Fort Sumter Tours, Inc. v. Babbitt, 94-1570

• Citation: 66 F.3d 1324
• Decision Date: 27 September 1995
• Docket Number: No. 94-1570,94-1570
• Parties: FORT SUMTER TOURS, INCORPORATED, Petitioner-Appellant, v. Bruce BABBITT, Secretary, United States Department of the Interior, Respondent-Appellee. National Park Hospitality Association, Amicus Curiae.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

Page 1324

66 F.3d 1324

FORT SUMTER TOURS, INCORPORATED, Petitioner-Appellant, v. Bruce BABBITT, Secretary, United States Department of the

Interior, Respondent-Appellee.

National Park Hospitality Association, Amicus Curiae.

No. 94-1570.

United States Court of Appeals, Fourth Circuit.

Argued May 1, 1995.

Decided Sept. 27, 1995.

ARGUED: Marvin DeWitt Infinger, Sinkler & Boyd, P.A., Charleston, South Carolina, for Appellant. John Harris Douglas, Assistant United States Attorney, Charleston, South Carolina, for Appellee. ON BRIEF: George E. Campsen, Jr., Campsen & Campsen, Charleston, South Carolina, for Appellant. J. Preston Strom, Jr., United States Attorney, Charleston, South Carolina, for Appellee. Henry L. Diamond, Fred R. Wagner, Scott F. Belcher, Beveridge & Diamond, P.C., Washington, DC, for Amicus Curiae.

Before ERVIN, Chief Judge, MURNAGHAN, Circuit Judge, and YOUNG, Senior United States District Judge for the District of Maryland, sitting by designation.

Affirmed by published opinion. Judge MURNAGHAN wrote the opinion, in which Chief Judge ERVIN and Senior Judge YOUNG joined.

OPINION

MURNAGHAN, Circuit Judge:

Fort Sumter Tours, Inc. ("FST") provides public boat transportation in Charleston, South Carolina under a concession arrangement with the United States Secretary for the Interior ("Secretary"), pursuant to a contract between FST and the National Park Service ("NPS"). Under the contract, FST is required to pay a franchise fee to the Secretary equal to a determined percentage of FST's annual gross receipts; the contract provides for reconsideration of the franchise fee at five-year intervals. After five years had passed on FST's present contract, NPS notified FST that it wished to renegotiate the franchise fee. FST objected to the proposed fee change, but refused to engage in discussions with NPS. After an investigation, NPS adopted a significantly increased franchise fee. When FST challenged the fee in the district court, the court affirmed NPS's decision to raise the franchise fee. FST appeals, and we affirm.

I. Factual Background

The Fort Sumter National Monument ("the Monument") is located in Charleston Harbor, South Carolina. NPS, which administers the Monument for the Secretary, organizes the provision of facilities and services for the public at the Monument by entering into concession contracts with private companies. FST is one such company. FST's contract with NPS provides that FST will furnish boat transportation services to and from the Monument. The concession contract requires FST to operate two mainland docking facilities and to provide sightseeing vessels; NPS maintains the Monument and a suitable dock at the Monument.

The concession relationship between the FST and NPS began on July 13, 1961, when NPS first selected FST to operate the boating facility. The present contract, entered into on June 13, 1986 with an expiration date of December 31, 2000, is the fourth in a series of concession contracts between FST and NPS. Section 9(a) of the present contract calls for FST to pay a franchise fee to the Secretary in the amount of 4.25% of FST's annual gross receipts. Section 9(e) of the contract further authorizes reconsideration of the fee at the end of each five-year period at the request of either party to the contract. If such a request is timely made (within sixty days after the end of a five-year period), the parties may negotiate the modification; if they cannot agree, however, NPS makes a final decision as to the franchise fee modification. The contract includes a provision for the appointment of an advisory arbitration panel to make a recommendation to NPS regarding the fee adjustment. Any new fees established are retroactive to the beginning of the five-year period for which a reconsideration of fees was sought.

In a letter of June 20, 1991, the NPS Southeast Regional Director notified FST that NPS was considering renegotiating the contractual franchise fee. NPS prepared a franchise fee analysis on February 27, 1992, which concluded that a 12% franchise fee was appropriate for the five-year period starting on June 13, 1991. FST was advised of the NPS determination by letter dated March 16, 1992; the letter also indicated that NPS was willing to meet with FST to discuss the determination. FST objected to the 12% figure by a letter on March 24, 1992.

Thereafter, an FST attorney sought documents relevant to the fee determination from NPS under the Freedom of Information Act ("FOIA"), 5 U.S.C. Sec. 552. On May 15, 1992, NPS again invited FST to discuss the franchise fee modification. However, on April 14, 1993, FST advised NPS that, rather than pursuing further negotiations, it intended to ask a court to rule on NPS's authority to increase the franchise fee. FST filed a declaratory action in the United States District Court for the District of South Carolina on April 21, 1993, seeking a ruling regarding the rights and obligations of the parties under the National Park System Concessions Policy Act, 16 U.S.C. Secs. 20-20g, and under the relevant concession contract. By a letter dated June 16, 1993, NPS advised FST that, because FST refused to negotiate the fee and did not wish to avail itself of the advisory arbitration provisions under the contract, NPS had performed an independent review and had determined that a fee of 12% was appropriate. The 12% fee determination became a final decision of the Secretary, and NPS requested payment of the fee amount from FST. FST's suit then became an administrative appeal of the Secretary's final decision, over which the district court had jurisdiction by virtue of the Administrative Procedure Act ("APA"), 5 U.S.C. Secs. 701-706.

Shortly after filing suit, FST attempted to depose several NPS employees. NPS moved for a protective order which was granted in part by a magistrate judge, and then granted in its entirety by the district court upon reconsideration. All discovery was prohibited.

After briefing and oral argument on January 5, 1994, the district court entered an order upholding NPS's decision to raise FST's franchise fee to 12% of FST's gross receipts. FST's motion for reconsideration of the order was denied, and FST appealed. In this Court, FST claims that NPS did not have the statutory or the contractual authority to raise the franchise fee. FST also contends that NPS's notice of its intention to change the fee was inadequate under the contract, and that NPS calculated the 12% fee incorrectly.

II. Statutory Authority

NPS claimed authority for its adjustment of FST's franchise fee under both the National Park System Concessions Policy Act ("CPA"), 16 U.S.C. Secs. 20-20g, and the concession contract between FST and NPS. To calculate the exact amount of the adjusted fee, NPS further relied on Chapter 24 of the Concessions Guidelines, commonly referred to as "NPS-48," which is an agency guideline developed by NPS in 1986 that establishes a methodology for the calculation of concessioner franchise fees. FST argues that the method used by NPS to calculate the fees challenged in the instant case contravenes both the language and the purpose of the CPA. Specifically, FST claims that (1) NPS, in violation of the CPA, used the adjustment of franchise fees as a way in which to limit FST's profits; (2) while the CPA allows NPS to reconsider fees unilaterally, it does not allow NPS to adjust fees; and (3) section 9(e) of the concession contract, which provides the contractual authority for an adjustment of franchise fees, does not constitute an "appropriate provision" for the reconsideration of fees as required by the CPA. This Court reviews de novo the district court's interpretation of a statute. C.G. Willis, Inc. v. The Spica, 6 F.3d 193, 196 (4th Cir.1993) (citing McDermott Int'l, Inc. v. Wilander, 498 U.S. 337, 356, 111 S.Ct. 807, 818, 112 L.Ed.2d 866 (1991)).

A. Limitation of Profits

The CPA authorizes the Secretary of the Interior to contract with private companies in order to provide services to visitors to the National Park System, see 16 U.S.C. Sec. 20a; the Secretary administers the provision of these services through NPS. The Act governs the concession agreements between the Secretary and his concessioners, such as the one between NPS and FST. The CPA contains an explicit provision regarding the reconsideration of franchise fees:

Franchise fees, however stated, shall be determined upon consideration of the probable value to the concessioner of the privileges granted by the particular contract or permit involved. Such value is the opportunity for net profit in relation to both gross receipts and capital invested. Consideration of revenue to the United States shall be subordinate to the objectives of protecting and preserving the areas and of providing adequate and appropriate services for visitors at reasonable rates. Appropriate provisions shall be made for reconsideration of franchise fees at least every five years unless the contract is for a lesser period of time.

Id. Sec. 20b(d) (emphasis added). NPS-48, developed pursuant to the CPA, provides a specific method for calculating franchise fees:

The appropriate franchise fee for concessioners shall be determined by first comparing the concessioner's profitability against the profitability of similar industries. The concessioner's reported statistics may be adjusted to reflect the value realized by the concessioner. Any known future changes in the financial condition of the operation should be taken into account.

In order to protect the investments and efforts of the parties involved, a minimum and maximum fee shall be determined thus establishing fee limits.

A fee will be determined within these limits that produces a reasonable level of profitability consistent with the risk undertaken by the concessioner.

As a final test, the impact of this fee should be reviewed to ensure that it is not at a level which will interfere with the concessioner's reasonable...