Air North America v. Department of Transp.
| Decision Date | 02 July 1991 |
| Docket Number | No. 89-70245,89-70245 |
| Parties | AIR NORTH AMERICA; Richard Neumann, President of Air North America, Inc.; Ross R. Hart, Vice President of Air North America, Inc., Petitioners, v. DEPARTMENT OF TRANSPORTATION, Respondent. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Ross R. Hart, and Richard D. Neumann, in pro se.
Thomas L. Ray, Sr. Trial Atty., U.S. Dept. of Transp., Washington, D.C., for respondent.
On Petition for Review of Orders of the United States Department of Transportation.
Before PREGERSON, REINHARDT and HALL, Circuit Judges.
Hart and Neumann, respectively the Vice President and President of Air North America, petition this court, pro se, for review of Department of Transportation ("the Department") orders revoking their airline's certificates of authority to provide air transportation. 1 We affirm the Department's orders.
Many years ago Congress established the rule that no one could operate as an air carrier until the Civil Aeronautics Board ("the Board") had issued a certificate of public convenience and necessity authorizing airline operations. Section 401(a) of the Federal Aviation Act of 1958 ("the Act"), 49 U.S.C.App. Sec. 1371(a). Section 401(d) of the Act barred the Board from issuing a certificate unless the applicant demonstrated that it was fit, willing, and able to provide the proposed air transportation services, and to comply with the Act and any rules promulgated thereunder.
In recent years the regulatory environment in which airlines operate has undergone dramatic change. Prior to 1978, the airline industry was heavily regulated; the agency charged with carrying out this regulation was the Board. See generally Civil Aeronautics Board v. Delta Airlines, 367 U.S. 316, 81 S.Ct. 1611, 6 L.Ed.2d 869 (1961). The Board was responsible for, inter alia, setting both air routes and the rates that could be charged by the airlines that serviced these routes. See id. In 1978, Congress decided to substantially deregulate the airline industry. See The Airline Deregulation Act of 1978 ("the Deregulation Act"), P.L. 95-504, 92 Stat. 1705 (1978). The Deregulation Act eliminated both the Board itself and many of its functions. See 49 U.S.C.App. Sec. 1551. Most of the Board's remaining functions were transferred to the Department. See id.
When Congress deregulated the airline industry, it expanded the pre-existing fitness requirement embodied in section 401(a) of the Act. The Deregulation Act added a continuing fitness requirement applicable to all certificated carriers. 49 U.S.C.App. Sec. 1371(r). Originally, the expanded fitness requirements were to end on December 31, 1984. Section 40 of Deregulation Act, 49 U.S.C.App. Sec. 1551. However, before the Board's demise Congress chose to renew these fitness requirements and to transfer their administration to the Department. See Section 3(e) of the Civil Aeronautics Board Sunset Act of 1984, P.L. 98-443, 98 Stat. 1703, 49 U.S.C.App. Sec. 1551. 2
Upon succeeding the Board, the Department initially used the fitness rules that it inherited from the Board. These inherited rules prohibited a carrier that did not operate in the two years after initially being found fit from beginning operations until the carrier filed updated fitness data with the Board and the Board determined that the carrier remained fit. 14 C.F.R. 204.8 (1985 ed.). In adopting this requirement the Board had reasoned that if a carrier did not begin service for an extended period following a fitness determination, the carrier's operating plans might change dramatically during the dormant period. Thus, the Board concluded that a substantial dormant period left it with "no assurance that the applicant found fit is essentially the same applicant that begins service years later." 45 Fed.Reg. 73085, 73086 (November 4, 1980). However, under the Board's rules dormant certificates were allowed to remain outstanding, though they could not be used absent Board approval.
The Department discovered three major problems with the Board's approach to the dormancy problem. First, the Department believed that the dormant carriers' retention of their certificates "implies to the world that they ... continue[ ] to be found fit by the U.S. Government." 51 Fed.Reg. 19071, 19072 (May 26, 1986). Of more concern to the Department was its simple inability to effectively monitor the fitness of air carriers under the old system of dormant certificates. "[I]n a universe so full of dormant certificates, [the Department] simply cannot rely upon a system that leaves retention of a certificate solely to the discretion of a dormant carrier to advise us of developments affecting its certificate authority." 51 Fed.Reg. 40410, 40411 (Nov. 7, 1986). The agency believed its ability to monitor a carrier's fitness during its dormancy to be "seriously compromised," because "carriers tend to undergo substantial changes in management, financial resources, and even compliance disposition" and "often fail to comply with our insurance and reporting requirements." 51 Fed.Reg. 19071, 19072 (May 27, 1986). Moreover, a market in dormant certificates had sprung up. Persons hoping to avoid a fitness investigation would buy other carriers' dormant authority. 51 Fed.Reg. 19071, 19072 (May 27, 1986).
The Department concluded that certificate authority supported by stale fitness findings should cease to exist. In 1986, the Department amended the Board's fitness rules to provide that the certificates of carriers that have been dormant for more than one year will automatically be revoked. 51 Fed.Reg. 40410 (November 7, 1986). The certificate of Petitioners' airline, AirNA, was revoked pursuant to this regulation, 14 C.F.R. 2048.
AirNA was originally found fit to provide a variety of air transportation services by the Board in the years 1980-81. Orders 80-4-216 (April 29, 1980) and 80-6-27 (April 29, 1980) (worldwide charter service); Order 81-10-57 (October 9, 1981) (domestic scheduled service). However, AirNA did not obtain the financing necessary for its proposed operations, did not apply for the required FAA certificate authority, and did not begin operations. Order 89-4-35 at 1, R. 25; Order 89-8-19 at 4.
During its dormancy AirNA twice had its fitness redetermined, first by the Board, Order 84-6-66 (June 21, 1984), and then by the Department, Orders 88-3-37 (March 15, 1988), and 88-3-68 (March 31, 1988). The Department order renewing AirNA's certificate authority stated that the authority would not take effect until the carrier obtained the necessary FAA authority and submitted certain current fitness information. Order 88-3-68 at 2. AirNA neither obtained the FAA authority nor submitted the additional information.
At the time that new rule 14 C.F.R. 204.8 was adopted, the Department issued a written notice to AirNA, informing AirNA of the regulation's terms. When AirNA remained dormant for over one year after the completion of the Department's last fitness review the Department revoked AirNA's certificates as provided in Rule 204.8. Order 89-4-35 (April 14, 1989), Order 89-4-58 (April 14, 1989). AirNA asked the Department to reconsider the orders revoking its authority. AirNA Pet. for Reconsideration. The Department denied reconsideration, finding that its procedures were fair and that there were no facts in dispute under Rule 204.8. Order 89-8-19 (August 11, 1989). In the course of denying reconsideration the Department rejected a number of AirNA's charges, among them charges that the automatic revocation system was anti-competitive and favored large carriers. These Orders are now under review. AirNA challenges the validity of the Department's Rule 204.8 in general, and the revocation of its certificates in particular.
The Department argues that its decision to define section 1371 "fitness" in Rule 204.8 to exclude dormant carriers is a reasonable interpretation of the statute to which we should defer. We agree.
The key case is Chevron U.S.A. v. Natural Resource Defense Council, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Shortly after the Reagan Administration took office, the Environmental Protection Agency changed the definition of the term "source" in its rules so that a collection of pollution-emitting facilities in a particular geographic area could be considered as one "source." Previously, each pollution-emitting device in a plant had been considered a distinct "source" of pollution. As a result of the EPA's amendment of its rules, increased pollution from a new or modified facility could be compensated for by a decrease in pollution from a pre-existing facility. The court of appeals had rejected the EPA's definition of "source," noting that the new regime might not decrease pollution levels as quickly as the old. National Resources Defense Council, Inc. v. Gorsuch, 685 F.2d 718, 726 (D.C.Cir.1982). The Chevron Court faced the question whether the Court of Appeals properly overrode the EPA's definition of "source." The Court held that, since the EPA's definition of "source" was consistent with the statute's broad policies and Congress had not specifically resolved the issue, the EPA's definition could not be overridden. 467 U.S. at 843-44, 104 S.Ct. at 2781-82.
In explaining its decision, the Court said:
The power of an administrative agency to administer a congressionally created ... program necessarily requires the formulation of policy and the making of rules to fill any gap left, implicitly or explicitly, by Congress.... [I]f the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute.... A Court may not substitute its own construction ... for a reasonable interpretation made by the administrator.
467 U.S. at 843-44, 104 S.Ct. at 2782.
Thus, Chevron's...
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