Csi Aviation Serv. Inc. v. United States Dep't of Transp.

• Decision Date: 01 April 2011
• Docket Number: No. 09–1307.,09–1307.
• Citation: 637 F.3d 408
• Parties: CSI AVIATION SERVICES, INC., Petitionerv.UNITED STATES DEPARTMENT OF TRANSPORTATION and Raymond L. LaHood, Secretary, Respondents.
• Court: U.S. Court of Appeals — District of Columbia Circuit

637 F.3d 408

394 U.S.App.D.C. 474

CSI AVIATION SERVICES, INC., Petitioner

v.UNITED STATES DEPARTMENT OF TRANSPORTATION and Raymond L. LaHood, Secretary, Respondents.

No. 09–1307.

United States Court of Appeals, District of Columbia Circuit.

Argued Sept. 21, 2010.Decided April 1, 2011.

On Petition for Review of an Order of the Department of Transportation.David M. Hernandez argued the cause and filed the briefs for petitioner.Mary F. Withum, Senior Trial Attorney, U.S. Department of Transportation, argued the cause for respondents. With her on the brief were Robert B. Nicholson and Kristen C. Limarzi, Attorneys, U.S. Department of Justice, Paul M. Geier, Assistant General Counsel, U.S. Department of Transportation, and Peter J. Plocki, Deputy Assistant General Counsel.Before: SENTELLE, Chief Judge, TATEL and GRIFFITH, Circuit Judges.Opinion for the Court filed by Circuit Judge GRIFFITH.

GRIFFITH, Circuit Judge:

The Department of Transportation ordered CSI Aviation Services, Inc., to cease and desist from acting as a broker of air-charter services for the federal government. Because the agency failed to justify its authority to issue the order, we grant CSI's petition for review.

I

Since 2003, CSI has been under contract with the General Services Administration (GSA) to broker air-charter service for various federal agencies. On March 10, 2009, CSI won a competitive bid to renew its status as a GSA contractor through 2014. A few days prior, on March 6, the Department of Transportation (DOT) sent CSI a letter requesting information to determine whether the company was engaging in “indirect air transportation” without the certificate of authority required by the Federal Aviation Act, 49 U.S.C. § 41101(a).

After the company provided the requested information, DOT sent another letter, stating that it had “review[ed] the information submitted by CSI” and “consult [ed] with GSA.” Letter from Samuel Podberesky, Assistant Gen. Counsel for Aviation Enforcement Proceedings, DOT, to David M. Hernandez, Counsel for CSI (Oct. 16, 2009) [hereinafter Oct. 2009 Letter to CSI]. The letter then declared:

Based on this information, CSI has been acting as an unauthorized indirect air carrier in violation of section 41101 with respect to business transacted via its GSA schedule listing. Violations of section 41101 also constitute unfair and deceptive practices and unfair methods of competition in violation of 49 U.S.C. § 41712.

Violations of these provisions subject CSI and its principals to the assessment of civil penalties ... of up to $27,500 for each violation. Each day such violation continues is a separate violation.

....

... Accordingly, CSI is warned to cease and desist from any further activity that would result in it engaging in indirect air transportation. If CSI immediately ceases from entering into new contracts pursuant to the GSA schedule, and ceases all its activities governed by existing GSA contracts within 180 days from the date of this letter, we will refrain from taking enforcement action regarding its past violations as discussed above.

Id.

Six other companies received similar letters. All six complied by terminating their status as contractors for GSA. CSI alone chose to challenge DOT's determination, asking the agency to withdraw the cease-and-desist letter on the grounds that the Act requires a certificate of authority only for companies that operate “as a common carrier,” 49 U.S.C. § 40102(a)(25), and that CSI's charter flights for the federal government are not common carriage. Letter from David M. Hernandez, Counsel for CSI, to Samuel Podberesky, Assistant Gen. Counsel for Enforcement Proceedings, DOT (Nov. 19, 2009).

On November 25, 2009, seeking another way to avoid shutting down its operations, CSI also submitted a petition to DOT for an emergency exemption from the certification requirement. In support of CSI's petition, GSA wrote to DOT explaining at length why the Act's certification requirements for common carriage make no sense for government contracts. “Acquisition [of air service] by the Federal Government ... is distinct in several ways from acquisition in the private sector and does not present the consumer protection related concerns typically at issue in the private sector.” Letter from Kris E. Durmer, Gen. Counsel, GSA, to Robert S. Rivkin, Gen. Counsel, DOT (March 1, 2010). “There are a number of ways in which the Federal agencies that purchase air charter broker services ... are protected from unscrupulous contractors.” Id.

DOT granted CSI a temporary exemption that was scheduled to expire in April 2011. The exemption order, signed by the Assistant Secretary for Aviation and International Affairs, indicated that DOT “remain[ed] of the view that ... the provision of air services for U.S. Government agencies through the GSA contracting system constitutes an engagement in air transportation, necessitating that brokers conducting such business hold economic authority from the Department to act as indirect air carriers.” Final Order, Docket No. OST–2009–0311, at 4 (Apr. 14, 2010) (DOT).¹ In the meantime, CSI has continued to provide air service for GSA. CSI timely filed this petition for review in December 2009.

The central issue in this case is whether DOT properly concluded that air charter brokers that operate under GSA contract engage in indirect air transportation and so require certification from DOT despite the statutory provision that requires certification only for those who provide air transportation “as a common carrier.” Before reaching this issue, however, we must first consider whether DOT has taken a final legal position that is fit for judicial review and whether DOT's grant of an exemption for CSI has rendered this case moot.

II

The Federal Aviation Act provides that “a person disclosing a substantial interest in an order issued [under the Act] ... may apply for review of the order by filing a petition for review” in this court. 49 U.S.C. § 46110(a). To avoid premature intervention in the administrative process, our review of agency action “has been judicially restricted to review of final agency orders.” Puget Sound Traffic Ass'n v. Civil Aeronautics Bd., 536 F.2d 437, 438–39 (D.C.Cir.1976). The Supreme Court set the standard for finality in Bennett v. Spear, 520 U.S. 154, 178, 117 S.Ct. 1154, 137 L.Ed.2d 281 (1997). An agency action is final when it marks “the ‘consummation’ of the agency's decisionmaking process” and is not merely of a “tentative or interlocutory nature.” Id. at 178, 117 S.Ct. 1154 (citations omitted). The action must be one in which “rights or obligations have been determined” or “from which legal consequences will flow.” Id.

Bennett highlights the importance of avoiding disruption of the administrative decisionmaking process, but it does not foreclose all pre-enforcement challenges. Our most instructive case on this point is Ciba–Geigy Corp. v. EPA, 801 F.2d 430 (D.C.Cir.1986), which we have recently described as “complementary” to Bennett. Reckitt Benckiser, Inc. v. E.P.A., 613 F.3d 1131, 1137 (D.C.Cir.2010). In Ciba–Geigy, an EPA official sent letters to twenty private companies directing them to modify their pesticide labels. The letters stated that if the companies refused, the EPA would consider the pesticides “misbranded,” leading to enforcement actions and penalties. Seventeen of the twenty companies complied but Ciba–Geigy resisted, claiming that the EPA was misreading its legal authority to allow it to bring a misbranding action before following the registration cancellation process required by statute. Facing the choice between costly compliance and the risk of prosecution, Ciba–Geigy filed a pre-enforcement lawsuit seeking injunctive and declaratory relief.

Noting that “an agency may not avoid judicial review merely by choosing the form of a letter to express its definitive position on a general question of statutory interpretation,” Ciba–Geigy, 801 F.2d at 438 n. 9, we held that the EPA's assertion of its statutory authority was reviewable final agency action for three reasons. First, the agency had taken a “definitive” legal position concerning its statutory authority. Id. at 436. Second, the case presented “a purely legal” question of “statutory interpretation.” Id. at 435. In the absence of disputed facts that would bear on the statutory question, there was no benefit in waiting for the agency to develop a record before granting judicial review. And third, the agency's letter imposed an immediate and significant practical burden on Ciba–Geigy, ordering the company to “conform to the new labeling requirement on pain of civil and criminal penalties.” Id. at 437.

All three factors from Ciba–Geigy are present here. First, DOT has issued a “definitive” statement of the agency's legal position. Its initial warning letter clearly took the position that air charter brokers under GSA contract require agency certification. The letter declared in no uncertain terms that “CSI has been acting as an unauthorized indirect air carrier in violation of section 41101.” Oct. 2009 Letter to CSI. After CSI protested and explained why it believed DOT to be misreading its statutory authority, the agency refused to change its legal position. Instead it issued an order granting CSI a temporary exemption from the certification requirement. The exemption order reiterated DOT's position that “the provision of air services for U.S. Government agencies through the GSA contracting system constitutes an engagement in air transportation, necessitating that brokers conducting such business hold economic authority from the Department to act as indirect air carriers.” Final Order, Docket No. OST–2009–0311, at 4 (Apr. 14, 2010) (DOT). The warning letter and the exemption order taken together amount to a definitive statement of DOT's legal position. “Not only did the statement of position admit of no ambiguity, but it gave no indication that it was...