Air Transport Ass'n of America v. Department of Transp., 89-1195

Decision Date27 April 1990
Docket NumberNo. 89-1195,89-1195
Citation900 F.2d 369
PartiesAIR TRANSPORT ASSOCIATION OF AMERICA, Petitioner, v. DEPARTMENT OF TRANSPORTATION; Samuel Skinner, Secretary of Transportation; Federal Aviation Administration; and James B. Busey, Administrator, Respondents.
CourtU.S. Court of Appeals — District of Columbia Circuit

Michael S. Sundermeyer, with whom Steven A. Solomon, Washington, D.C., was on the brief, for petitioner.

Bruce G. Forrest, Attorney, Dept. of Justice, with whom Stuart M. Gerson, Asst. Atty. Gen., Anthony J. Steinmeyer and John P. Schnitker, Attorneys, Dept. of Justice, Gregory S. Walden, Chief Counsel, John H. Cassady, Acting Deputy Chief Counsel, Allan H. Horowitz, Washington, D.C., and Cynthia A. Dominick, Attorneys, F.A.A., were on the brief, for respondents.

Robert M. Lichtman, Washington, D.C., for National Air Carrier Ass'n, Inc., et. al., Gary Green and Jerry D. Anker, Washington, D.C., for Air Line Pilots Ass'n, John E. Gillick and Robert Reed Gray, Washington, D.C., for America West Airlines, Inc., John S. Yodice, Washington, D.C., and Donald L. Hardison, for Aircraft Owners and Pilots Ass'n, Alan Armstrong for Albert O. McCauley, were on the joint brief, for intervenors National Air Carrier Ass'n, Inc., et al.

Before MIKVA, HARRY T. EDWARDS and SILBERMAN, Circuit Judges.

Opinion for the Court filed by Circuit Judge HARRY T. EDWARDS.

Dissenting opinion filed by Circuit Judge SILBERMAN.

HARRY T. EDWARDS, Circuit Judge:

The issue in this case is whether respondent governmental agencies (collectively "Federal Aviation Administration" or "FAA") were obliged to engage in notice and comment procedures before promulgating a body of regulations governing the adjudication of administrative civil penalty actions. See 53 Fed.Reg. 34,646 (1988) (codified at 14 C.F.R. pt. 13) ("Penalty Rules" or "Rules"). The FAA issued the Penalty Rules pursuant to a temporary enabling statute intended to augment the agency's authority to enforce compliance with aviation safety standards. See 49 U.S.C. app. Sec. 1475 (Supp. V 1987). Petitioner Air Transport Association of America ("Air Transport") contends that the FAA's failure to comply with the notice and comment requirements of the Administrative Procedure Act ("APA"), see 5 U.S.C. Sec. 553 (1988), renders the Penalty Rules invalid. The FAA maintains that it was justified in dispensing with notice and comment under the "rules of agency organization, procedure, or practice" and "good cause" exceptions to section 553. See id. Sec. 553(b)(A)-(B).

We grant the petition for review. It is well established that the exemption under section 553(b)(A), for "rules of agency organization, procedure, or practice," does not apply to agency action that "substantially alter[s] the rights or interests of regulated" parties. American Hosp. Ass'n v. Bowen, 834 F.2d 1037, 1041 (D.C.Cir.1987). The Penalty Rules fall outside the scope of the exception because they substantially affect civil penalty defendants' "right to avail [themselves] of an administrative adjudication." National Motor Freight Traffic Ass'n v. United States, 268 F.Supp. 90, 96 (D.D.C.1967) (three-judge panel), aff'd mem., 393 U.S. 18, 89 S.Ct. 49, 21 L.Ed.2d 19 (1968). Moreover, because we find that the time constraints of the enabling statute did not impose an insurmountable obstacle to complying with the applicable notice and comment requirements of the APA, we also reject the FAA's reliance on the "good cause" exception under section 553(b)(B). Consequently, we hold that the Penalty Rules are invalid and that the FAA may not initiate new prosecutions until it has complied with the procedural requirements of the APA.


In December of 1987, Congress enacted a series of amendments to the Federal Aviation Act relating to civil penalties. See Pub.L. No. 100-223, Sec. 204, 101 Stat. 1519 (codified in scattered sections of 49 U.S.C. app.). Among other things, these amendments raised to $10,000 the maximum penalty for a single violation of aviation safety standards, see 49 U.S.C. app. Sec. 1471(a)(1) (Supp. V 1987), and established a "demonstration program" authorizing the FAA to prosecute and adjudicate administrative penalty actions involving less than $50,000, 49 U.S.C. app. Sec. 1475 (Supp. V 1987). 1 Under the terms of the demonstration program, the FAA was granted the authority to assess administrative penalties for a two-year period beginning on December 30, 1987, see id. Sec. 1475(d)(4), and was to report to Congress on the effectiveness of the program within eighteen months, see Pub.L. No. 100-223, Sec. 204(i)(2), 101 Stat. 1521.

Congress' goal in enacting this legislation was to strengthen the enforcement powers of the Federal Aviation Administration. Before the 1987 amendments, the FAA could propose a maximum civil penalty of only $1,000 per violation and had no enforcement authority of its own. 2 When an alleged violator disputed a penalty, the FAA was obliged to refer the case to the United States Attorney's office for prosecution in federal district court; relatively few such cases were prosecuted, however, because of competing work obligations facing U.S. Attorneys. See 133 CONG.REC. S15,294 (daily ed. Oct. 28, 1987) (statement of Sen. Wilson); 53 Fed.Reg. 34,646 (1988). Understandably, Congress did not view this as a particularly effective system for assuring compliance with aviation safety standards. By raising the maximum penalty and giving the FAA the power to prosecute penalty actions administratively, Congress sought to "close the holes in the FAA's safety net" and thereby "provide[ ] an incentive for airlines to ensure that [their safety] systems are maintained at the highest of standards." 133 CONG.REC. S15,294 (statement of Sen. Wilson). 3 At the same time, however, Congress remained attentive to the adjudicative rights of civil penalty defendants. Congress provided that the FAA could assess a civil penalty "only after notice and opportunity for a hearing on the record in accordance with section 554 of [the APA]." 49 U.S.C. app. Sec. 1475(d)(1). As the conference report accompanying section 1475 explained, the express incorporation of the APA's procedural protections was designed to achieve two purposes:

First, the requirement is intended to advise the FAA of the appropriate level of procedural formality and attention to the rights of those assessed civil penalties under this demonstration program. Secondly, this requirement is intended to provide reasonable assurance to the potential subjects of such civil penalties that their due process rights are not compromised.

H.R. CONF.REP. No. 484, 100th Cong., 1st Sess. 81 (1987).

Approximately nine months after enactment of section 1475, the FAA promulgated the Penalty Rules. See 53 Fed.Reg. 34,646 (1988) (codified at 14 C.F.R. pt. 13). Effective immediately upon their issuance, the Penalty Rules established a schedule of civil penalties, including fines of up to $10,000 for violations of the safety standards of the Federal Aviation Act and related regulations. See 14 C.F.R. Sec. 13.16(a)(3) (1989). The Penalty Rules also established a comprehensive adjudicatory scheme providing for formal notice, settlement procedures, discovery, an adversary hearing before an ALJ and an administrative appeal. See id. Secs. 13.201-13.235. In explaining why it dispensed with prepromulgation notice and comment, the FAA emphasized the procedural character of the Penalty Rules and the time constraints of section 1475. See 53 Fed.Reg. 34,646, 34,652-53. The FAA did respond to post promulgation comments but declined to make any amendments to the Rules. See 54 Fed.Reg. 11,914 (1989).

Congressional oversight of the section 1475 demonstration program is ongoing. In its report to Congress, the FAA vigorously defended the Penalty Rules. See Respondent's Supplemental Addendum at 1-54. Others, including commercial and noncommercial aviators and the Administrative Law Section of the American Bar Association were less enthusiastic, criticizing what they perceived to be the Rules' systematic procedural bias in favor of the FAA. See Petitioner's Supplemental Addendum 2-40. In response to the controversy, Congress declined FAA's request to extend section 1475 by two years, and instead extended the statute by only four months. See Pub.L. No. 101-236, Sec. 1,103 Stat. 2060 (1989). Supporters of this legislation emphasized that extension "should not be viewed as approval of the FAA's procedures" but only "as a way to preserve the status quo while" Congress "review[s] ... how the major concerns coming from every segment of the aviation community are going to be resolved." 135 CONG.REC. H8917 (daily ed. Nov. 17, 1989) (statement of Rep. Hammerschmidt); id. (statement of Rep. Valentine). Indeed, on March 6, 1990--approximately one month after this case was argued--the FAA issued a notice of proposed rulemaking announcing the agency's intention to amend some of the individual Rules that have provoked the most controversy. See 55 Fed.Reg. 7980 (1990).

In its petition for review, Air Transport raises two challenges to the Penalty Rules. 4 First, it attacks the procedural adequacy of the Rules, arguing that the FAA was obliged by section 553 of the APA to permit notice and comment before the Rules became effective. Second, Air Transport attacks the substantive adequacy of the Rules on the ground that they establish adjudicatory procedures inconsistent with section 554 of the APA. In a previous order, we deferred consideration of the FAA's motion to dismiss the petition on ripeness grounds and directed the parties to address this issue in their briefs on the merits. We now find that Air Transport'sprocedural challenge to the Penalty Rules is ripe for review and grant the petition on that ground. 5

A. Ripeness

The FAA contends that, under the ripeness doctrine, ...

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