Huntleigh Usa Corporation v. U.S.

• Decision Date: 15 May 2008
• Docket Number: No. 2007-5118.,2007-5118.
• Citation: 525 F.3d 1370
• Parties: HUNTLEIGH USA CORPORATION, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

525 F.3d 1370

HUNTLEIGH USA CORPORATION, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.

No. 2007-5118.

United States Court of Appeals, Federal Circuit.

May 15, 2008.

Jonathan J. Lerner, Skadden, Arps, Slate, Meagher & Flom LLP, of New York, NY, argued for plaintiff-appellant. With him on the brief was Lauren E. Aguiar.

Kyle E. Chadwick, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With him on the brief was Jeanne E. Davidson, Director. of counsel on the brief was Janessa Grady Fleming, Senior Counsel, Office of the Chief Counsel, Transportation Security Administration, of Arlington, VA.

Before NEWMAN, MAYER, and SCHALL, Circuit Judges.

SCHALL, Circuit Judge.

Huntleigh USA Corporation ("Huntleigh") is a corporation in the business of providing passenger and baggage screening services at airports throughout the United States. During the period between 1989 and early 2002, airlines contracted with Huntleigh in order to meet their responsibilities for passenger and baggage screening under the Air Transportation Security Act of 1974, Pub.L. No. 93-366, 88 Stat. 415 (1974) ("Air Transportation Security Act") (repealed 1994).

Following the terrorist attacks of September 11, 2001, Congress enacted, and the President signed into law, the Aviation and Transportation Security Act, Pub.L. No. 107-171, 115 Stat. 597 (2001) (codified in scattered sections of 5 U.S.C. and 49 U.S.C.) ("ATSA"). Two of ATSA's provisions are pertinent to this appeal. The first provision, section 101(g)(1), 49 U.S.C. § 44901 (note) (Supp. I 2001), provided that the Under Secretary of Transportation for Security was to assume all security and screening functions at United States airports. The second provision, section 101(g)(2), id., provided that the Under Secretary of Transportation could perform those functions by assuming the contracts of private companies that, at the time, provided security and screening functions at airports. If the government chose to accomplish its security and screening obligations via this route, the statute required that it pay adequate compensation to the private companies whose contracts were assumed. Id. ATSA's transfer of responsibility for passenger and baggage screening from airlines to the federal government had the effect of bringing to an end Huntleigh's security screening contracts with airlines.

In November of 2003, Huntleigh filed suit in the United States Court of Federal Claims under the Tucker Act, 28 U.S.C. § 1491(a)(1) (2000). In its suit, Huntleigh alleged that ATSA's transfer of responsibility for passenger and baggage screening resulted in a taking of its property without just compensation, in violation of the Fifth Amendment to the Constitution. Huntleigh also alleged that it was entitled to compensation under section 101(g)(2) of ATSA. In November of 2006, the Court of Federal Claims conducted a four-day trial on Huntleigh's claims. Thereafter, on March 15, 2007, the court rendered a decision in which it rejected both of Huntleigh's claims and ordered the dismissal of Huntleigh's complaint. Huntleigh USA Corp. v. United States, 75 Fed.Cl. 642 (2007). The court ruled that Huntleigh's takings claim failed because Huntleigh had failed to establish that its property had been taken by the government. Id. at 645-46. The court ruled against Huntleigh on its claim for compensation under section 101(g)(2) of ATSA on the ground that the government had not assumed any of Huntleigh's contracts. Id. at 649.

Huntleigh now appeals the decision of the Court of Federal Claims. Because we conclude that governmental action did not effect the taking of Huntleigh's property under the Fifth Amendment and that the government did not assume Huntleigh's security screening contracts so as to entitle Huntleigh to compensation under section 101(g)(2) of ATSA, we affirm the court's decision.

BACKGROUND

I.

The facts pertinent to this case are not in dispute. With the enactment of the Air Transportation Security Act in 1974, Congress directed the Federal Aviation Administration to require airlines to implement security programs to screen all passengers and luggage traveling in commercial aviation. Air Transportation Security Act, Pub.L. No. 93-366, § 315(a), 88 Stat. 415, 415 (1974) ("The Administrator shall prescribe . . . reasonable regulations requiring that all passengers and all property intended to be carried in the aircraft cabin in air transportation . . . be screened by weapon-detecting procedures or facilities employed or operated by employees or agents of the air carrier. . . ."). In order to meet their obligations under the statute, most airlines hired private security contractors to perform the required passenger and baggage screening.

Huntleigh began offering passenger screening services in 1989, and it assumed baggage screening functions in 1999. As of November 19, 2001, when ATSA became law, Huntleigh had in place contracts with approximately 75 airlines. The contracts covered passenger and baggage screening at some 35 airports across the United States.

The provisions of Huntleigh's contracts varied. Some contracts contained set periods of performance, whereas others simply continued indefinitely. All contracts, however, were terminable upon one party's providing a certain number of days notice to the other party. Huntleigh contends, and the government does not dispute, that, as of 2001, Huntleigh had acquired an excellent reputation in the industry and that no major airline had terminated a contract with Huntleigh since 1991.

II.

In the wake of the terrorist attacks of September 11th, Congress reassessed the effectiveness of the screening regime created by the Air Transportation Security Act, wherein airlines were responsible for screening functions and generally met that responsibility by hiring private contractors such as Huntleigh. Specifically, Congress determined that the federal government, through a new federal agency, the Transportation Security Administration ("TSA"), could more effectively provide screening services at airports than could private contractors. See H.R.Rep. No. 107-296, at 53-54 (2001), U.S.Code Cong. & Admin.News 2002, pp. 589, 590 ("The conferees . . . note the terrorist hijacking and crashes of passenger aircraft on September 11, 2001 . . . required a fundamental change in the way [the conferees] approach[ ] the task of ensuring the safety and security of the civil air transportation system. The Conferees expect that security functions at United States airports should become a Federal government responsibility. . . ."). Consequently, Congress enacted ATSA, thereby assigning all airport screening responsibilities to the TSA, rather than commercial airlines.

ATSA imposed screening responsibilities upon the federal government and set forth a way in which the government could meet those responsibilities. Thus, section 101(a) of ATSA amended 49 U.S.C. § 114(d) to provide that the Under Secretary of Transportation "shall be responsible for security in all modes of transportation," and ATSA section 101(g)(1) stated that, not later than three months after the enactment of ATSA, the Under Secretary of Transportation "shall assume civil aviation security functions and responsibilities." ATSA section 101(g)(2), in turn, provided that, in order to meet the government's responsibilities, the Under Secretary of Transportation "may assume the rights and responsibilities of an air carrier or foreign air carrier contract for provision of passenger screening services at airports in the United States." If the Under Secretary of Transportation chose to meet the government's obligations under ATSA by assuming a contract that existed between an airline and a private screening contractor, section 101(g)(2) required the "payment of adequate compensation to parties to the contract."

Though ATSA nowhere expressly forbade Huntleigh or other private contractors from continuing to provide airport screening functions, it effectively eliminated the market for such services, given that it concentrated all screening functions in the federal government. Thus, although no airline other than American Airlines specifically sent a termination notice to Huntleigh, Huntleigh and the other airlines with which it had contracts treated their contracts as terminated upon the government's full assumption of screening functions at airports, resulting in a considerable loss of business to Huntleigh.

III.

As noted above, Huntleigh filed suit in the Court of Federal Claims under the Tucker Act, alleging that ATSA's transfer of responsibility for security screening from airlines to the federal government resulted in a taking of its property without just compensation in violation of the Fifth Amendment. Huntleigh also alleged that it was entitled to compensation under section 101(g)(2) of ATSA. Following a trial, the Court of Federal Claims rendered a decision rejecting both of Huntleigh's claims and ordering the dismissal of Huntleigh's complaint. See generally Huntleigh.

The Court of Federal Claims began by addressing Huntleigh's takings claim. Huntleigh alleged the taking of several property interests. Huntleigh contended first that the government had appropriated its contracts with the airlines. Though Huntleigh conceded that the government had not actually substituted itself as a party to any of its contracts, it argued that the government had effectively appropriated the contracts insofar as it had taken upon itself the responsibility of performing precisely the functions formerly performed by Huntleigh. Id. at 645. Huntleigh relied upon Cienega Gardens v. United States, 331 F.3d 1319 (Fed.Cir.2003), to establish entitlement to compensation for the taking of its contractual rights. Huntleigh, 75 Fed.Cl. at 646. Second, Huntleigh argued that the government had effected a taking by...