Star Marianas Air, Inc. v. Commonwealth Ports Authority - No. 16-18-01
FAA Docket No:
16-18-01
Author:
D. Kirk Shaffer, Associate Administrator for Airports
Complainant(s):
Star Marianas Air, Inc.Respondent(s):
Commonwealth Ports AuthorityAirport(s):
Airports in the Commonwealth of the Northern Marianas Islands (CNMI)
History:
Affirming Director's Determination (5/5/20)
Holding:
Affirmed.Abstract:
Complainant averred that the Commonwealth Ports Authority (“Ports Authority”) was operating CNMI airports in a discriminatory manner by imposing excessive, unreasonable, and discriminatory charges, including head taxes, without any basis or support. (Director’s Determination, p. 1.) It further stated that these charges did not relate to the Ports Authority’s costs and resulted in revenue surpluses. (Director’s Determination, p. 1.) Finally, the Complainant alleged that the Ports Authority permitted airside access at one of the terminals (Rota Airport) to Star Marianas’ competitors, while denying Star Marianas the same or similar access. (Director’s Determination, p. 1.)
The Ports Authority denied the allegations, claiming that it applied its ratemaking methodology consistently to all airlines operating at the three airports, in conformance with the Department of Transportation Rates and Charges Policy. (Director’s Determination, p. 1.) In addition, Respondent countered that it consulted with the airlines on the proposed rates, charges, and fees. (Director’s Determination, p. 1.) It also differentiated the rates so that the airlines with fewer passengers and smaller aircraft, operating at the Saipan Commuter, Rota, and Tinian terminals, paid less than the airlines in the Saipan International Terminal Building. (Director’s Determination, p. 1.) Finally, the Ports Authority noted that final rates and charges calculations were reconciled, and it provided refunds to individual airlines. (Director’s Determination, p. 1.)
The Director ruled that Star Marianas provided evidence of alleged past inaccurate settlements related to its anti-head tax claims under Grant Assurance 1, General Federal Requirements, but found no violation given that the FAA only considers current compliance with a sponsor’s federal obligations, and the Ports Authority had taken action to update its annual rates and charges in a timely manner. (Director’s Determination, p. 13.) The Director further found that Star Marianas alleged but did not provide any substantive or persuasive evidence to support its allegations of any current violation of Grant Assurance 22, Economic Nondiscrimination. (Director’s Determination, p. 15.) The Director found that the Ports Authority provided Star Marianas reasonable access to the airport under the existing federal requirements. (Director’s Determination, p. 16.)
Next, the Director found that Star Marianas failed to show which carrier obtained an exclusive right under Grant Assurance 23, Exclusive Rights, that Star Marianas alleged it was denied. (Director’s Determination, p. 16.) The Director also found that Star Marianas failed to provide any substantive detailed financial evidence to support its allegation under Grant Assurance 24, Fee and Rental Structure, of an unreasonable amount of surplus funds to cover the capital and operating costs or unreasonable reserves for the airports system. (Director’s Determination, p. 16.) Additionally, the record did not identify any misuse of airport revenue for non-airport purposes, and the allegations under Grant Assurance 25, Airport Revenues, were dismissed. (Director’s Determination, p. 18.)
Star Marianas appealed, arguing that the Director erred by not considering issues other than whether the Ports Authority violated the Anti-Head Tax Act (“AHTA”) when providing an analysis of Grant Assurance 1, General Federal Requirements. Star Marianas claimed that the Director relied on descriptions and methodologies provided by the Ports Authority that did not exist. (Final Agency Decision, p. 4.) In addition, Star Marianas continued to object to terms of an Airline Use Agreement it signed with the Ports Authority and raised new issues on appeal. (Final Agency Decision, p. 4.) Star Marianas essentially asked the Associate Administrator to do two things: (1) require the Authority to provide airside access to Star Marianas at the Rota terminal, and (2) require the Authority to provide Star Marianas with an annual accounting of its costs attributable to Star Marianas based on reasonable charges. Additionally, Star Marianas asked that the Associate Administrator deny the Ports Authority future Federal Airport Improvement Program grants and suspend current grant fund payments for six months or until the violations alleged were rectified; and require the Respondent to submit a Corrective Action Plan demonstrating how it intended to eliminate the violations. (Final Agency Decision, p. 4.)
Grant Assurance 1, General Federal Requirements
On appeal, Star Marianas claimed that it asserted in its Complaint that the Ports Authority “violated Grant Assurance 1, General Federal Requirements, by imposing unreasonable and excessive charges on a per passenger basis without a maximum limitation based on: fair market value; the Ports Authority’s operational costs; and the weight of Star Marianas landed aircraft.” (Final Agency Decision, p. 7.) Star Marianas further claimed on appeal that it also alleged that the Ports Authority was imposing fees or head charges on individuals traveling in air commerce contrary to 49 U.S.C. § 40116(b). (Final Agency Decision, p. 7.) And, Star Marianas alleged that the Director only considered, within this section of the determination, the Complainant’s allegation that the Ports Authority violated AHTA. (Final Agency Decision, p. 7.) Star Marianas also claimed that the Director stated, “Star Marianas expanded from a cargo carrier to provide passenger services at Saipan in 2009. This is factually incorrect. Star Marianas was initially certificated as an on-demand air carrier on April 1, 2009.” (Final Agency Decision, p. 7). In addition, Star Marianas stated that contrary to the findings of the Director, “Ports Authority does not apply the compensatory method and instead continues to use the existing [Airline Use Agreement (“AUA”)], Article 7: Charges and Fees. Also, the Director relies on descriptions and methodologies provided by Ports Authority that do not exist.” (Final Agency Decision, p. 7.)
In reply, the Ports Authority characterized the appeal as “incoherent and fails to meet the appellant’s duty to direct the Associate Administrator to specific errors of applicable law and fact in the DD. Instead, Star Marianas repeats its prior, scattershot arguments while adding new, unsubstantiated allegations without making any effort to comply with the strict requirements of 14 C.F.R. 16.33(f).” (Final Agency Decision, p. 7-8.) The Ports Authority also noted that Star Marianas “concedes that the method provided for in the AUA does not violate the AHTA [and also failed to explain] how the alleged failure [of a particular provision of the AUA] resulted in violations of the AHTA or the Port Authority’s grant assurances …” (Final Agency Decision, p. 8.)
According to the Associate Administrator, a review of the Director’s Determination “shows that the Director parceled out the various rates and charges allegations to specific issues to be analyzed under the applicable grant assurance. In so doing, the Director undertook an analysis of allegations of whether the Ports Authority violated the AHTA in his analysis under Grant Assurance 1. Relatedly, the Director examined issues related to unreasonable and excessive charges raised by Star Marianas as violations of Grant Assurance 1 under Grant Assurance 22.” (Final Agency Decision, p. 8.)
According to the Associate Administrator, moreover, the Director correctly noted that, “[u]nder 49 U.S.C. § 47129, the FAA may only determine whether a fee is reasonable or unreasonable. FAA may not set the level of the fee.” (Final Agency Decision, p. 9.) Pursuant to 49 U.S.C. § 47129(e), complaints about the reasonableness of a fee set by agreement filed by a party to the agreement setting the disputed fee will not be considered by the Department of Transportation. Therefore, when considering such a dispute, FAA’s role is to determine whether the airport proprietor is in compliance with its grant obligations and statutory obligations relating to airport fees. (Final Agency Decision, p. 9.) In this context, the Director noted that a properly formulated rates and charges methodology does not constitute an illegal head tax, stating, “[b]ased on the descriptions of the methodologies provided by the Ports Authority, the Director finds that Star Marianas has not provided persuasive evidence showing how the Ports Authority rates and charges assessed for each cost center and common use area was, or currently is, a violation of the AHTA.” (Final Agency Decision, p. 9.)
The Associate Administrator then recognized that Star Marianas was initially certificated as an on-demand air carrier, and not a cargo carrier and that any statement by the Director that confused Star Marianas’ initial status was harmless and did not rise to the level of a reversible error. (Final Agency Decision, p. 9.)
In all, the Associate Administrator found that the conclusions reached in the Director’s Determination were made in accordance with law, precedent, and policy. The Director did not err in his analysis of the AHTA and the rate setting methodology used by the Ports Authority. Moreover, the Associate Administrator found that the Director correctly identified and analyzed the allegations of a violation of the AHTA under Grant Assurance 1 and concluded there was no violation. (Final Agency Decision, p. 9.) On appeal, Star Marianas had not identified how the Director erred in this conclusion, but simply objected to the conclusion. (Final Agency Decision, p. 9.)
Grant Assurance 22, Economic Nondiscrimination
Complainant alleged that the Ports Authority was not making terminals available for public use on reasonable terms and without unjust discrimination to all types, kinds, and classes of aeronautical activities, including commercial aeronautical activities. (Director’s Determination, p. 13.) Additionally, Complainant alleged that the Ports Authority violated the FAA policy on rates and charges; that fees were unreasonably high; and that there was a head tax in violation of federal law related to the sale of air transportation. (Director’s Determination, p. 13.) Finally, Complainant argued that the rates and charges should be set to allow for recovery of operating costs, not to make a profit. (Director’s Determination, p. 13.)
According to the Director, however, the record showed that although the Ports Authority failed to establish its rates and charges based on an annual evaluation required under the AUA, it had since satisfactorily provided evidence that it had done so retroactively and intended to continue to do so going forward. (Director’s Determination, p. 14.) The Director was “satisfied that the Ports Authority current rates and charges methodology is transparent and reasonable. The Part 16 process only determines whether sponsors are currently in compliance with Federal obligations, and does not provide restitution or financial damages.” (Director’s Determination, p. 14.) Consequently, “the FAA will consider the successful action by the airport to cure any alleged or potential past violation of applicable Federal obligations to be grounds for dismissal of such allegations.” (See Wilson Air Center v. Memphis and Shelby County Airport Authority, FAA Docket No. 16-99-10, (August 30, 2001).) (Director’s Determination, p. 14-15.)
Finally, according to the Director, Complainant failed to meet its burden of proof under Part 16 by failing to present the Director with any substantive or persuasive evidence to support its allegations of any current Grant Assurance 22 violation. (Director’s Determination, p. 15.) Therefore, the Director dismissed the allegations under Grant Assurance 22, Economic Nondiscrimination. (Director’s Determination, p. 15.)
On appeal, Star Marianas repeated its argument that the Ports Authority charges went beyond what was permitted in the AUA and Airport Rules and Regulations and that these charges were imposed after it started passenger services. (Final Agency Decision, p. 10.) Star Marianas also argued that the Ports Authority’s retroactive charges were unreasonable because Star Marianas could not recoup the additional costs from the passengers when Ports Authority delayed its calculations for the prior years, in violation of the AUA. (Final Agency Decision, p. 10.) Additionally, Complainant claimed that the Ports Authority’s non-compliance deprived it of the ability to ensure that the Ports Authority’s fees were based on operational expenses. (Final Agency Decision, p. 10.) Further, on appeal, Complainant asserted it was not able to be competitive with other air carriers, and thus, the Ports Authority was economically discriminating against it. (Final Agency Decision, p. 10.)
In its reply to the appeal, the Ports Authority claimed that it made the airport available to Star Marianas on fair and reasonable terms and without unjust economic discrimination in accordance with Grant Assurance 22. (Final Agency Decision, p. 10.) The Ports Authority also argued that, “[f]undamentally, Star Marianas’ rates and charges allegations present a contract dispute over the interpretation of various sections of the AUA. Those allegations must be rejected because contract disputes cannot be adjudicated in a Part 16.” (Final Agency Decision, p. 10.)
The Associate Administrator recognized that unreasonable and unjustly discriminatory terms in a contract might be reviewable under a Part 16, but that had not been demonstrated in the case: “These issues are clearly a contract dispute with Star Marianas and the Ports Authority over an agreement signed by both parties. Star Marinas is essentially rearguing the issues identified and examined in the Determination. The fact that the Ports Authority has a methodology that Star Marinas does not agree with does not mean it violates Grant Assurance 22.” (Final Agency Decision, p. 11.) Accordingly, the Associate Administrator ruled that Star Marianas must take its objections of the lease terms and the rates and charges directly to the Ports Authority for resolution in the absence of evidence that the Ports Authority is acting in violation of its Grant Assurances. (Final Agency Decision, p. 11.) “A Part 16 proceeding is not intended to provide a mechanism for adjudicating the respective rights of the parties to a fee dispute.” (Final Agency Decision, p. 11.) The Associate Administrator affirmed, finding no evidence presented on appeal sufficient to overturn or remand the Director’s Determination.
Grant Assurance 23, Exclusive Rights
Complainant averred it operated only cargo services when it entered into a lease with Ports Authority at Rota International Airport, and that when it expanded to provide scheduled passenger service, Complainant requested airside access at the terminal like other similarly situated air carriers. (Director’s Determination, p. 15.) The Ports Authority allegedly denied the request, however, requiring Star Marianas to enplane its passengers and cargo at the far west end of the Rota Terminal. (Director’s Determination, p. 15.) In this context, Complainant argued that the Ports Authority granted special rights or privileges to other air carriers and has denied this same right to Star Marianas. (Director’s Determination, p. 15.)
The Ports Authority countered by noting that Complainant had airside access at the Rota terminal, and that access was neither direct nor exclusive. (Director’s Determination, p. 15.) The Ports Authority also contended that another airline, Arctic Circle, also was required to enplane its passengers and cargo through the west end of the terminal building to access aircraft. (Director’s Determination, p. 15.) On this basis, the Ports Authority argued that the reason for the non-exclusive location was that both airlines do not require Transportation Security Administration (“TSA”) screening. (Director’s Determination, p. 15.)
Given this, the Director noted that if its passengers did not require TSA screening, it was reasonable that Star Marianas passengers could not share the same areas with such passengers and that other space is required for unscreened passengers to board and unload from small aircraft. (Director’s Determination, p. 16.) Under these circumstances, the Ports Authority provided reasonable terms and without unjust discrimination to Star Marianas without adversely affecting the efficiency and utility of the airport in the Rota airport security program. (Director’s Determination, p. 16.)
Also supporting the Director’s Determination was the fact that Star Marianas did not provide any response to Ports Authority’s argument of compliance with TSA security requirements. (Director’s Determination, p. 16.) Contrarily, the Ports Authority provided Star Marianas reasonable access to the airport under the existing requirements and Complainant failed to show which carrier had obtained an exclusive right that Star Marianas itself was denied. (Director’s Determination, p. 16.) Thus, the Ports Authority remained in compliance with its grant assurances and federal surplus property obligations and the Director dismissed allegations under Grant Assurance 23, Exclusive Rights, and Grant Assurance 22, Economic Nondiscrimination.
On appeal, Complainant continued to object to enplaning its passengers and cargo at the west end in the Rota Terminal, contending that the Ports Authority granted special rights or privileges to other air carriers and has denied this same right to Star Marianas. (Final Agency Decision, p. 11.) Star Marianas stated, “two (2) years after the cessation of TSA, Star Marianas, now the only carrier serving Rota, is still required to board through the arrival area at the Rota Terminal.” (Final Agency Decision, p. 11.) In reply, the Ports Authority asserted that it had not granted an exclusive right, and it had identified several efforts it made to accommodate Star Marianas in the terminal. (Final Agency Decision, p. 12.)
The Associate Administrator affirmed, noting that the Director had reviewed the allegation that the Ports Authority provided exclusive airside access to other airlines at the Rota Terminal while requiring Star Marinas to enplane cargo and passengers though the main terminal building, and found that “Star Marianas failed to show which carrier had obtained an exclusive right that Star Marianas itself was denied.” (Final Agency Decision, p. 12.) Moreover, Star Marianas had “not identified another similarly situated user that has been granted an exclusive right. There is no evidence presented by Star Marianas that the Ports Authority is denying access to the terminal or granting an exclusive right. In fact, it is apparent the Authority is seeking to accommodate Star Marianas with direct counter to ramp access, but Star Marianas has not accepted the accommodation to date. The Associate Administrator is not persuaded that Star Marianas is being denied access to the airport in violation of Grant Assurance 23, Exclusive Rights, or that Star Marianas has been denied an aeronautical opportunity offered to another entity.” (Final Agency Decision, p. 12-13.)