ACI-NA’s Weekly Legal Briefing



Volume 2011, Issue 19

Week of July 5– July 8, 2011

Legal Affairs Committee Members:

The following matters are highlighted for your review and information.

Litigation Update:

On July 1, 2011, the U.S. Court of Appeals for the District of Columbia Circuit issued its decision in the Southwest Airlines Co. v. Transportation Security Administration case.  The opinion of a divided court which upheld the TSA determinations, was issued by Judge Kavanaugh and joined by Judge Henderson. Judge Brown issued a dissenting decision.

In this case, Southwest and 19 other airlines allege that TSA’s determination of their year 2000 airport security costs were arbitrary and capricious under the Administrative Procedure Act, and were unconstitutional.  The majority opinion found that the TSA charges were neither, and dismissed the appeal brought by the airlines.

In this case, the airlines did not challenge the TSA fees collected on airline passengers, but only challenged the TSA fees imposed on airlines, which are intended to track the costs the airlines incurred to screen passengers and property when airlines performed that function during the year 2000.

In 2004, the Government Accountability Office (“GAO”) was asked to conduct an independent review of the airlines’ year 2000 screening costs as determined by TSA, and at the conclusion of that review issued a report finding that TSA assessed insufficient fees to cover screening costs.  Based on the GAO’s findings, TSA assessed additional fees on many airlines for year 2005 and subsequent years.

It was later determined that GAO’s estimate of year 2000 screening costs included both the costs of screening non-passengers as well as passengers and property.  TSA’s imposed airline fees, however, were capped at the amount that TSA determines airlines “paid…for screening passengers and property” in the year 2000.  Several airlines, including some participants in this litigation, then challenged TSA’s fee increase, arguing that TSA violated the plain language of the statute.  The U.S. Court of Appeals for the District of Columbia Circuit agreed and remanded the case to TSA for the agency to exclude the costs of screening non-passengers from its calculation of airline fees and to issue refunds accordingly.

On remand, TSA commissioned a report from the consulting firm of Simat, Helliesen & Eichner (“SH&E”)  to determine what percentages of individual screenings in 2000 were attributable to passengers and to non-passengers, and to determine what proportion of the airlines’ screening costs were fixed, such that they would not decrease even if non-passengers were excluded. The SH&E report, along with an airline-commissioned report from Campbell Aviation Consultants, were submitted to TSA as part of the record for the agency’s determination of appropriate fees.  TSA accepted the findings of the SH& E report, recalculated each airline’s fee liability on the basis of the results contained therein, and sent written notices of its refund determinations to each airline.  This case is the appeal initiated by the airlines’ concerning the appropriateness of TSA’s determinations.

The Court found that TSA’s decision to rely on the SH&E Report was not arbitrary and capricious or an abuse of discretion because it made a thorough review of the two reports and stated in its letters to the airlines that the Campbell report was “insufficient for further consideration due to the report’s use of limited date and broad, simplistic methodologies that did not consider the full spectrum of specific cost categories.”  The more extensive methodologies employed in the SH&E report were also explained in the letter determinations from TSA.  The Court thus found that TSA’s adequate consideration of contradictory evidence did not permit the reviewing court to displace TSA’s choice between conflicting views.  The court pointed out that agency deference is particularly strong in this matter because the underlying statute itself provides that the fee is based on the amount TSA “determined” the airlines paid in 2000.

The Court also rejected the airlines’ argument that TSA’s determination was arbitrary and capricious simply because TSA never specifically mentioned a figure contained in the prior Department of Transportation (“DOT”) report on the number of individuals screened in 2000.  The Court stated that although TSA did not mention the DOT report by name, that the report was referenced implicitly, and that the most important piece of data in the Campbell report was the figure contained in the DOT report.  The Court further stated that the airlines failed to present any evidence that the figure in the DOT report was at all reliable.  In fact, the Court noted that the DOT figure was not based on a governmental or independent audit, but rather was based on industry-reported, that is, airline-supplied, data.  The Court further observed that the airlines providing the information had an incentive to inflate the number and cost of screenings to convince the government either to shoulder some of the costs or to impose less burdensome security requirements on the airlines. In fact, one sentence in the Court’s opinion reflects its own skepticism of the reliability of the DOT reported numbers:  “Shaky numbers in, shaky numbers out.”

The Court also disposed of the airlines’ three remaining arguments, finding that:  (1) the TSA’s decision was neither arbitrary and capricious nor did it violate the Due Process Clause simply because the agency did not disclose the SH&E report until the day before it released the fee determination letters,  (2) the TSA did not improperly delegate its responsibilities to SH&E since that report was simply used by the agency in its fact-gathering stage of the decision-making process; and (3) the fact that the TSA’s combined refunds to the individual airlines fell short of the total amount due to the airlines under SH&E’s methodology was explained sufficiently by TSA, and the airlines failed to identify specific problems with any individual refund decision.

Judge Brown’s dissenting decision opinion is largely based on his view that TSA impermissibly ignored evidence contradicting the SH&E report on which it relied.

Regulatory Developments:

·            EPA:  EPA has issued guidance regarding compatibility of underground storage tanks with biofuel blends.  

Link to Federal Register Notice:

Compatibility of Underground Storage Tank Systems With Biofuel Blends

ACTION: Notice of final guidance.

SUMMARY: EPA is issuing final guidance on how owners and operators of underground storage tanks (USTs) can demonstrate compliance with the Federal compatibility requirement for UST systems storing gasoline containing greater than 10 percent ethanol or diesel containing greater than 20 percent biodiesel.

The Federal UST regulation in 40 CFR part 280 addresses preventing and detecting UST system releases; the provision in 40 CFR 280.32 requires the UST system be compatible with the substance stored; … biofuel blends can compromise the integrity of some UST system materials…. The July 5, 2011 Federal Registernotice issues guidance on how owners and operators of UST systems storing fuels containing greater than 10 percent ethanol or greater than 20 percent biodiesel can demonstrate compliance with the UST compatibility requirement.

FAA:   Proposes $194,249 Civil Penalty Against ERA Helicopters

The Federal Aviation Administration (FAA) issued a news release indicating that it has issued an enforcement letter in which it is proposing a $194,249 civil penalty against ERA Helicopters Inc. (“ERA”), of Lake Charles, La.  The FAA’s enforcement letter alleges the ERA was involved in multiple violations of the FAA’s drug and alcohol testing program regulations.  Among ERA’s alleged violations are:  (1) its failure to conduct required pre-employment drug tests and receive verified negative test results in 2010 before hiring eight employees to perform safety-sensitive duties and (2) its failure to conduct required random testing of at least 25 percent of its safety-sensitive employees during 2009. The company has 30 days from the receipt of the FAA’s enforcement letter to respond to the agency.

[submitted by James Briggs]

Upcoming Meetings and Events of Interest

James Briggs of the ACI-NA staff will be attending meetings of the U.S. Access Board in the Washington, D. C. metropolitan area several days next week.  Feel free to contact James at jbriggs@aci-na.orgif you are interested in learning more about the agenda of those meetings, or if you have questions that he might be able to raise on airport compliance issues.

Transportation Research Board Announces its 50th Annual Workshop on Transportation Law, July 17-20, 2011. Seattle, Washington.  For additional information, see:

·         The ABA Air & Space Law Forum is Hosting Young Lawyer Mentoring Events and Receptions For Young Lawyers and Law Students

They will provide opportunities for interested attorneys and law students to learn about aviation and space law and the ABA Forum dedicated to it! This Young Lawyers' Mentoring Event and Reception gives you the chance to meet briefly and one-on-one with leading lawyers including, General Counsels, senior appointees from the aviation industry, US and foreign airline associations, private practice, and the Federal government.

New York, NY
June 30, 2011 - 5:45 PM - JFK Terminal 5

Washington, DC
July 21, 2011 - 5:30 pm - Air Transport Association of America (ATA)
1301 Pennsylvania Avenue, NW, Suite 1100

ACI-NA General Counsel, Monica Hargrove, will be a presenter during the Washington, DC reception and mentoring event.

Chicago, IL
July 21, 2011
United Operations Center

Matters of Potential Interest

DOT/FAA:  This is just a reminder that comments on the Part 23 NPRM on proposed improvements in the Part 23 Disadvantaged Business Enterprise Program are due to USDOT by July 26 if you have not already submitted comments.

Effective July 1, 2011, ACI-NA associate law firm Quateman LLP became Polsinelli Shughart. Polsinelli, one of the fastest growing law firms in the country.  Lisa Greer Quateman will continue to serve as the office Managing Partner and the entire core team of attorneys and staff of the Quateman firm joined Polsinelli.


If you have information of interest to share, please forward it to me by COB on Thursday of each week.  Send it to:

Have a wonderful weekend!


Monica R. Hargrove
General Counsel

Direct: (202) 861-8088