IBC Airways, Inc. v. Broward County, Florida – No. 16-21-03

Author:

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

Complainant(s):

Respondent(s):

Airport(s):

Fort Lauderdale/Hollywood International Airport (FLL)

Holding:

Abstract:

Complainant asserted various claims that the County acted in an arbitrary, capricious, retaliatory, and discriminatory manner as Complainant tried to become a Fixed Base Operator (“FBO”) at the airport. (p. 1.)

In particular, Complainant alleged that the County violated Grant Assurance 5 by (1) forcing leaseholders to accept limitation on services to subtenants that conflict with the County’s obligations under the grant assurances; and (2) failing to use subordination clauses in the lease. (p. 2.)

Complainant also claimed that the County violated Grant Assurance 22 by (1) discriminatory and retaliatory treatment of Complainant over its request to operate as an FBO; (2) failing to provide lease terms and minimum standards that were provided to other FBOs; (3) unfair application of minimum standards; and (4) refusing to participate in discussions to amend the master lease to allow additional services. (p. 2.)

Complainant also claimed that the County violated Grant Assurance 23 by (1) refusing to participate in discussions with it and Aero Lauderdale regarding permission for Complainant to operate as an FBO; (2) creating an undue burden to Complainant becoming an FBO, and thereby providing an exclusive right to competing FBOs; and (3) continued and pervasive obstructionist conduct towards Complainant’s efforts to become an FBO. (p. 2.)

Complainant specifically alleged that the County violated the certain grant assurances by “forcing leaseholders to accept limitations on services and to pass those restriction[s] on to [subtenants], thus removing the ability [of the Broward County Airport Department (“BCAD”)] to perform any or all of the terms, conditions and assurances in the grant agreements...” (p. 3.) Complainant further stated that Aero Lauderdale was the Lessee in the Master Lease and the Sub-lessor to Complainant as the sub-lessee; Complainant thus claimed that requiring “Aeroterm to sign a lease that prevents all sub-lessees from utilizing the airport on reasonable terms … violates the Federal Grant Assurance Program.” (p. 3.) In addition, Complainant alleged that the County violated its obligations by “fabricating a land shortage, then fabricating a glut of FBOs, and then granting FBOs more favorable treatment ... and granting access to available airport property.” IBC also argued that the County refused to participate in “any three-way discussions to modify the Master Lease Agreement with BCAD.” (p. 3.)

In response, the County filed a Motion to Dismiss the Complaint for failure to state a claim that warrants investigation or further action by the FAA and argued “what is sufficiently clear from IBC’s Complaint and the documents attached thereto is that the Master Lease, the terms by which IBC is bound, prohibits Aero’s entire leasehold, and therefore IBC’s subleased property, to be utilized for the operation of an FBO.” (p. 3.)

Additionally, the County stated: “Equally clear, despite IBC’s allegations that County violated its Grant Assurances by placing unreasonable restrictions in its leases and wrongfully refusing to offer IBC an alternative location in which to operate as an FBO, IBC has no desire to operate as an FBO in any other location but its current leasehold where such use is not permitted … Now, in yet another attempt to avoid the unavoidable, IBC files this Part 16 Complaint asserting that County’s enforcement of the terms of a nearly 20-year-old lease, to which it is not a party, violates Grant Assurances 5, 22, and 23 in an effort to have the FAA relieve it from its contractual obligations and lease (and sublease) limitations IBC was fully aware of 13 years ago.” (p. 3.)

Grant Assurance 5, Rights and Powers

The Director agreed with the County, noting that the lease-related claim did not warrant an investigation or further action by the FAA pursuant to 14 CFR §16.26(b)(l)(ii). (p. 6.) The Director noted that the lease agreed to by the County and Aero Lauderdale was signed by both parties and explicitly stated in Section 5, Use of the Premises, that “[t]he retail sale of fuel to non-commercial operators is prohibited.” (p. 6.) Thus, “[i]t is clear from the Complaint that Aero Lauderdale is abiding by the terms of this agreement and cannot allow IBC Airways to sell fuel. It is true that IBC elected not to provide the FAA with a copy of its sublease agreement with Aero Lauderdale in its Complaint filing. It is not a violation of Grant Assurance 5 for an airport sponsor to enforce the terms of a lease agreed to by all parties.” (p. 6.) What is more, “[t]he County is not obligated to abrogate the terms of a lease both parties agreed to in deference to the demands of a third party. The County is well within its right and powers in declining to interject itself into the lease agreement of its tenant, Aero Lauderdale, and the subtenant, IBC.” (p. 6.)

Moreover, the Director noted, “airport sponsors are not required to develop any and all parcels of land in a manner consistent with the wishes of any one party but rather may exercise its proprietary rights and powers to develop and administer the airport’s land in a manner consistent with the public’s interest.” (p. 6.) “As to Grant Assurance 5, providing a restriction in a master lease that then gets passed to sublessees in no discernable way deprives the County of the power to comply with its Federal obligations.” (p. 6.)

The Director also rejected Complainant’s allegation that the County continued to violate Grant Assurance 5 by failing to use strong subordination clauses in its leases. (p. 7.) Stated otherwise, the Director agreed that the subordination-related claim did not warrant an investigation or further action by the FAA pursuant to 14 CFR § 16.26(b)(1)(ii). Reasoned the Director: “IBC misunderstands the purpose of subordination clauses used in lease agreements between an airport sponsor and its tenants. Subordination clauses are a method a sponsor may use to subordinate the terms of the lease or agreement to the federal grant assurances and surplus property obligations. A subordination clause may assist the sponsor in amending a tenant lease or agreement that otherwise deprives the sponsor of its rights and powers. A typical subordination clause will state that if there is a conflict between the terms of a lease and the federal grant assurances, the grant assurances will take precedence and govern. This does not mean that a sponsor is required to abrogate its lease with a tenant at the insistence of a third party.” (p. 7.) Indeed, “Grant Assurance 5 requires the sponsor to retain sufficient rights and powers to maintain adequate control of its airport. An effective way to do this is by incorporating terms in lease agreements, which then can be passed on in subleases. Upon review of the County’s motion to dismiss and IBC’s Response, the Director finds that as to IBC claims under Grant Assurance 5, Rights and Powers, the Complaint on its face does not state a claim that warrants an investigation or further action by the FAA.” (p. 7.)

Grant Assurance 22, Economic Nondiscrimination

The Director also found no violation of Grant Assurance 22 for largely the same reasons as he found no violation of Grant Assurance 5. That is, the allegations under Grant Assurance 22 stemmed from the County’s refusal to change its lease with Aero Lauderdale; but as the Director noted, the County was not obligated to take this action. (p. 8.)

“The lease terms between IBC and Aero Lauderdale do not allow IBC to provide fueling services from its existing leasehold … sponsors are not required to develop any and all parcels of land in a manner consistent with the wishes of any one party, and may restrict certain areas of the airport for certain activities at the exclusion of others.” (p. 8.) “Here the County has other land available for an FBO on the airport. Accordingly, the County is well within its rights to decline to renegotiate an agreement with Aero Lauderdale so IBC Airways can operate as an FBO on its existing leasehold. IBC has made it clear that it is not interested in other parcels of land available for an FBO but will only accept contract changes to allow it to stay where it is and not incur the cost of building a new facility. Those arguments do not rise to a grant assurance violation by the County. Nor is it within the FAA’s province in a Part 16 proceeding to engage in contractual grievances between parties.” (p. 8.)

Grant Assurance 23, Exclusive Rights

Finally, the Director agreed with the County that this was a contract issue under a sublease agreed to by both Complainant and Aero Lauderdale, and that the County did not create an undue burden to Complainant becoming an FBO. (p. 9). “In fact, the County advised lBC that it could apply for a new lease agreement to initiate the process to request the lease of property at FLL that is conducive to fixed based operations.” (p. 9.) Consequently, the “County’s declination to intervene to change the terms of the Master Lease is not obstructionist conduct and does not amount to a violation of Grant Assurance 23.” (p. 10.)

Index Terms: