Opinion ID: 450361
Heading Depth: 2
Heading Rank: 2

Heading: The FAA's Exercise of Exemption Authority

Text: 32 Having established that the FAA has broad authority to grant or deny exemptions, we now consider whether the FAA has exercised that authority in an arbitrary and capricious fashion. Under this familiar standard, [t]he scope of review ... is narrow and a court is not to substitute its judgment for that of the agency. Motor Vehicle Manufacturers Ass'n, Inc. v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29, 103 S.Ct. 2856, 2866, 77 L.Ed.2d 443 (1983). Deference to agency authority or expertise, however, is not a license to ... treat like cases differently. United States v. Diapulse Corporation, 748 F.2d 56, 62 (2d Cir.1984). See also Local 777, Democratic Union Organizing Committee v. NLRB, 603 F.2d 862, 872 (D.C.Cir.1978). As the FAA recognizes, the agency [has] no choice but to apply the same criteria to all airlines petitioning for exemptions. Any other policy would fly in the face of Congress' intent that air carriers be treated even-handedly. Brief for FAA, Carefree Vacations, at 12. We recognize, of course, that an agency is free to alter its past rulings and practices even in an adjudicatory setting. Hatch v. FERC, 654 F.2d 825, 834 (D.C.Cir.1981). Nevertheless, it is equally settled that an agency must provide a reasoned explanation for any failure to adhere to its own precedents. Id. At the very least, an agency changing its course must supply a reasoned analysis indicating that prior policies and standards are being deliberately changed, not casually ignored, and if an agency glosses over or swerves from prior precedents without discussion it may cross the line from tolerably terse to intolerably mute. Greater Boston Television Corp. v. FCC, 444 F.2d 841, 852 (D.C.Cir.1970) (citations omitted), cert. denied, 403 U.S. 923, 91 S.Ct. 2229, 29 L.Ed.2d 701 (1971). Petitioners and intervenors alike (although with different objectives) contend that the FAA has arbitrarily applied different decisional criteria to similarly situated carriers. We agree. 33 The FAA's application of the exemption criteria can only be described as grossly inconsistent and patently arbitrary. Elementary even-handedness requires that if all five factors must be met by one petitioner, then all five factors must be met by the next. This has not been the FAA's practice. For example, in an exemption denial issued on December 13, 1984, the FAA unequivocally stated that all five factors must be met by a petitioner in each case. 20 Yet the valuable air service requirement, a factor that the FAA repeatedly asserts on appeal is essential, 21 was not even mentioned in the January 4 grant of an exemption to Ports of Call Travel Club, 22 the December 28 grant of an exemption to Airmark Corporation, 23 or the December 28 grant of an exemption to Buffalo Airways. 24 The latter airlines received exemptions in undeniable contravention of the rule that all five factors must be met in each case. 25 34 Another critical inconsistency appears in the FAA's determinations of what constitutes a good faith compliance effort. Before December 1984, the FAA stated repeatedly that the mere negotiation of a hush kit contract would not satisfy the requirement of a good faith effort to comply with the noise regulation. 26 On December 27, however, in denying a reconsideration of Tradewinds' petition, the FAA recognized that the execution of hush kit contracts does represent some evidence of a good faith compliance effort. 27 One day later the FAA concluded that the situation [had] changed to the extent that a hush kit contract conclusively established good faith. In its sua sponte reconsideration of Airmark's petition for exemption, the FAA found that petitioner has made significant, good faith compliance efforts by entering into a firm contract to purchase a hush kit. 28 The FAA might argue that circumstances had gradually changed between November, when the execution of a hush kit contract did not indicate good faith compliance, December 27, when the execution of a hush kit contract was some evidence of good faith compliance, and December 28, when the applicant needed only to execute a hush kit contract to prove good faith. Even this post hoc rationalization, however, cannot explain the criteria applied in a December 28 denial of Skystar International's petition for exemption, in which the FAA stated: the petitioner asserts that it is making a good faith compliance effort by contracting for hush kits for its aircraft. The FAA does not agree. Good faith was destroyed, the FAA reasoned, because [p]etitioner obtained its aircraft with full knowledge that such aircraft could not be operated at U.S. airports on or after January 1, 1985. 29 By contrast, the FAA found that Airmark, which was granted a partial exemption the same day, demonstrated good faith by the execution of a hush kit contract despite the fact it too had purchased its noncompliant aircraft long after the FAA set the January 1, 1985 deadline. 30 35 The FAA's exemption shell game is also displayed in its application of the financial havoc criterion. Before December 28, 1984, the FAA held that an airline would not meet the financial havoc criterion if the havoc was created by the airline's own doing, that is, by the airline's purchase of noncompliant aircraft after the regulations establishing the January 1, 1985 deadline went into effect. For example, in its August 30, 1984 denial of Surinam Airway's petition for exemption, the FAA stated that 36 all the information available in this petition indicates that petitioner is now confronting its present difficult situation entirely as a result of its own decision to acquire aircraft that do not meet the noise rule and which cannot now be modified in time to do so. Certainly, those drafting the Conference Report did not intend that financial 'havoc' of a petitioner's own making could justify an exemption. 31 37 The FAA did not apply this reasoning, however, in granting Buffalo Airways a partial exemption on December 28, 1984. Buffalo did not even begin operations until 1984; yet, the financial havoc was somehow not of its own choosing, or, if it was of its own choosing, it was nonetheless enough to satisfy the criterion. In some cases, the FAA has ignored the financial havoc criterion altogether. In its January 18, 1985 grant of an exemption to Hawaiian Airlines, for example, the FAA did not even discuss whether the refusal of an exemption would result in any financial havoc. 32 38 The FAA's arbitrary exemption process is vividly demonstrated in its treatment of the petitions from Tradewinds, Carefree, and, to a lesser extent, Airmark. In its August 9, 1984 denial of Tradewinds' petition, the FAA stated that it would be unfair to compliant operators to grant the exemption. 33 By January 1985, the FAA had found that a significant number of operators had invested the sums necessary to bring their fleets into compliance. Inexplicably, this widespread compliance did not make the unfairness rationale more compelling. Rather, it somehow led the FAA to ignore altogether the unfairness of granting exemptions. 34 In a January 4, 1985 grant of an exemption to Ports of Call, the FAA, citing the industry's increasing compliance with the noise regulations, stated the broad rule that those operators which have demonstrated their firm commitment to modifying their aircraft to bring them into compliance, and which, if not granted limited exemptions, would be forced to stop operating, will be permitted to continue operating under certain restrictions until their aircraft can be modified. 35 In granting an exemption to Ports of Call, the FAA took an opposite view of the very considerations that had been fatal to Tradewinds' petition. 39 The June 5, 1984 denial of Carefree's petition contained the same reasoning found in its Tradewinds order: the grant of an exemption would be unfair to complying carriers, and the financial havoc facing Carefree was of its own doing. Yet, as shown above, in later orders granting exemptions to other operators, the FAA repeatedly ignored those considerations found dispositive in its denial of Carefree's petition. 40 Airmark, on the other hand, has been in large part a beneficiary of the FAA's inconsistent approach to considering petitions for exemptions. In granting Airmark a partial exemption, the FAA found that Airmark's purchase of a hush kit evidenced good faith, did not consider whether the impending financial havoc was of Airmark's own doing, and did not measure the value of the air service provided. 36 Airmark contends, however, that the curfew imposed on the exemption is inconsistent with other grants. We agree. Similar restrictions were not imposed on either Buffalo Airways 37 or Icelandair. 38 The FAA has offered no coherent explanation for this disparate treatment.