Indianapolis Airport Authority v. American Airlines, Inc.

Citation733 F.2d 1262
Decision Date10 May 1984
Docket NumberNo. 82-2774,82-2774
Parties15 Fed. R. Evid. Serv. 1340 INDIANAPOLIS AIRPORT AUTHORITY, Plaintiff-Appellant, v. AMERICAN AIRLINES, INC., et al., Defendants-Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)

William P. Wooden, Wooden, McLaughlin & Sterner, Indianapolis, Ind., for plaintiff-appellant.

Malcolm C. Mallette, Krieg, DeVault, Alexander & Capehart, Indianapolis, Ind., for defendant-appellee.

Before POSNER, COFFEY and FLAUM, Circuit Judges.

POSNER, Circuit Judge.

The Indianapolis Airport Authority appeals from a decision invalidating the user fees that it imposes on airlines; the appellees are six airlines that among them carry more than 90 percent of the passengers who use the Indianapolis International Airport. The 15-year leases under which each of the airlines operated expired on August 31, 1980, and because the parties had been unable to agree on terms for new leases, the airport authority--a local governmental body established pursuant to the Indiana Airport Authorities Act, Ind.Code Secs. 8-22-3-1 et seq.--enacted an ordinance (later amended) setting new fees effective September 1, 1980. When the airlines refused to pay the new fees, which were almost double those in the expired leases, and continued paying at the old level, the Authority brought this diversity action to collect the difference between the new fees and the old--some $2 million. In the district court the airlines successfully defended their refusal to comply with the ordinance on the ground that the fee schedule in the ordinance was unreasonable on a variety of statutory (state and federal) and constitutional grounds, and they also persuaded the court that they were holdover tenants entitled under Indiana law to continue paying at the old lease rate until the Authority stopped accepting payments at that rate.

The main issue is whether the airport authority, in setting a new schedule of fees for the airlines, could disregard the revenues it obtains from airport concessionaires, in particular several car rental agencies and the operator of the airport's parking lot. The ordinance allocates the annual costs of operating the airport among the different classes of user--mainly interstate airlines, operators of private planes ("general aviation"), and concessionaires--largely on the basis of how much runway, hangar, terminal, and other indoor and outdoor airport space each class uses. (For services such as firefighting that have no fixed locale--obviously, the firemen and their equipment go wherever the fire is--a different method of allocation is used that we discuss later.) Since the concessionaires use much less space than the airlines, only a modest fraction of the airport's costs was allocated to them--in round numbers, $100,000 to the car rental agencies and $900,000 to the operator of the parking lot--compared to $3 million to the airlines. The ordinance requires the airlines to pay landing fees and other charges calculated to yield the full $3 million, even though the airport gets from its concessionaires a rental income that greatly exceeds the costs allocated to the concessionaires--about $3.5 million from the car rental agencies and the parking lot alone, compared to costs as we have said of about $1 million. The ordinance thus is calculated to yield the airport a total income substantially greater than its total costs, the excess being approximated by the difference between the airport costs allocated to the concessionaires and the airport rentals they pay.

The reasonableness of the concession rentals themselves is not in issue in this case--only the reasonableness of the fees charged the airlines. The basis of the airlines' complaint about those fees, however, is that the airport is required to and has failed to take its concession rentals into account in determining what fees to impose on the airlines.

The Indiana Airport Authorities Act authorizes airport authorities, such as the appellant, "To adopt a schedule of reasonable charges and to collect them from all users of facilities and services within the [airport] district." Ind.Code Sec. 8-22-3-11(9). However, reasonableness is not defined in the statute, and the statute has not been interpreted by the Indiana courts with reference to the issues in this case. The Federal Anti-Head-Tax Act forbids any state agency to "levy or collect a tax, fee, head charge, or other charge, directly or indirectly, on persons traveling in air commerce or on the carriage of persons traveling in air commerce ...," 49 U.S.C. Sec. 1513(a), other than "reasonable rental charges, landing fees, and other service charges from aircraft operators for the use of airport facilities," 49 U.S.C. Sec. 1513(b). Again, reasonableness is not defined, but the statute has a history and a context that enable us to give meaning to the term. Airport authorities, to raise revenues, had taken to imposing "head taxes" on passengers emplaning at their airports. Congress decided that "the head tax is an unnecessary burden on interstate commerce, that it is discriminatory, and that it has a stifling effect on air transportation," most of which, of course, is interstate. H.R.Rep. No. 157, 93d Cong., 1st Sess. 4 (1973). We may assume that what is unreasonable under the federal act is also unreasonable under the state act; but, in any event, if there is a clash, the federal act must of course prevail. Another federal act is invoked, the Airport and Airway Development Act of 1970, 49 U.S.C. Sec. 1718(a)(1) (1976 ed.), now 49 U.S.C. Sec. 2210(a)(1) which requires that airports receiving federal subsidies--such as the Indianapolis airport--be "available for public use on fair and reasonable terms and without unjust discrimination ...." It is unclear whether this act was intended to be enforceable by airport users, such as the appellee airlines; but it will not be necessary in this case to resolve this question, or determine whether the challenged user fees are unreasonable under this act.

Besides the Federal Anti-Head-Tax Act and important to understanding it, the appellees invoke the commerce clause of the Constitution (Art. I, Sec. 8, cl. 3), which has been interpreted to forbid the states to discriminate against interstate commerce. See, e.g., Southern Pac. Co. v. Arizona, 325 U.S. 761, 767-68, 65 S.Ct. 1515, 1519, 89 L.Ed. 1915 (1945), and for this circuit's most recent application of the clause W.C.M. Window Co. v. Bernardi, 730 F.2d 486, 493-96 (7th Cir.1984). Although the clause as written is a grant of authority to Congress to regulate interstate (and foreign) commerce rather than an independent limitation on state power, the Supreme Court, building on a dictum by John Marshall in Gibbons v. Ogden, 22 U.S. (9 Wheat.), 1, 197-209, 6 L.Ed. 23 (1824), early on interpreted the clause as prohibiting of its own force, without need for congressional action, state action that discriminates against interstate commerce. See, e.g., Cooley v. Board of Wardens, 53 U.S. (12 How.) 299, 319, 13 L.Ed. 996 (1851). Although controversial, see, e.g., Kitch, Regulation and the American Common Market, in Regulation, Federalism, and Interstate Commerce 7, 20-22 (Tarlock ed. 1981), this interpretation of the commerce clause can be defended on the practical ground that Congress is too busy--and maybe as James Madison feared too factionalized--to police every infringement of the policy (implied by a number of separate provisions of the Constitution) that the United States be a single "common market" for goods and services. See Eule, Laying the Dormant Commerce Clause to Rest, 91 Yale L.J. 425, 431-32 (1982). But this ground fails when Congress has exercised its regulatory power. "Once Congress acts, courts are not free to review state taxes or other regulations under the dormant Commerce Clause. When Congress has struck the balance it deems appropriate, the courts are no longer needed to prevent States from burdening commerce, and it matters not that the courts would invalidate the state tax or regulation under the Commerce Clause in the absence of congressional action." Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 154, 102 S.Ct. 894, 910, 71 L.Ed.2d 21 (1982). Congress has acted here, in the Anti-Head-Tax Act, by forbidding airport authorities to charge unreasonable rates, directly or indirectly, to interstate airlines. Therefore, when those rates are challenged, the only question is whether they are consistent with the congressional policy.

We are asked by an amicus curiae to consider the bearing of the Convention on International Civil Aviation ("the Chicago Convention," as it is known), 61 Stat. 1180. A treaty of the United States, see British Caledonian Airways Ltd. v. Bond, 665 F.2d 1153, 1159 n. 3 (D.C.Cir.1981), the Convention has the force of a federal statute. But it does not regulate airport fees. It establishes a Council with broad powers and the Council has recommended standards that require that landing fees and other airport charges be reasonable, but these standards are issued under a provision of the Convention, Article 55, relating to the "permissive" functions of the Council, and actions taken in discharge of those functions are not intended to have the force of law.

Two facts together persuade us that the district court was correct in concluding that the ordinance was unreasonable under the applicable state and federal standards in disregarding the airport's concession revenues. The first is monopoly. We take judicial notice of the fact that only six airports in Indiana are served by airlines other than commuter airlines and that Indianapolis International Airport is the only one in the central part of the state except for Purdue University Airport in Lafayette. See U.S. Dept. of Transportation, Federal Aviation Administration, National Airport System Plan: Revised Statistics 1980-1989, at 141 (1980). The Purdue airport is tiny...

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