David E. Mealy et al. v. Clarion County Airport Authority – No. 16-18-06
FAA Docket No:
FAA Docket No. 16-18-06
Author:
Kevin C. Willis, Director of Airport Compliance
Complainant(s):
David E. Mealy; Mealy Excavating and Construction, Inc.; and Brook TI, LLCRespondent(s):
Clarion County Airport AuthorityAirport(s):
Clarion County Airport (AXQ)
Holding:
Complaint Dismissed.Abstract:
Complainant—Mealy Excavating and Construction, Inc., a commercial construction/excavation company that previously entered into an aircraft storage lease for undivided space in a particular airport hangar—alleged that the County violated Grant Assurance 22, Economic Nondiscrimination, and Grant Assurance 23, Exclusive Rights, by granting another hangar tenant preferential treatment through inequitable and substantially favorable lease terms. (Director’s Determination, pp. 1-2.) By way of a motion to dismiss and answer, Respondent argued that it did not discriminate against Mealy or otherwise violate Grant Assurance 22 or Grant Assurance 23. To resolve these claims, the Director considered three issues.
Grant Assurance 22—Preferential Lease Terms
First, the Director evaluated whether the airport authority unjustly discriminated against Mealy by allegedly giving preferential lease terms to another tenant of Hangar “C” in violation of Grant Assurance 22, Economic Nondiscrimination. Respondent countered that Mealy and the other tenant were not “similarly situated” and therefore the Authority has no burden to offer the same lease terms to Mealy. (Director’s Determination, p. 7.)
As a starting point to this issue, the Director recounted that a complainant does not establish a violation of Grant Assurance 22 (unjust discrimination) simply by showing differences between two leases. (Director’s Determination, p. 7.) “The FAA has found that differences in lease terms executed at different points in time can be justified by the market conditions present at the time of lease execution and that Grant Assurance 22 prohibits only unjust economic discrimination, not all economic discrimination.” (Director’s Determination, p. 7.) Legal precedent also exists for the proposition that lease rates alone cannot determine whether tenants are similarly situated. (Director’s Determination, p. 7 citing Jim Hankins and Mike Plyler v. North Texas Regional Airport, Grayson County, TX, FAA Docket No. 16-19-15 (September 4, 2020)).
According to the Director: “Here, two different leases were executed at different times with different terms for different size leaseholds within the same hangar.” (Director’s Determination, p. 7.) Neither party provided aeronautical services to airport users; they were not competitors in any aeronautical business; and each effectively made the same use of airport facilities (aircraft storage). (Director’s Determination, p. 7.) Therefore, the Director concluded that he need not even reach the issue of whether the parties are similarly situated because, even if he assumed as much, no significant disparity was found. (Director’s Determination, p. 7.) Rather, “the overarching issue here is whether the Authority, in exercising its considerable discretion, established lease rates that are inequitable among the users of Hangar ‘C’ and thus are unjustly discriminatory to Mealy.” (Director’s Determination, p. 7.)
In any case, the Director concluded that Mealy provided no evidence or analysis whatsoever to support that the different spaces—his or those occupied by other tenants—should command different lease rates or that the existing rates are preferential to the other tenant or rose to a level of unreasonableness. (Director’s Determination, p. 8.) In this case, the Respondent, “as airport proprietor, has considerable discretion to establish rates and charges consistent with the type of airport facility use. While there are minor differences in the price per square foot, the differences do not justify a finding of unreasonableness.” (Director’s Determination, p. 8.) Relatedly: “The Director has consistently concluded Grant Assurance 22 does not require sponsors to offer lease rates and terms that are identical to other leases negotiated at different points in time, [and consequently,] Mealy fails to substantiate that the rates differences here are unreasonable and unjustly discriminatory. The Director finds that the Authority is not in violation of Grant Assurance 22, Economic Nondiscrimination.” (Director’s Determination, p. 8.)
Grant Assurance 22—Conditions of Entering into a Lease
Next, the Director considered whether the airport authority unjustly discriminated against Mealy via a requirement to agree to the Authority’s Code of Conduct as a condition of entering into a lease for hangar space at AXQ in violation of Grant Assurance 22, Economic Nondiscrimination. The core of Mealy’s argument was that the authority insisted that he sign a Code of Conduct as a condition of entering a lease—evidence that he had not been definitively denied access. (Director’s Determination, p. 10.) “Likewise, Mealy has failed to show that the Code of Conduct has been applied only to him; an assertion the sponsor denies.” (Director’s Determination, p. 10.)
The Director determined that Respondent’s actions were “a reasonable response to protect its legitimate proprietary interests as airport operator. Mealy has not shown that denying tenancy pending agreement with the Code of Conduct is unreasonable or unjustified. Crucially, Mealy fails to establish that the Authority’s code singles him out or is itself unjustly discriminatory. Lastly, Mealy has not—at the time of his Complaint filing—presented a willingness to abide by reasonable terms and conditions established by the Authority and thus denial of access, if shown, has probable justification. In consideration of the above, the Director finds that the Authority is not in violation of Grant Assurance 22, Economic Nondiscrimination.” (Director’s Determination, p. 10.)
Grant Assurance 23—Constructive Granting of an Exclusive Right
The Director in Issue 1 determined that Mealy provided no evidence to support that existing rates were preferential to another airport tenant and thus they were not unjustly discriminatory. (Director’s Determination, p. 10.) According to the Director, Mealy likewise provided no evidence that “rights, powers and privileges” were bestowed upon another tenant that were otherwise denied to other Hangar C tenants in such a way as to establish a prohibited exclusive right. (Director’s Determination, p. 10.)
“While it is accurate that the [other tenant’s] lease bestowed physically demarcated, exclusive use space within the hangar, the provision is not tantamount to conferring [that tenant] an unreasonable right, power, or privilege,” the Director ruled. (Director’s Determination, p. 11.) “A physically demarcated space at the front of an open-floor hangar cannot be construed as granting exclusive right to a tenant—such as an air ambulance operator—having a demonstrated need for dedicated space. [The other tenant] was provided space to facilitate its operation just as Mealy was provided space to facilitate storage of his aircraft. Likewise, there is no evidence that Mealy (1) requires, and (2) requested similar access but was denied such by the Authority,” the Director ruled, moreover. (Director’s Determination, p. 11.) Thus, given that “[a]n exclusive rights violation occurs when the airport sponsor excludes others, either intentionally or unintentionally, from participating in an on-airport aeronautical activity [and given that a] prohibited exclusive right can be manifested by an express agreement, unreasonable minimum standards, or by any other means … [i]n this case, the record provides no evidence to support Mealy’s allegation that he has been unreasonably excluded from the airport, or that [the other tenant] has been provided preferential treatment to his detriment.” (Director’s Determination, p. 12.) Therefore, the record did not support a violation of Grant Assurance 23, Exclusive Rights.