FEDERAL AVIATION ADMINISTRATION UNITED STATES DEPARTMENT OF TRANSPORTATION 

### ----------------------------------------------------------------------------------)( UNITED AIRLINES, INC.,

v. Complainant, Docket No. FAA-16-14-13
THE PORTAUTHORITY OF NEWYORKAND NEWJERSEY, Respondent. 

### ----------------------------------------------------------------------------------)(

REBUTTAL OF THE PORT AUTHORITY OF NEWYORK AND NEWJERSEY

Documents in this proceeding should be served upon the following individuals:



## RECEIVED JUN 

## 16 2015 PART 16 DOCKETS Carlene V. Mcintyre Arnold D. Kolikoff Faith Tabafunda David 

### R. Kromm THE PORT AUTHORITY OF NEW YORKAND NEWJERSEY 4 World Trade Center 150 Greenwich Street, 25th Floor New York, New York, 10007 Telephone: (212) 435-3503FEDERALAVIATION ADMINISTRATION UNITED STATES DEPARTMENT OFTRANSPORTATION' 

### ----------------------------------------------------------------------------------)( UNITED AIRLINES, INC, Complainant,
v. THE PORTAUTHORITY OF NEWYORKAND NEWJERSEY, Respondent 

### ----------------------------------------------------------------------------------)( Docket No. FAA-16-14-13

REBUTTAL OF THE PORT AUTHORITY OF NEWYORK AND NEWJERSEY INTRODUCTION Respondent, The PortAuthority of NewYork and New Jersey ("the Port Authority"), hereby submits this Rebuttal to the Reply Of United Airlines, Inc. to The Port Authority Of NewYork And NewJersey's Answer To The Complaint, dated June 4, 2015 ("Reply" or "United Reply") pursuantto 14 C.F.R 

### § 16.23(f). By Order dated April 27, 2015, the Director denied the PortAuthority's Motion for Summary Judgment, determining that "there are genuine issues ofmaterial fact" presented in the Complaint, including, but not limited to violations ofcertain grant
assurances. However, in its Reply, United Airlines, Inc. ("United") leaps to the
erroneous conclusion that United is now entitled to a Director's Determination in its favor. In so arguing, United would have the FAA ignore: (a) United's own burden of proofto establish or provide evidence supporting its claims and (b) the points asserted by the PortAuthority in its Memorandum Of Points And Authorities In Support Of Its Motion For SummaryJudgment Dismissing The Complaint ("PortAuthority Memorandum") and supporting papers which are pertinent to any inquiry as to whetherthe Complaint demonstrates that the PortAuthority is in violation ofthe grant assurances. The PortAuthority respectfully refers the FAA to the PortAuthority Memorandum and asserts the following in rebuttal to United's request forthe entry of an Order in its favor. The PortAuthority respectfully reserves all the arguments raised in its Motion for Summary Judgment, and refers the FAA to those arguments, but by way of rebuttal mentions onlythose arguments which pertain to certain points raised in United's Reply. ARGUMENT UNITED AIRLINES HAS FAILED TO SATISFY ITS BURDEN OF PROOF TO ESTABLISH THAT THE PORT AUTHORITY IS IN VIOLATION OF ANY GRANT ASSURANCE United's assertion ofa rightto a Director's Determination in its favor based on the denial ofthe PortAuthority's motion forsummaryjudgment ignores United's role as Complainant and the nature ofthe denial ofthe PortAuthority's motion. As Complainant, United bears the burden of proofto show noncompliance bythe Port Authority with its grant assurances and FAA policy statement 14 C.F.R 

### § 16.23(k)(1); Carey v. Afton-Lincoln CountyMunicipalAirportJointPowers Board, Docket No. FAA16-06-06, (Jan. 16, 2007) (Director's Determination) at 21 ("The FAA makes conclusions offact and law regarding the Complainant's allegations. Underlying these conclusions is the basic requirement of Part 16 thatthe Complainant showwith evidence that the airport owner orsponsor is violating its commitments

... by failing to adhere to its grant assurances. The burden of proof rests with the Complainants." (citation omitted)); Martyn v. PortofAnacortes, Docket No. FAA-16-02-03, at 32 (Apr. 14, 2003) (Director's Determination) ("[The] standard burden ofproof in a Part 16



### 2proceeding is consistent with the Administrative Procedure Act (APA) and Federal case law. The APA provision states, 'except as otherwise provided

... the proponent ofa rule or order has the burden ofproof.'" (citation omitted)); Aerodynamics ofReading, Inc. v. Reading RegionalAirportAuthority, Docket No. FAA-16-00-03, at 14 (July 23, 2001) (Final Decision) ("As required by Part 16, the proponent of a motion, request, or order- in this case, the Complainant- has the burden of proof." (citation omitted)). The Director's prior determination that the Port Authority was not entitled to dismissal ofthe Complaint on a motion for summaryjudgment is not the equivalent of United's demonstration of noncompliance with grant assurances by the PortAuthority. In denying the PortAuthority's motion for summaryjudgment, the Directorfound only that "[t]he Director has reviewed all the submissions and has concluded thatthere are genuine issues ofmaterial fact. Order, April 27, 2015 ("Order"), at 3. "[T]he denial of a motion for a summaryjudgment because of unresolved issues offact does not settle or even tentatively decide anything aboutthe merits ofthe claim. It is strictly a pretrial orderthat decides only one thing-thatthe case should go to trial." Switzerland Cheese Association, Inc. v. 

### E. Home's Market, Inc., 385 U.S. 23, 25, 87 S.Ct. 193, 195 (1987). "[T]he mere denial ofa defendant's summaryjudgment motion does not relieve a claimant ofthe burden of introducing evidence attrial on every element essential to her claim, even though the factual predicate was not ingenuine dispute at summary judgment." Rivera-Flares v. Puerto Rico Telephone Co., 64 F.3d 742, 747 (1st Cir. 1995). Thus, the denial ofthe Port Authority's motion for summaryjudgment does not relieve United of its burden to present evidence to show noncompliance on the part of



### 3the PortAuthority. Denial ofthe PortAuthority's motion is most certainly insufficient to warrant a Director's Determination in United'sfavor. United has failed to carry its burden ofestablishing the essential elements of its Complaint. Accordingly, the Director should reject United's requestfor an Order determining thatthe Port Authority is in violation of its GrantAssurances. Ifthe Director does not conclude that United's Complaint should be dismissed on the current record, the Director should proceed with an investigation of United's Complaint in accordance with 14 C.F.R. 

### § 16.29. First and foremost, United has failed to present necessary evidence to support its claim that the flight fee at Newark Liberty International Airport ("EWR") is unjustly discriminatory in violation of GrantAssurance 22. Here, in evaluating whetherthe flight fee charged to United is discriminatory, it is highly significant that in this case, there is no claim that United is being charged aflight fee that is differentfrom the flight fee charged to any other carrierthat is at EWR. See Complaint at '1!21). Indeed, all signatory airlines at EWR have the same flight fee formula in their agreements. As set forth below, a failure to showthat an airline is being treated differentlyfrom any other airline atthe airport is fatal to any claim of discrimination. See, GrantAssurance 22(e)(comparison is between rates, fees and rentals charged to "[e]ach air carrier using such airport" and those making "similar use of such airport"). In fact, United has cited not one precedent where a carrier has been



### 4able to make out a claim of discrimination underthe grant assurances based on an alleged disparity in rates charged to carriers at another airport. 1 United, however, argues that the flight fee at EWR is unjustly discriminatory in violation of GrantAssurance 22 just because the EWR flight fee is calculated using a formula differentfrom that used to determine the flight fees at John F. Kennedy International Airport ("JFK") and LaGuardia Airport ("LGA"). It is indisputable that United cannot establish unjust discrimination merely by showing that two airlines are being charged landing fees pursuantto differentfee structures at differentairports pursuant to differentagreements entered into in differentdecades. To succeed in establishing a claim of unjust discrimination in landing fees, an airline must establish that it_is being charged according to a fee structure differentfrom another airline that is similarly situated to the complaining airline. Rates and Charges Policy Statement**at~~** 3.1 2
, 3.1.1 ;3 see, PortAuthorityofNew York andNewJerseyv. Department of Transportation, 479 F.3d 21, 42, 43 (D.C. Cir. 2007) (upholding agency determination that airlines failed to carry their burden of persuasion concerning claims of

1 Moreover, even assuming that the level offees at JFK and LGA was pertinent, it is also significant that United is a party to the flight fee agreement at LGA and JFK and has admitted (Answer of United to Port Authority's Motion for Summary Judgment at 7) that it entered into thatflight fee agreement after negotiations occurring years later after its predecessors first executed the EWR agreements. 2 "The airport proprietor must apply a consistent methodology in establishing fees for comparable aeronautical users ofthe airport." (emphasis added). 3 "The prohibition on unjust discrimination does notprevent an airport proprietor from making reasonable distinctions among aeronautical users (such as signatory and nonsignatory carriers) and assessing higherfees on certain categories ofaeronautical users basedon those distinctions (such as higherfees for nonsignatory carriers, as compared to signatory carriers)." (emphasis added).



### 5discrimination because they presented no evidence regarding the status ofthe airline allegedly receiving beneficial treatment). The decades-long gap between the EWR flight fee agreement and the JFKand LGA agreements is byitselfa sufficient reason to reject United's claims of discrimination. It has long been recognized that "[a]n airport sponsor is notassumed to have engaged in unjust discrimination simply by adjusting its rates orterms over time,
even when that adjustment results in imposing different lease rates and terms at different points to otherwise similarlysituatedtenants." Desert Wings Jet CenterLLC v. CityofRedmond, Docket No. FAA16-09-07, 2010 WL 4723466, at *22( Nov. 10, 201 0) (Director's Determination) (emphasis added). In order to establish a claim of unjust discrimination based on the fact that the EWRfee formula is differentfrom the formula that is used to determine the flight fees at JFK and LGA, United must demonstrate that it is similarly situated to the airlines at JFK and LGA. United has utterly failed to satisfy this requirement United has failed to make any comparison between the terms ofthe respective agreements otherthan the flightfee formulas, or, of key importance in this circumstance, between the commercial conditions underwhich the respective agreements were negotiated, to demonstrate that United is similarly situated to the airlines who are parties to the flightfee agreements at JFK and LGA. Second, a fatal flaw in United's claim that the EWRflight fee is aviolation of GrantAssurance 22 is that the EWR flight fee is established by an agreement to which



### 6United is a party4 United does not denythat it is a party to the agreements establishing the EWR flightfee agreement. Rather, United argues that itshould not be treated as a party to the agreements establishing the EWR flightfee, but United has failed to present evidence to support its contention. United's mere objection to the EWRflight fee terms in the relevant agreements cannot establish aviolation of GrantAssurance 22. As the FAA itself has stated: The FAA does notfind a sponsor in noncompliance because a party to an agreementwith that sponsor later objects to a provision in the agreement. Contracts and negotiations frequently contain provisions that might appear questionable in hindsight, butwere agreed to by both parties, without concern or notice. This is one reason why the FAA considers the actual actions or inactions ofa sponsorwhen considering questions of compliance, ratherthan the terms ofan agreement freely entered into by the parties

.... [Ifa sponsor insists] on an unreasonable term, overthe objections ofan aeronautical user, then that mayconstitute evidence ofa possible grant assurance violation." AmAv, Inc. v. MarylandAviation Administration, Docket No. FAA-16-05-12, at 21 (March 20, 2006) (Director's Determination) (emphasis added) 5 Thus, a contracting party's dissatisfaction with certain provisions in a binding agreement is an insufficient basis for determining a violation of a grant assurance in the

4 To avoid any misunderstanding, the substantive impact ofthe fact thatthe EWR flightfee is established by an agreementto which United is a party is distinctfrom the claim rejected in the Orderthat United's status as a partyto that agreement is a barto the FAA's consideration of United's claims. 5 In AmAv, Inc., the FAA concluded that the terms ofthe subject agreement did not constitute a violation of a grant assurance because there was no evidence ofan unreasonable act by the sponsor with respectto the formation oradministration ofthe agreement. In this case, United has not presented any evidence ofan unreasonable act by the PortAuthority with respect to the formation ofthe agreements. containing the EWRflight fee formula, in its original form or as modified, and has not presented any evidence that the PortAuthority has administered those agreements in any manner otherthan enforcement oftheirterms or mutual agreementto modification ofthose terms.



### 7absence ofevidence establishing the context in which the provision became part ofthe agreement. Evidence of context is especially important with respect to review of one provision ofa complex agreement between sophisticated parties, such as the EWR flight fee provision in the agreements between United and the PortAuthority, since a partyto such an agreement might agree to one provision that is objectionable in isolation, but which is acceptable in light ofthe presence of other provisions that are favorable to that party. In this case, United has presented no evidence at all regarding the circumstances underwhich the EWR flight fee agreements were originally established,
were modified, orwere accepted during bankruptcy proceedings, but relies solely on the terms ofthe agreementto establish its claim thatthe EWR flight fee is unreasonable. United presents no evidence to establish that the agreements were otherthan "freely negotiated" originally, when modified, or accepted during bankruptcy proceedings. Thus, United has failed to establish that the PortAuthority is in noncompliance because the terms ofthe EWR flight fee formula are set forth in the agreements to which United is a party. United's contention that the PortAuthority enjoys monopoly powerwith respect to EWR does not establish thatthe Port Authority engaged in misconduct ofthe type described in AmAv, Inc. with respect to the formation or modification ofthe EWR flight fee agreements with United. Third, United has failed to present evidence to support its claim thatthe EWR flight fee violates GrantAssurances 22 and 25 underthe Rates and Charges Policy because the EWR flight fee produces revenue in excess ofthe cost items included in the flight fee formula.



### 8The fact that the EWRflight fee may produce revenue in excess ofthe cost items included in the flight fee formula does not mean that the revenue from the EWR flight fee formula violates GrantAssurance 22 underthe Rates and Charges Policy. The flight fee formula includes only certain on-airport and off-airport overhead costs incurred by the Port Authority in providing EWR airfield services and assets, but does not include other such costs. Declaration ofJoseph R. Garcia, dated February 9, 2014 ("Garcia Decl.") at '11286 Moreover, United has failed to present evidence to support its claim that the EWR flight fee violates GrantAssurances 22 and 25 underthe Rates and Charges Policy since it has failed to present evidence to support its claim that it should not be treated as a partyto the agreements establishing its flightfee at EWR. Even if United shows that the EWRflight fee formula results in the collection of revenues which exceed the costs of providing the EWR airfield services and airfield assets, United would still have failed to establish that collection ofthe EWR flight fee violated Grant Assurance 22 under the Rates and Charges Policy because the EWRflight fee is set by agreements

6 The on-airport overhead costs in operating EWR which are not included in the flight fee include rental payments made by the PortAuthority to the City of Newark pursuantthe lease for EWR, and on-airport police, maintenance and operation administrative and clerical costs. Garcia Decl. at '1128 (a). The off-airport indirect overhead costs ofoperating EWR that are not included in the flight fee include: the costs ofthe Aviation Department's services for all Port Authority airports, and the costs ofoperating the Executive Director's Office, the Secretary's Office, Comptroller Department, Law Department, Treasury Department, Human Resources Department, and Engineering Department, and all other Port Authority activities ofthe PortAuthority located offof EWR that support EWR operations. GC)rcia Decl. at'1128 (b).



### 9to which United is a party, and United has failed to support its contention that it should not be treated as a party to those agreements. According to Rates and Charges Policy Section 2.2 (a), collection offlight fee
revenue exceeding the costs to the airport proprietor of providing airfield services and airfield assets is permissible when agreed to by an affected aeronautical user. Section 2.2 (a) ofthe Rates and Charges Policy states: 2.2 Revenues from fees imposed for the use ofthe airfield ("airfield revenues") may not exceed the costs to the airport proprietor of providing airfield services and airfield assets currently in aeronautical use unless: (a) Otherwise agreedto 

### by the affectedaeronauticalusers. (emphasis added); see also, FAAAirport Compliance Manual (FAA Order 5190.66 at 18-6 ("Unless users agree otherwise, airfield fees generally may not exceed the airfield capital and operating costs ofexisting airfield facilities and services

...."(emphasis added)). Thus, under Section 2.2 (a) ofthe Rates and Charges Policy, United is not entitled to an Order determining that the EWRflightfee violates GrantAssurance 22 on the ground thatthe EWRflight fee formula generates fees in excess of EWR airfield costs because United is party to agreements setting forth that formula and United has not presented evidence to support a conclusion United should not be treated as a party to those agreements. Fourth, United hasfailed to present evidencethatthe diversion of revenue from EWR constitutes a violation of GrantAssurances 25. As an initial matter, United's contention that the diversion of revenue constitutes a violation ofthe grant assurances is inconsistentwith both federal law and FAA policy. The Port Authority is permitted 

### by statute to produce revenue to be used offthe airport. 49 U.S.C. 

### § 471 07(b); see Port

10Authority Memorandum at 34-35. United's contention that "the PortAuthority ignores legal authorities that show that it is unreasonable to charge rates that will generate the surplus revenue that allows such diversion," United Reply at 7, is tantamount to an argument, contrary to law, that the Port Authority is not "grandfathered." United cannot produce evidence that the PortAuthority has diverted EWR
revenue in excess ofthe amountthe Port Authority is permitted to do so as a "grandfathered airport" under49 U.S.C. 

### § 471 07(b). Although United cites the Port Authority's grandfathered payments between 2005 and 2013 pursuant to reports under 49 U.S.C. 471 07(b)(2), see Reply at 7, on a cumulative basis, the PortAuthority's "grandfather payments" between 2005 and 2013, as reflected in those reports were belowthe permitted level ofsuch payments. As stated in the Port Authority's report to the FAA addressing the amount ofairport revenue used to fund non-airport activities, which is used to inform thedecision ofthe United States Department ofTransportation
as to whether to grant discretionaryfederal aid to the PortAuthority under49 U.S.C. 47115, "[t]he total amount ofthe 'grandfather payments' during 2005-2013 were $584,781 ,033 below the total ofthe base amounts, adjusted for changes in the Consumer Price Index for the period." Declaration ofCheryl 

### A. Yetka, dated May 19, 2015,

**at~** 9. Fifth, the amount of EWR revenue attributable to the EWR flight fee is far less than the majority oftotal EWR revenues. In 2013, the EWR flightfee produced only 27 percent oftotal EWR revenue. Garcia Decl.

**at~** 32. The other 73 percent oftotal EWR
revenue was from non-flight fee sources. !d.

**at~** 31. United does not and cannot demonstrate that it is entitled to a credit for such non-flightfee revenue in calculation of

11the EWR flight fee. Under the Rates and Charges Policy, airlines have no right to claim credit for non-flightfee revenue. See, Rates and Charges Policy 

### § 2.1.1; Brendan Airways, LLC, v. PortAuthority, Docket OST-05-20407, 2005 WL4747012, at *21 (March 16, 2005) (Instituting Order). Sixth, United has failed to present evidence to support its claims that the EWR flightfee is unreasonably high based on the allegation that certain Port Authority salaries are excessive. United offers only general statements about Port Authority salaries in the Aviation Department and the PortAuthority Police Department. This evidence is insufficientto establish that the EWR flight fee is unreasonably high. General statements about PortAuthority salaries are irrelevant since only the Port Authority salaries included in costs covered by the flightfee formula are relevant to the level ofthe EWRflight fee, and United has not presented any evidence with respect to the salary ofany particular PortAuthority employee or class ofemployees whose salaries were included in calculation ofthe EWRflight fee in any given year. Seventh, United has failed to present evidence to support its claims that the EWR flight fee is unreasonably high because of expenditures by the PortAuthority on non-aviation activities. The evidence is directlyto the contrary. The EWRflightfee is based solely on certain costs incurred by the PortAuthority in the operation of EWR. Garcia Decl. at

## '1m 20, 22. Thus, expenditures by the PortAuthority on non-aviation activities, irrespective ofthe nature or amount ofthose expenditures, has no effect on the EWR flight fee. As to United's contention thatthe PortAuthority has argued that it is allowed to expend revenues "on anything to dowith transporting goods or servicing people"

12(United Reply at 14), an examination ofthe Port Authority's argument demonstrates the fallacy ofthis contention. The project expenditures which United challenges as constituting improper diversion of revenues were related to or in support of Port Authority facilities and/or operations. See PortAuthority Memorandum at 35, citing Complaint Ex. D at 11-11, 11-13, Preliminary Official Statementfor 183'd Consolidated Bond Series. A project that is related to, or in support of, a PortAuthority facility and/or operation is not one, which, as United would have it, simply relates to "transporting goods or servicing people."

13CONCLUSION Forthe foregoing reasons, United has failed to carry its burden ofestablishing the essential elements.of its Complaint. The Director should reject United's requestfor
an Order determining that the Port Authority is in violation of its GrantAssurances. If the Director does not conclude that United's Complaint should be dismissed on the current record, the Director should proceed with an investigation of United's Complaint in accordance with 14 C.F.R. 

### § 16.29. Dated: June 15, 2015
Respectfully submitted,



# t2~/[ **:IL-~** Carlene

## v. Mcintyre Arnold D. Kolikoff Faith Tabafunda David R. Kromm THE PORTAUTHORITY OF NEW YORKAND NEWJERSEY 4 World Trade Center 150 Greenwich Street, 25th Floor NewYork, New York, 10007 Telephone: (212) 435-3503

14FEDERALAVIATION ADMINISTRATION UNITED STATES DEPARTMENT OF TRANSPORTATION 

### ----------------------------------------------------------------------------------)( UNITED AIRLINES, INC., Complainant,


### v. THE PORTAUTHORITY OFNEWYORKANDNEWJERSEY, Respondent.

### -------------------------------~--------------------------------------------------)( CERTIFICATE OF SERVICE DocketNo. FAA 16-14-13

Ihereby certifythatbyFederal Express OvernightDelivery Ihavethis day servedthe foregoing Rebuttal OfThe PortAuthority OfNewYorkAndNewJersey onthepersons setforth below atthe addresses indicated. Dated: June 15,2015

Stephen Peabody Senior Paralegal Specialist

Addressees: Office ofthe ChiefCounsel Attention: FAAPart 16 AirportProceedings Docket, AGC-600 FederalAviationAdministration 800 Independence Avenue, SW Washington D.C. 20591
Keith J. Harrison Gerald F. Murphy StevenJ. Seiden Crowell & MoringLLP 1001 PennsylvaniaAvenue, NW Washington, DC20004 (202) 624-2500RobertS. Span Alan 

### K. Steinbrecher Sophy Chen Steinbrecher & SpanLLP 1155 F Street, N.W., Suite 1050 Washington, DC 20004 (202) 559-8680 rspan@steinbrecherspan.com Attorneys for Complainant

2