Source: http://www.natlawreview.com/article/dc-circuit-limits-dot-s-authority-to-regulate-air-charter-brokers
Timestamp: 2015-04-25 18:14:49
Document Index: 35746613

Matched Legal Cases: ['§ 40102', '§ 40102', '§ 706', '§ 41101', '§ 40102', '§ 40102']

D.C. Circuit Limits the DOT’s Authority to Regulate Air Charter Brokers | The National Law Review April 25, 2015
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Advertisement D.C. Circuit Limits the DOT’s Authority to Regulate Air Charter Brokers
Six other companies received similar letters. All six complied by terminating their status as contractors for GSA. Convinced that the DOT was exceeding its statutory authority, CSI alone chose to challenge DOT’s determination, asking the DOT to withdraw the cease-and-desist letter on the grounds that the Act requires a certificate of authority only for companies that operate “as a common carrier,”[3]and that CSI’s charter flights for the federal government are not common carriage.[4] On November 25, 2009, seeking to avoid shutting down its business, CSI submitted a petition to DOT for an emergency exemption from the certification requirement. GSA supported CSI’s petition and in a letter to the DOT GSA explained at length why the Act’s certification requirements for common carriage should not apply to government contracts. “Acquisition [of air service] by the Federal Government . . . is distinct in several ways from acquisition in the private sector and does not present the consumer protection related concerns typically at issue in the private sector.”[5]GSA also added that Federal agencies which purchase air charter broker services are protected from unscrupulous contractors in a number of ways.[6]Although DOT granted CSI a temporary exemption, it indicated that it “remain[ed] of the view that . . . the provision of air services for U.S. Government agencies through the GSA contracting system constitutes an engagement in air transportation, necessitating that brokers conducting such business hold economic authority from the Department to act as indirect air carriers.”[7]
Initially, DOT argued that its letter was not a “final order” and that the court did not have jurisdiction. The court, however, rejected the DOT’s position and held that the letter was indeed an order because (1) it marked the consummation of the agency’s decision making process; (2) it was not merely of a tentative or interlocutory nature; and (3) the order was an action in which “rights or obligations have been determined” or “from which legal consequences will flow.”[8]The court noted that CSI was faced with a choice between costly compliance and the risk of prosecution. The court also stressed that “an agency may not avoid judicial review merely by choosing the form of a letter to express its definitive position on a general question of statutory interpretation.”[9] The court stressed that “at the very least, the DOT’s letter cast a cloud of uncertainty over the viability of CSI’s ongoing business. It also put the company to the painful choice between costly compliance and the risk of prosecution at an uncertain point in the future—a conundrum that we described in Ciba-Geigy as “the very dilemma [the Supreme Court has found] sufficient to warrant judicial review.”[10]The court reasoned that the DOT’s action was sufficiently burdensome to make six other GSA contractors terminate their air charter operations for fear of prosecution. The court stressed that “having thus flexed its regulatory muscle, DOT cannot now evade judicial review.”[11]
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 certificate of authority for air charter brokers operating under GSA contract. The court focused on the definition of air transportation under the Federal Aviation Act and stressed that the Act states that “an air carrier may provide air transportation only if the air carrier holds a certificate issued under this chapter […] The term “air carrier” means “a citizen of the United States undertaking by any means, directly or indirectly, to provide air transportation.”[14]The DOT’s position was that, as a broker of charter flights for the federal government, CSI was engaged in the indirect provision of “air transportation.” But the DOT’s reading failed to engage with the special statutory definition of that term. Under section 40102(a)(5), “‘air transportation’ is defined to include ‘interstate air transportation,’ which in turn means the interstate ‘transportation of passengers or property by aircraft as a common carrier for compensation,’ id. § 40102(a)(25) (emphasis added).”[15]“Common carrier” refers to a commercial transportation enterprise that “holds itself out to the public” and is willing to take all comers who are willing to pay the fare, “without refusal.”[16]Some type of holding out to the public is the essential requirementof the act of “provid[ing]” “transportation of passengers or property by aircraft as a common carrier.”[17]
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 court chastised DOT for failing to address this critical issue both in its cease-and-desist order and in its brief to this court. “This failure is all the more baffling because CSI twice informed DOT that it does not believe it is covered by the “air transportation” portion of the Federal Aviation Act—once in CSI’s letter to DOT dated November 19, 2009, and again in CSI’s brief before this court.”[19]Yet DOT’s brief inexplicably claims, ‘It is undisputed that CSI’s service is indirect air transportation.’[20]The court emphasized that “not only is this a disputed point, it is at the very heart of the present controversy.”[21]
[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.
[5] Id. at 4. [6] Id.
[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). [11] Id. at 8.
[12] See 5 U.S.C. § 706(2).
[13] Id. at 11-12.
[14] Id. at 12 (citing 49 U.S.C. § 41101(a)). [15] Id. at 12.
[17] Id. at 13 (citing 49 U.S.C. § 40102(a)(25), 41101).
[18] Id. (citing § 40102(a)(25)).
[19] Id. at 14. [20] Id.
[21] By David Hernandez [22] Id.
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