Richard K Simon, Esq. 1700Decker School Lane Malibu, CA 90265 (310) 503-7286 rsimon3(a!verizon.net Office ofthe ChiefCounsel Attention: FAA Part 16Airport Proceedings Docket AGC-610 FederalAviationAdministration 800 IndependenceAve. S.W, Washington, D.C. 20591 Re: Part 16 Complaint 

# RECt=lVED**_,~,\11** 

## 28Z016

January 28, 2016



### National BusinessAviation Association, KruegerAviation, Inc., Harrison Ford, JusticeAviation,Kim DavidsonAviation,Inc.,AeroFilm, YouriBujko,JamesRoss, Wonderful Citrus, LLC, and Aircraft Owners and Pilots Association v. City of SantaMonica, California DocketNos. 16-14-04/FAA-2014-0592

Replyofthe Complainants to Respondent'sAppealfrom the Director's Determinationandto Respondent's Petitionto Supplementthe Record onAppeal The Complainantsrespectfully submitthis Reply, pursuantto 14C.F.R. § 16.33(d), to the appeal and accompanying petition filed in this docket by the City of Santa Monica ("City," "SantaMonica," or"Respondent") onJanuary 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"), orto close the Airportaltogether, 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 ofits 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



### 1GrantAssurances through August 27, 2023 and that finding now should be affirmed bythe AssociateAdministrator. I. The City's PetitiontoSupplementtheRecord ShouldBe Denied. As an initial matter, the City has filed a petition to supplementthe 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 ofthese declarations atthis late date, and the City's requestshouldbe denied.l The very crux ofthe Complaint in this docket is the consequence ofthe acceptance ofgrantfunds. Thus, the City has beenon notice since atleastthefiling ofthe Complaint on july 2, 2014 that its contemporaneous understanding ofthe significance ofthe 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 actuallywas, aware ofthe issue. Yet the City has offered no explanation as to whyit did not submitthe 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 establishedthat in an internal agency appeal process new evidence need not be admitted unless the new evidence was not available andcould not have been discovered orpresentedatthepriorproceeding"). 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 arebesidethe point. As previously explainedby Complainants- without substantive response from the City

- the City's prior misunderstanding ofits obligations provides no basis to argue thatthe FAA's interpretation ofthose commitments was outofstep withthe 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 circumstancesbeyondthe control ofthe Cityand the signatoryto the declaration, butthat requestis mootfor the reasons discussedin this section.

2 The Matthieu Declaration seeks to introduce a 1994 City report as evidence ofthe City's understanding of the consequences ofthe 2003 grantmodification (see '11 5).

2Corporation 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 partiesto a contractwill onlysign it iftheyfully understandits terms andconditions"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 ofSanta 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 patternappearsyet again in theproffered McCarthy declaration, which gratuitously repeats the City's alleged beliefthat the 1984 Agreement "representedthe definite end ofthe City's legal obligation to operate theAirport" (see '1[ 4; see also Appeal, p. 5), a claimwhich has been shownto be demonstrablyfalse. 4 The City's ongoing record oflegal and factual amnesia, even ifcharitably 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 ofthe appeal in any event, given the overwhelming support for the Director's findings vis-a-vis the2023 date, as further setforth 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 duringwhich it is obligated to comply with the GrantAssurances. The City does not dispute thatthe projectfunded in 2003 (a blastwall at SMO) will have a useful life thatwill extend atleastthrough 2023. Rather, the City argues thatthe newbatch offunds

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 thatthe City, from atleastjanuarythroughjune 2015, was negotiatingwith the FAA for a new, multi-yearlease for the federal navaidsand towerat SMO.

4 See the amicus brieffiled by NBAA andAOPA in the City's appeal ofits Surplus PropertyAct challenge, 2015 WL 416879, *13-*18 (9th Cir. No. 14-55583january22, 2015)) andthe decisions rejectingthis contentionby boththeunderlyingU.S. DistrictCourt (2014WL 1348499, *12 (C.D.Cal. No. 13-CV-8046, February 13, 2014)) and the Director in a prior Part 16 proceeding (In the Matter ofCompliance Obligations bythe Citv ofSanta Monica California. Docket No. 16-02-08, Director's Determination, p. 60 (May 27, 2008)).

3that it accepted in 2003 should not be understood to have restarted the clock on its obligations, and thatthey instead expired 20 years afterthe date ofthe initial grant- 1&., in 2014. Complainants respectfully disagree with the City's reasoning, and for the reasons statedinthe Director's Determination,the Complaintand otherpriorfilings, andthis Reply, urge the Associate Administrator to affirm the Director's conclusion that 2023 is the correctdate. 

### 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 ofthe 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 ofthe GrantAgreement remain in full force and effect." Butthat does not facially mean that the 20-year duration period in effect since 1994 was unchanged

- only thatthe 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 remainthe same"). In short,the City's language-based argumentfor the interpretationofthe 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 subsequentsections ofthis Reply. 

### b) The language inthe2003 grantmodificationmustbe construed infavor oftheFAA. The City next argues that even ifthe language ofthe 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 1984Agreement. butthat agreement provided that ""federal funding of program improvements intended to further this Agreement, executed prior to july 1, 1995'" shall not extendthe City's obligation to operate the Airport. Indisputably. the 2003 grantmodification was executed afterjuly 1, 1995. See Director's Determination, p. 18. Nor has the City shown that the 2003 grantmodification was designedto implementa program or improvementcoveredbythe 1984Agreement.

4contention alreadywas fairly considered and properly rejected bythe Director, in reliance on the Supreme Court's holding in Bennettv. Kentucky Department ofEducation, 470 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 ofcontraproferentem, 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 bythe City as authoritative (in its answer dated October 20, 2014, pp. 15- 16)- the courtexplained,withoutqualification, that: "[G]overnmental contracts should be interpreted against the backdrop ofthe legislative scheme that authorized them, and [the] interpretation of ambiguous terms or implied covenants can only be made in light of the policies underlyingthe controllinglegislation." 

### l.!L p. 1542, quoting Peterson v. Department of the Interior, 899 F.2d 799, 807 (9th Cir. 1990). Likewise, in City and County ofSan Franciscov. 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 Circuitexplainedthat: The conditions Congress imposed on the grantto local airportproprietors 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 grantagreementbased 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 ofAmerica 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 ofanairport'sAlP obligations.

5deference to the interpretation adopted by the agency charged with administeringthe 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 statutoryto have weight and effect; "[s]ponsors are not free to ignore non-statutorygrant assurances orterms"). In contrast,the principal case cited bythe City, Clay TowerApartments v. Kemp, 978 F.2d 478, 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 ofIdaho, Inc. v. Department ofEducation, 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 ofa type thatthe 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 ofadministrative agencies, for some deferenceto theirviews 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 Toweris relevant- oreventhatit is valid law. In the same vein is the City's suggestionthat even ifthe FAA is entitled to deference, the 2003 grantmodification nevertheless mustbe construed againstthe FAA. See Appeal, p. 21. But the cases cited bythe City do not stand for that proposition. Indeed, one ofthose 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" ofstate and local officials, as implied by the City's citations of decisions such as National Federation of Independent Businessesv. 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 projectextendeduntil2023.

6c) The City's proposed interpretation ofthe language in the 2003 grant modificationisnotreasonable. The City asserts thatits interpretation ofthe 2003 grantmodification is reasonable. See Appeal, pp. 21-23. Even assuming thatwouldbe relevantiftrue

- given the deference that should be given to the FAA's interpretation ofthe 2003 grant modification- the City's interpretation is most certainlynot reasonable, becausethe consequences of its reasoning would not be in the general interest, either at SMO or more broadly. As noted by the Director, Congress intended thatthe FAA and the public receive a benefit in return for the federal investmentofAlP funds, which the grant assuranceshave defined tobe a term of20 years (with exceptions nothererelevant).' In contrast, underthe 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 thatthe 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 briefperiod oftime, far less thanthe useful life ofa funded project, ifa modification was entered into at a date well afterthe initial grant date. That reasoning would be a predicate for as-bad or even-worse funding arrangements at other airports. Accordingly, it is entirelyreasonable for the FAA to have concluded thatthe 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 thatthe grant modification at issue restarted the clock for the City's 20-yearobligationperiod.

7As 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 theyare built to FAA standards." The baseline for FAA-funded improvements has been 20 years for decades, predatingtbeAlP itself. See. e.g.. 14C.F.R. Part 152, Appx. D, No. 17 [duration ofobligations for grants made underAirport and Airway DevelopmentAct of 1970).

8 See also Airport Compliance Requirements FAA Order 5190.6A, § 1-1 [October 2, 1989) [AlP "is a program to administervaluable rights obtained for the people ofthe United States ata substantial costin directgrants offunds and in donations ofFederal 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 responsibilityofseeingthatthese commitments are met"] [emphasisadded).

7

### d) The Director was correct to conclude thatthe 2003 grant modification requiredconsideration- andthatto theextentitdid, 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 ofits 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 differentform. See Appeal, pp. 14-17. The City is in error. As an initial matter, the City suggests that no consideration was necessarybecause the absence of consideration would have meant only that the City could not enforce the modification- a mootpoint,becausetheCity actually received an additional $240,000from the FAA. But ifthere had been no consideration, thatwould also meanthatthe 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 statutorydirectives applicable to the FAA for AlP grants generally; and (iii) most especially given the long-standingtensions betweenthe 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)- wouldhave chosento make an "unenforceable grant"to SantaMonica. Santa Monica next suggests thatno consideration was required becausethe City and the FAA in 2003 merely entered into a modification ofan existing contract. See Appeal, p 14n.l. But the general authority citedbythe City- Uniform Commercial Code§ 2-209- is only concerned with contracts for the sale of goods, which the 1994 grant agreement unquestionablywas not.9 Further,the City elsewhere acknowledges thatthe interpretation ofthe 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).

8situation may be in otherjurisdictions,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); Porkertv. Chevron Corp., 461 Fed. Appx. 245, 250 (4th Cir. 2012) (under California law, "[t]he valid modification ofa written contract must satisfy the same criteria essential to the formation of the original contract, including

. . . adequate consideration").ll The City also claims thatthe Director erredto the extent thathe conceptually relied on certain U.S. Supreme Court authorityin 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 ofthe 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 shouldbe puton notice ofapplicable conditions, the City has misrepresentedthe significance and scope of those statements. Jackson noted that Bennett. in interpreting Pennhurst.found thattherewas sufficient notice ofgrantconditions "where a statute made clear that some conditions were placed on the receipt of federal funds

... Congress need

10The only other authorityrelied upon by Santa Monica- Angel v. Murray. 322 A.2d 630 (R.l. 1974)- is outof-jurisdiction and was explicitly concerned with contractmodifications 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 cannothave itbothways.
11Additionally, as notedbythe Director, the 1994grantwas understood bythe FAA to havebeenclosedprior to the 2003 grantmodification. See Director's Determination, p. 15; see alsop. 17. The FAA subsequentlydid agree to reopen the grant- an "extraordinary" circumstance. See Airport Improvement Program Handbook FAA Order 5100.38D, § 5-65. (Indeed, normallya grantshould notbe leftopen for more than four years, and a "final" grantpaymentis made at closeout. See id. § 5-57- as also similarly stated in the version ofthe 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.

9not 'specifically identif[y] and proscribe[]' [sic] each condition." 544 U.S. at 183, quoting 470 U.S. at 666. As the Supreme Court sagelyunderstood, "the Federal Government simply could not prospectively resolve every possible ambiguity concerning particular applications." 470 U.S. at 669. So, in practice, "prior notice ofthe general principle to be regulated in a cooperative schemebetween the federal government andthe states does not need to be all encompassing." Massachusetts ex rei. Executive Office ofHealth 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 onetoblamebutitselffor failing to be proactivein confirmingthe details ofthegrants. Finally, the City suggeststhateven ifconsiderationwas required, it couldhave taken theform ofexpenditures on airportmaintenance. See Appeal, pp.16-17. Butthe uncertain language ofthe Airport Manager's May 7, 2003 "imploring" requestfor 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 notrise 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 mustbe definite and substantial to comprise consideration); Piano v. Premier Distributing Co., 107 P.3d 11, 14 (N.M. 2005) ("a promise thatputs no constraints on what a party may do in the future

- in other words, when a promise, in reality, promises nothing

- 

### Dis illusory, and it is not consideration") (quotation marks and citation omitted). Nor is there anyevidence that such expenses werewhatwas referredto bythe reference to "benefits to accrue to theparties" in the 2003 grantmodification. The City has offered nothing to show that,to the extentconsiderationis relevant, it could havebeen oractuallywas comprised of anything otherthan an extension ofits obligation period. 

### e) The City's objection to the Director's use ofthe term "akin to a new grant" is much ado aboutnothing. 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. Butthis ultimatelyis much ado aboutnothing. The Directorused thephrase "akin to a new grant" only once, in a header in the Director's Determination. 12 The apparentpurposewas

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 onetime

...with no indication thatthis provision was the bedrockofthe deal forT-Mobile

....The courtwill notrelyupon the meaninginferred from such an obscure (continued

..)
10to make the pointthatbecause ofthe circumstances ofthe 2003 grantmodification, itwas appropriateto find thatthe clock for the duration ofSanta Monica's federal obligations had restarted. It was presumablynotthe Director's intentto suggestthe existence ofor 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 mustundergo the same process as an altogethernew grant. The characterofa decision is to be determined from its substance, notfrom a caption. See. e.g., Wilson v. Freeland, 773 So.2d 305, 308 (Miss. 2000).13 The City also challenges the FAA's citation oftwo 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 ifthe 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 newgrantwouldbe subjectto anystatutory 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 mustbe 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 ofthe City's obligations was concerned, itwas akin to a newgrant.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 thatappeared onlyonce incited opinion),

13 The City further mentionsthatthe 2003 grant modification was not specificallyidentified as a newgrant in a certain FY 2003 report and a certain FY 2003 spreadsheet- see Appeal pp. 24-25 -but does not explain how /whythese high-level summaries are determinative ofthe obligations that accompanied the modification.

14 The City also suggests that Congress intended to strictly distinguish new grants and modifications by its adoption of49 U.S.C. § 47111(e). See Appeal, p. 25. But that is not an accurate statement ofthe statute's purpose. See. e.g.. H.Rpt. 103-677, p. 67 (August 5, 1994) (legislative intent ofPub. L. 103-305, § 112 is that: "Ifan airport violates the assurances against revenue diversion and refuses to take corrective action ... the Secretary shall notapprove newAlP applications"). Likewise, the City cites a statutoryprovision that allows for additional funding, 49 U.S.C. § 47108(b)(3)(A), but that provision is understood to apply only before a grantis closed. See FAA Order 5100.38D, § 5-55, Table 5-27(a)(5); FAA Order 5100.388, § 1142(a).

11f) 

### 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-commentrulemaking. 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 ofnew Grant Assurances, and notthe clarification ofexisting obligations (such as their duration).lS And in any case, as the Supreme Court recentlyheld in Perez v. Mortgage Bankers Association, 135 S.Ct. 1199, 1204 (2015), a new agency interpretation generally does not require notice-and-commentrulemaking. 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 thatrequire further clarification. See Appeal, pp. 27-28. But the same could be said ofany Part 16 decision involving an issue offirst impression, and ofjurisprudence generally. Thatis 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 ofRevenue Diversion by the City ofLos Angeles,

15 To the extentthat the City again seeks support in Air TransportationAssociation ofAmerica v. City ofLos 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-commentrulemaking. See. e.g.. let 1 Center Inc. v. NaplesAirportAuthority, Docket No. 16-04-03, Final Agency Decision, pp.14-16 (July 15, 2005).

12Docket No. 16-96-01, Record ofDetermination, p. 17 (March 17, 1997).17 Moreover, given that the vast majority of airport sponsors accept AlP grants on a continuing basis

- few have soughtto "run outtheclock" ontheirobligations, as has Santa Monica- anyambiguity left in the wake ofa final decision in this proceeding is likely to have limited import and could easilyberesolved bythe FAA on a case-by-casebasis. III. The Director's Determination that this Proceeding Was Proper as a MatterofProcedureWas CorrectandShould Be Affirmed. In the final sections ofits 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 differentlythanthe Director. Butin the interestofa 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 ofthe 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 clearits intentto close theAirport atfirst 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 thatwas 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 (September2010)- andregularlyissues Program Guidance Letters regardingAlP requirements.

13negotiate for long-term leases at all. 18 See also Complainants' answer dated August 28, 2014, p. 6n.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 andhave not submitted a "live" dispute for the FAA's consideration becausethe City has notyet actuallyviolated or stated an intentto violate the GrantAssurances (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 andthus thereis no generalprohibition on advisory opinions, even ifthere 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 -ofwhich the City's asserted lack ofobligations 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 thatthe City represented to the Director that "the City Council has previouslyvoted 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 ofanyduration 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, ifever accurate, does not reflectpresentrealities is additionallytroublesome.

19The 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 contractmaybring a claim in courtfor the breachthereof, and doesnotgovern thejurisdiction ofthe FAA underPart 16. Thatsaid, Comment Cto § 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 subsequenttojune 29, 2014 and, in its own words, "long-expressed policyto seek closure ofthe 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 ofaction for anticipatoryrepudiationwhereparty "declared the contractto bevoidand statedits intentionto begin entertainingoffers from otherbuyers").

14and 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 ofwhat 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 ofSanta 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'replydated October 30,2014,pp. 5-6. Conclusion Forthe reasons statedabove, the City's appeal and accompanying petition shouldbe denied and the Director's Determination should be affirmed, including the finding therein thatthe City is obligatedbythe GrantAssurances throughAugust 27, 2023.



# Rio~ 1700 Decker School Lane Malibu, CA 90265 (310) 503-7286 rsimon3@lverizon.net

15Certificate ofService
Ihereby certifythat Ihave this daycausedthe foregoing answertobe served on the following personsbyfirst-class mailwith a courtesycopybyelectronicmail: 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 ofPublic Works, City of Santa Monica, 1685 Main Street, Room 116, SantaMonica, 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:nadoC<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

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