L.i.;'i I , 

. „^,,-r,-j-,^(j i 

BEFORE THE 

FEDERAL AVIATION ADMINISTRATION 

WASHINGTON, D.C. 

SKYDIVE SACRAMENTO, 

Complainant, 

V. 

THE CITY OF LINCOLN, CALIFORNIA, 

Respondent. 

ilKfeu^E 

OCT 1 4 iuua 

PART 16 DOCKETS 

Docket No. 16-09-09 

RESPONDENT'S REBUTTAL 

Please serve: 

Scott P. Lewis 

Christine M. Griffin 

ANDERSON & KREIGER LLP 

One Canal Park, Suite 200 

Cambridge, MA 02141 

T: 617.621.6500 

F: 617.621.6660 

slewis@andersonkreiger.com 

cgriffin@andersonkreiger.com 

Counsel for Respondent 

October 13,2009 
Table of Contents. 

Page 

Argument 1 

I. SKYDIVE HAS ABANDONED MANY OF ITS CLAIMS 2 

A. Automobile Liability Insurance - "Specific Violations C and E." 2 

B. Annual Rate of Rent Increase - "Specific Violation H." 2 

C. Lease Term - "Specific Violation I." 3 

D. Use of Drop Zone - "Specific Violation K." 3 

E. Indemnification - "Specific Violations L and M." 3 

F. Time Is Of The Essence - "Specific Violation N." 3 

n. THERE IS NO MERIT TO ANY OF THE REMAINING CLAIMS 4 

A. The City Has No Obligation To Allow Skydive To Operate A Jump 

Zone Without Either Providing Or Paying For Adequate Insurance 4 

B. Skydive's Two Remaining Complaints About Boilerplate Provisions 

In The Proposed Lease Cannot Justify Any Enforcement Action By 

FAA 8 

Conclusion 9 
BEFORE THE 

FEDERAL AVIATION ADMINISTRATION 

WASHINGTON, D.C. 

SKYDIVE SACRAMENTO, 

Complainant, 

V. 

THE CITY OF LINCOLN, CALIFORNIA, 

Respondent. 

Docket No. 16-09-09 

RESPONDENT'S REBUTTAL 

The respondent, the City of Lincoln, California (the "City"), submits this Rebuttal under 

14 C.F.R. § 16.23(f) in support of its Mofion to Dismiss the Complaint by Skydive Sacramento 

("Skydive"). In its Reply, Skydive has abandoned all but four of the claims initially raised in its 

Complaint. On its remaining claims, Skydive has failed to establish that the City is currently 

violating any applicable federal requirements, and there is no jusfification for any enforcement 

action by FAA. The FAA should therefore dismiss all of the claims by Skydive. 

Argument. 

The City showed in its initial motion papers that Skydive had not met its burden to prove 

any of the claims it brought against the City. In this Rebuttal, the City focuses on several points 

that Skydive has raised in its Reply and discusses newly-emerging facts. The City otherwise 

continues to rely upon its Answer and its Memorandum in Support of its Motion to Dismiss. 
I. SKYDIVE HAS ABANDONED MANY OF ITS CLAIMS. 

Skydive's Complaint alleged that various provisions in the Lease the City offered for a 

"drop zone" at the Lincoln, California Regional Airport (the "Airport") violate federal aviation 

law because, according to Skydive, they (a) constitute unjust economic discrimination; 

(b) impose unattainable conditions; or (c) constructively grant unlawfiil exclusive rights. The 

City denies that in attempting to accommodate Skydive's desire for a drop zone at the Airport the 

City has violated any of its obligations as an AIP grant sponsor. In its Reply, Skydive has 

dropped the following claims against the City:' 

A. Automobile Liability Insurance - "Specific Violations C and E." Skydive had 

alleged that the automobile liability insurance coverage the City requires is unavailable to 

Skydive and that the City has not required other tenants to obtain comparable coverage (see 

Complaint ^j^ 57, 60). After reviewing the City's answer and supporting evidence, Skydive has 

acknowledged that its allegations were mistaken and has given up this claim (see Reply at 8). 

B. Annual Rate of Rent Increase - "Specific Violation H." Skydive had 

complained that the 5% armual rent escalator sought by the City was unlawful (see Complaint 

^ 67). Skydive now concedes that the rent adjustment proposed by the City is the same as the 

rent adjustment the City has required in leases with other similarly-situated tenants, and Skydive 

is not pursuing this claim (see Reply at 8). 

' In its Answer (T[ 60), the City noted that Skydive never sought to review the City's leases with other airport 

tenants before filing its complaint under Pt. 16 alleging that the City was discriminating against Skydive. Skydive 

has not disputed this point. Now Skydive has belatedly acknowledged, after reviewing the leases submitted by the 

City with its Answer, that "the City's proposed lease does treat Complainant equally with other commercial 

operators in a number of specific areas" (Reply at 8, emphasis added). As a result, Skydive has dropped most of its 

claims of unjust discrimination. 
C. Lease Term - "Specific Violation I." Skydive had complained that the 

proposed Lease provided for only a two-year lease term (see Complaint TI 68). Skydive no 

longer claims a right to a long-term lease and has dropped this claim (see Reply at 8). 

D. Use of Drop Zone - "Specific Violation K." Skydive had complained that the 

proposed Lease only permitted Skydive to use the drop zone for skydiving and did not permit 

Skydive to erect any structure at the proposed drop zone site (see Complaint Tn| 73-78). Skydive 

now concedes that the City has offered adequate justification for declining to allow Skydive to 

erect any structures at the jump zone and no longer claims a right to use the drop zone for nonskydiving purposes (see Reply at 8-9).^ 

E. Indemnification - "Specific Violations L and M." Skydive had complained 

that the indemnification provisions contained in the proposed Lease are unjustly discriminatory 

and otherwise unlawful (see Complaint Yli 79-80). Skydive now acknowledges that the City 

"treats commercial tenants equally in this regard" and has abandoned these claims (see Reply 

at 9). 

F. Time Is Of The Essence - "Specific Violation N." Skydive had complained that 

the proposed Lease made "time of the essence" for Skydive's performance, but not for the City's 

(see Complaint If 81). Skydive has given up this inconsequential claim (see Reply at 9). 

^ Skydive's Reply (at 2-3) questions whether the proposed drop zone site is denoted as a "non-aviation" or 

"aviation reserve" area in the Airport Layout Plan. The City inadvertently misstated in its Answer (^ AF6) that the 

drop zone would be located entirely within a "non-aviation" area. The City acknowledges that the site of the 

proposed drop zone would partially fall within an "aviation reserve" area and partially within a "non-aviation" area. 

This distinction is of no conceivable consequence in this case, however, since Skydive does not contest the site that 

has been offered by the City for use as a drop zone. 
11. THERE IS NO MERIT TO ANY OF THE REMAINING CLAIMS. 

Only four issues remain to be resolved by the FAA: two relate to insurance, and two to 

boilerplate provisions in the proposed Lease. There is no evidence before the FAA that would 

warrant a finding against the City on any of these claims. 

A. The City Has No Obligation To Allow Skydive To Operate A Jump Zone 

Without Either Providing Or Paying For Adequate Insurance. 

Skydive's complaint framed three distinct insurance issues: has the City violated its 

grant assurances (a) by requiring Skydive to procure liability coverage for skydiving incidents 

that is unavailable to commercial skydive operators (see Complaint W 48-54, "Specific 

Violation A," and TI1f.58-59, "Specific Violation D"); (b) by requiring Skydive to obtain for its 

subcontractors the same insurance coverage it must have for itself (^ee Complaint Yi 55-56, 

"Specific Violation B"); or (c) by requiring Skydive to reimburse the City for the costs the City 

will incur to insure itself against claims arising out of Skydive's activities (see Complaint Ht 61-

64, "Specific Violation F"). 

Skydive no longer challenges the City's requirement that Skydive's subcontractors have 

the same coverage as Skydive itself (^ee Reply at 9-10). So the insurance issues in this case boil 

down to these: can an airport sponsor require a skydiving operator either to procure or pay for 

reasonable limits of liability coverage for claims arising out of skydiving incidents - or must an 

' Skydive continues to insinuate in its Reply that the City has administered its large-volume fuel discount 

program in an imprudent or unjustly discriminatory manner {see Reply at 3-4). Skydive points to an Airport 

newsletter dated January 2009 which states that a volume discount is available "for purchases of 300 gallons or 

more of Jet A fiiel" (see Skydive Ex. 7). There is nothing in that newsletter that contradicts the City's statement that 

Skydive has failed to qualify for that program because it has never had a single purchase of more than 300 gallons of 

jet fuel. The City has administered it fuel discount program in a reasonable and nondiscriminatory manner. Skydive 

has made no attempt to prove that any similarly-situated fuel purchasers have been treated differently than Skydive, 

and Skydive seeks no relief with respect to the fiiel discount offered by the City (see Reply at 17). There is, as a 

result, no basis for the FAA to take any enforcement action against the City with respect to the discount it offers to 

large-volume fuel purchasers. 
airport sponsor assume substantial uninsured risks associated with a would-be commercial 

tenant's skydiving business? 

The City has approached these insurance issues firom a prudent and practical perspective: 

the City believes that skydiving is an inherently dangerous activity that can be expected, fi"om 

time to time, to result in serious injury or death to the skydivers themselves and can also lead to 

third-party claims for bodily injury or property damage. As the proprietor of the Airport, the 

City contends that it has the right to demand that Skydive Sacramento either (a) provide adequate 

insurance to protect the City from liability or (b) reimburse the City for the incremental costs the 

City incurs to procure adequate insurance coverage for itself The City also contends that if 

adequate insurance is not available, then the City has no obligation to allow Skydive to operate at 

its Airport. 

Skydive protests that the coverage the City seeks - which would protect the City from 

claims by jumpers beyond the $50,000 limit of coverage carried by Skydive and from third-party 

claims above the $300,000 limit of coverage carried by Skydive - is unavailable to Skydive in 

the insurance market. It follows, according to Skydive, that the City can neither ask Skydive to 

procure higher limits of coverage because they are "unattainable" nor demand that Skydive 

reimburse the City for its own insurance costs (see Reply at 9-15). 

When a tenant claims that an insurance requirement is unattainable or prohibitively 

expensive in the insurance market, no current violation will be found by the FAA where the 

Airport works with the tenant to identify attainable insurance coverage that will satisfy the 

Airport. See Flightline Aviation, Inc. v. City ofShreveport, 2008 WL 5955355 at "^24-25 

(March 7, 2008) (Director's Determination). That is precisely what the City has been attempfing 

to do. 
At the time it filed its Answer, it was the City's hope and expectation that Skydive would 

be able to raise the limits of coverage on its own policies for skydiver bodily injury claims so 

that if the City bought coverage attaching to claims at or above $1,000,000, the City would be 

fully insured. The City understood, at that time, that it would be able to procure a new City 

policy of that kind from AIG and thereby eliminate the exclusion for skydiving claims that is 

contained in the City's current policy, at an incremental annual cost of about $7,000 - $8,000 

(see Answer,^ 61). 

In its Reply, however, Skydive continues to protest that the existing limits of its own 

coverage are all that Skydive will be able to provide to the City. The City has been investigating 

the insurance market since receiving Skydive's Reply and acknowledges that Skydive's assertion 

may be correct.'* After receiving Skydive's Reply, the City went back to its insurance providers 

to determine whether the City would be able to procure a liability policy that would attach at the 

limits of coverage Skydive has been able to obtain.^ The City has recently learned that it may be 

possible to purchase a policy containing such additional coverage at an incremental annual cost 

that could exceed $15,000 - $20,000; the City has not yet been able, however, to obtain a 

commitment or a binding quote from any insurance carrier (see City Ex. 31, attached).^ In order 

to resolve the issue of insurance, and without conceding that the insurance it has asked Skydive 

to obtain is "unattainable," the City proposes, as a condition of a drop zone lease with Skydive, 

•* The inability of commercial skydive operators to obtain higher limits of coverage suggests, of course, that 

their operations present risks of loss that insurers are unwilling to cover. The absence of coverage for skydiving 

operators is of no comfort to the City and underscores the City's need to protect itself fi^om potential claims. 

* The City notes in passing that during the pendency of Skydive's complaint, Skydive's own airport premises 

liability policy was cancelled as a result of Skydive's nonpayment of premium. The cancelled policy was, the City 

has been notified, recently reinstated. 

^ City Exhibit 31 is a current report of efforts by the City's insurance provider, Alliant Insurance Services, 

Inc., to obtain skydiving coverage for the City. 
to purchase such a policy - if one can be found - and to bill Skydive for the City's incremental 

costs of obtaining coverage for claims arising solely out of Skydive's activities.^ 

Skydive cannot reasonably complain that this would be an unlawful condition upon 

whatever federally-protected right, if any, Skydive may have to operate a drop zone at the 

Airport. The City has no federal obligation to allow Skydive to operate a drop zone at the 

Airport without having adequate insurance protection nor is there any federal obligation for the 

City to bear the costs of any new policy it must obtain so that the City has coverage for 

skydiving claims. 

The City's own liability policy currently has a skydiving exclusion (see Answer, ^ 48). 

Skydiving is the only aeronautical activity excluded from the City's liability policy. To obtain 

reasonable coverage to protect the City from claims arising out of Skydive's activities, the City 

would have to purchase additional coverage through a new policy that it would not otherwise 

have (id.). There is nothing unreasonable or discriminatory about the City's proposal that 

Skydive bear the incremental costs associated with the City's need to procure skydiving 

coverage. Charging Skydive for the costs of insurance coverage required solely as a result of 

Skydive's activities is consistent with familiar principles of fair and reasonable airport ratesetting that seek to allocate to airport users the costs associated with the activities they conduct 

and the use they make of airport facilities. In fact, if the City were to seek to recover the costs of 

skydiving insurance coverage from all of its tenants, the City could be faulted for unjust 

discrimination against them. See Policy Regarding Airport Rates and Charges, ^ 3.4.1, 61 Fed. 

Reg. 31994 (June 21, 1996), as amended at 73 Fed. Reg. 40430 (July 14, 2008). See also 

' The City will also require that Skydive obtain from each of its jumpers a suitable waiver of liability that 

inures to the benefit of both Skydive and the City. The City has no reason to expect this to be problematic. 
Northwest Airlines, Inc., v. Indianapolis Airport Authority, 2008 WL 3976461 (August 19, 2008) 

(Director's Determination) (noting that FAA policies regarding rates and charges prohibit an 

airport sponsor from charging aeronautical users or user groups for costs properly allocable to 

other users or user groups); Jet I Center, Inc. v. Naples Airport Authority, 2005 WL 389218 at 

*26 (January 4, 2005) (Director's Determination) (same). Given the Airport's obligation under 

49 U.S.C. § 47107(a)(13) and Grant Assurance 24 to maintain a fee and rental structure that 

makes the airport as financially self-sustaining as possible, the Airport has an obligation to 

charge Skydive for the incremental costs of insurance that the City will incur solely as the result 

of Skydive operating a drop zone at the Airport. 

If the City is unable to procure its own skydiving insurance coverage at limits that drop 

down to the coverage carried by Skydive - or if Skydive refuses to pay the City for such 

coverage - the FAA should find that the City has no obligation to provide a lease to Skydive. 

The AIP grant assurances do not require airport sponsors to assume uninsurable risks associated 

with inherently dangerous tenant activities. 

B. Skydive's Two Remaining Complaints About Boilerplate Provisions In The 

Proposed Lease Cannot Justify Any Enforcement Action By FAA. 

Skydive continues to complain that certain of the recitals contained at the beginning of 

the proposed Lease are "insulting" and, according to Skydive, unfairly impugn skydiving (see 

Complaint ^ 65-66, "Specific Violation G") and that the draft lease prepared by the City 

contains conflicting terms with respect to compliance with federal regulatory requirements (see 

Complaint Tf^I 69-72, "Specific Violation J") (Reply at 15-16). Neither of these claims raises any 

federal issues that could possibly justify a Part 16 complaint, as the City has previously argued 

(see Memorandum in Support of Respondent's Motion to Dismiss at 16-17). The City remains 

willing, in any event, to resolve these issues by rewording the recitals to remove any perceived 
"insults" and by eliminating any inadvertent appearance of conflict between the requirements of 

§ 5 and § 8 of the proposed Lease (id.). 

Conclusion. 

For all of these reasons, and the reasons offered in the City's Memorandum in Support of 

its Motion to Dismiss, the FAA should dismiss Skydive's Complaint with prejudice. 

Respegtfiilly submitted. 

Scjeftt P. Lewis 

ristine M. Grfffin 

'ANDERSON^TKREIGE R LLP 

One Canal Park, Suite 200 

Cambridge, MA 02141 

T: 617.621.6500 

F: 617.621.6660 

slewis(^andersonkreiger.com 

cgriffin@andersonkreiger.com 

Counsel for Respondent 

October 13, 2009 
CERTIFICATE OF SERVICE 

I hereby certify in accordance with 14 CFR § 16.15(a) that today I served the foregoing 

Respondent's Rebuttal on the following persons at the following addresses by Federal Express: 

Richard J. Durden 

Attorney at Law 

27987 Richmond Hill Road 

Conifer, CO 80433 

Office of Chief Counsel, Attention: 

FAA Part 16 Airport Proceedings Docket 

AGC-610 

FEDERAL AVIATION ADMINISTRATION 

800 Independence Avenue, SW 

Washington, DC 20591 

Dated this 13"" day of October, 2009 

10 
Page 1 of2 

Scott Lewis 

From: Dave Daly [ddaly@ci.lincoln.ca.us] 

Sent: Tuesday, October 13, 2009 3:58 PM 

To: Scott Lewis 

Co: Christine M. Griffin 

Subject: City of Lincoln - Skydive Sacramento Status 

ScottPlease see the report from Alliant below. 

Dave Daly, Airport Manager 

Lincoln Regional Airport 

1480 Flightline Drive Lincoln CA 95648 

916-645-3443 Fax: 543-0208 

From: Marylin Keiley [mailto:MKelley@alliantinsurance.com] 

Sent: Tuesday, October 13, 2009 12:53 PM 

To: Dave Daly 

Subject: City of Lincoln - Skydive Sacramento Status 

Dave: 

Here is the current status of your request for a quote for insurance coverage at the Lincoln 

Airport that v^rould include coverage for the City of Lincoln as respects on-Airport skydiving 

activities by a contractor of the Airport. 

1. Your current carrier for Airport Liability Coverage is Phoenix Aviation Managers. As you are 

av^are, your insurance policy with Phoenix excludes parachuting/skydiving coverage. The 

premium for your current insurance coverage with Phoenix is $20,946 annually for $25 million 

in Airport Liability coverage and $1,000,000 in coverage for Hangar Keepers Liability. 

2. We originally searched, in early 2009, for insurance coverage for the Airport that would 

include coverage for the City of Lincoln for any claims naming the City arising out of 

parachuting/skydiving activities of a contractor with the City Airport. AIG would have provided 

you with a policy with the above coverage limits and an additional $1 million in limited 

parachuting/skydiving coverage contingent upon Skydive Sacramento having its own liability 

policy in place, naming the City of Lincoln as an additional insured and providing $1 million in 

coverage. The cost for such an AIG policy including this option was quoted as $27,992 

annually. This quote assumed that the other coverage in place was at a limit of $1,000,000. 

3. We have asked AIG if it can offer this same coverage but over a lower other insurance 

limit. AIG has said that it can. However, the AIG Underwriter is out of the office and I have not 

yet been able to obtain a quote for this coverage or additional details on what level of lower 

City Exhibit 13 

10/13/2009 
Page 2 of2 

insurance AIG would require. 

4. My guess is that adding this additional coverage will cost in excess of an additional 

$15,000- $20,000, depending on the levels of lower insurance coverage that AIG requires. 

This is my guess only and is not in any way a quotation. I also do not know how low an 

attachment point the Underwriter will approve. 

5. Stacy, from my office, spoke with AIG, and they said that this proposed policy would need 

to be approved by the AIG Underwriting Manager. AIG was not willing to commit on coverage 

or price without having referred and gotten approval from management. This means that there 

is a possibility that the City's request for insurance will be denied. 

6. As Stacey discussed with you earlier this week, she approached four other Underwriters of 

Aviation Insurance carriers and they declined to provide this level of coverage. 

Marilyn Keiley 

Vice President 

Alliant Insurance Services, Inc. 

100 Pine Street, 11th Floor 

San Francisco, CA 94111 

(415)403-1402 

mkelley@alliant insurance.com 

This e-mail and all attachments to it are for the sole use of the intended recipients and may contain 

proprietary information and trade secrets of Alliant Insurance Services, Inc. and its subsidiaries. This email may also contain information which is confidential or which is protected from disclosure by 

privilege. Any unauthorized use, disclosure or distribution of this e-mail and its attachments is 

prohibited. If you are not the intended recipient, let us know by reply e-mail and then erase and destroy 

all electronic or other copies of this message. 

10/13/2009