Centennial Express Airlines v. Arapahoe Co. Public Airport Auth.
Final Agency Decision
FAA Docket No. 16-98-05



FAA Order No. 1999-1 (Part 16, Subpart G)
Docket Nos. 16-98-05, 13-94-03


Docket No. 13-94-25


No Separate Docket Number [FN 1]


February 18, 1999

[FN 1] Under 14 C.F.R. 16.203(b)(1), the agency became a party when the Director of the FAA Office of Airport Safety and Standards issued his determination providing the Airport Authority the right to a hearing.

I. Introduction

The question at the heart of this appeal is the lawfulness of a Federally- assisted airport operator's ban on all scheduled passenger service. At stake is the airport operator's eligibility for additional Federal grants.

II. Background

Arapahoe County Public Airport Authority (the Airport Authority) owns and operates Centennial Airport, which is outside of Denver, Colorado. Over the years, the Airport Authority has received millions of dollars in airport improvement grants from the Federal Aviation Administration (FAA). In exchange for the funds, the Airport Authority signed a grant assurance promising not to grant any person or persons exclusive rights, and another promising to make the airport "available for public use on reasonable conditions and without unjust discrimination." Under the latter assurance, however, the airport operator may "prohibit or limit any given type, kind, or class of aeronautical use ... if such action [is] necessary for the safe operation of the airport or necessary to serve the civil aviation needs of the public."

Beginning in 1985, Centennial Express contacted the Airport Authority about starting scheduled 14 C.F.R. Part 135 passenger service at Centennial Airport. On February 20, 1989, the Airport Authority published the following statement in its newsletter:

... [C]ommercial service has always existed at Centennial in the form of Part 135 charter/air taxi certification, which permits "for hire" passenger and freight service, whether scheduled or unscheduled. Such activity may not be prohibited but is limited to aircraft with 30 seats or less.
(Director's Determination at 12; emphasis added.) On October 3, 1989, the Airport Authority's newsletter contained the following statement:
No scheduled air carrier, either large or small, has applied to the Authority to operate at the airport. Should any apply, the Authority will consider only the smaller, regional air service applications. No action will be taken by the Authority to consider such applications, however, without extensive community input and public hearing.

On December 12, 1991, Centennial Express sent the Airport Authority a letter asking the Airport Authority to set standards that would allow Centennial Express to operate scheduled passenger service. Centennial Express alleges that the Airport Authority notified Centennial Express that it was revising its airport policy statement and needed to complete the revision before it would enact minimum standards for scheduled passenger service under Part 135.

On March 12, 1992, the Airport Authority adopted a policy statement that stated as follows:

The Authority reaffirms the original intent of the airport to service the general aviation community. To this end. Centennial will continue to accommodate aircraft operating under Federal Aviation Regulations Part 135/Operations Specifications 135 (30 or fewer seats). Requests for scheduled air service shall be reviewed for compliance with this policy, the established weight limit, and the application minimum standards.
(Director's Determination at 13.)

On April 8, 1993, the Airport Authority imposed a moratorium on considering applications for scheduled passenger service. Nevertheless, on May 7, 1993, Centennial Express Airlines (Centennial Express) -- having acquired Golden Eagle Charters and its operating certificate, aircraft, and organization -- applied to the Airport Authority to conduct scheduled passenger service at Centennial Airport. The Airport Authority did not approve Centennial Express's application. On September 8, 1994, the Airport Authority issued a policy statement banning scheduled passenger service at Centennial Airport.

On December 20, 1994, Centennial Express initiated scheduled passenger service between Centennial Airport and Dalhart, Texas with one six-passenger Beechcraft aircraft. [FN 2] At the time, Centennial Express possessed both Federal safety and Federal economic authority to conduct scheduled passenger service operations at Centennial Airport. Two days later, the Airport Authority obtained a temporary restraining order from the District Court, County of Arapahoe, State of Colorado, prohibiting Centennial Express from providing scheduled service at Centennial Airport. On December 23, 1994, the U.S. Department of Transportation sent the Airport Authority an opinion letter stating that it was arbitrary to exclude a particular class of service for factors not reasonably related to the impacts of that service. On January 10, 1995, the Airport Authority obtained a permanent injunction from the same court. In January 1995, Centennial Express voluntarily surrendered its Part 135 operating certificate to the FAA.

[FN 2] FAA Exhibit 1, Item 6.
On August 7, 1994, Thomas Kehmeier, a shareholder of Centennial Express, filed a formal complaint with the FAA, in Docket No. 13-94-25, as a private citizen, alleging that the Airport Authority violated Federal law and its grant assurances by imposing a moratorium on considering applications for scheduled passenger service at Centennial Airport. On January 30, 1995, Centennial Express also filed a formal complaint with the FAA, in Docket No. 13-95-03, alleging that the Airport Authority had improperly prohibited scheduled passenger service at Centennial Airport. Both complaints were filed under 14 C.F.R. Part 13, entitled "FAA Investigative and Enforcement Procedures." 14 C.F.R. Part 13, Subpart D. After the Rules of Practice for Federally-Assisted Airport Proceedings contained in 14 C.F.R. Part 16 went into effect, [FN 3] Centennial Express filed a second complaint under Part 16 on February 23, 1998 (Docket No. 16-98-05). Centennial Express's Part 16 complaint contained the same allegations as its Part 13 complaint. The FAA consolidated the Part 13 dockets and their administrative records into the Part 16 proceeding to avoid duplicative proceedings and to assure that the agency met the Part 16 time requirements for the Part 16 complaint.
[FN 3] The Rules of Practice contained in Part 16 went into effect on December 16, 1996. 61 Fed. Reg. 53,998 (October 16, 1996).
Meanwhile, Centennial Express was appealing the permanent injunction through the Colorado courts. On December 12, 1996, the Colorado Court of Appeals reversed the permanent injunction granted by the District Court. Arapahoe County Public Airport Authority v. Centennial Express Airlines, Inc., 942 P.2d 1270 (Colo. App. 1996). While the case was on appeal to the Colorado Supreme Court, the state of Colorado dissolved Golden Eagle Charters, the subsidiary of Centennial Express, in May 1997 after Golden Eagle failed to file its 1997 corporate report.

On April 13, 1998, the Colorado Supreme Court ruled that the Court of Appeals erred in reversing the permanent injunction. Arapahoe County Public Airport Authority v. Centennial Express Airlines, Inc., 956 P.2d 587 (Colo. 1997) (en banc). The FAA was not a party to the state court proceedings and did not participate in developing the state court record. The Colorado Supreme Court declined to defer to the FAA's primary jurisdiction. It found that the issue was not Federally preempted under the 49 U.S.C. 41713(b)(1) provision prohibiting state or local regulation of "price, route or service of an air carrier" but rather fell within the proprietor exception in § 41713(b)(3). The majority also held that the ban did not violate the FAA grant assurance requiring the sponsor to "make its airport available as an airport for public use on fair and reasonable terms without unjust discrimination to all types, kinds, and classes of aeronautical users." Additionally, the majority said that "the authority's ban on scheduled service is necessary to ensure safe operation of the airport" and that "increased congestion is sure to have an impact on safety." Id. at 596.

After investigation, the Director of the FAA's Office of Airport Safety and Standards rendered an initial determination on August 21, 1998, under 14 C.F.R. 16.31 regarding the complaints filed by Centennial Express and Thomas Kehmeier. The Director found that the FAA was not bound by the Colorado Supreme Court's decision. He determined that the Airport Authority violated Federal law and its grant assurances by banning scheduled service at Centennial Airport.

The Airport Authority requested a hearing under 14 C.F.R. Part 16, Subpart F. On September 28, 1998, the Deputy Chief Counsel issued a Hearing Order identifying the parties and issues. Prior to the hearing, Greenwood Village moved to intervene as a party under 14 C.F.R. 16.207, and the hearing officer granted the motion.

The hearing was held on November 12-13, 1998, in Denver, Colorado. The hearing officer's initial decision affirmed the Director's determination on all issues. The Airport Authority and Greenwood Village have filed the instant appeal of the hearing officer's initial decision. [FN 4]

[FN 4] Citing 14 C.F.R. 16.19, the City of Greenwood Village has filed a motion to strike a number of alleged factual misstatements in the reply brief of the FAA Office of Airport Safety and Standards. In response, counsel for the FAA Office of Airport Safety and Standards has filed a document in which it claims that Greenwood's motion was actually an impermissible additional brief that should be stricken.

The FAA Office of Airport Safety and Standards is correct that additional legal argument would be impermissible, because the rules of practice permit only one brief per party. 14 C.F.R. 16.241(f)(2) ("parties may file one brief on review to the Associate Administrator"). Greenwood's motion, however, briefly lists alleged factual misstatements. Thus, it does not constitute an improper additional brief and it has been considered in reaching this decision.

Under the Rules of Practice the Hearing Officer may "issue an initial decision or rule in a party's favor only if the decision or ruling is supported by, and in accordance with, reliable, probative, and substantial evidence contained in the record and is in accordance with law." 14 C.F.R. 16.227. Otherwise, the Hearing Officer's decision or ruling is subject to reversal. This standard of proof will guide the following discussion of the parties' arguments on appeal. [FN 5]
[FN 5] Any arguments not specifically addressed have been considered and found to be without merit.

III. Standing

Greenwood Village argues that the Hearing Officer should have dismissed the complaints because Complainants Centennial Express/Golden Eagle Charters and Thomas Kehmeier lack standing under 14 C.F.R. Part 16. Greenwood points out that Centennial Express no longer holds a Part 135 air carrier certificate and Golden Eagle Charters has been dissolved. As for Kehmeier, Greenwood argues that he can no longer benefit from scheduled service at Centennial Airport because he has moved away from Denver. Greenwood contends that as a shareholder of Centennial Express, Kehmeier is simply a proxy for Centennial Express and thus he lacks standing just as Centennial Express does. [FN 6]

[FN 6] Greenwood has several additional arguments relating to standing. Greenwood argues that the Hearing Officer erred in suggesting that the Part 13, Subpart D complaints could cure the lack of standing under Part 16, and that it is unfair for the agency to apply only the sections of Part 16 that favor the agency. Moreover, Greenwood believes that the Hearing Officer erred in reasoning that because the FAA could have brought its own case under 14 C.F.R. 16.101, it is irrelevant whether these particular Complainants lack standing. According to Greenwood, the agency chose not to bring a case of its own, and even if had it done so, it could not have based it on a live controversy, because there is currently no Part 135-certificated carrier seeking to offer scheduled service at Centennial Airport.
At the outset, it should be noted that standing requirements in administrative adjudications are less strict than in Federal court actions. As the court stated in ECEE, Inc. v. Federal Energy Regulatory Commission, 645 F.2d 339, 349 (5th Cir. 1981):
Administrative adjudications ... are not ... article III proceeding[s] to which either the "case or controversy" or prudential standing requirements apply; within their legislative mandates, agencies are free to hear actions brought by parties who might be without standing if the same issues happened to be before a federal court. Gardner v. FCC, 530 F.2d 1086, 1090-91 (D.C. Cir. 1976). Accord, Koniag, Inc., Village of Uyak v. Andrus, 580 F.2d 601, 611-17 (D.C. Cir.) (Bazelon, J., concurring), cert. denied, 439 U.S. 1052 (1978).
The Rules of Practice for Federally-Assisted Airport Enforcement Proceedings in 14 C.F.R. Part 16 provide that "[a] person directly and substantially affected by any alleged non-compliance may file a complaint with the Administrator." 14 C.F.R. 16.23(a). Assuming, arguendo, that the standing requirement of Part 16 applies, [FN 7] it is difficult to imagine a stronger case for a direct and substantial effect on Complainants. The Airport Authority obtained an injunction that immediately brought Centennial Express's scheduled passenger operations at Centennial Airport to a halt, forcing it out of business there. Kehmeier is a shareholder of Centennial Express and therefore is directly and substantially affected by any prohibition on Centennial Express's revenue operations. The very facts that Greenwood points to -- the surrender of the Part 135 certificate and the dissolution of Golden Eagle Charters -- are perhaps the most compelling evidence possible that the Airport Authority's alleged non-compliance had a direct and substantial effect on Complainants. [FN 8] As Kenneth Culp Davis states in § 24.1 of the Administrative Law Treatise (2 supernd ed. 1983), "A main objective in reforming the law of standing should be to strip down the law to one simple proposition: one who is adversely affected in fact should never be denied standing." [FN 9]
[FN 7] Arguably, the less stringent standing requirements of Part 13, Subpart D apply because Centennial Express and Thomas Kehmeier filed their complaints under Part 13, Subpart D before Part 16 came into existence. (Part 16 applies to complaints filed and investigation initiated by the FAA on or after December 16, 1996. 14 C.F.R. 16.1(d). For complaints filed earlier, Part 13, Subpart D continues to apply.)

Part 13, Subpart D permits any person to file a complaint with the Administrator with respect to anything done or omitted to be done by any person in contravention of any provision of any Act or any regulation or order issued under it, as to matters within the jurisdiction of the Administrator. 14 C.F.R. 13.5. For the agency to apply the stricter Part 16 rules for standing and pleading to the complaints already accepted and pleaded under more lenient rules in Part 13, Subpart D arguably would have violated Complainants' due process rights.

[FN 8] Section 16.23(a) does not state that the person directly and substantially affected must hold a Part 135 certificate. Note that the Airport Authority has admitted that it has the discretion to consider an application for scheduled passenger service even where the applicant does not possess an FAA operating certificate at the time of application. Exhibit 20e.

[FN 9] Greenwood argues that the Airport Authority's ban on scheduled passenger service caused neither the surrender of Centennial Express's Part 135 certificate nor the dissolution of Golden Eagle Charters. It is hard to believe that no causal connection exists, given the timing of the surrender (immediately after the Airport Authority obtained an injunction again Centennial Express's scheduled operation). Centennial Express went to some trouble to set up scheduled operations at Centennial Airport. The injunction the Airport Authority obtained halting Centennial Express/Golden Eagle Charters' scheduled passenger operations certainly would not have helped the financial situation of Centennial Express and Golden Eagle Charters.

Regardless, even if there was no causal connection between the ban on the one hand and the surrender of the operating certificate and dissolution of Golden Eagle Charters on the other, the ban still had a direct and substantial effect on Centennial Express -- Centennial Express/Golden Eagle Charters sought to operate scheduled passenger service at Centennial Airport, but the Airport Authority obtained an injunction stopping it from doing so.

Even if Complainants lacked standing, dismissal of the proceeding would be inappropriate at this point because the FAA, with its statutory mandate to ensure that Federally-funded airports comply with their grant assurances, would remain as party and as prosecutor. The FAA became a party after the Director of the FAA's Office of Airport Safety and Standards issued his initial determination finding the Airport Authority in violation of Federal law and its grant assurances and the Airport Authority requested a hearing. The Rules of Practice provide that: "The parties to the hearing are the respondent(s) named in the hearing order, the complainant(s), and the agency." [FN 10] 14 C.F.R. 16.203(b)(1) (emphasis added). They further provide, in relevant part, that, "the agency attorney will serve as prosecutor for the agency from the date of issuance of the Director's determination providing an opportunity for hearing." 14 C.F.R. 16.203(b)(2) (emphasis added). In accordance with these provisions, the Hearing Order named the FAA Office of Airport Safety and Standards as a separate party, "as prosecutor for the agency." (Emphasis added.) See also 14 C.F.R. 16.3, which defines "agency attorney" as an attorney "who represents the FAA during the investigation of a complaint or at a hearing on a complaint, and who prosecutes on behalf of the FAA ...."
[FN 10] The FAA Office of Safety and Standards has indicated in its reply brief that if the complaints were dismissed, the Director would begin an investigation under 14 C.F.R. 16.101. The FAA does not need a "live" complainant to initiate an investigation. Notice and the opportunity for informal resolution under Section 16.101 at this point would be pro forma. The Airport Authority has had ample notice of the FAA's position, and the Airport Authority's refusal to comply with its grant assurances after an FAA investigation and several decisions does not suggest an interest in informal resolution. Under the circumstances, complaint dismissal would be wasteful of agency and taxpayer resources.
Thus, the role of the FAA Office of Airport Safety and Standards is not to represent Complainants, but to represent the agency, acting to protect the public interest. The role of the private complainant is simply to bring to the agency's attention apparent violations of airport grant assurances. See 61 Fed. Reg. at 53,999 (October 16, 1996), noting that the FAA is the party with the burden of proof and that the Rules of Practice give Complainants party status only to assist the FAA in the development of the factual record.

In summary, Complainants Centennial Express and Thomas Kehmeier have standing because the Airport Authority's ban on scheduled passenger service substantially and directly affected them. In addition, the FAA has standing by operation of the rules. [FN 11]

[FN 11] While Greenwood claims that the FAA intentionally destroyed evidence "highly relevant" to its standing claim -- i.e., the Part 135 operator file for Centennial Express/Golden Eagle Charters -- the record indicates that the local FAA Flight Standards District Office destroyed the file along with other inactive files several years ago when moving FAA Denver-based field offices to the new Denver International Airport. In any event, Greenwood has not shown how the Part 135 file is relevant to this proceeding.

IV. Mootness

As for the Airport Authority's and Greenwood's argument that this proceeding is moot, it is undisputed that the ban on scheduled passenger service continues in place at Centennial Airport. [FN 12] Thus, this case presents a live controversy because the FAA, as a party, has a genuine interest in enforcing the applicable Federal statutory provisions and grant assurances. [FN 13]

[FN 12] To support its mootness argument, Greenwood states that there are currently no Part 135-certificated carriers seeking to offer scheduled service at Centennial Airport. Assuming, arguendo, that Greenwood's representation is still accurate, these proceedings are not moot because the Airport Authority has conceded that one need not have a Part 135 certificate at time of application. In addition, the Airport Authority's ban would likely discourage potential carriers from applying to operate scheduled service.

[FN 13] Also, because the mootness doctrine arises from the case or controversy requirement for Article III courts, it does not necessarily apply to proceedings before Article I executive branch administrative proceedings.

V. Due Process

Under the Rules of Practice in Part 16, a Hearing Officer rather than an Administrative Law Judge presides over the hearing. (See, e.g., 14 C.F.R. 16.202, detailing the powers of the Hearing Officer, which include presiding over the hearing and issuing an initial decision.) Greenwood argues that the FAA Deputy Chief Counsel violated its due process rights by declining to amend the hearing order to include the issue of whether the Hearing Officer should have referred the case to an Administrative Law Judge for a hearing under the Administrative Procedure Act (APA).

Greenwood's Standing to Raise Issues

In this proceeding, the Director withheld approval of the Airport Authority's new grants - not Greenwood's. Greenwood is merely an intervenor. [FN 14] Under 49 U.S.C. 47106(d), the statute under which the Director's Determination withheld approval of new grants, only the Airport Authority, as the airport sponsor, may request a hearing. Significantly, the Airport Authority, the only respondent with the statutory right to a hearing, has not argued that an Administrative Law Judge rather than the Hearing Officer should have heard its case.

[FN 14] The section in the Rules of Practice regarding intervention provides that "Participation under this section is at the discretion of the FAA."
Greenwood, having no right to request a hearing, is outside the "zone of interests" protected by 49 U.S.C. 47106(d). Clarke v. Securities Industry Association, 479 U.S. 388 (1987). As a result, Greenwood is without standing to raise the issue of who should have heard this case.

Inapplicability of APA

Even if the Airport Authority, rather than Greenwood, had raised the same argument - i.e., that the APA requires that an administrative law judge hear this case -- it would still fail. Greenwood argues as follows:

... the Hearing Officer did not satisfy the APA's separation of functions doctrine because he is an FAA attorney in the Procurement Legal Division of the Office of the Chief Counsel. The Office of the Chief Counsel is responsible, inter alia, for investigations and enforcement actions by the FAA. The Hearing Officer, therefore, was conspicuously under the supervision and direction of an agency employee who is engaged in the performance of investigative or prosecuting functions for the agency. Since the Hearing Officer and FAA investigators are responsible to the FAA Administrator through the same chain of authority (the Chief Counsel), the Hearing Officer's role as adjudicator in this case violated the APA. (Appeal Brief at 33.)
The APA, however, does not apply to hearings provided under 49 U.S.C. ss 47106(d) & 47111(d). [FN 15]
[FN 15] The wording of 49 U.S.C. 47106(d) indicates that Congress did not intend to require full agency adherence to all APA Section 554 components. Unlike another part of the same statute (the Airport and Airway Improvement Act of 1982, as amended) which is subject to the APA and which expressly requires a hearing before an administrative law judge under 14 C.F.R. Part 302 [see 49 U.S.C. 47129(c)], 49 U.S.C. 47106(d) only requires "an opportunity for a hearing." Section 554 of the APA does not apply where the statute, rather than requiring a hearing on the record, simply requires an opportunity for a hearing without more. Friends of the Earth v. EPA, 966 F.2d 690, 6593 (D.C. Cir. 1992); St. Louis Fuel and Supply Co. v. FERC, 890 F.2d 446, 448 (D.C. Cir. 1989).

Part 16's Separation of Functions Provision

Although the APA does not apply, to ensure the integrity of the decisionmaking process, the Rules of Practice in 14 C.F.R. Part 16 include a provision separating investigative/prosecutorial functions from adjudicative/decisionmaking functions. See 14 C.F.R. 16.5(b), providing that an agency employee who investigates or prosecutes will not advise or communicate substantively about the case with the hearing officer or the Associate Administrator regarding their respective decisions (except as counsel or witness in public proceedings). [FN 16]

[FN 16] As the FAA explained in the Notice of Proposed Rulemaking for 14 C.F.R. Part 16: "Separation of functions is not required by statute because hearings under part 16 would not be subject to APA hearing requirements; however, the separation is provided to promote confidence in the impartiality and integrity of decisions under the new procedures." 59 Fed. Reg. 29,880, 29,883 (June 9, 1994).
Contrary to Greenwood's argument, the Chief Counsel is not an investigator/prosecutor under the Rules of Practice in Part 16. Instead, the Chief Counsel advises the Associate Administrator, who issues the agency's final decision in Part 16 cases. See 14 C.F.R. 16.5(c), stating that "[t]he Chief Counsel ... advises the Associate Administrator ... regarding any case brought under this part." Thus, the Chief Counsel's function in Part 16 cases is adjudicative, not investigative or prosecutorial.

The only attorneys who investigate and prosecute Part 16 cases are "agency attorneys." See 14 C.F.R. 16.5, providing that "[p]roceedings under this part ... will be prosecuted by an agency attorney." The Rules of Practice specifically define "agency attorney" to exclude the Chief Counsel. See 14 C.F.R. 16.3, providing that "an agency attorney shall not include the Chief Counsel ...." The record contains no evidence that any agency employee violated Section 16.5(b). The Hearing Officer was completely independent of the Chief Counsel in all matters pertaining to this case from the date of his appointment until he issued his initial decision.

Continued in Part Two