Court Opinion

ID: 6939565
Source: CourtListenerOpinion
Date Created: 2022-07-24 00:58:25.916281+00
Date Added: 2024-06-11T16:07:38.759330
License: Public Domain

WALD, Circuit Judge,
concurring in part and dissenting in part:
While I agree with my colleagues’ conclusion that the termination clause here should be analyzed under general contract principles, I disagree with their interpretation of this contractual language:
If the Government terminates payments provided for under this order because of insufficient appropriated funds, then, at the end of the period for which the Government does make payments, the carrier may terminate or reduce the service provided for under this order without regard to any requirement for notice of such termination or reduction.
Order 94-910, reprinted in App. 123.
As the majority correctly notes, absent evidence to the contrary we “assume that the meaning ordinarily ascribed to ... words reflects the intentions of the parties.” NRM Corp. v. Hercules, Inc., 758 F.2d 676, 681 (D.C.Cir.1985).1 The ordinary definition of “terminate” is “to bring to an ending or cessation in time, sequence or continuity,” or “to end formally and definitely.” Webster’s Third New International Dictionary 2359 *507(1976) (emphasis added). Thus, it would have been redundant for DOT to have written “terminates completely,” which the majority says would have rendered the order unambiguous. Maj. op. at 504.
Moreover, the clause says that “If the government terminates payments ... the carrier may terminate or reduce the service” required under the order (emphasis added). If “terminates” really means “terminates or reduces” in the first part of the clause, as the majority says it does, then the word “reduce” as used in the second part would be superfluous, in contradiction of the basic principle that “an interpretation which gives a[n] ... effective meaning to all the terms is preferred to an interpretation which leaves a part ... of no effect.” Restatement (Second) of Contracts § 203 (1981).2
My colleagues say that the phrase “provided for under this order,” which directly follows “payments” somehow changes the meaning of “terminates.” Maj. op. at 505. I fail to understand why. All the “provided for” phrase does is specify which payments, if terminated, will allow the carrier to terminate or reduce service. Some such limiting phrase was necessary to specify the payments whose discontinuation would allow the airline to terminate or reduce service.3 In any case, I see no real difference between “If the government terminates payments ...” and “If the government terminates payments provided for under this order .... ” insofar as defining what constitutes termination. In the absence of strong evidence to the contrary — and there is none here — the word “terminate” should be given its ordinary meaning, and the termination clause should be construed to apply only if DOT discontinues subsidy payments entirely.
The majority argues that this interpretation could lead to absurd results, because DOT could reduce the subsidy to a pittance yet not trigger the termination clause. See Maj. op. at 506. I agree that even if DOT reduced the subsidy by 99% the termination clause would not kick in to allow the carriers to terminate the contracts. But the carriers would not be without legal recourse. DOT is not free to arbitrarily determine the amounts it will pay airlines. Rather, it is required by statute to “determine the reasonable amount of compensation,” to be paid to the airlines, which must include “expense elements based on representative costs of air carriers.” 49 U.S.C. § 41737(a) (1994). DOT thus has no legal authority to make the airlines fly without adequate compensation as defined in the statute, and if DOT reduced the subsidies below a reasonable level, the carriers could pursue any and all remedies legally available against the agency, possibly including cessation of service.
To the contrary, it is the majority’s interpretation which leads to absurd results. Under the EAS program, carriers who service an “eligible place” cannot simply drop their *508service, even if they were originally providing service without government compensation. See 49 U.S.C. 41733(a) (90-day notice required).4 The upshot of the majority’s opinion, however, is that those airlines who had been receiving subsidies can simply walk away from their obligations if their compensation is even slightly reduced, while those airlines who had been serving areas without subsidies must continue service, receiving payments under the statutory compensation formula, even if they wish to terminate service immediately.
Here, DOT reduced payments to Mesa, but also reduced its obligations to fly the routes. This may or may not have been a reasonable approach.5 If Mesa believed the new payments did not qualify as a statutorily required “reasonable amount of compensation” in relation to its obligations, it could have challenged DOT’s reductions. But rather than pursuing this route, Mesa attempted to get out of its contractual obligation altogether. Mesa remains free to challenge DOT’s determination of the reduced payments as inconsistent with the statute, but I do not believe it had the contractual right to invoke a clause which by its terms only applies when payments are tenninated.
For the foregoing reasons, I respectfully dissent.

. I can find no such evidence to the contrary. Previously, when Congress reduced EAS funding, DOT terminated payments for certain cities rather than making the pro rata reductions it made here. The termination clause appears to be directed principally to that situation.

. The majority is only speculating on the economics of the situation here when it predicts, "[sjurely a carrier would have little interest in merely reducing its service in the face of a total cessation of payments.” Maj. op. at 505. For all we know, a carrier might find it profitable to fly to a remote area a few times a week, even without the subsidy it needs to ensure more frequent service. If the subsidy were terminated, the airline would then want to reduce its flights, not end them completely.

. If the phrase under dispute were omitted, the provision would be ambiguous in several respects, as it would read:
If the Government terminates payments because of insufficient funds, then, at the end of the period for which the Government does make payments, the carrier may terminate or reduce the service without regard to any requirement for notice of such termination or reduction.
Which payments would it refer to? Which service would the carrier be able to terminate or reduce? The same carrier may have several different subsidy contracts with DOT for servicing different routes (three such contracts are involved in this litigation). The words "provided for under this order” are necessary, in my opinion, merely to delimit the scope of the termination clause.
Had the parties wished to provide that any reduction in payments would trigger this clause, they had many much clearer ways of doing so (ie.g., "If the Government terminates or reduces payments provided for under this order ... ”; "If the Government does not meet its obligations under this agreement ..."; "If the Government modifies the payments provided for under this order ... ”).

. A formerly-uncompensated airline which
wishes to terminate service must notify the Secretary, who may require it to continue flying, and who, after 90 days must, pay the airline its "fully allocated cost ... plus a reasonable return on investment that is at least 5 percent of operating costs." 49 U.S.C. § 41734(e).

. Mesa, for example, argues that it has certain fixed costs which it incurs regardless of the number of weekly flights it offers, and that DOT did not adequately account for those costs in determining the size of the subsidy reduction.