in the lobby of the airport. 

According to American, the airline only undertook the more 

expensive project at TSA's insistence and with the promise that 

the agency would reimburse the airline once Congress gave TSA 

the authority to grant such requests. After Congress granted that 

authority and after American's expenditures on the screening 

system totaled nearly $30 million, the airline requested 

reimbursement from TSA. The agency denied that request, 

citing limited funding and a need to prioritize ongoing security 

risks ahead of completed projects. American petitions for 

review of that denial, arguing that TSA failed to comply with 

Congress's requirements for the agency's reimbursement 

determinations. Because TSA either has failed to base its 

reimbursement decision on the prioritization list mandated in 49 

U.S.C. § 44923 or has failed to create a suitable prioritization 

list in the first place, we grant the petition and remand to TSA 

1 As of the date the opinion was published Judge Ginsburg had 

taken senior status. 

2 NOTE: Portions of this opinion contain Sensitive Security 

Information, which has been redacted. The redactions are indicated 

bYI~ and 41 symbols. 

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for further proceedings. 

I. Background 

After the September 11, 2001, attacks, Congress enacted 

a series of laws to protect and enhance airline security. First 

among these was the Aviation and Transportation Security Act 

("AT SA"), Pub. L. No. 107-71, 115 Stat. 597, 614-15 (2001). 

With the ATSA, Congress created the TSA and charged the 

agency with ensuring that by the end of 2002 all passengers and 

materials carried onboard passenger aircraft would be screened 

for explosives. 49 U.S.C. § 44901(a), (d). 

At the time of the enactment of the A TSA, construction 

had begun on "Terminal 8" at New York's John F. Kennedy 

International Airport. As sole tenant of the new terminal, 

American took the lead in the project, which involved the Port 

Authority of New York and New Jersey as the operator of the 

airport and, eventually, TSA as well. After the attacks, the new 

TSA urged that Terminal 8 be built to include an "in-line" 

system for its explosive detection system ("EDS"). An in-line 

system checks bags for explosives within the airport's baggage 

conveyor system, thus avoiding the need for TSA baggage 

screeners to physically transport bags to and from the EDS 

machine. This makes screening cheaper-particularly for 

TSA-yet it scans baggage at a higher rate than alternative 

methods. American, on the other hand, preferred the simpler 

"lobby screening solution," in which bags are screened in the 

airport lobby at standalone EDS stations and then transported by 

TSA employees to the baggage conveyor system. The lobby 

system would be far cheaper and quicker to implement, and it 

would not require alterations to the terminal building itself. 

During TSA' s attempts to persuade American to use the more 

expensive system, the only statute then in effect, the A TSA, did 

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not address funding for in-line security systems. American 

claims, however, that TSA assured the airline that once 

procedures for reimbursement were in place and Congress had 

given authority to do so, Terminal 8 would receive favorable 

and expedited consideration. American agreed to alter the 

design for Terminal 8 to utilize an in-line screening system, as 

TSA requested. The parties did not sign an agreement or 

memorandum of understanding. 

In 2003, Congress granted TSA the authority to make 

grants for projects that "improve security at an airport or 

improve the efficiency of the airport without lessening security," 

including projects related to the installation of in-line explosive 

detection systems. Vision 100-Century of Aviation 

Reauthorization Act, Pub. L. No. 108-176, 117 Stat. 2490,2566 

(2003). Under that act, airport sponsors seeking funding apply 

to TSA, and, if approved, receive a "letter of intent" which 

commits TSA to use future budget authority to assist in funding 

the project. In 2004, Congress enacted a statute which urged 

TSA to move faster with the installation of in-line baggage 

screening and to undertake a study to develop a "formula for 

cost-sharing" among government and private entities for in-line 

baggage screening projects. Intelligence Reform and Terrorism 

Prevention Act of 2004, Pub. L. No. 108-458, 118 Stat. 3638, 

3721-22. 

Around that time, American began requesting 

reimbursement from TSA for the in-line screening system in 

Terminal 8. In 2004, American wrote to Admiral David Stone, 

then-Acting TSA Administrator, noting that the airline had taken 

on the additional expense of the in-line screening system with 

the expectation of full reimbursement. Admiral Stone 

responded, applauding American's leadership in deploying the 

in-line system but declining to reimburse American at that time 

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because "TSA' s work to achieve and maintain full electronic 

screening at a number of airports [was] not yet complete." 

Discussions continued between American, TSA, and Port 

Authority officials, including a 2005 meeting with Congressman 

Gregory W. Meeks of New York. The Congressman has stated 

that TSA "made [it] very clear" that American would be 

reimbursed for the Terminal 8 project. 

In 2007, Congress amended the previous airport security 

acts with the Implementing Recommendations of the 9/11 

Commission Act of2007 ("2007 Act"), Pub. L. No. 110-53, 121 

Stat. 266, 480. There, Congress amended the provisions that are 

chiefly at issue in this case. The amended subsections read: 

Grant authority.-Subject to the requirements of this 

section, the Under Secretary for Border and Transportation 

Security of the Department of Homeland Security shall make 

grants to airport sponsors-

(1) for projects to replace baggage conveyer systems related 

to aviation security; 

(2) for projects to reconfigure terminal baggage areas as 

needed to install explosive detection systems; 

(3) for projects to enable the Under Secretary to deploy 

explosive detection systems behind the ticket counter, in the 

baggage sorting area, or in line with the baggage handling 

system; and 

(4) for other airport security capital improvement projects. 

49 U.S.C. § 44923(a). Conspicuously, the amendments changed 

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the words "may make" to "shall make." The 2007 Act also 

amended the notes to that section to require TSA to create a 

"prioritization schedule for airport security improvement 

projects," which "shall include airports that have incurred 

eligible costs associated with development of partial or 

completed in-line baggage systems before the date of enactment 

of this Act in reasonable anticipation of receiving a grant." Id. 

§ 44923 note. 

American continued to remind TSA of the airline's 

up-front investment in the in-line screening project, stating in a 

February 2008 letter that the airline "only proceeded with the 

investment because [American] had the reasonable expectation 

of federal reimbursement in the future." A few months later, 

TSA issued a $400 million grant to the Port Authority so that it 

could implement in-line baggage screening improvements at the 

several airports it administers. That grant, TSA later 

determined, could not by its terms be used to reimburse 

American's expenses, notwithstanding the Port Authority's 

willingness to do so. 

In January 2010, American wrote to Janet Napolitano, 

Secretary of Homeland Security, requesting reimbursement and 

noting the Port Authority's willingness to use a portion of its 

$400 million grant to do so. Acting TSA Administrator Gale 

Rossides replied in March 2010, again noting TSA's view that 

the statute's mandate of risk-based prioritization required it to 

fund new projects before reimbursing old ones and again stating 

that the $400 million grant to the Port Authority could not be 

used to reimburse American. 

Finally, on August 20, 2010, American and the Port 

Authority wrote TSA directly to request a meeting with the new 

TSA Administrator, John Pistole. Administrator Pistole 

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responded on October 25, 2010, declining the meeting and 

stating that he had come to the "difficult decision" that 

"reimbursement for previous work outside a formal agreement 

comes at the cost of advancing current or future security 

measures." American requested reconsideration in a letter dated 

December 9, 2010, and noted in that letter that the airline would 

seek judicial review if it did not receive appropriate relief by 

December 22, 2010. Having received no response by that date, 

American filed this petition. On the same day, Administrator 

Pistole sent a letter to American denying reconsideration. 

II. Finality and Timeliness 

American characterizes the October 25, 2010, letter as 

the final agency decision and the airline's December 9, 2010, 

letter to the TSA as a request for reconsideration. TSA 

disagrees, contending that the October 2010 letter was no 

different than the many rejections the agency had sent to 

American prior to that date and that the March 2010 letter to 

American is better understood as the final agency action. 

Therefore, TSA asserts, American's petition for review is 

untimely because the petition was not filed with this Court 

within sixty days of that action, as required by 49 U.S.C. 

§ 46110(a). We disagree. The October 25, 2010, letter is the 

only agency communication bearing sufficient indicia of finality 

to make clear to American that a final decision had in fact been 

made, and this petition was filed within sixty days of the 

October 2010 letter. 

A final agency action is one that "mark [ s] the 

consummation of the agency's decisionmaking process," and is 

one "by which rights or obligations have been determined, or 

from which legal consequences will flow." Bennett v. Spear, 

520 U.S. 154, 177-78 (1997) (internal citations and quotation 

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marks omitted). The agency action must state an "unequivocal 

position," Ciba-Geigy Corp. v. EPA, 801 F.2d 430, 436 (D.C. 

Cir. 1986), rather than one which is contingent on future agency 

actions, see AT&T Co. v. EEOC, 270 F.3d 973, 975 (D.C. Cir. 

2001). Ifwe considered agency statements lacking clear indicia 

of finality to nonetheless be final agency action, subjects of 

agency regulation would be forced to file repeated precautionary 

petitions for review. Such petitions would waste the time and 

resources of the Court and of the parties, and would promote 

unfairness by allowing an agency to retroactively determine 

whether a particular statement was final or not. Considerations 

such as these have long been an integral part of finality 

determinations. See, e.g., Abbott Labs. v. Gardner, 387 U.S. 

136, 149 (1967) ("The cases dealing with judicial review of 

administrative actions have interpreted the 'finality' element in 

a pragmatic way."); see also 15A Charles Alan Wright, Arthur 

R. Miller, & Edward H. Cooper, Federal Practice and 

Procedure § 3913 (2d ed.) ("[W]ell-established rules of 

appealability ... have nonetheless the great virtue offorestalling 

the delay, harassment, expense, and duplication that could result 

from multiple or ill-timed appeals."). 

Applying this reasoning, we compare the two letters in 

question, looking for statements attesting to an unequivocal 

decision made by the agency that is not contingent on future 

agency actions. Comparison of the March 2010 communication 

from Acting TSA Administrator Rossides with the October 20 1 0 

letter from TSA Administrator Pistole reveals that the October 

2010 letter is the only TSA communication bearing sufficient 

indicia of finality to constitute final agency action. The October 

2010 letter states that the Administrator had "concluded" and 

had made a "decision" denying American's reimbursement 

request. The March 2010 letter, on the other hand, uses no such 

clear language and instead merely describes the general 

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risk-assessment policy. That letter even notes TSA's desire to 

"foster a close working relationship . . . on this and other 

homeland security issues" (emphasis added). Furthermore, in 

the October 2010 letter, Administrator Pistole notes, without 

mentioning the March 2010 letter, that he "personally reviewed 

the documentation" related to the project-a review that would 

be redundant if a final decision had been reached in March 2010. 

The March 2010 letter was general and tentative. The October 

2010 letter was specific and unequivocal in denying the 

reimbursement. 

Indeed, TSA's December 22, 2010, letter denying 

reconsideration belies TSA' s timeliness argument. That letter 

expressly thanks American for "requesting reconsideration of 

the October 29, 2010[,] decision denying reimbursement" 

(emphasis added). It seems that only during this litigation did 

TSA decide that it had actually reached a final decision in 

March 2010. An agency's post-hoc and self-serving 

determination that an earlier statement was final cannot override 

textual evidence to the contrary. Cf Burlington Truck Lines, 

Inc. v. United States, 371 U.S. 156, 168-69 (1962) ("The courts 

may not accept appellate counsel's post hoc rationalizations for 

agency action .... "). We find that the final agency action in this 

controversy is the October 25, 2010, letter from TSA denying 

American's request for reimbursement. American's filing of 

this petition on December 22, 2010, was therefore timely. 3 

TSA alludes in its brief to the possibility that some 

communication prior to March 2010 may, in fact, have been the final 

agency action, but that we need not look beyond the March 2010 letter 

to judge the timeliness of the petition. Because the agency does not 

specifically identify and explain the earlier communication or 

communications it purports to be final, we need only address TSA's 

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III. TSA's Denial of Reimbursement 

As amended by the 2007 Act, the statute states that TSA 

"shall make grants to airport sponsors" for qualifying airport 

security projects. 49 U.S.C. § 44923(a). The statute also 

requires that TSA "shall establish a prioritization schedule for 

airport security improvement projects" and must base that 

prioritization schedule on "risk and other relevant factors." 49 

U.S.C. § 44923 note. That prioritization list "shall include 

airports that have incurred eligible costs associated with 

development of partial or completed in-line baggage systems 

before the date of enactment" of the statute, "in reasonable 

anticipation of receiving a grant." Id. At issue is whether TSA 

has properly exercised discretion under the statute in denying 

American's reimbursement request and whether TSA has 

properly created and followed the prioritization list required by 

the 2007 Act. 

A. 

American contends, above all, that TSA' s denial of 

reimbursement stands in direct conflict with the command in the 

2007 Act that TSA "shall make grants" to airport sponsors of 

qualifying projects, including those who have already completed 

their projects. See 49 U.S.C. § 44923 (a). Because TSA's 

actions are contrary to the plain meaning of the 2007 Act, 

American urges, TSA' s decision is not entitled to deference. 

claim regarding the finality of the March 2010 letter. At any rate, we 

note, as does Petitioner, that TSA' s casual statement that the decision 

could actually have become final at some unspecified point in the past 

only highlights the absence of clear, firm statements prior to the 

October 2010 letter. 

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The statute's language, American suggests, contains repeated 

mandates that TSA must provide reimbursement for qualified 

projects, and American's project, completed with reasonable 

expectation of reimbursement, qualifies. 

Next, American argues that even if TSA has discretion 

in awarding funding to qualified projects, it has abused that 

discretion. First, American argues that the 2007 Act requires 

TSA to prioritize reimbursement requests for completed in-line 

projects, such as Terminal 8, and TSA failed in its 

communications to "examine the relevant data and articulate a 

satisfactory explanation" for departing from that statutory 

command. Motor Vehicle Mfrs. Ass 'n v. State Farm Mut. Auto. 

Ins. Co., 463 U.S. 29,43 (1983). Further, American argues that 

the agency's limited-funding rationale is both 

inaccurate and Ie 

TSA responds to these arguments by noting that the 

"prioritization" requirement in the 2007 Act logically must be 

understood to mean that some projects would be reimbursed 

while others would not-otherwise, there would be no need to 

prioritize at all. Congress, knowing that, intended that TSA 

would have the discretion to make funding determinations based 

on "risk and other relevant factors," as specified in the 2007 Act. 

49 U.S.C. § 44923 note. TSA asserts in its brief that the agency 

included the Terminal 8 project on the prioritization list it 

submitted to Congress and that its decision to prioritize funding 

for unresolved security risks over resolved risks like that at 

Terminal 8 is both rational and consistent with the agency's 

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intended discretion under the 2007 Act. 

B. 

We review TSA's decision under familiar standards. 

When Congress delegates to an agency the authority to interpret 

and apply a statute, appellate courts review the agency's actions 

under the two-step process from Chevron, U.S.A., Inc. v. Natural 

Res. De! Council, Inc., 467 U.S. 837 (1984). If "the intent of 

Congress is clear, that is the end of the matter," and the Court 

will apply the statute accordingly. Id. at 842. But if a statute is 

unclear on the point in question, the Court will defer to the 

agency's reasonable interpretation. Id. at 843-44. Nonetheless, 

"a regulation contrary to a statute is void." Orion Reserves Ltd. 

P'ship v. Salazar, 553 F.3d 697, 703 (D.C. Cir. 2009) (citing 

Manhattan Gen. Equip. Co. v. Comm 'r of Internal Revenue, 297 

U.S. 129, 134 (1936)). The 2007 Act gives TSA both the 

authority and the mandate to create a prioritization list. 49 

U.S.C. § 44923 note. That said, we will not set aside the 

agency's policy determinations in doing so unless they are 

"arbitrary, capricious, an abuse of discretion, or otherwise not in 

accordance with law." 5 U.S.C. § 706(2)(A). 

Despite the deference owed to TSA' s policy 

determinations, the agency decision before us cannot survive 

judicial scrutiny because the agency either has not made a 

prioritization schedule as required by 49 U.S.C. § 44923 note, 

or, if the schedule TSA has provided to the Court is the schedule 

mandated by statute, the agency has acted arbitrarily and 

capriciously in deviating from that schedule by denying 

American's reimbursement request without providing a 

sufficient rationale on the record for doing so. Regardless of 

which is the case, we vacate the decision to deny reimbursement 

to American and remand to the agency to conduct further 

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proceedings. 

Congress's explicit mandate that TSA develop a 

prioritization list for reimbursing airport security proj ects carries 

with it the implication that the agency will actually follow that 

prioritization list in making its reimbursement decisions. 

Otherwise, the mandate of the 2007 Act that TSA create such a 

prioritization list becomes a meaningless exercise. See 

Inhabitants of the Twp. ofMontclairv. Ramsdell, 107 U.S. 147, 

152 (1883) ("It is the duty of the court to give effect, ifpossible, 

to every clause and word of a statute .... "); see also United 

States v. Seals, 130 F.3d 451, 462 (D.C. Cir. 1997). At the 

same time, we agree with TSA that Congress's intent in 

requiring the agency to prioritize projects logically compels the 

understanding that some projects will be currently funded while 

others will not. Otherwise, there would be little need to 

prioritize funding at all. With that in mind, we must reject any 

suggestion that the 2007 Act must be read-or could even 

reasonably be read-to absolutely require reimbursement for 

any and all qualified projects. 

TSA's discretion under the 2007 Act is not, however, 

unlimited. By the plain terms of the statute, TSA must create a 

prioritization list and must base the prioritization on "risk and 

other relevant factors." 49 U.S.C. § 44923 note. The list must 

include completed projects undertaken with reasonable 

expectation of reimbursement. Id. And while there could be 

cases in which the agency finds that it must deviate from its 

general prioritization, the agency must "adequately define the 

circumstances that 'trigger' the case-by-case analysis," and the 

agency must promulgate an "identifiable standard" to guide 

those determinations. Oceana, Inc. v. Locke, No. 10-5299,2011 

WL 2802989, at *3 (D.C. Cir. July 19,2011). TSA has not done 

so. Rather, TSA has stated the prioritization list it created is 

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merely a "top-down" "initial guide," and it has expressly 

reserved the discretion to depart from the list on a case-by-case 

basis using a different, "bottom-up" methodology when making 

actual funding decisions. Like the provision at issue in Oceana, 

Inc., TSA cannot make an exception to the prioritization list so 

vague or large "as to make the rule meaningless," id., nor can 

TSA promulgate a prioritization list and then act contrary to it 

based on previously unannounced factors. Ultimately, TSA's 

decision here must be vacated either because the agency 

improperly deviated from its provided prioritization list or 

because the agency has failed to make a prioritization list that 

would comport with the mandates of the 2007 Act. 

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purports to con.slal~r 

a point for making funding determinations based on 

other criteria, it has failed to sufficiently establish and follow 

criteria for departing from its general rule, thus rendering its 

prioritization list inadequate. See Oceana, Lll!!lnc. 2011 WL 

2802989, at *3. If instead we consider the I I 

prioritization list provided to the Court to be t e bona fi e, 

complete prioritization list already accounting for "risk and 

other relevant factors" mandated by the 2007 Act, 49 U.S.C. 

§ 44923 note, then TSA simply failed to abide by it in making 

this decision and thus is acting contrary to the statute. See 5 

U.S.C. § 706(2)(A). In either case, the agency's actions here 

must be vacated, and the issues remanded to the agency for 

further action or explanation. 

IV. Conclusion 

F or the reasons set forth above, we vacate TSA' s 

decision to deny reimbursement to American for the Terminal 

8 project and remand to TSA for further proceedings consistent 

with this opinion. 

So ordered. 

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