HTX Helicopters, LLC d/b/a HeliBlock v. Rhode Island Airport Corporation – No. 16-21-10
Author:
Kevin C. Willis, Director of Airport Compliance and Management Analysis
Complainant(s):
HTX Helicopters, LLC d/b/a HeliBlockRespondent(s):
Rhode Island Airport Corporation (RIAC)Airport(s):
Block Island State Airport (KBID)
Holding:
No Violation of Grant Assurances 19, 22 (in part), or 23. Violation of Grant Assurance 22 (in part) and Corrective Action Plan Required.Abstract:
Complainant alleged that Respondent violated Grant Assurance 22, Economic Nondiscrimination, and Grant Assurance 23, Exclusive Rights, when it denied Complainant the ability to operate out of the airport without a lease, and when it did not renew Complainant’s lease based on a contested breach of the previous lease. (Director’s Determination, p. 1.) Complainant further claimed that Respondent discriminated against it by not providing reasonable access to the airport, and also claims that Respondent was granting an exclusive right to other aeronautical users by banning the helicopter operator from the airport. Last, Complainant alleged that Respondent violated Grant Assurance 19, Operation and Maintenance, in asserting that Respondent did not operate the airport in a safe and serviceable condition. (Director’s Determination, p. 1.)
Respondent denied the allegations, asserting that it had a long-standing unwritten policy to require a lease for commercial operators based at all of the airports it operates. (Director’s Determination, p. 1.) Further, Respondent claimed that its actions to deny Complainant access to the airport without a lease and to choose not to renew the lease due to the contested breach were “reasonable” and “prudent.” (Director’s Determination, pp. 1-2.) Respondent further stated that Complainant provided no evidence to suggest that the airport was not being operated in a safe and serviceable manner. (Director’s Determination, p. 2.) Further, it stated, “HeliBlock is being treated in the same manner, and subject to the same terms and conditions, as all other similarly situated users of RIAC airports.” (Director’s Determination, p. 2.)
As further detailed in his Determination, the Director found the Respondent was not in violation of Grant Assurance 19, Operation and Maintenance, because no evidence was submitted by the Complainant to support the claimed violation. (Director’s Determination, p. 2.) But the Director found the Respondent was in violation of Grant Assurance 22, Economic Nondiscrimination; the application of an indemnification clause by Respondent for a noise/nuisance lawsuit was unreasonable and unjustly denied Complainant access to the airport. (Director’s Determination, p. 2.) Finally, the Director found the Respondent not in violation of Grant Assurance 23, Exclusive Rights, because the pleadings provided no evidence that a similarly situated operator was granted an exclusive right that was being denied to Complainant. (Director’s Determination, p. 2.)
Grant Assurance 19, Operation and Maintenance
As a preliminary matter, Complainant claimed that Respondent was in violation of Grant Assurance 19, Operation and Maintenance, but, according to the Director, failed to provide any detail to support its claim that the airport was not being operated in a safe and serviceable manner. (Director’s Determination, p. 7.) The Director therefore dismissed the claim for lack of specificity or evidence and found that Respondent was not in violation of Grant Assurance 19. (Director’s Determination, p. 7.)
Grant Assurance 22, Economic Nondiscrimination—Requiring Lease and Operating Agreement as a Condition of Operation at Airport
Complainant asserted several violations of Grant Assurance 22 in connection with: (1) Respondent’s ability to require a lease and operating agreement for exclusive and nonexclusive use of airport facilities; (2) the timing of adoption of the written leasing policy and minimum standards; and (3) the inconsistent application of lease requirements. (Director’s Determination, p. 7.)
However, after reviewing the applicable lease, the Director noted that it was common practice to have a lease and operating agreement with a tenant that covered both the exclusive and nonexclusive use of the airport and operational spaces for operators that offered commercial aviation services to the public, all in harmony with Order 5190.6B, Airport Compliance Manual. In addition, the Director agreed with the FAA precedent cited by Respondent for the proposition that leases are a valid tool for sponsors to use to regulate safety and ensure a standard level of service. (Director’s Determination, p. 9.)
In addition, the Director ruled that Respondent had a proprietary right as the operator of the airport to implement processes to regulate based commercial operations to ensure safety and efficiency as well as to maintain a specific standard of service to the public. (Director’s Determination, p. 10.) Further, Respondent had a responsibility under Grant Assurance 24 to be as self-sustaining as possible, which may include collecting fees for use of the airfield and airport facilities. (Director’s Determination, p. 10.) According to the Director, moreover, the FAA recognizes a lease, operating agreement, or permit that may cover both exclusive and nonexclusive use of the airport as standard methods to meet these obligations and the authority to mandate such methods is a business decision granted to the airport operator. (Director’s Determination, p. 11.) Therefore, consistent with Grant Assurance 22(h), Respondent made the business decision to require all commercial based operators to have a lease and operating agreement. (Director’s Determination, p. 10.)
In contrast, “to allow [Complainant] to conduct and base its commercial operations without a lease while requiring all other commercial operators to have a lease could be seen as a violation of Grant Assurance 22,” the Director ruled. (Director’s Determination, p. 10.) Stated otherwise: “[Respondent] did not violate Grant Assurance 22, when it required Complainant to have a lease similar to all other based operators.” (Director’s Determination, p. 10.) (As part of this rule, the Director observed that Complainant’s suggestion that the formal leasing policy and minimum standards were implemented to justify [Respondent’s actions against Complainant] was not relevant to his determination. (Director’s Determination, p. 11.) Additionally, the Director concluded that Respondent’s different treatment of Complainant from transient operators was reasonable as the FAA has consistently treated “based aircraft” users and “transient” users of specific airport sponsors as not “similarly situated” in regard to general aviation airport user fees and terms. (Director’s Determination, p. 11 and footnote 6.))
In all, the Director found no evidence that Respondent applied the lease requirement inconsistently for similarly situated operators in accordance with Grant Assurance 22(e). (Director’s Determination, p. 11.)
Grant Assurance 22, Economic Nondiscrimination—Refusal to Renew Lease and Denying Access to Airport
Complainant contracted with Respondent to operate a helicopter sightseeing business at the airport. (Director’s Determination, p. 3.) Later, Complainant was party to a lawsuit initiated by several property owners who alleged that related helicopter noise disturbance was a nuisance given the frequency and nature of the operations. (Director’s Determination, p. 3.) In an amended complaint, the property owners named Respondent as a defendant, alleging inverse condemnation claims. (Director’s Determination, p. 4.) Respondent cross-claimed against Claimant as well as claimed a right to indemnification from Claimant under its lease with Claimant. (Director’s Determination, p. 4.) In addition, Respondent informed Claimant that it did not intend to renew the lease or consider a new lease with Claimant unless Claimant rectified a breach by defending, indemnifying, and holding Respondent harmless in the nuisance lawsuit. (Director’s Determination, p. 4.)
In evaluating this claim, the Director observed that the agency does not typically involve itself in lease disputes. (Director’s Determination, p. 14). “However, if the terms and, moreover, the actions of the sponsor in regard to the agreement are unreasonable and unjustly deny access to an aeronautical user, the terms of the lease should be considered.” (Director’s Determination, p. 14.) The Director also established that the pending state court lawsuit for nuisance and inverse condemnation “regarding a lease dispute does not preclude the FAA from evaluating the actions of the sponsor for reasonableness and compliance with FAA grant obligations.” (Director’s Determination, p. 14.)
In the foregoing context, the Director concluded that noise liability insurance as well as taking insurance were not available to the Complainant. (Director’s Determination, p. 16.) Stated the Director: “The record, however, shows that HeliBlock’s 2019 lease does not require noise liability insurance and that the lease agreement was not covered as an insured contract. Further, the legal opinion requested by the insurance company of the policy coverage demonstrates that HeliBlock and RIAC are not covered for the [nuisance/condemnation] lawsuit.” (Director’s Determination, p. 16.)
As such, the Director ruled that
- [a]n indemnification clause that is applied by an airport sponsor to encompass any and all instances related to liability is not reasonable under the grant assurances if it results in a denial of access. The tenant is agreeing to an unknown and likely significant cost for potential legal fees and damages not covered by its insurance policy and for which insurance may not be available as a condition of access. Indeed, no reasonable operator would sign a lease if it were aware that it would be signing a blank check to cover any future uninsured liability on behalf of the airport sponsor. The Director finds [Respondent’s] application of the indemnification clause to be unreasonable and thus an unreasonable denial of access in violation of Grant Assurance 22.
(Director’s Determination, p. 16.) Relatedly, the Director found that even if Respondent’s claim, that timely notification was not made and was a breach of the lease agreement, was accepted, it would not have been a substantial violation that would be cause to not renew the lease and deny access to Complainant. (Director’s Determination, p. 19.) Further, Respondent acknowledged that it would renew the lease and continue its business relationship with Complainant if it indemnified Respondent and covered attorney fees, but mentioned nothing of the notification requirements. (Director’s Determination, p. 19.) As such, Respondent’s claims were not sufficient to warrant its actions to deny access to the operator, and the Director found Respondent’s actions in not renewing the lease an unreasonable denial of access in violation of Grant Assurance 22. (Director’s Determination, p. 19.)
In all, the Director ordered Respondent to present a corrective action plan to the FAA New England Region Airports Division within 30 days from the date of the Order. (Director’s Determination, p. 20.) According to the Director, the plan must explain in detail how Respondent intended to return the airport to compliance with its federal grant assurances by providing reasonable access in accordance with Grant Assurance 22. (Director’s Determination, p. 20.)
Grant Assurance 23, Exclusive Rights—Denial of Lease and Access to Airport
Finally, the Director noted that “Grant Assurance 23 states a sponsor will ‘permit no exclusive right for the use of the airport by any person providing, or intending to provide, aeronautical services to the public.’” (Director’s Determination, p. 21.) Here, however, “[e]ven though HeliBlock is the only helicopter operator based at the Airport, RIAC’s formal leasing policy requires a similar indemnification clause in all its commercial leases. The Director finds RIAC did not violate Grant Assurance 23, Exclusive Rights.” (Director’s Determination, p. 21.)