City and County of San Francisco v. FAA
Cite as: 942 F.2d 1391


of the City and County of San Francisco, Petitioners,
FEDERAL AVIATION ADMINISTRATION; Department of Transportation,
National Transportation Safety Board, Respondents. (Three Cases)

FEDERAL AVIATION ADMINISTRATION; Department of Transportation,
National Transportation Safety Board, Respondents. (Two Cases)

of the City and County of San Francisco, Petitioners,
FEDERAL AVIATION ADMINISTRATION; Department of Transportation,
National Transportation Safety Board, Respondents,
Burlington Air Express ("Burlington"), Respondent-Intervenor.

Nos. 89-70055, 89-70053, 89-70057, 89-70482, 89-70483 and 89-70500.

Petition to Review a Decision of the Federal Aviation Administration.

Argued and Submitted Nov. 5, 1990
Decided Aug. 21, 1991


Steven S. Rosenthal, Morrison & Foerster, Washington, D.C., Porter Goltz, Deputy County Counsel, County of San Mateo, Redwood City, Cal., for petitioners.

John A. Bryson, U.S. Dept. of Justice, Washington, D.C., for respondents.

John W. Simpson, Kelley Drye & Warren, Washington, D.C., for intervenor.

Kenneth R. Williams, Deputy Atty. Gen., and Larry A. Thelen, Dept. of Transp., Sacramento, Cal., for amicus.

Before BROWNING, PREGERSON and TROTT, Circuit Judges.

JAMES R. BROWNING, Circuit Judge:

The City and County of San Francisco petitions for review of a decision of the Federal Aviation Administration (FAA) denying San Francisco's applications for airport improvement grants from the Airport and Airway Trust Fund. We affirm in part and reverse in part.


The Airport and Airway Trust Fund is made up of amounts equivalent to taxes on aviation fuel and air transportation received by the Treasury. See 26 U.S.C. s 9502 (1988). Money from the Trust Fund is allocated, pursuant to The Airport and Airway Improvement Act of 1982, 49 U.S.C.App. ss 2201-27 (1988), to finance the operation and improvement of major airports. Potential recipients include "primary airports" like San Francisco International Airport. See 49 U.S.C.App. ss 2202(a)(12), 2205(a)(2)(B).

To receive funds from the Trust Fund, an airport proprietor must submit a grant application to the Secretary of Transportation assuring the "airport to which the project relates will be available for public use on fair and reasonable terms and without unjust discrimination...." 49 U.S.C.App. s 2210(a)(1). San Francisco submitted grant applications for fiscal years 1986 through 1989. The FAA rejected the applications on the ground San Francisco had violated the assurance of nondiscrimination by unjustly discriminating against a retrofitted Boeing 707 airplane (Q707) through a Noise Abatement Resolution adopted by San Francisco's Airports Commission in 1978 ("1978 Regulation").

The FAA establishes standards for aircraft noise levels through a certification system. See 49 U.S.C.App. ss 1423, 1431. Aircraft are certified as Stage 1 (not allowed to operate in the U.S. after 1985), Stage 2, and Stage 3 (most quiet) based on the decibels they emit. See 14 C.F.R. Part 36 (1991). Stage 1 aircraft may be retrofitted to meet Stage 2 standards; the Q707 involved in this case is such a retrofitted Stage 1 aircraft.

San Francisco's 1978 Regulation prohibited aircraft from continuing operations at the Airport after January 1, 1985 unless certified as Stage 2 (or Stage 3) or retrofitted to meet Stage 2 certification requirements. Aircraft like the Q707 that had been retrofitted to meet Stage 2 certification requirements could begin operations at the Airport after January 1, 1985, only if the FAA had certified at least one plane of the same type as meeting Stage 2 requirements before January 1, 1985. Because FAA regulations required Stage 3 certification for new aircraft after November 1975, the practical effect of San Francisco's regulation was that only Stage 3 aircraft and "grandfathered" Stage 2 aircraft were allowed to operate at the Airport after January 1, 1985.

Burlington Air Express, an all-cargo carrier, applied to the San Francisco Airports Commission in August 1985 for a waiver of the 1978 Regulation so it could operate several retrofitted Q707s at the Airport. These planes received Stage 2 certification from the FAA in March 1985, three months after San Francisco's cutoff date of January 1, 1985. Burlington's waiver application was denied. Since the denial, Burlington has operated its Q707s from Oakland Airport across San Francisco Bay.

While Burlington's waiver request was pending before the Commission, Burlington filed a complaint with the FAA. The FAA's Chief Counsel issued a Notice of Proposed Cease and Desist Order, alleging exclusion of Burlington's Q707 aircraft was unjustly discriminatory in violation of section 2210(a)(1) and San Francisco's grant assurance. [FN1] The notice suspended airport improvement grants to San Francisco.

[FN1] The Chief Counsel alleged the exclusion violated other statutes, but these charges were later dismissed.
After a hearing, a Department of Transportation Administrative Law Judge held San Francisco had breached its assurance that it would operate the Airport without unjust discrimination. The Administrator of the FAA affirmed, holding the 1978 Regulation unjustly discriminatory because it allowed planes that were equally noisy or noisier than Q707s to operate at the Airport and to increase in number without limit while excluding the Q707, based on a characteristic -- date of type-certification as meeting Stage 2 requirements -- that had no relationship to noise. The FAA denied San Francisco's grant applications and withheld approval of new grants while the regulation remained in effect. San Francisco petitioned for review in this court.


We reject at the outset San Francisco's contention we should decide de novo as a matter of contract interpretation whether San Francisco violated its grant assurance. This contention misunderstands the nature of federal regulation of airport noise. It also misunderstands the role of the Airport and Airway Improvement Act, which denies federal funds to airport proprietors who exceed their regulatory authority by denying use of an airport on an unjustly discriminatory basis.

The federal government regulates aircraft and airspace pervasively, preempting regulation of aircraft noise by state or local governments. City of Burbank v. Lockheed Air Terminal, Inc., 411 U.S. 624, 633, 93 S.Ct. 1854, 1859, 36 L.Ed.2d 547 (1973). However, Congress reserved a limited role for local airport proprietors in regulating noise levels at their airports. See Santa Monica Airport Ass'n v. City of Santa Monica, 659 F.2d 100, 104 (9th Cir.1981) ("Congress intended that municipal proprietors enact reasonable regulations to establish acceptable noise levels for airfields and their environs."); see also City of Burbank, 411 U.S. at 635 n. 14, 93 S.Ct. at 1861 n. 14; San Diego Unified Port Dist. v. Gianturco, 651 F.2d 1306, 1316 (9th Cir.1981).

Congress made it clear, however, that the power delegated to airport proprietors to adopt noise control regulations is limited to regulations that are not unjustly discriminatory. When the Federal Aviation Act was amended in 1968 to extend the FAA's authority to regulate aircraft noise, the Senate Report accompanying the bill quoted with approval a letter from the Secretary of Transportation. The letter set forth the existing limited authority of airport proprietors to adopt nondiscriminatory noise regulations and stated that the 1968 amendment would not alter that limited authority:

the proposed legislation will not affect the rights of a State or local public agency, as the proprietor of an airport, from issuing regulations or establishing requirements as to the permissible level of noise which can be created by aircraft using the airport. Airport owners acting as proprietors can presently deny the use of their airports to aircraft on the basis of noise considerations so long as such exclusion is nondiscriminatory.
S.Rep. No. 1353, 90th Cong., 2d Sess. (1968), reprinted in 1968 U.S.Code Cong. & Admin.News 2688, 2694.

Courts have recognized both the delegation of regulatory power to airport proprietors and the limitation of this power to the issuance of nondiscriminatory regulations. See City of Burbank, 411 U.S. at 635 n. 14, 93 S.Ct. at 1861 n. 14 (quoting the Secretary of Transportation's letter); British Airways v. Port Auth. of New York (Concorde I), 558 F.2d 75, 84 (2d Cir.1977) (a local airport proprietor "is vested only with the power to promulgate reasonable, nonarbitrary and non-discriminatory regulations that establish acceptable noise levels for the airport and its immediate environs"); British Airways v. Port Auth. of New York, 564 F.2d 1002, 1011 (2d Cir.1977) (Concorde II) (maintaining "a fair and efficient system of air commerce ... mandates that each airport operator be circumscribed to the issuance of reasonable, nonarbitrary and nondiscriminatory rules defining the permissible level of noise which can be created by aircraft using the airport").

Although Congress has revisited the issue of how best to control airport noise on a number of occasions, it has declined to alter the delegation to airport proprietors of the limited noise control authority described in the Secretary's 1968 letter. See S.Rep. No. 1160, 92d Cong., 2d Sess. (1972), reprinted in 1972 U.S.Code Cong. & Admin.News 4655, 4663 (accompanying Noise Control Act of 1972) ("[t]his does not address responsibilities or powers of airport operators ..."); S.Rep. No. 52, 96th Cong., 2d Sess. 13 (1980), reprinted in 1980 U.S.Code Cong. & Admin.News 89, 101 (accompanying Aviation Safety and Noise Abatement Act of 1979) ("[N]othing in the bill is intended to alter the respective legal responsibilities of the Federal Government and local airport proprietors for the control of aviation noise."). [FN2]

[FN2] Neither the FAA or this Court has considered whether the Airport Noise and Capacity Act of 1990, 49 U.S.C.App. ss 2151-58, alters this division of responsibility since the Act was passed after the administrative proceedings were completed. We also note, but do not consider, Congress' 1990 declaration that the Airport and Airway Improvement Act "should be administered in a manner consistent with" the goal of "preventing unjust and discriminatory practices, including as they may be applied between category and class of aircraft." 49 U.S.C.A.App. s 2201(a)(5) (1991) (emphasis added).
The conditions Congress imposed on the grant to local airport proprietors of money from the Airport and Airway Trust Fund are designed in part to insure the maintenance of conditions essential to an efficient national air transport system, including access to airports on a reasonable and nondiscriminatory basis. Section 2210(a) of the Airport and Airway Improvement Act of 1982 requires the Secretary of Transportation to obtain certain assurances from airport proprietors as a condition of receiving a grant from the Fund. The first of these conditions is that the Secretary must
receive assurances in writing, satisfactory to the Secretary that -- (1) the airport to which the project relates will be available for public use on fair and reasonable terms and without unjust discrimination....
49 U.S.C.App. s 2210(a)(1). [FN3] Grants must be offered upon terms and conditions the Secretary considers necessary to meet the requirements of the statute, 49 U.S.C.App. s 2211(a), and the Secretary may not approve a grant application unless the Secretary is satisfied that this and other requirements of the statute have been met. 49 U.S.C.App. s 2208(b)(1)(E).
[FN3] The conditioning of federal grants to airport proprietors on assurances the airport will be available "for public use on fair and reasonable terms and without unjust discrimination" has a long history. The language in the present Act is taken directly from its predecessor, the Airport and Airway Development Act of 1970, Pub.L. No. 91-258, Title I, s 18, 84 Stat. 229 (1970), which continued the language from its predecessor, the Federal Airport Act, Pub.L. No. 79-377, s 11, 60 Stat. 176 (1946).
Pursuant to this statutory scheme, San Francisco received grant offers requiring San Francisco to assure the Secretary, in language tracking the statute, that it would operate its Airport on a fair and reasonable basis and without unjust discrimination. A grant agreement based on such an offer is not an ordinary contract, but part of a procedure mandated by Congress to assure federal funds are disbursed in accordance with Congress' will. Whether San Francisco violated this assurance depends upon whether its regulation conflicted with the statutory condition imposed by section 2210(a)(1) and incorporated in the grant contract. [FN4]
[FN4] Because the relevant language in the 1982 airport improvement act and its 1970 predecessor is identical, see supra note 3, it is irrelevant whether the particular grant assurances at issue were made pursuant to one act or the other.
While we review questions of statutory interpretation de novo, we accord substantial deference to the interpretation adopted by the agency charged with administering the statute. Utility Reform Project v. Bonneville Power Admin., 869 F.2d 437, 442 (9th Cir.1989). The FAA's interpretation of what constitutes unjust discrimination within the meaning of section 2210(a)(1) will be upheld unless it is unreasonable. See id. Deference is especially appropriate because Congress expressly mandated FAA enforcement of the statute by the Secretary (who delegated that duty to the Administrator) and, as the administrative record in this case demonstrates, application of the statute to airport noise regulations requires technical expertise.


The Administrative Law Judge found San Francisco had excluded the Q707 under the noise regulation because San Francisco had concluded the Q707 was noisier in takeoff than any other aircraft using the Airport. The ALJ found San Francisco's determination had been mistaken, and that other aircraft permitted to use the Airport under the regulation were as noisy or noisier than the Q707. The FAA Administrator stated:

[San Francisco] has apparently abandoned its contention that the aircraft's takeoff noise exceeded that of all other aircraft at [the Airport]. Indeed, [San Francisco] concedes the correctness of the Initial Decision's factual findings that during the period the Q707 has been denied permission to operate at the Airport, 15 other models of aircraft, emitting as much or more noise than the Q707, have been permitted to operate there; and that operators of these airlines have been permitted to increase the number of flights with these aircraft types. [San Francisco] also does not dispute that at least 560 takeoffs and landings are performed each month at [the Airport] by six aircraft models noisier than the Q707.
The factual assumption on which San Francisco denied a waiver to the Q707 was similarly mistaken. San Francisco based the denial on its conclusion the Q707 met Stage 2 standards through the use of thrust cutbacks and decibel tradeoffs, and would therefore be noisier in takeoff than all other aircraft at the Airport. The ALJ found, on substantial evidence, many aircraft models operating at the Airport, including aircraft models conducting more than half the departures from the Airport in 1985, also met Stage 2 requirements through the use of cutbacks and tradeoffs, and, as mentioned earlier, some of these planes were as noisy or noisier in takeoff than the Q707.

The Administrator approved the ALJ's holding that because San Francisco's noise regulation allowed planes that were equally noisy or noisier than Q707s to operate at the Airport and increase in number without limit, while excluding the Q707 based on a characteristic that had no bearing on noise (date of type-certification as meeting Stage 2 requirements), the regulation violated the requirement of section 2210(a)(1) and of San Francisco's grant assurance that the Airport would be available "without unjust discrimination." The Administrator noted

[e]xclusion of the Q707 based on the date of modification, rather than the date of complying operation is neither rational nor reasonable. The date of retrofit is irrelevant to the amount of noise an aircraft emits.
We are satisfied that the Administrator's interpretation of section 2210(a)(1), and therefore of the grant assurance, was reasonable. The Administrator held the
issue to be resolved was whether [San Francisco's] actions were discriminatory, as demonstrated by the evidentiary record and application of appropriate decisional law. In this respect, the ALJ's reliance on the Concorde Cases was proper.
We agree with the Administrator. The central issue was whether San Francisco's regulation was unjustly discriminatory within the meaning of the statute, and the Second Circuit's Concorde Cases were sound authority for the conclusion that it was. [FN5]
[FN5] The FAA Administrator rejected San Francisco's contention that the equal protection clause provides the measure of legality of San Francisco's noise regulation. San Francisco argued New Orleans v. Dukes, 427 U.S. 297, 96 S.Ct. 2513, 49 L.Ed.2d 511 (1976), provided the appropriate test. As the Administrator noted, however, New Orleans v. Dukes applies only when the Equal Protection Clause alone is invoked and not, as in this case, "when local regulation is challenged under the Supremacy Clause as inconsistent with relevant federal laws...." 427 U.S. at 304 n. 5, 96 S.Ct. at 2517 n. 5.

San Francisco's argument its exclusion of the Q707 was valid because it had a reasonable belief the Q707 was noisier than all other planes is based on its mistaken reliance on equal protection law and was properly rejected by the FAA. In any event, the ALJ found San Francisco did not have such a reasonable belief.

Continued in Part Two