Richard K Simon, Esq. 

1700 Decker School Lane 

Malibu, CA 90265 

(310) 503-7286 

rsimon3(a!verizon.net 

Office of the Chief Counsel 

Attention: FAA Part 16 Airport Proceedings Docket 

AGC-610 

Federal Aviation Administration 

800 Independence Ave. S.W, 

Washington, D.C. 20591 

Re: Part 16 Complaint 

RECt=lVED 

_,~,\11 2 8 Z016 

January 28, 2016 

National Business Aviation Association, Krueger Aviation, Inc., Harrison Ford, 

Justice Aviation, Kim Davidson Aviation, Inc., Aero Film, Youri Bujko, James Ross, 

Wonderful Citrus, LLC, and Aircraft Owners and Pilots Association v. City of 

Santa Monica, California 

Docket Nos. 16-14-04/FAA-2014-0592 

Reply of the Complainants to Respondent's Appeal from the Director's 

Determination and to Respondent's Petition to Supplement the Record on Appeal 

The Complainants respectfully submit this Reply, pursuant to 14 C.F.R. § 16.3 3 (d), to 

the appeal and accompanying petition filed in this docket by the City of Santa Monica 

("City," "Santa Monica," or "Respondent") on January 8, 2016. 

At its core, the City's appeal asserts that Santa Monica, uniquely, should not be 

subject to the obligations that apply to every airport that accepts federal Airport 

Improvement Program ("AlP") grants, and that the City's professed ignorance of what it 

was agreeing to when it accepted additional federal funds in 2003 should further excuse it 

from those obligations. As the FAA is aware, the City has for decades been seeking, 

unsuccessfully, to find a means by which to impose restrictions on operations at Santa 

Monica Municipal Airport ("SMO" or "Airport"), or to close the Airport altogether, a position 

specifically restated in its Appeal (see p. 22). This proceeding was triggered by the City's 

latest maneuver - the public and definitive denial of its Grant Assurance obligations after 

June 29, 2014- and that strategy should be no more successful than its prior efforts. As 

established by the Director's Determination in this proceeding, the City is obligated by the 

1 
Grant Assurances through August 27, 2023 and that finding now should be affirmed by the 

Associate Administrator. 

I. The City's Petition to Supplement the Record Should Be Denied. 

As an initial matter, the City has filed a petition to supplement the record pursuant 

to 14 C.F.R. § 16.33(f) to include two declarations to the effect that City officials did not 

understand the consequences ofthe 2003 grant modification that is at issue in this docket. 

The City has failed to show any good cause for the submission of these declarations at this 

late date, and the City's request should be denied.l 

The very crux of the Complaint in this docket is the consequence of the acceptance 

of grant funds. Thus, the City has been on notice since at least the filing of the Complaint on 

july 2, 2014 that its contemporaneous understanding of the significance of the 2003 grant 

modification was at least arguably relevant. In fact, the City raised the subject of its 

understanding in its answer dated October 20, 2014 (see pp. 20-21) - so there is no 

question that the City not only should have been, but actually was, aware of the issue. Yet 

the City has offered no explanation as to why it did not submit the proposed evidence until 

now. See. e.g., Langa Air. Inc. v. St. Louis Regional Airport Authority, Docket No. 16-00-07, 

Final Agency Decision, p. 15 (December 13, 2001) ("it is well established that in an internal 

agency appeal process new evidence need not be admitted unless the new evidence was 

not available and could not have been discovered or presented at the prior proceeding"). 

In any case, the new evidence proffered by the City is irrelevant because the City's 

contemporaneous - or even earlier2 - understandings of the significance of its actions in 

2003 are beside the point. As previously explained by Complainants- without substantive 

response from the City - the City's prior misunderstanding of its obligations provides no 

basis to argue that the FAA's interpretation of those commitments was out of step with the 

underlying statutory program. See. e.g .. Morris v. Redwood Empire Bancorp, 27 Cal. 

Rptr.3d 797, 809 (Cal. App. 2005) ("it is reasonable to expect even an unsophisticated 

businessman to carefully read, understand, and consider all the terms of an agreement 

affecting ... a vital aspect of his business"); In re Doble, 2011 WL 1465559, *3 

(Bankr.S.D.Cal. No. 10-11296 April 14, 2011) ("legally sophisticated parties are held to 

understand the consequences of their actions"); Hangzhou Silk Import and Export 

1 Complainants do not oppose the City's request for leave to submit one of those declarations late, due to 

circumstances beyond the control of the City and the signatory to the declaration, but that request is moot for 

the reasons discussed in this section. 

2 The Matthieu Declaration seeks to introduce a 1994 City report as evidence of the City's understanding of 

the consequences of the 2003 grant modification (see '11 5). 

2 
Corporation v. P.C.B. International Industries. Inc .. 2002 WL 2031591, *6 (S.D.N.Y. No. 00-

CV-6344 September 5, 2002) ("[e]specially with regard to sophisticated business people, 

capable of resort to counsel for advice, as is the situation here, the law presumes that 

parties to a contract will only sign it if they fully understand its terms and conditions"J.3 

Moreover, the City has a long record of alleged misunderstandings of its Grant 

Assurance and contractual obligations, which has necessitated repeated administrative and 

court proceedings -at significant cost and burden to the FAA and third parties- to ensure 

the City's compliance. See, e.g., City of Santa Monica v. FAA, 631 F.3d 550 (D.C. Cir. 2011); 

Bombardier Aerospace Corp. v. City of Santa Monica, Docket No. 16-03-11, Director's 

Determination (January 3, 2005). This pattern appears yet again in the proffered McCarthy 

declaration, which gratuitously repeats the City's alleged belief that the 1984 Agreement 

"represented the definite end of the City's legal obligation to operate the Airport" (see '1[ 4; 

see also Appeal, p. 5), a claim which has been shown to be demonstrably false. 4 

The City's ongoing record of legal and factual amnesia, even if charitably construed 

to be negligent rather than deliberate, should provide a framework and context for the 

FAA's review of the City's request to supplement the record with documentation and 

information that it has actually known for quite some time - and which should not affect 

the outcome of the appeal in any event, given the overwhelming support for the Director's 

findings vis-a-vis the 2023 date, as further set forth below. 

II. The Director's Determination that the 2003 Grant Amendment 

Extended the City's Obligations Until 2023 Was Proper and Should Be 

Affirmed. 

The principal issue on appeal is the Director's conclusion that by accepting 

additional AlP funds from the FAA in 2003, the City extended through 2023 the "not to 

exceed" period during which it is obligated to comply with the Grant Assurances. The City 

does not dispute that the project funded in 2003 (a blast wall at SMO) will have a useful life 

that will extend at least through 2023. Rather, the City argues that the new batch of funds 

3 Moreover, the assertion in the declarations that the City would not assume an Airport-related contractual 

obligation extending beyond july 1, 2015 (see McCarthy, 'If 5; Mattbieu, 'If 7) is at odds with the fact that the 

City, from at least january through june 2015, was negotiating with the FAA for a new, multi-year lease for the 

federal navaids and tower at SMO. 

4 See the amicus brief filed by NBAA and AOPA in the City's appeal of its Surplus Property Act challenge, 2015 

WL 416879, *13-*18 (9th Cir. No. 14-55583 january 22, 2015)) and the decisions rejecting this contention by 

both the underlying U.S. District Court (2014 WL 1348499, *12 (C.D.Cal. No. 13-CV-8046, February 13, 2014)) 

and the Director in a prior Part 16 proceeding (In the Matter of Compliance Obligations by the Citv of Santa 

Monica California. Docket No. 16-02-08, Director's Determination, p. 60 (May 27, 2008)). 

3 
that it accepted in 2003 should not be understood to have restarted the clock on its 

obligations, and that they instead expired 20 years after the date of the initial grant- 1&., in 

2014. Complainants respectfully disagree with the City's reasoning, and for the reasons 

stated in the Director's Determination, the Complaint and other prior filings, and this Reply, 

urge the Associate Administrator to affirm the Director's conclusion that 2023 is the 

correct date. 

a) The City inaccurately describes the language of the 2003 grant 

modification. 

The City's opening argument is that clear and unambiguous language in the 1994 

grant agreement and the 2003 grant modification require a 2014 expiration date for its 

obligations. See Appeal, pp. 10-13. But the City does not dispute that the duration of the 

obligation period is not explicitly addressed by the 2003 grant modification, nor did any 

language in the 1994 grant agreement establish 2014 as an unalterable expiration date.s 

For example, the City cites language in the 2003 modification which states that "[a]ll other 

terms and conditions of the Grant Agreement remain in full force and effect." But that does 

not facially mean that the 20-year duration period in effect since 1994 was unchanged -

only that the incorporated assurances continued in effect (and were also applicable to the 

modification), without any clarification of their post-modification term. Cf. Olympia 

Properties. LLC v. U.S .. 54 Fed Cl. 147, 153-55 (2002) (holding that portions of contract 

termination clause that did not explicitly expire during original contract period continued 

in indefinite effect post-modification, based on clause which provided that "all other terms 

and conditions remain the same"). 

In short, the City's language-based argument for the interpretation of the 2003 grant 

modification is not compatible with the factual record or the law. Instead, the FAA must 

determine how language in the modification should be interpreted - a matter discussed in 

the subsequent sections of this Reply. 

b) The language in the 2003 grant modification must be construed in favor 

ofthe FAA. 

The City next argues that even if the language of the 2003 grant modification is not 

unambiguous, it should be construed against the FAA. See Appeal, pp. 17-21. But this 

5 The City also premises its argument on language in the 1984 Agreement. but that agreement provided that 

""federal funding of program improvements intended to further this Agreement, executed prior to july 1, 

1995'" shall not extend the City's obligation to operate the Airport. Indisputably. the 2003 grant modification 

was executed after july 1, 1995. See Director's Determination, p. 18. Nor has the City shown that the 2003 

grant modification was designed to implement a program or improvement covered by the 1984 Agreement. 

4 
contention already was fairly considered and properly rejected by the Director, in reliance 

on the Supreme Court's holding in Bennett v. Kentucky Department of Education, 4 70 U.S. 

656, 669 (1985), distinguishing U.S. v. Seckinger, 397 U.S. 203, 210 (1970). That is to say, 

for grants that originate in and are governed by federal statutes, the standards of 

construction governing statutory interpretation, not the rule of contra proferentem, are to 

be applied.6 

The City acknowledges this general principle, but asserts that it is inapplicable in 

this case because the obligation period at issue is not an explicit statutory directive. See 

Appeal, p. 20. But the City cites no authority for this proposed distinction. On the other 

hand, in Westlands Water District v. Patterson, 864 F.Supp. 1536 (E.D.Cal. 1994)- a case 

previously cited by the City as authoritative (in its answer dated October 20, 2014, pp. 15-

16)- the court explained, without qualification, that: 

"[G]overnmental contracts should be interpreted against the backdrop of the 

legislative scheme that authorized them, and [the] interpretation of 

ambiguous terms or implied covenants can only be made in light of the 

policies underlying the controlling legislation." 

l.!L p. 1542, quoting Peterson v. Department of the Interior, 899 F.2d 799, 807 (9th Cir. 

1990). Likewise, in City and County of San Francisco v. FAA, 942 F.2d 1391 (9th Cir. 1991), 

the Court adopted a deferential standard of review toward an FAA ruling pursuant to its 

statutory authority which found that an airport had violated Grant Assurance-based 

obligations, irrespective of whether those obligations appeared in the literal text of the 

statute. The Ninth Circuit explained that: 

The conditions Congress imposed on the grant to local airport proprietors of 

money from the Airport and Airway Trust Fund are designed in part to 

insure the maintenance of conditions essential to an efficient national air 

transport system .... Pursuant to this statutory scheme, San Francisco 

received grant offers .... A grant agreement based on such an offer is not an 

ordinary contract. but part of a procedure mandated by Congress to assure 

federal funds are disbursed in accordance with Congress' will. ... While we 

review questions of statutory interpretation de novo, we accord substantial 

6 The City also seeks support for its position in language in Air Transportation Association of America v. City 

of Los Angeles California. Docket No. 13-95-05, Final Decision and Order, 2009 WL 1578613, *28 (June 1, 

2009). But that case concerned a change in the FAA's interpretation of an airport's substantive AlP 

obligations that also contradicted prior advice to that airport, not first~impression guidance on the duration 

of an airport's AlP obligations. 

5 
deference to the interpretation adopted by the agency charged with 

administering the statute. 

Id., pp. 1395-96 (emphasis added). Cf. Flightline Ground. Inc. v. Louisiana Department of 

Transportation, Docket No. 16-11-01, Final Agency Decision, p. 30 (January 15, 2015) 

(requirements need not be statutory to have weight and effect; "[s]ponsors are not free to 

ignore non-statutory grant assurances or terms"). 

In contrast, the principal case cited by the City, Clay Tower Apartments v. Kemp, 978 

F.2d 4 78, 480 (9th Cir. 1992), is an outlier that Complainants previously established to 

have been implicitly overruled. See Complainants' reply dated October 30, 2014, p. 7, n.5. 

Subsequent Ninth Circuit decisions have confirmed that Peterson is the authority to be 

followed. See. e.g., Student Loan Fund of Idaho, Inc. v. Department of Education, 272 F.3d 

1155, 1162 (9th Cir. 2001). See also Imperial Credit Industries. Inc. v. FDIC, 527 F.3d 959, 

969 (9th Cir. 2008) (distinguishing Clay Tower when agreement "included intrinsically 

regulatory terms of a type that the agency frequently employs its expertise in reviewing") 

(quotation marks and citation omitted). Cf. Nat'! Fuel Gas Supply Corp. v. FERC, 811 F.2d 

1563, 1570 (D.C.Cir. 1987) ("[a]s this court stated even before Chevron, there is room, in 

review of administrative agencies, for some deference to their views even on matters oflaw 

like the meaning of contracts, as on the meaning of statutes, where the understanding of 

the documents involved is enhanced by technical knowledge of industry conditions and 

practices") (quotation marks and citation omitted). The City simply has not shown why 

Clay Tower is relevant- or even that it is valid law. 

In the same vein is the City's suggestion that even if the FAA is entitled to deference, 

the 2003 grant modification nevertheless must be construed against the FAA. See Appeal, p. 

21. But the cases cited by the City do not stand for that proposition. Indeed, one of those 

cases - Barnes v. Gorman, 536 U.S. 181, 186 (2002) -specified that the scenario at issue 

therein was one in "which funding recipients may be held liable for money damages" - not 

a scenario applicable to AlP grant recipients generally, or to this proceeding in particular. 

Likewise, this proceeding does not involve the "commandeering" of state and local officials, 

as implied by the City's citations of decisions such as National Federation of Independent 

Businesses v. Sebelius, 132 S.Ct. 2566, 2602 (2012). 

Santa Monica voluntarily chose to participate in a statutory program administered 

by the FAA in accepting several AlP grants. It did so with the undisputed knowledge that 

the FAA would be fiscally responsible in requiring the City to use those funds in a manner 

that ensured a proper benefit in return to the public. Santa Monica must thus accept the 

consequences of the FAA's reasonable exercise of its statutory authority to find that the 

City's obligations - after the 2003 receipt of additional monies for an additional projectextended until2023. 

6 
c) The City's proposed interpretation of the language in the 2003 grant 

modification is not reasonable. 

The City asserts that its interpretation of the 2003 grant modification is reasonable. 

See Appeal, pp. 21-23. Even assuming that would be relevant if true - given the deference 

that should be given to the FAA's interpretation of the 2003 grant modification- the City's 

interpretation is most certainly not reasonable, because the consequences of its reasoning 

would not be in the general interest, either at SMO or more broadly. As noted by the 

Director, Congress intended that the FAA and the public receive a benefit in return for the 

federal investment of AlP funds, which the grant assurances have defined to be a term of 20 

years (with exceptions not here relevant).' In contrast, under the City's approach, the grant 

assurances applicable to the blast wall would have expired after only 12 years of use, 

depriving the FAA and the public of 40% of their intended benefit. See Director's 

Determination, p. 19. 

As Complainants previously have observed, the AlP grant scheme is designed to 

ensure that the FAA retained ongoing supervisory authority over airports that had 

accepted public largesse. See. e.g., FAA Order 5190.6B, § 1.5 ("[g]rants and property 

conveyances are made in exchange for binding commitments (federal obligations) designed 

to ensure that the public interest in civil aviation will be served") (emphasis added).B The 

City's position potentially would allow recipients of AlP funds to be subject to federal 

commitments for only a brief period of time, far less than the useful life of a funded project, 

if a modification was entered into at a date well after the initial grant date. That reasoning 

would be a predicate for as-bad or even-worse funding arrangements at other airports. 

Accordingly, it is entirely reasonable for the FAA to have concluded that the City's position 

is incompatible with the FAA's underlying statutory dictates and the protection of the 

public purse (both in regard to SMO and other airports), and to instead look to its own 

reasonable conclusion that the grant modification at issue restarted the clock for the City's 

20-year obligation period. 

7 As explained in Airport Compliance Manual. FAA Order 5190.68, § 4.4 [September 30, 2009): "Generally 

improvements are presumed to last at least 20 years because they are built to FAA standards." The baseline 

for FAA-funded improvements has been 20 years for decades, predating tbe AlP itself. See. e.g .. 14 C.F.R. Part 

152, Appx. D, No. 17 [duration of obligations for grants made under Airport and Airway Development Act of 

1970). 

8 See also Airport Compliance Requirements FAA Order 5190.6A, § 1-1 [October 2, 1989) [AlP "is a program 

to administer valuable rights obtained for the people of the United States at a substantial cost in direct grants 

of funds and in donations of Federal property. Such grants and donations are made in exchange for binding 

commitments designed to assure that the public interest would be served. The FAA bears the important 

responsibility of seeing that these commitments are met"] [emphasis added). 

7 
d) The Director was correct to conclude that the 2003 grant modification 

required consideration- and that to the extent it did, the 2023 date was 

the consideration. 

Although not necessary to its interpretation of the 2003 grant modification, the 

Director concluded that further support for its interpretation can be found in that the 

modification required consideration, and that the only consideration that the City could 

and did provide was the extension of its federal obligations through 2023. See Director's 

Determination, p. 16. The City disputes the Director's reasoning, asserting both that no 

consideration was required for the modification and that even if it were needed, that 

consideration could have taken a different form. See Appeal, pp. 14-17. The City is in error. 

As an initial matter, the City suggests that no consideration was necessary because 

the absence of consideration would have meant only that the City could not enforce the 

modification- a moot point, because the City actually received an additional $240,000 from 

the FAA. But if there had been no consideration, that would also mean that the FAA would 

have given nearly a quarter million dollars to Santa Monica with no ability to enforce 

accompanying terms - an implausible notion: (i) in a vacuum; (ii) more so given the 

statutory directives applicable to the FAA for AlP grants generally; and (iii) most especially 

given the long-standing tensions between the City and the FAA. It is simply not credible to 

suggest that the FAA - even if it had the ability to do so (which it did not, as discussed 

below)- would have chosen to make an "unenforceable grant" to Santa Monica. 

Santa Monica next suggests that no consideration was required because the City and 

the FAA in 2003 merely entered into a modification of an existing contract. See Appeal, p 

14 n.l. But the general authority cited by the City- Uniform Commercial Code§ 2-209- is 

only concerned with contracts for the sale of goods, which the 1994 grant agreement 

unquestionably was not.9 Further, the City elsewhere acknowledges that the interpretation 

of the 2003 grant modification is governed by federal law (see. e.g., Appeal, p. 11), and it is 

well-established that federal "government officers lack authority to enter into contracts," 

including modifications, "under which the government receives nothing." Aviation 

Contractor Employees. Inc. v. U.S .. 945 F.2d 1568, 1573 (Fed. Cir. 1991); see also Carter v. 

U.S., 102 Fed. CL 61, 66 (2011). But even if one were to look to state law for additional 

guidance, one would find that the City has not been forthright because whatever the 

9 As a general matter, the UCC does not even apply to agreements with the federal government. See. e.g .. 

Technical Assistance International. Inc. v. U.S .. 150 F.3d 1369, 1372 (Fed.Cir.1998); GAF Corporation v. U.S .. 

932 F.2d 947,951 (Fed. Cir.1991). 

8 
situation may be in other jurisdictions,lo in California it remains mandatory that contract 

modifications be accompanied by consideration. See. e.g., Post v. Palpar. Inc., 7 Cal. Rptr. 

823, 826 (Dist. Ct. App. 1960); Porkert v. Chevron Corp., 461 Fed. Appx. 245, 250 (4th Cir. 

2012) (under California law, "[t]he valid modification of a written contract must satisfy the 

same criteria essential to the formation of the original contract, including . . . 

adequate consideration").ll 

The City also claims that the Director erred to the extent that he conceptually relied 

on certain U.S. Supreme Court authority in concluding that federal grants are in the nature 

of a contract to the extent that in return for those monies the recipient agrees to comply 

with federally-imposed conditions. See Appeal, pp. 15-16. But the cases cited are explicit; 

there is no room to dispute that Iackson v. Birmingham Board of Education, 544 U.S. 167, 

182 (2005) and Pennhurst State School and Hospital v. Halderman, 451 U.S. 1, 17 (1981) 

stand for the asserted proposition. See also American Hospital Association v. Schweiker. 

721 F.2d 170, 184 (7th Cir. 1983) (Pennhurst principles for grants are that "in 

consideration of the federal financial assistance, the recipients agreed to a substantial 

amount of federal regulation"); Thermalon Industries. Ltd. v. U.S., 34 Fed. Cl. 411, 415 

(1995) ("[a]s to consideration, the terms of the offer and acceptance, which are contained 

in the solicitation, the 'Grant General Conditions,' and the other terms and conditions 

specified by NSF in the award, provide for the passage of consideration between the 

parties"). 

Further, to the extent that the lackson and Pennhurst cases also state that grant 

recipients should be put on notice of applicable conditions, the City has misrepresented the 

significance and scope of those statements. Jackson noted that Bennett. in interpreting 

Pennhurst. found that there was sufficient notice of grant conditions "where a statute made 

clear that some conditions were placed on the receipt of federal funds ... Congress need 

10 The only other authority relied upon by Santa Monica- Angel v. Murray. 322 A.2d 630 (R.l. 1974)- is outof-jurisdiction and was explicitly concerned with contract modifications due to "unexpected or unanticipated 

difficulties." But in the Appeal, p. 12. the City asserts that the 2003 grant modification actually "had been 

contemplated in the 1994 Grant Agreement itself ... in recognition of the possibility of cost overruns." 

Obviously, the City cannot have it both ways. 

11 Additionally, as noted by the Director, the 1994 grant was understood by the FAA to have been closed prior 

to the 2003 grant modification. See Director's Determination, p. 15; see alsop. 17. The FAA subsequently did 

agree to reopen the grant- an "extraordinary" circumstance. See Airport Improvement Program Handbook 

FAA Order 5100.38D, § 5-65. (Indeed, normally a grant should not be left open for more than four years, and 

a "final" grant payment is made at closeout. See id. § 5-57- as also similarly stated in the version of the order 

contemporaneously in effect with the 2003 grant modification, FAA Order 5100.388, § 1031[b)[5) and § 

1314(a) (May 31, 2002).) For these further reasons, the circumstances at issue in this case also were very 

different from those under which consideration may have been deemed unnecessary for the modification of 

open contracts. 

9 
not 'specifically identif[y] and proscribe[]' [sic] each condition." 544 U.S. at 183, quoting 

4 70 U.S. at 666. As the Supreme Court sagely understood, "the Federal Government simply 

could not prospectively resolve every possible ambiguity concerning particular 

applications." 4 70 U.S. at 669. So, in practice, "prior notice of the general principle to be 

regulated in a cooperative scheme between the federal government and the states does not 

need to be all encompassing." Massachusetts ex rei. Executive Office of Health and Human 

Services v. Sebelius, 701 F.Supp.2d 182, 196 (D.Mass. 2010). In this case, there is no 

dispute that Santa Monica was on notice that AlP grants carried conditions; and it has no 

one to blame but itself for failing to be proactive in confirming the details of the grants. 

Finally, the City suggests that even if consideration was required, it could have taken 

the form of expenditures on airport maintenance. See Appeal, pp.16-17. But the uncertain 

language of the Airport Manager's May 7, 2003 "imploring" request for new federal money 

(asserting that it would enable Airport funds instead to be used for "much needed and 

differed [sic] airfield maintenance projects," see FAA Item No. 11) certainly does not rise to 

the level of consideration: there is no evidence that the City could have, would have, or 

actually did engage in airport maintenance in return for the modification. See. e.g., City of 

Los Angeles v. Anchor Casualty Co., 22 Cal. Rptr. 278, 282 (Dist. Ct. App. 1962) (a promise 

must be definite and substantial to comprise consideration); Piano v. Premier Distributing 

Co., 107 P.3d 11, 14 (N.M. 2005) ("a promise that puts no constraints on what a party may 

do in the future - in other words, when a promise, in reality, promises nothing - D is 

illusory, and it is not consideration") (quotation marks and citation omitted). Nor is there 

any evidence that such expenses were what was referred to by the reference to "benefits to 

accrue to the parties" in the 2003 grant modification. The City has offered nothing to show 

that, to the extent consideration is relevant, it could have been or actually was comprised of 

anything other than an extension of its obligation period. 

e) The City's objection to the Director's use of the term "akin to a new 

grant" is much ado about nothing. 

The City asserts that the Director's description of the 2003 grant modification as 

being "akin to a new grant" is improper in that the Director has thus created an FAA 

funding category that did not previously exist; one which is incompatible with existing 

regulations to the extent that those regulations draw a distinction between the 

requirements for new grants and modifications to existing grants. See Appeal, pp. 23-26. 

But this ultimately is much ado about nothing. The Director used the phrase "akin to a new 

grant" only once, in a header in the Director's Determination.12 The apparent purpose was 

12 Cf. VIC! Racing. J.J.C v T-Mobile USA Inc .. 921 F. Supp.2d 317, 328 (D.Del. 2013), affirmed 763 F.3d 273 

(3rd Cir. 2014) ("the word telematics is used only one time ... with no indication that this provision was the 

bedrock of the deal forT -Mobile .... The court will not rely upon the meaning inferred from such an obscure 

(continued .. ) 

10 
to make the point that because of the circumstances of the 2003 grant modification, it was 

appropriate to find that the clock for the duration of Santa Monica's federal obligations had 

restarted. It was presumably not the Director's intent to suggest the existence of or create 

a new FAA funding category - nor did he actually do so - or to suggest that a grant 

modification triggering a new 20-year obligation period must undergo the same process as 

an altogether new grant. The character of a decision is to be determined from its substance, 

not from a caption. See. e.g., Wilson v. Freeland, 773 So.2d 305, 308 (Miss. 2000).13 

The City also challenges the FAA's citation of two GAO opinions on the basis that in 

those cases, the Comptroller General only decided that certain grant modifications were 

chargeable to the current fiscal years. See Appeal, pp. 25-26. But this criticism misses the 

point, because the City ignores the theoretical underpinnings of those GAO opinions -

which were specifically flagged by the Director. See Director's Determination, p. 17 n.10. 

The Comptroller General explained that if the U.S. government is not obligated to modify a 

grant, then it not only should but must require the underlying project to be completed 

without additional federal contributions - at least, absent consideration for new monies. 

See 41 Camp. Gen 134, 137 (1961). "And such new grant would be subject to any statutory 

limitations as though it were not in any way connected with the grant sought to be 

amended." 39 Camp. Gen. 296, 298 (1959). This principle remains good law. See. e.g., 72 

Camp. Gen. 175, 177 (1993) ("the enlargement of the grant beyond its original scope 

creates an additional obligation that must be regarded as a new grant"). And as discussed 

above in footnote 11, in this case the City's underlying grant had been closed prior to the 

2003 grant modification, and its subsequent reopening by the FAA was extraordinary. 

Thus the Comptroller General opinions are relevant to how the 2003 grant modification 

should be understood, and show that it was correct for the Director to determine that, so 

far as the duration of the City's obligations was concerned, it was akin to a new grant.14 

provision to illuminate the contract's overall scheme or plan"); Duramed Pharmaceuticals. Inc. v. Paddock 

Laboratories. Inc .. 715 F.Supp.2d 552,562 n.10 (S.D.N.Y. 2010) (plaintiff"place[d] undue weight" on a phrase 

that appeared only once in cited opinion), 

13 The City further mentions that the 2003 grant modification was not specifically identified as a new grant in 

a certain FY 2003 report and a certain FY 2003 spreadsheet- see Appeal pp. 24-25 -but does not explain 

how /why these high-level summaries are determinative of the obligations that accompanied the modification. 

14 The City also suggests that Congress intended to strictly distinguish new grants and modifications by its 

adoption of 49 U.S.C. § 47111(e). See Appeal, p. 25. But that is not an accurate statement of the statute's 

purpose. See. e.g .. H.Rpt. 103-677, p. 67 (August 5, 1994) (legislative intent of Pub. L. 103-305, § 112 is that: 

"If an airport violates the assurances against revenue diversion and refuses to take corrective action ... the 

Secretary shall not approve new AlP applications"). Likewise, the City cites a statutory provision that allows 

for additional funding, 49 U.S.C. § 47108(b)(3)(A), but that provision is understood to apply only before a 

grant is closed. See FAA Order 5100.38D, § 5-55, Table 5-27(a)(5); FAA Order 5100.388, § 1142(a). 

11 
f) The Director's interpretation of the 2003 grant modification was a 

proper exercise of the FAA's Part 16 authority and did not require 

notice-and-comment rulemaking. 

Finally, the City argues that the FAA's conclusion that the City's obligations extend 

through 2023 is procedurally improper because it amounts to policy guidance regarding 

the Grant Assurances that only could have been adopted through notice-and-comment 

rulemaking. See Appeal, pp. 26-29. But the specific statute invoked, 49 U.S.C. § 47107(h), 

clearly is inapplicable, because it sets forth the requirements for the addition of new Grant 

Assurances, and not the clarification of existing obligations (such as their duration).lS And 

in any case, as the Supreme Court recently held in Perez v. Mortgage Bankers Association, 

135 S.Ct. 1199, 1204 (2015), a new agency interpretation generally does not require 

notice-and-comment rulemaking. 

Moreover, what is on appeal in this proceeding is an agency adjudication. That is 

not only a further reason that section 47107(h) is inapplicable, but also is consistent with 

long-established Supreme Court guidance that administrative agencies generally may 

choose to announce new principles in adjudicative proceedings and that an agency's 

decision to proceed in such a manner "is entitled to great weight." See NLRB v. Bell 

Aerospace Co., 416 U.S. 267, 294 (1974). That high court guidance has been specifically 

invoked for past FAA adjudications. See. e.g., Union Flights. Inc. v. FAA. 957 F.2d 685, 688 

(9th Cir. 1992); Capitol Technical Services. Inc. v. FAA, 791 F.2d 964, 971 n.46 (D.C.Cir. 

1986).16 

Indeed, the City cites no further authority for its procedural assertion, but instead 

segues into a different argument, namely that the reasoning utilized in this case may have 

consequences that require further clarification. See Appeal, pp. 27-28. But the same could 

be said of any Part 16 decision involving an issue of first impression, and of jurisprudence 

generally. That is no reason for the FAA to fail to address a matter. As the FAA previously 

has explained, that a matter "is a case of first impression does not preclude us from 

adopting a standard ... based on an interpretation of existing law, policy and the City's 

existing grant obligations." In the Matter of Revenue Diversion by the City of Los Angeles, 

15 To the extent that the City again seeks support in Air Transportation Association of America v. City of Los 

Angeles California. for the same reason discussed in footnote 6, it involved different and inapplicable 

circumstances. 

16 The FAA also has previously recognized in Part 16 proceedings that guidance on airport compliance 

obligations promulgated through administrative decisions comprise interpretive rules that are not subject to 

notice-and-comment rule making. See. e.g .. let 1 Center Inc. v. Naples Airport Authority, Docket No. 16-04-03, 

Final Agency Decision, pp.14-16 (July 15, 2005). 

12 
Docket No. 16-96-01, Record of Determination, p. 17 (March 17, 1997).17 Moreover, given 

that the vast majority of airport sponsors accept AlP grants on a continuing basis - few 

have sought to "run out the clock" on their obligations, as has Santa Monica- any ambiguity 

left in the wake of a final decision in this proceeding is likely to have limited import and 

could easily be resolved by the FAA on a case-by-case basis. 

III. The Director's Determination that this Proceeding Was Proper as a 

Matter of Procedure Was Correct and Should Be Affirmed. 

In the final sections of its appeal brief, the City asserts various jurisdictional errors 

in the Director's Determination, but presents little or no new argument - just mere 

disagreement with the conclusions of the Director's Determination, and the authorities 

cited by the FAA and Complainants. As a result, these allegations by the City merit little 

attention, since no basis has been provided for the Associate Administrator to reason 

differently than the Director. But in the interest of a complete record, Complainants briefly 

respond as follows: 

• Complainants Are Directly and Substantially Affected. As recognized by the 

Director's Determination (pp. 9-10), Complainants are directly and substantially 

affected by the uncertainty created by the City's defiant and unique position that it 

simply is no longer obligated to comply with No. (B)(1), or any other of the Grant 

Assurances. They cannot plan for the future - as they are entitled to do - without 

the certainty that the City will comply with fundamental ground rules. See. e.g., 

Atlantic Helicopters, Inc. v. Monroe County. Florida, Docket No. 16-07-12, Director's 

Determination, at 31 (September 11, 2008). And the City for decades and currently 

has made clear its intent to close the Airport at first opportunity. See, e.g., Director's 

Determination, pp. 9-10. In its Appeal (p. 30), the City largely responds with 

irrelevant authority that already has been fully discredited: i.e., a Part 16 decision 

regarding the City's obligations that was issued before the 2003 grant modification, 

and a Part 16 decision which states only the unremarkable proposition that 

aeronautical tenants are not entitled to a long-term lease at the location of their 

choosing, but provides no support for the City's position that it may refuse to 

17 The FAA routinely provides guidance to airports and other interested parties as to how grant assurancebased requirements are to be applied in practice. For example, the FAA previously has provided extensive 

guidance regarding what incentives airports may offer to air carriers - see Air Carrier Incentive Program 

Guidebook (September 2010)- and regularly issues Program Guidance Letters regarding AlP requirements. 

13 
negotiate for long-term leases at all.18 See also Complainants' answer dated August 

28, 2014, p. 6 n.3, pp. 7-8; Complainants' reply dated October 30,2014, pp. 2-3,5.19 

• Complainants Have Stated A Claim Under Part 16. Both in connection with the 

issue above and separately, the City has asserted that Complainants lack standing 

and have not submitted a "live" dispute for the FAA's consideration because the City 

has not yet actually violated or stated an intent to violate the Grant Assurances (see 

Appeal at pp. 29, 31-32). This is another argument that has been recycled despite 

already having been fully discredited. See Director's Determination, pp. 8-11. To 

reiterate, this is not an Article Ill tribunal and thus there is no general prohibition on 

advisory opinions, even if there were not a "live" controversy (although there is, as 

described above). Nor is the FAA specifically prohibited by the underlying 

regulations from resolving the dispute at issue until a violation is imminent or has 

actually occurred. Part 16 allows the FAA to address current practices that are 

likely to result in future violations -of which the City's asserted lack of obligations 

under any of the Grant Assurances, coupled with its well-established intent to 

restrict operations at SMO or to close the Airport altogether, is a prime example. 

See. e.g., IetAway Aviation LLC v. Board of Commissioners. Montrose County. 

Colorado, Docket No. 16-06-01, Director's Determination, p. 34 (November 6, 2006). 

See also Complainants' answer dated August 28, 2014, pp. 4-9; Complainants' reply 

dated October 30,2014, pp. 4-5. 

• Complainants Engaged in Good Faith Resolution Efforts. As recognized by the 

Director's Determination (p. 11): "The City's position on the expiration date is clear 

18 Complainants note that the City represented to the Director that "the City Council has previously voted to 

offer three (3) year lease extensions which would run through june 30, 2018 and is in the process of 

considering proposed leasing guidelines." See. e.g., the City's August 14, 2014 motion to dismiss, p. 3. But 

nearly 18 months have passed since that representation, and in fact no lease extensions of any duration have 

been offered to aeronautical tenants [which since july 1, 2015 have been on month-to-month terms), even 

though lease extensions have been offered to non-aeronautical tenants. Complainants suggest that the FAA 

may take notice of these developments (or the lack thereof) pursuant to 14 C.F.R. § 16.29, to the extent 

necessary. Respondent's failure to self-disclose to the FAA that its representation, if ever accurate, does not 

reflect present realities is additionally troublesome. 

19 The one new authority cited by Respondent is Restatement (Second) of Contracts § 250 - but it is 

unavailing because it specifically implicates the circumstances under which a party to a contract may bring a 

claim in court for the breach thereof, and does not govern the jurisdiction of the FAA under Part 16. That said, 

Comment C to § 250 observes that a party to a contract is entitled to demand assurances in response to acts 

that fall short of a repudiation as defined by the Restatement, a concept which is consistent with the FAA's 

exercise of jurisdiction over the instant Complaint, given the City's asserted lack of Grant Assurance 

obligations subsequent to june 29, 2014 and, in its own words, "long-expressed policy to seek closure of the 

airport." See Appeal, p. 22. See also Highbridge Development BR. I.LC v. Diamond Development LLC. 888 

N.Y.S.2d 654, 656 (App. Div. 2009) (finding cause of action for anticipatory repudiation where party "declared 

the contract to be void and stated its intention to begin entertaining offers from other buyers"). 

14 
and unlikely to be voluntarily reversed." The City in its Appeal suggests that if 

Complainants engaged in further resolution efforts, the City somehow might have 

provided "assurances that might have obviated the need for these proceedings ... 

however 'fixed' the City's 'position on the expiration date" might have been." See p. 

33. But the City provides no explanation of what those "assurances" would be or 

how anything other than an acknowledgement by the City that its federal 

obligations do extend until 2023 would have resolved the instant dispute. As 

previously made clear by the FAA, complainants are not obligated to continue to 

engage in futile communications with an airport sponsor that has "for all practical 

purposes" signaled that it will not comply with Grant Assurances. See Bombardier 

Aerospace Corp. v. City of Santa Monica. California, Docket No. 16-03-11, Director's 

Determination, p. 23 Ganuary 3, 2005). See also Complainants' answer dated 

August 28,2014, pp. 9-10; Complainants' reply dated October 30,2014, pp. 5-6. 

Conclusion 

For the reasons stated above, the City's appeal and accompanying petition should be 

denied and the Director's Determination should be affirmed, including the finding therein 

that the City is obligated by the Grant Assurances through August 27, 2023. 

1700 

Rio~ Decker School Lane 

Malibu, CA 90265 

(310) 503-7286 

rsimon3@lverizon.net 

15 
Certificate of Service 

I hereby certify that I have this day caused the foregoing answer to be served on the 

following persons by first-class mail with a courtesy copy by electronic mail: 

Rick Cole, City Manager, City of Santa Monica, 1685 Main Street, Room 209, Santa 

Monica, CA 90401, manager@smgov.net 

Nelson Hernandez, Senior Advisor to the City Manager on Airport Affairs, Airport 

Administration Building, 3223 Donald Douglas Loop South, Santa Monica, CA 90405, 

ne!son.hernandez(wsmgov.net 

Marsha Moutrie, City Attorney, joseph Lawrence, Lance Gams, and Ivan Campbell, 

City of Santa Monica, 1685 Main Street, Room 310, Santa Monica, CA 90401, 

marsha.mQutrie@smgov.net, 

ivan.campbell(wsmgov.net 

!ance.gams(alsmgov.net, 

Stelios Makrides, Airport Manager, City of Santa Monica, Airport Administration 

Building, 3223 Donald Douglas Loop South, Santa Monica, CA 90405, 

Martin Pastucha, Director of Public Works, City of Santa Monica, 1685 Main Street, 

Room 116, Santa Monica, CA 90401, martin.pastucha(dlsmgov.net 

G. Brian Busey, Paul Varnado, and james Sigel, Morrison & Foerster, LLP, 2000 

Pennsylvania Avenue, N.W., Washington, DC 20006, gbusey(wmofo.cmn, 

pvar:nad oC<llrl:Jofo.com, i.ojg£1 @mofo.co m 

Zane Gresham, Morrison & Foerster, LLP, 425 Market Street, San Francisco, CA 

94105, zgresham(wmofo,com 

1700 Decker School Lane 

Malibu, CA 90265 

(310) 503-7286 

rsimon3@verizon.net 

16