CTI Aviation Services LLC v. Millington Airport Authority, Tennessee – No. 16-20-02

Author:

Kevin C. Willis, Director, Office of Airport Compliance and Management Analysis

Complainant(s):

Respondent(s):

Airport(s):

Millington-Memphis Airport (NQA)

Holding:

Abstract:

Complainant, the second Fix Base Operator (“FBO”) at the airport, alleged that the airport authority violated Grant Assurance 22, Economic Nondiscrimination, in several ways: (1) Respondent did not enforce its Minimum Standards fairly between it and another FBO (Tulsair); (2) Respondent did not make a good faith effort to collect more than nearly $8,000 owed by Tulsair as reimbursement for fire inspection repairs that the authority implemented on its behalf whereas Complainant had to pay for its own fire inspection repairs; and (3) Respondent failed to routinely collect fuel flowage fees from Tulsair while CTI paid its fuel flowage fees. (Director’s Determination, p. 7.)

Additionally, Complainant alleged that it had consistently paid its rent, while the authority acquiesced to Tulsair’s history of missed or late rent payments. (p. 7.) Complainant further alleged that it had paid overtime to its own employees to service Tulsair’s customers due to Tulsair not having the required staffing during business hours consistent with the Minimum Standards. (p. 7.) Complainant also alleged that the authority did not require Tulsair to have a current certificate of insurance, and that since the filing of its Part 16 Complaint, the authority increased its rent as retaliation though it did not raise other commercial tenant rents in the last five years. (p. 7.)

Respondent countered that it investigated any reported Minimum Standards violations and took appropriate action. For example, Respondent noted that the other FBO’s owner died and that Respondent wanted to work with the new owners, but that Tulsair remained delinquent on its past payments for rents and reimbursement for the fire code repairs. (p. 8.) Additionally, Respondent repeatedly requested from Tulsair a current certificate of insurance and successfully sued in state court to evict Tulsair and collect for past rents and reimbursement for the fire code repairs. (p. 8.) Stated otherwise, according to Respondent, the record showed that it took action when Complainant brought its claims of Tulsair’s violations of Minimum Standards to Respondent’s attention and obtained a Consent Order evicting Tulsair from the Airport. (p. 8.)

Grant Assurance 22—Failure to Apply Minimum Standards Consistently

Beginning with the proposition that the focus in a Part 16 process is on the airport sponsor’s current compliance, not on the airport sponsor’s alleged or potential past noncompliance, the Director noted that the record did indeed show that Respondent took reasonable action when there was a claim that Tulsair was in violation of the Minimum Standards. (p. 8.) “Moreover, even if FAA or another airport sponsor may have reacted differently over time—even if such hypothetical action would have resulted in enhanced compliance—we still find no violation where the airport has taken action to resolve the violation. The Authority’s lawsuit to recover the amounts owed it by Tulsair, coupled with its eviction of Tulsair, adequately resolve the violations alleged.” (p. 9.)

Additionally, “to the extent Complainant claimed that it suffered financial harm from the actions of Respondent vis-à-vis Tulsair, an assertion upon which the FAA need not rule, there is no remedy that falls within Part 16 for such a claim,” the Director ruled. (p. 9.) “FAA has enforcement authority over an airport sponsor and it does not award damages to persons subjected to an airport sponsor’s noncompliance with its grant assurances.” (p. 9.)

Finally, the Director found “no improper retaliatory action that would violate the terms of Grant Assurance 22 associated with the increase in rent for Complainant [“CTI”]. The Authority has explained that the rent increase was contemplated by the lease, a fact that CTI has not refuted. Moreover, increases in rent from time to time are consistent with the Airport’s sustainability obligations. The Director declines to find a rent increase improper when it was specifically contemplated by the lease. For the reasons stated above, the Director dismisses the allegations under Grant Assurance 22, Economic Nondiscrimination.” (p. 9.)

Grant Assurance 23—Restriction on Lease of Fuel Tank

Complainant next argued that Respondent, by way of a letter of agreement, granted Tulsair “exclusive rights” to fuel storage tanks at no additional rental yet refused an earlier request by Complainant to use such fuel tanks at the airport. (p. 9.) As such, Complainant alleged that Respondent had established an “exclusive lease” denying it the opportunity to occupy the fuel tank at the airport. (p. 9.)

Respondent countered that Complainant built its own state-of-the-art fuel tank, and that Tulsair’s use of the airport’s fuel tank did not constitute an impermissible exclusive right. Relatedly, “CTI never formally asked in writing to use the Airport’s fuel tank,” and in any case, to compensate Complainant for the cost of building its own tank, Respondent charged Complainant a lower fuel flowage fee. (p. 9.) Meanwhile, the record showed that both parties agreed that the tank could be shared, that both FBOs used different fuel vendors, and that Complainant was permitted to construct a fully self-fueling 100LL AvGas pump at which small aircraft users can refuel. (p. 9.)

In this foregoing context, the Director dismissed the allegations under Grant Assurance 23, Exclusive Rights, noting that the purpose of the grant assurances is to protect the public interest in the operation of federally assisted airports, not to provide alternative or supplemental rights to those normally available to commercial tenants in disputes with their landlords, i.e., negotiation or commercial litigation under applicable state laws. (p. 10.)

Thus, in this case, the Director opined that Respondent had provided reasonable access to Complainant without adversely affecting its ability to provide fueling services at the airport; relatedly, Complainant had failed to demonstrate how Tulsair obtained an exclusive right where Complainant itself was not denied the ability to provide fueling services at the airport. (p. 10.) In fact, Complainant built its own tank in accordance with its Business and Marketing Plan, was afforded a lower fuel flowage fee than Tulsair, and at no time was barred from providing fueling services at the airport. (p. 10.) Given that both FBOs had fuel tanks, and both were also to provide fueling services, the Director declined to find an exclusive right where the tenant that was first-in-time had exclusive access to the airport’s tank. (p. 11.) In any case, any claim that the airport violated Grant Assurance 23, Exclusive Rights, was moot as Tulsair had been evicted from the airport, which eviction effectively terminated any exclusive right that may have been granted. (p. 11.) “Even if Tulsair had, prior to its eviction, been operating under an exclusive right in violation of Grant Assurance 23, the FAA’s focus in a Part 16 process is on current compliance, not on providing a complainant with a means of redress for perceived injuries from past noncompliance.” (p. 11.)

Grant Assurance 24, Fee and Rental Structure

Complainant contended that the airport violated Grant Assurance 24, Fee and Rental Structure, in that the airport’s budget relied, in part, on rents and fees from its two FBOs; Complainant argued that the airport had been unsuccessful in collecting some, if not all, rent fees from Tulsair and that the airport’s budget relied, in part, on having access to insurance coverage. (p. 11.) Additionally, Complainant averred that even with Tulsair’s Certificate of Insurance expired, the airport made no effort to bring Tulsair into compliance with its insurance obligations. (p. 11.)

The airport responded that it filed with a state court for judgment for unpaid rent and fees and to evict Tulsair from the Airport because Tulsair was “delinquent” in rent payments; additionally, the airport followed up and requested Tulsair to provide a current certificate of insurance since the previous one expired. (p. 12.) Thus, Respondent argued, the record showed that it took action that demonstrated that it addressed issues raised by Complainant, and Respondent further evicted Tulsair for noncompliance with the terms of its lease agreement. (p. 12.)

In this context, the Director dismissed Complainant’s allegations, recognizing precedent that “[t]he FAA will not attempt to negotiate a remedy to a dispute between [airport tenants and the airport sponsor]. The FAA does not mediate disputes through the Part 16 complaint process.” (p. 12.) “Nor does the FAA enforce contract terms of agreements between airports and tenants. Rather, the FAA enforces the agreements it enters into with airport sponsors. Our resolution of this issue is based on the same analysis in Issue 1. It is not the FAA’s role to resolve disputes between airport tenants and the airport sponsor. The FAA’s focus is on current compliance with the grant assurances. Here, the violations, to the extent they ever existed, are resolved by the actions taken by the airport sponsor to both evict Tulsair and recover amounts due.” (p. 12.)

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