American Airlines, Inc. v. U.S.

• Decision Date: 22 December 2008
• Docket Number: No. 2007-5174.,2007-5174.
• Citation: 551 F.3d 1294
• Parties: AMERICAN AIRLINES, INC., Plaintiff-Appellee, v. UNITED STATES, Defendant-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

551 F.3d 1294

AMERICAN AIRLINES, INC., Plaintiff-Appellee, v. UNITED STATES, Defendant-Appellant.

No. 2007-5174.

United States Court of Appeals, Federal Circuit.

December 22, 2008.

Adam P. Feinberg, Miller & Chevalier Chartered, of Washington, DC, argued for plaintiff-appellee.

Kyle E. Chadwick, Senior Trial Counsel, Commercial Litigation Branch, United

States Department of Justice, of Washington, DC, argued for defendant-appellant. With him on the brief were Jeffrey S. Bucholtz, Acting Assistant Attorney General; and Jeanne E. Davidson, Director. Of counsel on the brief were Andrew S. Kosegi, Attorney, U.S. Customs and Border Protection, of Indianapolis, Indiana; and Cynthia A. Koch, Senior Counsel, United States Department of Agriculture, of Washington, DC.

Before NEWMAN, MAYER and SCHALL, Circuit Judges.

NEWMAN, Circuit Judge.

This action was brought by American Airlines, Inc. ("American") in the United States Court of Federal Claims, claiming that the United States unlawfully required American to pay to the government the full amount of "user fees" that American had been unable to collect from passengers. The Court of Federal Claims ruled that the government illegally exacted these sums from the airline, American Airlines, Inc. v. United States, 68 Fed.Cl. 723 (2005), and that the amount exacted should be refunded, with interest, American Airlines, Inc. v. United States, 77 Fed.Cl. 672 (2007). The government appeals both rulings.

BACKGROUND

At issue are two fees imposed on persons entering the United States: the Immigration Inspection User Fee and the Agricultural Quarantine Inspection User Fee. Both fees are based on the principle that government services should be paid for by the users of the services.

The purpose of the Immigration Inspection User Fee is to cover the cost of various immigration inspection services. The authorizing statute, 8 U.S.C. § 1356(d)-(k), was enacted in 1986 and provides (with certain exceptions not here relevant) that each passenger entering the United States on a commercial carrier shall pay a fee for immigration inspection. See 8 U.S.C. § 1356(d) ("In addition to any other fee authorized by law, the Attorney General shall charge and collect $7 per individual for the immigration inspection of each passenger arriving at a port of entry in the United States...."). Generally the fee is collected by the issuer of the ticket at the time of issuance. Id. § 1356(f)(1). If the ticket is issued in a foreign country and the fee is not collected at ticketing, then the carrier is required to collect the fee at the time the passenger departs from the United States. Id. § 1356(f)(2). The person who collects the fees pursuant to § 1356(f)(1) or (2) is required to remit the collected fees quarterly to the Attorney General. Id. § 1356(f)(3). All commercial tickets are required to be marked to show the user fee status. Id. § 1356(f)(1)(B); 8 C.F.R. § 286.4(b).

The regulations provide further details about the Immigration User Fee, at 8 C.F.R. §§ 286.1-286.7. The regulations relevant to the issues herein include the following (with emphases added):

8 C.F.R. § 286.4 Fee collection responsibility

(a) It is the responsibility of the air or sea carriers, travel agents, tour wholesalers, or other parties, which issue tickets or documents for transportation on or after December 1, 1986, to collect the fee set forth in § 286.2 of this part from all passengers transported to the United States who are not excepted under § 286.3 of this part.

(b) Tickets and documents for transportation shall be marked by the collector of the fee to indicate that the required fee has been collected. Such markings shall be in accordance with the procedures set forth in the ARC Industry Agents Handbook, the SATO Ticketing Handbook, or compatible procedures set forth in the operations manual of individual collectors.

(c) It is the responsibility of the carrier transporting a passenger from the United States to collect the fee upon departure, if the passenger was not excepted under § 286.3 of this part and tickets or documents for transportation of the passenger do not reflect collection of the fee at the time of issuance. If at the time of departure such a passenger refuses to pay the fee, the carrier shall record the full name, complete address, nationality, passport number, and alien file number, if any, of the passenger and immediately notify the Associate Commissioner, Finance.

8 C.F.R. § 286.5 Remittance and statement procedures

(a) The air or sea carrier whose ticket stock or document for transportation reflects collection of the fee is responsible for remittance of the fee to the Service. The travel agent, tour wholesaler, or other entity, which issues their own noncarrier related ticket or document for transportation to an air or sea passenger who is not excepted from the fee pursuant to § 286.3 of this part, is responsible for remittance of the fee to the Service, unless by contract the carrier will remit the fee.

The regulations also require an air carrier to maintain records of fees collected and remitted, 8 C.F.R. § 286.6, and provide the government with enforcement powers including independent audits, id. § 286.5(f), subpoena power, id. § 286.5(g), and penalties against the carrier for noncompliance, specifically, termination of contracts and suspension of enroute inspections or preinspections, id. § 286.7. The regulations do not provide a penalty against passengers who refuse to pay the fees.

The second fee at issue is the Agricultural Quarantine Inspection (AQI) User Fee, enacted in 1990 and codified at 21 U.S.C. § 136a. This fee is intended to cover the cost of providing agricultural quarantine and inspection services to airline passengers entering the United States. 21 U.S.C. § 136a(a); see 7 C.F.R. § 354.3(f)(1) ("[E]ach passenger aboard a commercial aircraft who is subject to inspection ... upon arrival from a place outside of the customs territory of the United States, must pay an AQI user fee."). Much like the Immigration User Fee provisions, the AQI regulations require collection of the fee by the carrier or other agent, and remittance as instructed. See 7 C.F.R. § 354.3(f)(4)-(5). Again, tickets are marked to show collection of the fee. Id. § 354.3(f)(4)(i)(A). The relevant regulations include the following (with emphases added):

7 C.F.R. § 354.3(f)(4) Collection of fees

(i) Any person who issues tickets or travel documents on or after May 13, 1991, is responsible for collecting the AQI user fee from all passengers transported into the customs territory of the United States to whom the AQI user fee applies.

(A) Tickets or travel documents must be marked by the person who collects the AQI user fee to indicate that the required AQI user fee has been collected from the passenger.

(B) If the AQI user fee applies to a passenger departing from the United

States and if the passenger's tickets or travel documents were issued on or after May 13, 1991, but do not reflect collection of the AQI user fee at the time of issuance, then the carrier transporting the passenger from the United States must collect the AQI user fee upon departure.

7 C.F.R. § 354.3(f)(5) Remittance and statement procedures

(i) The carrier whose ticket stock or travel document reflects collection of the AQI user fee must remit the fee to the U.S. Bank, United States Department of Agriculture (USDA), APHIS, AQI, P.O. Box 979044, St. Louis, MO 63197-9000. The travel agent, United States-based wholesaler, or other entity, which issues its own non-carrier related ticket or travel document to a passenger who is subject to an AQI user fee under this part, must remit the fee to APHIS, unless by contract the carrier will remit the fee.

A "compliance" provision allows the Animal and Plant Health Inspection Service (APHIS) to verify the accuracy of fees that are collected and remitted. Id. § 354.3(f)(7).

American has duly collected and made regular remittances of both of these user fees. American explains that typically a very small percentage of user fees is not collected, for various reasons. For example, some tickets are issued by foreign travel agents in countries that prohibit ticket agents from collecting United States user fees at the time of ticketing. While the user fee statutes and regulations provide that the airline shall collect any unpaid fees before such a passenger boards an aircraft to leave the United States, American states that the airlines cannot force passengers to pay the user fees at the point of departure because the airlines are not authorized to refuse to board ticketed passengers who refuse to pay these fees.

American's records and payments were audited by the government on an annual or biannual basis. According to the government's audit methodology, a sampling of tickets from American's flights during a specific time period was checked for marking or other evidence that the user fees were collected. Tickets lacking such evidence were placed on a list of "potential errors," which American then researched to determine whether any other evidence showed that the user fees were collected for the "potential error" tickets. Any ticket whose fee status was not resolved after such further research was deemed a "confirmed error," which the government audit treated as a ticket for which user fees were not collected. The error rate, measured as the ratio of "confirmed error" tickets to the total number of sampled tickets, was then multiplied by the total dollar amount of fee remittances by American during the relevant time period, to approximate the shortfall in collected user fees. During the audit periods at issue, the aggregate error rate for these user fees as audited was less than 1%.

The government assessed American for the amount of the approximated shortfalls in collected user fees as audited, and American paid the assessed amounts for each audit period. American objected to the user fee...