Northwest Airlines, Inc. v. County of Kent, Mich.

• Decision Date: 07 May 1992
• Docket Number: 90-2117,Nos. 90-1811,s. 90-1811
• Citation: 955 F.2d 1054
• Parties: NORTHWEST AIRLINES, INC.; Simmons Airlines, Inc.; Piedmont Aviation, Inc.; Comair, Inc.; Midway Airlines, Inc.; USAir, Inc.; American Airlines, Inc.; and United Airlines, Inc., Plaintiffs-Appellants, v. COUNTY OF KENT, MICHIGAN; the Kent County Board of Aeronautics; and the Kent County Department of Aeronautics, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1054

955 F.2d 1054

NORTHWEST AIRLINES, INC.; Simmons Airlines, Inc.; Piedmont Aviation, Inc.; Comair, Inc.; Midway Airlines, Inc. USAir, Inc.; American Airlines, Inc.; and United Airlines Inc., Plaintiffs-Appellants, v. COUNTY OF KENT, MICHIGAN; the Kent County Board of Aeronautics; and the Kent County Department of Aeronautics, Defendants-Appellees.

Nos. 90-1811, 90-2117.

United States Court of Appeals Sixth Circuit.

Argued Sept. 23, 1991.

Decided Feb. 3, 1992.

Rehearing En Banc

Denied April 16, 1992.

Dissent from Denial of Rehearing

En Banc Filed May 7, 1992.

Douglas E. Wagner, Christopher C. Williams, Mark S. Bransdorfer (briefed), Warner, Norcross & Judd, Grand Rapids, Mich., Walter A. Smith, Jr. (argued), Hogan & Hartson, Washington, D.C., Malcolm C. Mallette (briefed), James G. McIntire, Krieg, DeVault, Alexander & Capehart, Indianapolis, Ind., for plaintiffs-appellants.

Richard A. Kay, Mark S. Allard (briefed), Varnum, Riddering, Schmidt & Howlett, W. Fred Hunting, Jr. (argued), briefed, Robert A. Buchanan, Law, Weathers & Richardson, Grand Rapids, Mich., for defendants-appellees.

Before KENNEDY and NELSON, Circuit Judges, and CONTIE, Senior Circuit Judge.

KENNEDY, Circuit Judge.

Northwest, Simmons, Piedmont Aviation, Comair, Midway, USAir, American and United Airlines dispute the landing fees, terminal building rental rates, carrying charges, and crash/fire/rescue charges assessed them at the Kent County International Airport serving Grand Rapids, Michigan. The Airlines also argue that surplus revenue generated by the fees charged non-airline concessions should be cross-credited to reduce the fees charged to the Airlines. For the reasons stated below, we REVERSE and REMAND to the District Court to determine the proper allocation of fees between the Airlines and general aviation in regard to crash, fire and rescue costs. We AFFIRM the District Court's dismissal of the Airlines' claims under the Airport and Airway Improvement Act of 1982 and the Commerce Clause, its finding that the Airlines have no right to be cross-credited for concession revenues, the finding that the allocation of terminal rental fees between the Airlines and concessions were reasonable, and the finding that the method the airport used to assess airside operation fees for general aviation and the Airlines was reasonable.

I.

The Kent County International Airport ("Airport") is operated by the Kent County Aeronautics Board and the Kent County Department of Aeronautics ("defendants"), both departments of Kent County. The County is the owner and landlord of the Airport and its facilities. The Airport was originally financed by the issuance of general obligation bonds which were later retired through a tax levy. The Airport is a relatively small hub airport whose primary passengers consist of people with Western Michigan origins or destinations. The Airport is serviced by Northwest, Simmons, Piedmont Aviation, Comair, Midway, USAir, American and United Airlines ("Airlines").

The accounting methodology used by the Airport views the Airport as the landlord, and all users as tenants. This accounting system, developed by James C. Buckley, is known as the Buckley or compensatory "methodology" and is widely used by airports. ¹ The system is designed so that the Airlines are only charged for the land costs, physical facilities and other expenses which can be directly allocated to them. When using this system, the Airport first determines the cost basis of the land and facilities. Next, the usage of all areas is calculated and the various users are assigned rents that reflect their usage level. The costs are primarily divided among three groups: the Airlines, non-airline concessions, and general aviation. ² These users enter into leases with the Airport which establishes the fees and rates to be charged.

The Airlines and the Airport negotiated and agreed on the fees to be charged through December 31, 1986. In 1986, a new rate study resulted in increased fees and the Airlines and Airport could not reach an agreement. Finally, on March 10, 1988, the airport passed an ordinance which unilaterally increased the fees. On April 1, 1988, this case was filed challenging the ordinance rates and the rates charged subsequent to December 31, 1986. ³ The Airlines specifically dispute the landing fees of 70.21 cents per 1,000 lbs., the terminal building rental rates, the carrying charge, the fact that general aviation was not also charged based on their costs, and the Airport's allegedly excessive fund balance.

II.

Prior to the trial in this case, the District Court ruled on cross motions for summary judgment. The District Court held that the Airlines did have a private right of action under the Anti-Head Tax Act ("AHTA") and denied the Airport's motion for summary judgment. It also held, however, that the Airlines had no right of action under the Airport and Airway Improvement Act or the Interstate Commerce Clause of the United States Constitution. We agree with the District Court.

The defendants first claim that the Airlines are precluded from challenging the current rates in federal court under either the AHTA or Airport and Airway Improvement Act of 1982 ("AAIA") because they failed to exhaust their administrative remedies. The defendants argue that the Airlines must first raise any claims with the Secretary of Transportation under the AAIA before any claims may be made in the District Court. In Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975), the Supreme Court established four factors to be used in determining whether Congress intended to create an implied right of action. These factors are:

First, is the plaintiff "one of the class for whose especial benefit the statute was enacted" ... ? Second, is there any indication of legislative intent, explicit or implicit, either to create such a remedy or to deny one? Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff? And finally, is the cause of action one traditionally relegated to state law, in an area basically the concern of the States, so that it would be inappropriate to infer a cause of action based solely on federal law?

Id. at 78, 95 S.Ct. at 2088 (quoting Texas & Pacific Ry. Co. v. Rigsby, 241 U.S. 33, 39, 36 S.Ct. 482, 484, 60 L.Ed. 874 (1916)) (emphasis in original; citations omitted). The Supreme Court has placed increasing emphasis on the second factor--the intent of Congress. Touche Ross & Co. v. Redington, 442 U.S. 560, 575-76, 99 S.Ct. 2479, 2489, 61 L.Ed.2d 82 (1979); Niagara Frontier Transp. Auth. v. Eastern Airlines Inc., 658 F.Supp. 247 (W.D.N.Y.1987).

Several courts have found that the AHTA satisfies all the Cort factors and that a private right of action exists. Interface Group, Inc. v. Massachusetts Port Auth., 816 F.2d 9 (1st Cir.1987); Niagara, 658 F.Supp. at 247. Most importantly, the intent of Congress to grant a private right of action seems inherent in the language of the statute satisfying the second Cort factor. The AHTA expressly prohibits states from levying "a tax, fee, head charge, or other charge, directly or indirectly...." 49 U.S.C.A. App. § 1513(a) (West Supp.1991). As noted by the First Circuit, this statute does not mention the Secretary of Transportation nor an administrative or judicial enforcement scheme like those created in similar statutes. Interface Group, 816 F.2d at 16. In addition, the other Cort factors are also met. Private enforcement furthers the purposes of the statute by ensuring that airlines will file claims that individuals may lack the time and expenses to pursue. The AHTA also clearly identifies the class to be protected. We find that the Airlines had no duty to exhaust administrative remedies as to the statutory claims made under section 1513.

The Airlines face different administrative requirements under 49 U.S.C.A. App. § 2210, the AAIA. A review of the Cort factors indicate that Congress intended that there would be no private right of action under section 2210. The statute provides that assurances must be given to the Secretary of Transportation regarding the reasonable terms and rates of an airport development project. 49 U.S.C.A. App. § 2210 (West 1991); Interface Group, 816 F.2d at 15. This provision indicates that Congress intended to establish an administrative enforcement scheme. ⁴ The AHTA and the AAIA do not cover similar issues or provide similar remedies. The AHTA addresses state taxation of air commerce for which recovery of unreasonable taxation or fees would be the remedy. The AAIA, on the other hand, requires certain assurances to be made prior to approval of an airport development project. Failure to make these assurances would result in denial of the grant. For this reason, all claims against the defendants under the AAIA were properly dismissed for failure to exhaust administrative remedies.

Second, the defendants assert that the Airlines are estopped or have waived their rights to object to the methodology and fees adopted by the defendants. They base this argument on the Airlines' failure to protest the fees during the twenty previous years. As support, they point to a December 22, 1983 letter from John Sorensen of United Airlines, then serving as the negotiator for all the Airlines, which they claim acknowledges the reasonableness of the rates. The defendants' argument is without merit.

The complaint filed by the Airlines clearly states that the protested fees were reportedly adopted on March 10, 1988 and became effective on April 1, 1988. The past fees referred to in the complaint are only those fees assessed subsequent to the contract which expired on December 31, 1986. The assessed fees do not represent rates which were agreed upon after negotiation. Rather, they are fees which were charged during the negotiation period. None of the protested fees or the requested remedies involves fees assessed under past...