Prompted by an inquiry from Brettman, the chief counsel for the FAA notified the City on September 1, 1983 that the City's latest offer to Brettman did not reflect the FAA's understanding of the City's obligations and commitments, which formed the basis of the FAA's agreement to withdraw its Notice of Proposed Order against the City. The chief counsel wrote that the FAA's withdrawal of its Notice was predicated upon the City offering Brettman a thirty-year lease and negotiating in good faith the financial terms of that lease. It has been the FAA's view, wrote the agency's legal officer,

that the financial terms of the Brettman lease which are susceptible to negotiation include not only the amount of investment, but also those terms of the lease which may have a direct impact on the financial viability of Mr. Brettman's proposed operation and on his ability to compete on an equal basis with the existing operators.

An administrative hearing was conducted in February 1984. Following four days of testimony and the receipt of more than five hundred pages of exhibits, the hearing officer found that the lease the City offered Brettman contained provisions that were not applied to other lessees and that were unjustly discriminatory to Brettman. The hearing officer listed ten differences between the lease offered to Brettman and the leases held by the incumbent fixed base operators. [FN 9] Additionally, the hearing officer concluded that the "extended period of time and delays in negotiating a lease between [Brettman] and the City ... result[ed] in benefits to other applicants of leases and lessees and [was] unjustly discriminatory [having] the effect of granting exclusive right to the use of ... Pompano Beach Airpark." Accordingly, the hearing officer ruled that the City was in violation of the Federal Aviation Act, 49 U.S.C.App. 1349(a), and in noncompliance with the terms and conditions of its deed of conveyance. The City was ordered to cease and desist unjustly discriminating against Brettman and to offer Brettman a lease containing terms and conditions substantially identical "to those in the leases between the City and incumbent airplane fixed base operators at the Air Park." The hearing officer advised the City that, if it remained in violation of the Federal Aviation Act and the covenants in its deed of conveyance, it might be liable for a civil penalty of up to $1,000 a day, pursuant to 49 U.S.C.App. 1471(a) (1982), and could be prohibited from leasing any further property at the Air Park without the FAA's specific approval.

[FN 9] The ten "unjustly discriminatory" provisions enumerated by the hearing officer pertained to:

(a) Amount required for investment in capital improvements in the lease term of the Intervenor as distinguished from other persons conducting fixed based operations at the Airpark.

(b) Changes and modifications in the "standards" and "guidelines" of leases of the Intervenor and interpretation of the "standards" and "guidelines" in the leases of the Intervenor.

(c) Transfer of control in the Intervenor's business or property and lease conditions limiting the sale, assignment, and/or sub-lease of the Intervenor's business or property.

(d) Requirement that the Intervenor comply with minimum standards and future-imposed standards while exempting other lessees from that requirement.

(e) Requiring the disclosure of confidential commercially valuable business information by the Intervenor while exempting other lessees from that obligation.

(f) Requiring the operation by the Intervenor in more than one category under the City's standards for airpark lessees and to operate as a fixed base facility before being able to rent hangar space.

(g) Requiring approval of several City administrative authorities for new construction facilities not required by others.

(h) Discriminatory gasoline tax provisions.

(i) Required deposit by the Intervenor not required of others.

(j) Bankruptcy, lien and rental rate provisions of Intervenor's lease unlike the provisions of other lessees.

[FN 10] The City also advances the novel argument that the July 7, 1983 determination by the FAA assistant general counsel, that the lease submitted by the City to the FAA appeared to be reasonable and not unjustly discriminatory, and the stipulation which resulted in the FAA's withdrawal of its Notice should be treated as an administrative consent decree and thus given res judicata effect. Alternatively, the City argues that the FAA's reissuance of its Notice of Proposed Order on October 27, 1983, was arbitrary and capricious. The City's arguments are meritless.

The agreement by the FAA to withdraw its Notice based on the City's promise to negotiate with Brettman in good faith in no way resembles a consent judgment by a neutral court entered upon a settlement by parties litigating before it. The City cites no legal authority for such a proposition. "The settlement by consent provision is extremely important [in the administrative context] because agencies ought not engage in formal proceedings where the parties are perfectly willing to consent to judgments or adjust situations informally." 3 K. Davis, Administrative Law Treatise s. 14.9, at 39 (2d ed. 1980). Precluding an agency from reinitiating formal administrative action against a party who reneges on an informally agreed settlement would discourage an agency from attempting to settle disputes short of formal proceedings and be contrary to the above noted policy.

The doctrine of res judicata has been applied in the administrative context. An administrative decision will be given res judicata effect when "an administrative agency is acting in a judicial capacity and resolves disputed issues of fact properly before it which the parties have had an adequate opportunity to litigate...." United States v. Utah Construction and Mining Co., 384 U.S. 394, 422, 86 S.Ct. 1545, 1560, 16 L.Ed.2d 642 (1966). See Pantex Towing Corp. v. Glidewell, 763 F.2d 1241, 1245 (11th Cir.1985). The administrative decision approved by the Supreme Court in Utah Construction, supra, was the result of a full adversary proceeding with testimony, cross-examination, exhibits, briefs, and argument. See Nasem v. Brown, 595 F.2d 801, 807 (D.C. Cir. 1979). It follows that an agency proceeding which does not afford an opportunity to present live witnesses or to cross-examine opposing witnesses does not meet the test that the parties were afforded a full opportunity to litigate. Nasem v. Brown, 595 F.2d at 807. See 4 K. Davis, Administrative Law Treatise s. 21.4 (2d ed. 1983).

The July 7 stipulation signed by the FAA and the City was the product of an informal settlement reached at a meeting in a Congressman's office in Washington, D.C. Officials from the City and the FAA gathered to discuss the possibility of whether the dispute could be resolved short of formal adjudicatory proceedings. Brettman, the intervenor, was not present. Nor was there testimony by live witnesses and cross-examination of opposing witnesses. The interested parties in this controversy were not accorded a full opportunity to litigate. Additionally, the writing of a letter, by the assistant general counsel for the FAA, concluding that the City's lease appeared to be reasonable, could hardly be classified as the judicial act of an administrative agency; the counsel's letter was not the result of any formal adversary proceedings, but rather the product of his review of an incomplete document. In conclusion, the events of July 7 cannot be accorded res judicata effect.

The City's alternative argument is equally specious. Even if the FAA's decision to reinitiate formal proceedings against the City constituted the type of informal decision making cited by the Supreme Court in Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971), the agency's conduct stands the test of judicial review. Judicial review of an informal administrative agency decision focuses first upon whether the administrator acted within the scope of his or her authority, and, second, upon whether the administrator's decision was arbitrary and capricious. Id. at 416, 91 S.Ct. at 823. "To make this finding the court must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment.... Although this inquiry into the facts is to be searching and careful, the ultimate standard of review is a narrow one. The court is not empowered to substitute its judgment for that of the agency." Id. at 416, 91 S.Ct. at 823-24. Also, to survive judicial review under the arbitrary and capricious standard an agency must explain the rationale for its decision. Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 285-86, 95 S.Ct. 438, 442, 42 L.Ed.2d 447 (1974); Deaton v. Interstate Commerce Commission, 693 F.2d 128, 131 (11th Cir.1982).

Because the July 7 stipulation is not to be accorded res judicata effect, the FAA's decision to reinitiate formal proceedings against the City was clearly within the Administrator's scope of authority. The agency explained its reasons for reissuing its notice in letters to the City dated September 1, 1983, and October 27, 1983. As the FAA explained, the City was not complying with its agreement to negotiate in good faith the financial terms of the Brettman lease so that they were not unreasonable and unjustly discriminatory when compared to the financial terms of the Becker leases. In addition, the FAA noted that the City had not provided the agency with the full text of the proposed Brettman lease prior to the July 7 stipulation; the City had omitted its minimum standards which were incorporated by reference into the lease and contained a number of provisions that would have placed Brettman in a disadvantageous position when compared to the Beckers. We find the FAA's position to be reasonable and not arbitrary and capricious and uphold its decision to reinstitute formal proceedings against the City.

Our standard for reviewing the FAA's findings of fact is dictated by statute; "[t]he findings of facts ... by the Secretary of Transportation [here, the Administrator of the FAA], if supported by substantial evidence, shall be conclusive." 49 U.S.C.App. 1486(e) (1982). See Blackwell v. Bond, 619 F.2d 372, 373 (5th Cir.1980); [FN 11] Herring v. Administrator, FAA, 532 F.2d 1003, 1004 (5th Cir.1976); Stern v. Butterfield, 529 F.2d 407, 409 (5th Cir.1976). In reviewing administrative fact findings to determine whether they are supported by substantial evidence, we must look at the record in its entirety, "'including the body of evidence opposed to the [agency's] view.'" NLRB v. Southern Florida Hotel & Motel Association, 751 F.2d 1571, 1579 (11th Cir.1985) (quoting Universal Camera v. NLRB, 340 U.S. 474, 488, 71 S.Ct. 456, 465, 95 L.Ed. 456 (1951)). Substantial evidence supporting the agency's findings exists, if the record reveals "relevant evidence [that] a reasonable mind might accept as adequate to support a conclusion." Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 217, 83 L.Ed. 126 (1938); see also Universal Camera, 340 U.S. at 477, 71 S.Ct. at 459; Abilene Sheet Metal, Inc. v. NLRB, 619 F.2d 332, 337 (5th Cir.1980); Aircraft Owners & Pilots Association v. FAA, 600 F.2d 965, 970 (D.C.Cir.1979) (construing 49 U.S.C.App. 1486(e)). "[We] must decide only whether the agency made a reasonable finding...." Abilene Sheet Metal, Inc. v. NLRB, 619 F.2d at 338.

[FN 11] In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir.1981) (en banc), this court adopted as binding precedent all decisions of the former Fifth Circuit handed down prior to October 1, 1981.

Next, we must ascertain whether there is a rational connection between the facts found and the decision made by the agency. Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 285, 95 S.Ct. 438, 442, 42 L.Ed.2d 447 (1974); National Wildlife Federation v. Marsh, 721 F.2d 767, 780 (11th Cir.1983). Courts conducting a review under 49 U.S.C.App. 1486(e) consistently take this second step in their analyses. Thus, not only must the agency's factual findings be supported by substantial evidence, but the agency's nonfactual analysis, including its interpretation of the governing statute, application of that statute to the facts, and conclusion must also be reasonable and not arbitrary and capricious. South Dakota v. Civil Aeronautics Board, 740 F.2d 619, 621 (8th Cir.1984); Aircraft Owners & Pilots Association, 600 F.2d at 973; Rombough v. FAA, 594 F.2d 893, 896 (2d Cir.1979); Starr v. FAA, 589 F.2d 307, 310 (7th Cir. 1978); Air Line Pilots Association International v. Civil Aeronautics Board, 502 F.2d 453, 457 (D.C. Cir. 1974), cert. denied, 420 U.S. 972, 95 S.Ct. 1391, 43 L.Ed.2d 652 and 420 U.S. 972, 95 S.Ct. 1392, 43 L.Ed.2d 652 and 420 U.S. 972, 95 S.Ct. 1393, 43 L.Ed.2d 652 and 421 U.S. 988, 95 S.Ct. 1991, 44 L.Ed.2d 477 (1975); cf. Herring v. Administrator, FAA, 532 F.2d at 1004 (administrative law judge affirmed when findings were supported by substantial evidence and not based on any erroneous legal theory). "The construction of a statute by an agency charged with its administration is entitled to substantial deference" from the reviewing court. South Dakota v. Civil Aeronautics Board, 740 F.2d at 621; see also White Industries, Inc. v. FAA, 692 F.2d 532, 534 (8th Cir. 1982); Aircraft Owners & Pilots Association, 600 F.2d at 973-74; Rombough v. FAA, 594 F.2d at 896 n. 6; cf. Scarborough v. Officer of Personnel Management, 723 F.2d 801, 806 (11th Cir. 1984). Although that court is the final authority on issues of statutory construction, Frank Diehl Farms v. Secretary of Labor, 696 F.2d 1325, 1331 (11th Cir. 1983), it must respect the agency's findings and conclusions when the question involves an interpretation of a statute that is within the agency's specialized knowledge and expertise. Id. at 1329; Hi-Craft Clothing Co. v. NLRB, 660 F.2d 910, 915 (3d Cir. 1981). This court "will adhere to the 'principle that the construction of a statute by those charged with its execution should be followed unless there are compelling indications that it is wrong.'" Veterans Administration Medical Center v. Federal Labor Relations Authority, 675 F.2d 260, 262 (11th Cir.1982) (quoting National Federation of Employees, Local 1451 v. Federal Labor Relations Authority, 652 F.2d 191, 193 (D.C.Cir.1981)); see also Florida Power and Light Co. v. Federal Energy Regulatory Commission, 660 F.2d 668, 677 (5th Cir. Unit B 1981), cert. denied, 459 U.S. 1156, 103 S.Ct. 800, 74 L.Ed.2d 1003 (1983).

Here, we are confronted by a statute committed to the FAA for its administration. See 49 U.S.C.App. 1354(a) (1982); [FN 12] 14 C.F.R. 13.1-13.131 (1984). Formerly section 303 of the 1938 Civil Aeronautics Act, section 1349(a) of Title 49 is now a part of the Federal Aviation Act of 1958, the act that established the FAA. H.R.Rep. No. 2360, 85th Cong., 2d Sess., reprinted in 1958 U.S.Code Cong. & Ad.News 3741, 3741-42; see Hill Aircraft & Leasing Corp. v. Fulton County, 561 F.Supp. 667, 673 & n. 3 (N.D. Ga. 1982), aff'd, 729 F.2d 1467 (11th Cir. 1984); Midway Airlines, Inc. v. County of Westchester, 584 F.Supp. 436, 441 (S.D.N.Y.1984). The FAA is responsible for ensuring compliance with the Federal Aviation Act and its regulations. Section 1349(a) provides generally that federal funds may not be expended for the maintenance or operation of air navigation facilities, except upon written recommendation and certification by the Secretary of Transportation or, as the regulations make clear, the Secretary's delegate, the Administrator of the FAA. The statute further provides that "[t]here shall be no exclusive right for the use of any landing area or air navigation facility upon which Federal funds have been expended." 49 U.S.C.App. 1349(a). See Hill Aircraft, 561 F.Supp. at 670; see also Air California v. United States Department of Transportation, 654 F.2d 616, 618 (9th Cir.1981); Guthrie v. Genesee County, 494 F.Supp. 950, 959-60 (W.D.N.Y.1980). Because the City of Pompano Beach has been the recipient of federal funds and property for its Air Park through various federal aid programs, it is subject to federal prohibitions against unjust discrimination resulting from the grant of an exclusive right. See City of Dallas v. Southwest Airlines Co., 371 F.Supp. 1015, 1026 (N.D. Tex. 1973), aff'd, 494 F.2d 773 (5th Cir.), cert. denied, 419 U.S. 1079, 95 S.Ct. 668, 42 L.Ed.2d 674 (1974); Alphin v. Henson, 392 F.Supp. 813, 818 (D. Md. 1975), aff'd, 538 F.2d 85 (4th Cir. 1976), modified on other grounds, 552 F.2d 1033 (4th Cir.), cert. denied, 434 U.S. 823, 98 S.Ct. 67, 54 L.Ed.2d 80 (1977).

[FN 12] 49 U.S.C.App. 1354(a) (1982) provides:

s. 1354. Other powers and duties of Secretary of Transportation
(a) Generally
The Secretary of Transportation is empowered to perform such acts, to conduct such investigations, to issue and amend such orders, and to make and amend such general or special rules, regulations, and procedures, pursuant to and consistent with the provisions of this chapter, as he shall deem necessary to carry out the provisions of, and to exercise and perform his powers and duties under, this chapter.

In 1941, the Attorney General of the United States advised that the term "exclusive right," as used in section 303 of the Civil Aeronautics Act of 1938, the predecessor of section 1349(a), "was intended to describe a power, privilege, or other right excluding or debarring another or others from enjoying or exercising a like power, privilege, or right." 40 Op. Att'y Gen. 71, 72 (1941). Construing the legislative history of the predecessor act, the Attorney General opined that "the purpose of the provision is to prohibit monopolies and combinations in restraint of trade or commerce and to promote and encourage competition in civil aeronautics ..." at federally subsidized airports. Id. The term "exclusive right for the use of any landing area" does not apply broadly to the total of aeronautical uses to which an airport may be devoted; that would frustrate the purpose of the statute's limitation upon the use of federal funds by permitting mini-monopolies in the various airport activities. Id. Rather, "[t]he provision is clearly applicable to any right for the use of a landing area or an airport ... which is exclusive in character," prohibiting the grant of an exclusive right to each "particular aeronautical activity." Id. at 73. See Hill Aircraft, 561 F.Supp. at 673; City of Dallas, 371 F.Supp. at 1032; Niswonger v. American Aviation, Inc., 411 F.Supp. 763, 766 (E.D. Tenn. 1975), aff'd, 529 F.2d 526 (6th Cir. 1976). The type of exclusive right prohibited by section 1349(a) has been described as "one of the sort noxious to the anti-trust laws." Aircraft Owners and Pilots Association v. Port Authority of New York, 305 F.Supp. 93, 105 (E.D.N.Y.1969).

In a nonregulatory circular to public airport owners, the FAA defined "exclusive right" as follows:

A power, privilege, or other right excluding or debarring another from enjoying or exercising a like power, privilege, or right. An exclusive right may be conferred either by express agreement, by imposition of unreasonable standards or requirements, or by any other means. Such a right conferred on one or more parties but excluding others from enjoying or exercising a similar right or rights would be an exclusive right. [FN 13]

[FN 13] Echoing and interpreting the language of 49 U.S.C.App. 1349(a), see supra note 2, the FAA qualified its definition of "exclusive right" as follows:

The presence on an airport of only one enterprise conducting aeronautical activities does not necessarily mean that an exclusive right has been granted. If there is no intent by express agreement, by imposition of unreasonable standards, or by other means to exclude others, the absence of a competing activity is not a violation of this policy. This sort of situation frequently arises where the market potential is insufficient to attract additional aeronautical activities. So long as the opportunity to engage in an aeronautical activity is available to those who meet reasonable and relevant standards, the fact that only one enterprise takes advantage of the opportunity does not constitute a grant of an exclusive right.

FAA Advisory Circular No. 150/5190-2A at 4-5 (April 4, 1972).

We note two cases in which a court has found a violation of the federal prohibition against the grant of an exclusive right at an airport upon which federal funds have been expended. In City of Dallas v. Southwest Airlines Co., 371 F.Supp. 1015 (N.D. Tex. 1973), aff'd, 494 F.2d 773 (5th Cir.), cert. denied, 419 U.S. 1079, 95 S.Ct. 668, 42 L.Ed.2d 674 (1974), the district court concluded that a city ordinance governing the phase-out provisions of Love Field near Dallas that would have allowed continued service at Love Field by certain types of aircraft but required Southwest and other aircraft in Southwest's classification to move to the new Regional Airport constituted unjust discrimination and a grant of an exclusive right of access to some carriers and not to others. The city's explanation for prohibiting Southwest from continuing its operation at Love Field was that it wanted to avoid the potential competitive effect on the regional airport; the district court said this was an insufficient justification. Id. at 1030. In Niswonger v. American Aviation, Inc., 411 F.Supp. 763, 769 (E.D. Tenn.1975), aff'd, 529 F.2d 526 (6th Cir.1976), a case closely analogous to the case at bar, the district court held that the public airport authority violated federal law by granting an exclusive right to an incumbent fixed base operator. In Niswonger, an applicant for a fixed base operator's lease at the airport was denied access to the airport on the grounds that all available land had been leased to the incumbent fixed base operator. The court said that this transaction constituted a violation of federal law, particularly because the lessee, by this device, had acquired control and exclusive use of more area of the airport than it reasonably needed or could be expected to use in conducting its business. Id. at 771.