Sima Products Corp. v. McLucas

• Decision Date: 03 January 1980
• Docket Number: No. 78-2500,78-2500
• Citation: 612 F.2d 309
• Parties: SIMA PRODUCTS CORPORATION, an Illinois Corporation, et al., Plaintiffs-Appellants, v. Dr. John McLUCAS, Administrator, Federal Aviation Administration, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 309

612 F.2d 309

SIMA PRODUCTS CORPORATION, an Illinois Corporation, et al Plaintiffs-Appellants, v. Dr. John McLUCAS, Administrator, Federal Aviation Administration, Defendant-Appellee.

No. 78-2500.

United States Court of Appeals, Seventh Circuit.

Argued Sept. 24, 1979.

Decided Jan. 3, 1980.

Ray Jeffrey Cohen, Chicago, Ill., for plaintiffs-appellants.

Curtis J. Wilder, Federal Aviation Admin., Chicago, Ill., for defendant-appellee.

Before SWYGERT, PELL and BAUER, Circuit Judges.

SWYGERT, Circuit Judge.

Plaintiffs-appellants Sima Products Corporation and its president, Irvin Diamond, brought this action in the district court, seeking declaratory relief against an amendment to a regulation, 14 C.F.R. § 121.538a(e) (1978), promulgated by the Federal Aviation Administration ("FAA") under certain sections of the Federal Aviation Administration Act, 49 U.S.C. §§ 1356, 1357 ("the Act"), and 14 C.F.R. §§ 121.1(a), 121.538. Plaintiffs challenge the legality of the amendment on both procedural and substantive grounds. The district court dismissed the complaint for lack of subject matter jurisdiction, holding that jurisdiction to review the amendment issued by the FAA lies exclusively in the courts of appeals under section 1006(a) of the Federal Aviation Act, 49 U.S.C. § 1486. Sima Products Corp. v. McLucas, 460 F.Supp. 128, 134 (N.D.Ill.1978). We affirm.

I

On March 5, 1975 the FAA promulgated an amendment to rule 121.538a which regulates the use of X-ray devices for the inspection of carry-on baggage and other items at airport security points. In relevant part, paragraph (e) of the amendment states that:

No certificate holder (i. e., airport) may use an X-ray system to inspect carry-on baggage or items, unless a sign is posted in a conspicuous place which notifies passengers that such items are being inspected by an X-ray system and advises them to remove all X-ray and scientific film from their carry-on baggage and items before inspection. If the X-ray system exposes any carry-on baggage or item to more than one milliroentgen during the inspection, the certificate holder shall post a sign which advises passengers to remove film of all kinds from their carry-on baggage and items before inspection. If requested by a passenger, his photographic equipment and film packages shall be physically inspected without exposure to an X-ray system.

14 C.F.R. § 121.538a(e). ¹ Pursuant to this rule, commercial airports have posted signs similar to those posted at the American Airlines and Northwest Airlines security points in the O'Hare International Airport, Chicago, Illinois, which state:

X-ray baggage inspection.

Carry-on baggage is being inspected by X-ray.

Inspection will not affect ordinary undeveloped film.

Remove all X-ray and scientific film from luggage.

Physical inspection may be requested.

Approximately nine months before the rule was promulgated, a notice of the proposed amendment and rule making appeared in the Federal Register. See 39 Fed.Reg. 22275 (June 21, 1974). In response to this notice, the FAA received numerous comments including ones from scientific and technical organizations, film manufacturers, and an association of photographic suppliers. Plaintiffs Diamond and Sima Products Corporation, which manufacturers and distributes lead laminated containers that protect ordinary commercial film from the effects of X-ray machines, submitted written material to the FAA in opposition to the proposed amendment. They urged that the airport signs advise travelers that X-rays present a danger to all types of film. Along with the other responses, plaintiffs' comments were considered by the FAA and made part of the administrative record. See 14 C.F.R. § 11.-47(a). No evidentiary hearing was held prior to promulgating rule 121.538a.

On August 31, 1976 plaintiffs filed a petition with the FAA, requesting it to amend paragraph (e) so that passengers would be advised to remove all film from their carry-on baggage and items before inspection by an X-ray system. ² See 14 C.F.R. § 11.25. Plaintiffs argued that signs like the ones posted in the O'Hare airport are misleading, and contrary to both scientific fact and personal experience of the plaintiffs. Therefore, plaintiffs maintained, the rule allowing airports to erect such signs is arbitrary, capricious, and unreasonable. To support the allegations, plaintiffs offered a variety of exhibits, including copies of articles in publications, personal correspondence, and a sign posted in the Tokyo, Japan airport by a non-U.S. air carrier.

Four months later, having failed to receive a response to their petition, plaintiffs filed this suit in district court against Dr. John McLucas, the FAA Administrator. ³ Asserting jurisdiction under 28 U.S.C. § 1346, they requested that the district court declare rule 121.538a void as arbitrary and unreasonable and order the FAA to promulgate an amendment to the rule notifying air travelers that X-ray devices are not film safe. The suit was dismissed for lack of jurisdiction and this appeal ensued.

II

At the outset, plaintiffs concede that the FAA fully complied with the notice procedures outlined in section 553 of the Administrative Procedure Act, 5 U.S.C. § 553, and that, in response to the notice of the proposed amendment and rule making that appeared in the Federal Register, they submitted written correspondence. Nonetheless, they argue that they never received a "true hearing" on the merits of their position and for this reason they are entitled to a hearing in the district court. The FAA opposes this position by contending that the explicit statutory language of section 1486 mandates that a determination as to the unreasonableness or arbitrariness of the amendment may be made only by this court.

In granting the FAA's motion to dismiss for lack of subject matter jurisdiction, the district court relied on 49 U.S.C. § 1486. That statute provides in pertinent part that "orders" of the FAA "shall be subject to review by the courts of appeals of the United States or the United States Court of Appeals for the District of Columbia" and that "the court shall have exclusive jurisdiction to affirm, modify, or set aside the order complained of . . . ." 49 U.S.C. §§ 1486(a) and (d). For a variety of reasons plaintiffs contend that regulation 121.538a(e) is not an "order" within the meaning of the section. However, we are unpersuaded.

First, plaintiffs urge that a literal approach to interpreting section 1486 be adopted by this court. It is argued that the special review statute does not apply to the FAA's action because it is labelled a "regulation," rather than an "order." This attempt to skirt the exclusive language of section 1486 is meritless because the term "order" for purposes of this statute should be construed more expansively than plaintiffs suggest. By adopting a liberal construction of "order," FAA actions which are the product of informal rulemaking, such as in this case, may be reviewed by courts of appeals, providing an adequate administrative record has been compiled by the agency. Both statutory and judicial authority support our interpretation of section 1486.

The term "order" is broadly defined in both the Federal Aviation Act, 49 U.S.C. § 1354(a) ⁴ and the Administrative Procedure Act, 5 U.S.C. § 551(6). ⁵ Moreover, the purposes of special review statutes coherence and economy are best served if courts of appeals exercise their exclusive jurisdiction over final agency actions. See City of Rochester v. Bond, 195 U.S.App.D.C. 345, 354, 603 F.2d 927, 936 (D.C.Cir. 1979).

In reaching our decision, we note that the District of Columbia Circuit Court has construed "order" for purposes of special review statutes expansively, to permit direct review of regulations promulgated through informal notice-and-comment rulemaking, such as in this case. See, e. g., City of Rochester v. Bond, supra; Investment Company Institute v. Board of Governors of Federal Reserve System, 170 U.S.App.D.C. 311, 551 F.2d 1270 (D.C.Cir. 1977); Deutsche Lufthansa Aktiengesellschaft v. C.A.B., 156 U.S.App.D.C. 191, 479 F.2d 912 (D.C.Cir. 1973). But see PBW Stock Exchange, Inc. v. SEC, 485 F.2d 718 (3d Cir. 1973), Cert. denied, 416 U.S. 969, 94 S.Ct. 1992, 40 L.Ed.2d 558 (1974).

Plaintiffs' second argument is that inasmuch as the X-ray device amendment was promulgated without the FAA conducting an evidentiary hearing, it cannot be an "order" within section 1486. Although at one time it was believed that regulations promulgated after informal rulemaking were not reviewable in the courts of appeals, See United Gas Pipe Line Co. v. Federal Power Commission, 86 U.S.App.D.C. 314, 181 F.2d 796 (D.C.Cir.), Cert. denied, 340 U.S. 827, 71 S.Ct. 63, 95 L.Ed. 607 (1950), more recent decisions establish that the indicium of "orders" reviewable within the meaning of special review statutes is the adequacy of the agency record. In Deutsche Lufthansa, supra, 156 U.S.App.D.C. at 195, 479 F.2d at 916, in which the identical review statute raised in this case was interpreted, the court stated: "It is the availability of a record for review and not the holding of a quasi judicial hearing which is now the jurisdictional touchstone." This approach, construing "order" to mean any agency action capable of review on the basis of the administrative record, was confirmed in Investment Company Institute, supra. There the District of Columbia Court explicitly rejected the notion that regulations promulgated after informal rulemaking were not reviewable, holding that "the general approach taken by United Gas Pipe Line is no longer good law in this circuit." Id. 170 U.S.App.D.C. at 317, 551 F.2d at 1276. The court articulated the purposes served by construing "order" in this fashion:

. . . if the administrative record forms the basis for review, requiring petitioners challenging regulations to go first to the district court results in unnecessary delay and expense . ....