Flytenow, Inc. v. Fed. Aviation Admin.

• Decision Date: 18 December 2015
• Docket Number: No. 14–1168.,14–1168.
• Citation: 808 F.3d 882
• Parties: FLYTENOW, INC., Petitioner v. FEDERAL AVIATION ADMINISTRATION, Administrator, Respondent.
• Court: U.S. Court of Appeals — District of Columbia Circuit

808 F.3d 882

FLYTENOW, INC., Petitioner

v.FEDERAL AVIATION ADMINISTRATION, Administrator, Respondent.

No. 14–1168.

United States Court of Appeals, District of Columbia Circuit.

Argued Sept. 25, 2015.

Decided Dec. 18, 2015.

Jonathan Riches argued the cause for petitioner. With him on the briefs were Gregory S. Winton, Clint Bolick, and Aditya Dynar.

Sydney A. Foster, Attorney, U.S. Department of Justice, argued the cause for respondent. With her on the brief were Benjamin C. Mizer, Acting Assistant Attorney General, Ronald C. Machen Jr., U.S. Attorney at the time the brief was filed, and Mark R. Freeman, Attorney.

Before: PILLARD and WILKINS, Circuit Judges, and GINSBURG, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge PILLARD.

PILLARD, Circuit Judge:

Flytenow, Inc., developed a web-based service through which private pilots can offer their planned itineraries to passengers willing to share the pilots' expenses. After starting operations in early 2014, Flytenow sought a legal interpretation from the Federal Aviation Administration (FAA) regarding its business plan's compliance with the Federal Aviation Act of 1958 and the FAA's regulations. The FAA responded with a Letter Interpretation, concluding that pilots offering flight-sharing services on Flytenow's website would be operating as "common carriers," which would require them to have commercial pilot licenses. Flytenow's members, licensed only as private pilots, thus would violate FAA regulations if they offered their services via Flytenow.com.

Flytenow asks us to set aside the FAA's Interpretation as arbitrary and capricious and inconsistent with statutory and constitutional law. Because we conclude that the FAA's Interpretation is consistent with the relevant statutory and regulatory provisions and does not violate Flytenow's constitutional rights, we deny Flytenow's petition for review.

I.

Flytenow.com facilitates connections between pilots and "general aviation enthusiasts" who pay a share of the flight's expenses in exchange for passage on a route predetermined by the pilot. Enthusiasts must be members of Flytenow to search for flights, but anyone may become a member by filling out an online form. Pilots using Flytenow's service "initially and unilaterally dictate the time, date, and points of operation" of their proposed flights. J.A. 48. After a member-enthusiast expresses interest in being a passenger on a particular flight, a pilot may "accept or reject an enthusiast's request ... for any or no reason." Id. If a pilot carries one or more passengers, Flytenow facilitates the sharing of expenses on a pro rata basis between passengers and pilot. Id. Around the same time that Flytenow publicly launched its flight-sharing website and requested the FAA's legal opinion, another firm proposing a substantially similar service, AirPooler, Inc., submitted a parallel request for a legal interpretation on the same issue.

The FAA is charged with "promot[ing] safe flight of civil aircraft." 49 U.S.C. § 44701. To that end, the FAA is empowered to regulate nearly every aspect of private and commercial flight, including licensing and regulation of pilots and their operations. See, e.g., id. §§ 44701(a), 44703, 44705. At issue here is whether the FAA permissibly concluded that private pilots using Flytenow's service to offer flights to potential passengers hold themselves out as common carriers transporting persons from place to place for compensation in violation of the terms of their noncommercial licensure.

The FAA issues several categories of "airman certificates" licensing qualified pilots to fly in various capacities subject to specified terms. See id. §§ 44702, 44703; 14 C.F.R. §§ 61.81 –95, 61.102 –17, 61.121 –33. Relevant to this petition are "commercial pilot" licenses, id. Part 61, subpart F, and "private pilot" licenses, id. subpart E. Certified commercial pilots are qualified to transport passengers or property for compensation. See id. § 61.133(a)(1). Private pilots, by contrast, are barred from receiving compensation. See id. § 61.113(a).

Seven narrow, enumerated exceptions to the compensation bar permit private pilots to receive compensation in specified circumstances. Id. § 61.113(b)-(h). Those exceptions authorize, for example, private pilots to accept compensation for certain charity events, id. § 61.113(d), search-and-location operations, id. § 61.113(e), or airplane-sale-related flights, id. § 61.113(f). One of the seven exceptions to the compensation bar provides that a private pilot may share expenses with passengers, provided that the pilot does "not pay less than the pro rata share of the operating expenses" and that the expenses "involve only fuel, oil, airport expenditures, or rental fees." Id. § 61.113(c). The pro rata sharing of expenses is further limited by the FAA's "common-purpose test," which requires private pilots and their expense-sharing passengers to share a "bona fide common purpose" for their travel. See FAA Legal Interpretation Letter from Rebecca B. MacPherson, Assistant Chief Counsel for Regulations, to Mark Haberkorn (Oct. 3, 2011) (Haberkorn Interpretation), J.A. 41–44. Private pilots' receipt of compensation outside of the seven exceptions is a violation of section 61.113 subject to civil penalties under 49 U.S.C. § 46301.

In addition to pilot licensing, the FAA regulates the conduct of aircraft and pilots in flight. The regulations make an important distinction between private carriage and common carriage, with the latter subject to more stringent operating requirements.

Part 91 of the FAA's regulations establishes baselines that apply to all aircraft operating in the United States. See 14 C.F.R. § 91.101 ; see generally id. §§ 91.101 –47. Part 91 governs, for example, the use of seat belts, id. § 91.107, minimum safe altitudes, id. § 91.119, aircraft speed, id. § 91.117, and rights of way among aircraft, id. § 91.113.

Part 119 of the FAA's regulations subjects flights operating as air carriers to safety requirements beyond what Part 91 requires of all flights. See 14 C.F.R. § 119.1. An "air carrier" under the Federal Aviation Act is a person undertaking to provide "air transportation," 49 U.S.C. § 40102(a)(2), defined to include "foreign air transportation, interstate air transportation, or the transportation of mail by aircraft," id. § 40102(a)(5). Interstate air transportation, the category relevant to this case, "means the transportation of passengers or property by aircraft as a common carrier for compensation...." Id. § 40102(a)(25). Anyone piloting as an air carrier must have "an air carrier operating certificate" and operate only in compliance with its terms. 49 U.S.C. § 44711(a)(4). The term "[a]ir carrier" for purposes of Part 119 of the regulations tracks the statutory definition. See 14 C.F.R. § 1.1. Thus, as relevant here, under the statutory and regulatory definitions, an "air carrier" is a person engaged in transportation of passengers as a "common carrier."

The statute does not define "common carrier" or "compensation." See 49 U.S.C. § 40102(a). Instead, the FAA has relied for nearly thirty years on a definition of common carriage it announced in an advisory circular. FAA Advisory Circular 120–12A (April 26, 1986) (FAA Advisory Circular), J.A. 30–32. That circular noted the common-law heritage of "common carriage" and "private carriage" and determined that, because the Act left those terms undefined, FAA "guidelines giving general explanations" of the terms "would be helpful." Id. ¶ 3, J.A. 30.

The FAA Advisory Circular distinguished "private carriage" from "common carriage." It explained that "[p]rivate carriage for hire is carriage for one or several selected customers, generally on a long-term basis." Id. ¶ 4.d., J.A. 31. As long as she does not hold herself out to the public generally, and any compensation she receives does not exceed the passenger's pro rata share of expenses, a private pilot may offer private carriage consistently with the regulations. See generally FAA Advisory Circular, J.A. 30–31. In contrast to private carriage, the FAA's Advisory Circular defined "common carriage" as service meeting four elements: "(1) a holding out of a willingness to (2) transport persons or property (3) from place to place (4) for compensation." Id. ¶ 4, J.A. 30. The two "common carriage" definitional factors at issue here are the first and fourth—holding oneself out as willing to transport passengers, and doing or offering to do so for compensation.

As noted above, a pilot with a commercial license is qualified to offer carriage for compensation; a private pilot may only receive compensation pursuant to one of the seven exceptions in section 61.113. 14 C.F.R. § 61.113. Under the FAA Advisory Circular, a pilot's receipt of compensation may be evidence that a pilot's operations are "air transportation," meaning common carriage, requiring a higher level of pilot qualification. FAA Advisory Circular, J.A. 31. For example, notwithstanding the regulatory permission for private pilots to carry selected customers and share flight costs with them pursuant to the express exception set forth in section 61.113(c), even carriers flying members of only "one organization may be ... common carrier[s] if membership in the organization and participation in the flights are, in effect, open to a significant segment of the public." Id. ¶ 4.f., J.A. 31. The FAA also noted that a private pilot's provision of "free transportation" for a hotel or casino that requested "nominal charges" for "gifts and gratuities" has been held to be "common carriage based on the fact that the passengers [we]re drawn from the general public and the nominal charge constituted compensation." Id. ¶ 4.g., J.A. 31.

The FAA Advisory Circular defined "holding out" as making representations "to the public, or to a segment of the public" that a carrier is "willing to furnish transportation within the limits of its facilities to any person who wants it." Id....