Source: https://www.vedderprice.com/dc-circuit-limits-the-dots-authority-to-regulate-air-charter-brokers-06-30-2011
Timestamp: 2019-04-24 12:04:37+00:00

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The CSI case is signifi cant on many levels. First, the case is the first successful challenge of the scope of DOT’s consumer protection regulatory authority and it established the first precedent limiting DOT’s broad interpretation of what constitutes “common carrier” in the context of the definition of “air transportation”. Second, the case involved an inter-agency dispute involving the General Services Administration (GSA), which strongly disagreed with DOT’s position on having the authority to regulate CSI’s ability to enter into government contracts with various federal agencies. Finally, the case is significant because the court held that the DOT does not possess the authority to interfere with business relationships between the federal government and air charter brokers unless and until the DOT provides a reasonable explanation for its actions.
Since 2003, CSI has been under contract with the GSA to broker air charter service for various federal agencies. On March 10, 2009, CSI won a competitive bid to renew its status as a GSA contractor through 2014. A few days prior, on March 6, the DOT sent CSI a letter requesting information to determine whether the company was engaging in “indirect air transportation” without the certificate of authority required by the Federal Aviation Act (FAvA). After the company provided the requested information, the DOT sent another letter, stating that based on the information CSI provided, CSI was acting as an unauthorized indirect air carrier in violation of the FAvA with respect to business transacted via its GSA schedule listing. The DOT also stressed that violations of the FAvA constitute unfair and deceptive practices and unfair methods of competition in violation of 49 U.S.C. § 41712.
Next, the court explained why the DOT’s actions violate the Administrative Procedure Act. Specifically, the court explained that the fundamental question in reviewing an agency action is whether the agency has acted reasonably and within its statutory authority. The agency must not only adopt a permissible reading of the authorizing statute, but must also avoid acting arbitrarily or capriciously in implementing its interpretation,12 which requires the agency to “take whatever steps it needs to provide an explanation that will enable the court to evaluate the agency’s rationale at the time of decision.”13 In the CSI case, the DOT simply failed to explain why the Federal Aviation Act requires a certifi cate of authority for air charter brokers operating under GSA contract.
The court relied heavily on the fact that CSI performs under its contract with the GSA as a dedicated service provider, not as a common carrier. Under the GSA contract, CSI provides charter service to government agencies only, not to all comers. Thus, within the scope of the contract, CSI does not appear to provide “transportation of passengers or property by aircraft as a common carrier.”18 If CSI is not a common carrier under its GSA contract, then it does not engage in “air transportation” and its services for GSA do not fall within the certification requirement of the Federal Aviation Act.
The immediate impact of the CSI decision is that CSI, along with other air charter brokers, will be able to continue to enter into contracts to arrange air transportation as a principal without the fear of a potential DOT enforcement action. Air charter brokers will continue to perform a valuable service for the federal government. The federal government spends several million dollars annually procuring air transportation services and the use of brokers enables the federal government to obtain the best possible prices and options for air transportation services from FAvA and DOT certifi cated air carriers. For example, most of the nation’s Immigration and Customs Enforcement deportations and federal interstate prisoner movements are arranged by air charter brokers.
CSI’s position throughout the entire dispute was that DOT’s consumer protection regulations simply don’t apply because the federal government is not the “public,” and the court agreed. Indeed, the protections afforded the federal government under the Federal Acquisition Regulations are much more effective that DOT consumer protection regulations. Unscrupulous contractors may be prosecuted by the U.S. Department of Justice under a wide variety of civil and criminal fraud statutes.
1 No. 09-1307 (D.C. Cir. April 1, 2011).
2 Vedder Price acted as CSI’s counsel in this case.
3 49 U.S.C. § 40102(a)(25).
4 CSI Aviation Services, Inc., No. 09-1307, slip op. at 3.
9 Id. at 6 (citing Ciba-Geigy Corp. v. EPA, 801 F.2d 430, 438 n.9 (D.C. Cir. 1986)).
10 Id. at 8 (citing Ciba-Geigy, 801 F.2d at 439).
12 See 5 U.S.C. § 706(2).
14 Id. at 12 (citing 49 U.S.C. § 41101(a)).
17 Id. at 13 (citing 49 U.S.C. § 40102(a)(25), 41101).
18 Id. (citing § 40102(a)(25)).

References: § 41712
 § 40102
 v. 
 § 706
 § 41101
 § 40102
 § 40102