United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 21, 2010 Decided April 1, 2011
No. 09-1307
CSI AVIATION SERVICES, INC.,
PETITIONER
v.
UNITED STATES DEPARTMENT OF TRANSPORTATION AND
RAYMOND L. LAHOOD, SECRETARY,
RESPONDENTS
On Petition for Review of an Order
of the Department of Transportation
David M. Hernandez argued the cause and filed the
briefs for petitioner.
Mary F. Withum, Senior Trial Attorney, U.S.
Department of Transportation, argued the cause for
respondents. With her on the brief were Robert B. Nicholson
and Kristen C. Limarzi, Attorneys, U.S. Department of
Justice, Paul M. Geier, Assistant General Counsel, U.S.
Department of Transportation, and Peter J. Plocki, Deputy
Assistant General Counsel.
Before: SENTELLE, Chief Judge, TATEL and GRIFFITH,
Circuit Judges.
2
Opinion for the Court filed by Circuit Judge GRIFFITH.
GRIFFITH, Circuit Judge: The Department of
Transportation ordered CSI Aviation Services, Inc., to cease
and desist from acting as a broker of air-charter services for
the federal government. Because the agency failed to justify
its authority to issue the order, we grant CSI’s petition for
review.
I
Since 2003, CSI has been under contract with the General
Services Administration (GSA) to broker air-charter service
for various federal agencies. On March 10, 2009, CSI won a
competitive bid to renew its status as a GSA contractor
through 2014. A few days prior, on March 6, the Department
of Transportation (DOT) sent CSI a letter requesting
information to determine whether the company was engaging
in “indirect air transportation” without the certificate of
authority required by the Federal Aviation Act, 49
U.S.C. § 41101(a).
After the company provided the requested information,
DOT sent another letter, stating that it had “review[ed] the
information submitted by CSI” and “consult[ed] with GSA.”
Letter from Samuel Podberesky, Assistant Gen. Counsel for
Aviation Enforcement Proceedings, DOT, to David M.
Hernandez, Counsel for CSI (Oct. 16, 2009) [hereinafter Oct.
2009 Letter to CSI]. The letter then declared:
Based on this information, CSI has been acting as an
unauthorized indirect air carrier in violation of section
41101 with respect to business transacted via its GSA
schedule listing. Violations of section 41101 also
3
constitute unfair and deceptive practices and unfair
methods of competition in violation of 49 U.S.C.
§ 41712.
Violations of these provisions subject CSI and its
principals to the assessment of civil penalties . . . of up to
$27,500 for each violation. Each day such violation
continues is a separate violation.
....
. . . Accordingly, CSI is warned to cease and desist from
any further activity that would result in it engaging in
indirect air transportation. If CSI immediately ceases
from entering into new contracts pursuant to the GSA
schedule, and ceases all its activities governed by existing
GSA contracts within 180 days from the date of this
letter, we will refrain from taking enforcement action
regarding its past violations as discussed above.
Id.
Six other companies received similar letters. All six
complied by terminating their status as contractors for GSA.
CSI alone chose to challenge DOT’s determination, asking
the agency to withdraw the cease-and-desist letter on the
grounds that the Act requires a certificate of authority only for
companies that operate “as a common carrier,” 49 U.S.C.
§ 40102(a)(25), and that CSI’s charter flights for the federal
government are not common carriage. Letter from David M.
Hernandez, Counsel for CSI, to Samuel Podberesky, Assistant
Gen. Counsel for Enforcement Proceedings, DOT (Nov. 19,
2009).
On November 25, 2009, seeking another way to avoid
shutting down its operations, CSI also submitted a petition to
DOT for an emergency exemption from the certification
4
requirement. In support of CSI’s petition, GSA wrote to DOT
explaining at length why the Act’s certification requirements
for common carriage make no sense for government
contracts. “Acquisition [of air service] by the Federal
Government . . . is distinct in several ways from acquisition in
the private sector and does not present the consumer
protection related concerns typically at issue in the private
sector.” Letter from Kris E. Durmer, Gen. Counsel, GSA, to
Robert S. Rivkin, Gen. Counsel, DOT (March 1, 2010).
“There are a number of ways in which the Federal agencies
that purchase air charter broker services . . . are protected
from unscrupulous contractors.” Id.
DOT granted CSI a temporary exemption that was
scheduled to expire in April 2011. The exemption order,
signed by the Assistant Secretary for Aviation and
International Affairs, indicated that DOT “remain[ed] of the
view that . . . the provision of air services for U.S.
Government agencies through the GSA contracting system
constitutes an engagement in air transportation, necessitating
that brokers conducting such business hold economic
authority from the Department to act as indirect air carriers.”
Final Order, Docket No. OST-2009-0311, at 4 (Apr. 14, 2010)
(DOT).1 In the meantime, CSI has continued to provide air
service for GSA. CSI timely filed this petition for review in
December 2009.
The central issue in this case is whether DOT properly
concluded that air charter brokers that operate under GSA
contract engage in indirect air transportation and so require
1
The agency has since issued a one-year extension of the original
exemption, which is now scheduled to expire on April 14, 2012.
See Final Order, Docket No. OST-2009-0311 (Mar. 3, 2011)
(DOT). The extension order does not revise the agency’s position
that GSA contractors require certification.
5
certification from DOT despite the statutory provision that
requires certification only for those who provide air
transportation “as a common carrier.” Before reaching this
issue, however, we must first consider whether DOT has
taken a final legal position that is fit for judicial review and
whether DOT’s grant of an exemption for CSI has rendered
this case moot.
II
The Federal Aviation Act provides that “a person
disclosing a substantial interest in an order issued [under the
Act] . . . may apply for review of the order by filing a petition
for review” in this court. 49 U.S.C. § 46110(a). To avoid
premature intervention in the administrative process, our
review of agency action “has been judicially restricted to
review of final agency orders.” Puget Sound Traffic Ass’n v.
Civil Aeronautics Bd., 536 F.2d 437, 438-39 (D.C. Cir. 1976).
The Supreme Court set the standard for finality in Bennett v.
Spear, 520 U.S. 154, 178 (1997). An agency action is final
when it marks “the ‘consummation’ of the agency’s
decisionmaking process” and is not merely of a “tentative or
interlocutory nature.” Id. at 178 (citations omitted). The
action must be one in which “rights or obligations have been
determined” or “from which legal consequences will flow.”
Id.
Bennett highlights the importance of avoiding disruption
of the administrative decisionmaking process, but it does not
foreclose all pre-enforcement challenges. Our most instructive
case on this point is Ciba-Geigy Corp. v. EPA, 801 F.2d 430
(D.C. Cir. 1986), which we have recently described as
“complementary” to Bennett. Reckitt Benckiser, Inc. v. E.P.A.,
613 F.3d 1131, 1137 (D.C. Cir. 2010). In Ciba-Geigy, an EPA
official sent letters to twenty private companies directing
6
them to modify their pesticide labels. The letters stated that if
the companies refused, the EPA would consider the pesticides
“misbranded,” leading to enforcement actions and penalties.
Seventeen of the twenty companies complied but Ciba-Geigy
resisted, claiming that the EPA was misreading its legal
authority to allow it to bring a misbranding action before
following the registration cancellation process required by
statute. Facing the choice between costly compliance and the
risk of prosecution, Ciba-Geigy filed a pre-enforcement
lawsuit seeking injunctive and declaratory relief.
Noting that “an agency may not avoid judicial review
merely by choosing the form of a letter to express its
definitive position on a general question of statutory
interpretation,” Ciba-Geigy, 801 F.2d at 438 n.9, we held that
the EPA’s assertion of its statutory authority was reviewable
final agency action for three reasons. First, the agency had
taken a “definitive” legal position concerning its statutory
authority. Id. at 436. Second, the case presented “a purely
legal” question of “statutory interpretation.” Id. at 435. In the
absence of disputed facts that would bear on the statutory
question, there was no benefit in waiting for the agency to
develop a record before granting judicial review. And third,
the agency’s letter imposed an immediate and significant
practical burden on Ciba-Geigy, ordering the company to
“conform to the new labeling requirement on pain of civil and
criminal penalties.” Id. at 437.
All three factors from Ciba-Geigy are present here. First,
DOT has issued a “definitive” statement of the agency’s legal
position. Its initial warning letter clearly took the position that
air charter brokers under GSA contract require agency
certification. The letter declared in no uncertain terms that
“CSI has been acting as an unauthorized indirect air carrier in
violation of section 41101.” Oct. 2009 Letter to CSI. After
7
CSI protested and explained why it believed DOT to be
misreading its statutory authority, the agency refused to
change its legal position. Instead it issued an order granting
CSI a temporary exemption from the certification
requirement. The exemption order reiterated DOT’s position
that “the provision of air services for U.S. Government
agencies through the GSA contracting system constitutes an
engagement in air transportation, necessitating that brokers
conducting such business hold economic authority from the
Department to act as indirect air carriers.” Final Order,
Docket No. OST-2009-0311, at 4 (Apr. 14, 2010) (DOT). The
warning letter and the exemption order taken together amount
to a definitive statement of DOT’s legal position. “Not only
did the statement of position admit of no ambiguity, but it
gave no indication that it was subject to further agency
consideration or possible modification.” Ciba-Geigy, 801
F.2d at 436-37.
Second, this case presents a “purely legal” question of
statutory interpretation—whether an air charter broker
operating as a GSA contractor is engaged in the provision of
air transportation “as a common carrier” and therefore
requires a certificate of authority. 49 U.S.C. § 40102(a)(25).
In the absence of any disputed facts that would bear on this
question, our review of the agency’s legal position would not
“benefit from a more concrete setting.” Ciba-Geigy, 801 F.2d
at 435. The legal question we review concerns the meaning of
the Federal Aviation Act, which is antecedent to and distinct
from whether CSI itself has violated the law.
And third, DOT has imposed an immediate and
significant burden on CSI. The agency effectively declared
the company’s operations unlawful and warned the company
“to cease and desist from any further activity that would result
in it engaging in indirect air transportation.” Oct. 2009 Letter
8
to CSI. At the very least, this cast a cloud of uncertainty over
the viability of CSI’s ongoing business. It also put the
company to the painful choice between costly compliance and
the risk of prosecution at an uncertain point in the future—a
conundrum that we described in Ciba-Geigy as “the very
dilemma [the Supreme Court has found] sufficient to warrant
judicial review.” 801 F.2d at 439. DOT’s legal
pronouncement was sufficiently burdensome to make six
other GSA contractors terminate their air charter operations
for fear of prosecution. Having thus flexed its regulatory
muscle, DOT cannot now evade judicial review.
The government relies on FTC v. Standard Oil Co. of
California, 449 U.S. 232 (1980), to argue that final agency
action in a case like this one requires the completion of a full
enforcement action. In light of Ciba-Geigy, however, this
argument is mistaken. In Standard Oil, the FTC initiated an
enforcement action upon finding “reason to believe” that
Standard Oil’s quasi-monopoly violated the Federal Trade
Commission Act. Id. at 234. In the midst of the FTC’s
enforcement action, with key facts still in dispute, Standard
Oil of California (Socal) filed a lawsuit arguing that the FTC
lacked the requisite “reason to believe” the company had
violated the law. The Court dismissed the case for lack of
finality. Id. at 238.
Standard Oil differs from the present case in three key
respects. First, unlike in this case, the FTC in Standard Oil
did not definitively state its legal position. The FTC’s stated
finding of a “reason to believe” that Socal had violated the
law was only a “threshold determination that further inquiry
[was] warranted and that a complaint should initiate
proceedings.” Id. at 241. This contrasts sharply with DOT’s
definitive statement that “the provision of air services for U.S.
Government agencies through the GSA contracting system
9
constitutes an engagement in air transportation,” Final Order,
Docket No. OST-2009-0311, at 4 (Apr. 14, 2010) (DOT), and
that “CSI has been acting as an unauthorized indirect air
carrier in violation of section 41101 with respect to business
transacted via its GSA schedule listing,” Oct. 2009 Letter to
CSI.
Second, the petition in Standard Oil did not raise a purely
legal question that was amenable to immediate judicial
review. Whether Socal had violated the law—and whether
there was a “reason to believe” it had—depended on a large
body of unresolved facts, best sorted out by the FTC with its
expertise and fact-finding capability. In the presence of
disputed facts, the case did not present a fully crystallized
“legal issue . . . fit for judicial resolution.” Standard Oil, 449
U.S. at 239 (quoting Abbott Labs. v. Gardner, 387 U.S. 136,
153 (1967)). Granting Socal’s petition for review would have
been premature: it would have caused “interference with the
proper functioning of the agency and [imposed] a burden [on]
the courts.” Id. at 242. Here, by contrast, we face a clean
question of statutory interpretation with no disputed facts.
There is no need to withhold review pending further factual
development that might clarify the issue.
Third, the FTC’s enforcement action against Socal did
not impose the same magnitude of hardship that DOT has
imposed on CSI. As the Supreme Court explained, the FTC’s
tentative determination that Socal might be violating the
antitrust laws had no significant “effect upon [Socal’s] daily
business.” Id. at 243. Here, however, DOT’s legal position
cast a shadow over CSI’s customer relationships, tainted
almost every aspect of its long-term planning, and impaired
the company’s ability to fend off competitors. Indeed, the
very purpose of DOT’s legal pronouncements, accomplished
with six other companies, was to prompt CSI to shut down its
10
operations. Thus, whereas Socal had “the burden of
responding to the charges made against it” in a formal
hearing, id. at 242, CSI faced the more troubling question of
whether it was willing to risk serious penalties in order to
obtain such a hearing at all.
It is clear from Standard Oil that courts should take care
not to inject themselves into fact-bound agency proceedings
that have yet to produce any definitive legal conclusions. But
this is not such a case. DOT took a definitive legal position
denying the right of GSA contractors to continue operating
without certification from the agency. This order imposed a
substantial burden on CSI, and the disputed statutory
authority underlying the order is fully fit for judicial review
without further factual development.2
III
2
Of course, whether an agency letter threatening enforcement
action is subject to judicial review varies based on the
circumstances. In Reliable Automatic Sprinkler Co. v. Consumer
Product Safety Commission, 324 F.3d 726 (D.C. Cir. 2003), we
found a lack of finality where the Commission sent a letter
informing a sprinkler company that it “intended to make a
preliminary determination that the [company’s] sprinkler heads
present[ed] a ‘substantial product hazard.’” Id. at 729. That case is
inapposite here because it lacked two key factors for reviewability.
The letter was not definitive because the Commission had “yet to
determine conclusively its jurisdiction to regulate; [] yet to
determine whether the sprinkler heads present[ed] a ‘substantial
product hazard’; and [] yet to issue any compliance orders.” Id.
And, equally important, the question at issue there, whether
sprinkler heads qualified as “consumer products” under the
Consumer Product Safety Act, “clearly involve[d] the resolution of
factual issues and the creation of a record,” as well as the exercise
of “agency expertise” prior to court involvement. Id. at 734.
11
DOT argues that this case is moot for two reasons. First,
the agency “plans to hold a rulemaking on this subject [that]
will most likely change the legal landscape that gave rise to
the warning letter.” Resp’t’s Br. 11-12. And second, the
agency granted CSI a temporary exemption from the statutory
certification requirement. In DOT’s view, this exemption
“superseded the Department’s warning letter and completely
resolved the controversy” before us. Id. at 10.
We reject DOT’s mootness arguments. The agency’s
promised rulemaking has yet to occur, and CSI’s exemption is
merely temporary. Thus, DOT’s assurances provide nothing
more than the mere possibility that the agency might allow
CSI to continue operating. If the agency does not see fit to
change its legal position or extend CSI’s exemption, the
exemption will expire and the company will face the full force
of the adverse legal determination that DOT has announced.
This not only raises the specter of future harm to CSI, but
actually harms the company now. CSI is in the business of
bidding for air-travel contracts and arranging air-charter
logistics, both of which require a substantial amount of
advance planning. The daily difficulties of running such a
business are amplified by the looming threat of a legal kibosh.
IV
We turn at last to the merits of CSI’s petition. The
fundamental question in reviewing an agency action is
whether the agency has acted reasonably and within its
statutory authority. The agency must not only adopt a
permissible reading of the authorizing statute, but must also
avoid acting arbitrarily or capriciously in implementing its
interpretation. See 5 U.S.C. § 706(2). Among other things,
this requires the agency to “take whatever steps it needs to
provide an explanation that will enable the court to evaluate
12
the agency’s rationale at the time of decision.” Pension
Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633, 654 (1990).
In this case, DOT failed to explain why the Federal
Aviation Act requires a certificate of authority for air charter
brokers operating under GSA contract. The Act states that “an
air carrier may provide air transportation only if the air carrier
holds a certificate issued under this chapter.” 49 U.S.C. §
41101(a). The term “air carrier” means “a citizen of the
United States undertaking by any means, directly or
indirectly, to provide air transportation.” Id. § 40102(a)(2).
DOT appears to have assumed that, as a broker of charter
flights for the federal government, CSI was engaged in the
indirect provision of “air transportation.” But this reading
failed to engage with the special statutory definition of that
term. Under the relevant part of the statute, “air
transportation” is defined to include “interstate air
transportation,” id. § 40102(a)(5), which in turn means the
interstate “transportation of passengers or property by aircraft
as a common carrier for compensation,” id. § 40102(a)(25)
(emphasis added).
“Common carrier” is a well-known term that comes to us
from the common law. See Try Scheidler v. Nat. Org. for
Women, Inc., 537 U.S. 393, 402 (2003) (noting presumption
in favor of following common law usage where Congress has
employed a term with a well-settled common law meaning).
The term refers to a commercial transportation enterprise that
“holds itself out to the public” and is willing to take all
comers who are willing to pay the fare, “without refusal.”
BLACK’S LAW DICTIONARY 226 (8th ed. 2004). Some courts
have allowed that holding out on an all-comers basis to a
limited segment of the public might be enough to qualify as a
common carrier. See Woolsey v. Nat’l Transp. Safety Bd., 993
F.2d 516 (5th Cir. 1993) (concluding that an air carrier had
13
acted “as a common carrier” in offering services pursuant to
negotiated contracts to members of the music industry
because it had “held itself out to the public or to a definable
segment of the public as being willing to transport for hire,
indiscriminately”). But whatever the particular test, some type
of holding out to the public is the sine qua non of the act of
“provid[ing]” “transportation of passengers or property by
aircraft as a common carrier.” 49 U.S.C. § 40102(a)(25),
41101.
In the present case, it appears that CSI has performed
under its contract with the GSA as a dedicated service
provider, not as a common carrier. Under the GSA contract,
CSI provides charter service to government agencies only, not
to all comers. Thus, within the scope of the contract, CSI does
not appear to provide “transportation of passengers or
property by aircraft as a common carrier.” Id. § 40102(a)(25).
If CSI is not a common carrier under its GSA contract, then it
does not engage in “air transportation” and its services for
GSA do not fall within the certification requirement of the
Federal Aviation Act.
Perhaps one could argue that if a company is a common
carrier in any aspect of its business, it necessarily acts “as a
common carrier” in all aspects of its business. The more
obvious reading of the statute, however, is that a company can
segregate its operations, acting sometimes “as a common
carrier” and sometimes not. Indeed, DOT itself has taken this
approach in the past. In Advisory Circular No. 120-12A,
“Private Carriage Versus Common Carriage of Persons or
Property” (Apr. 24, 1986), the agency provided “guidelines
for determining whether current or proposed transportation
operations by air constitute private or common carriage,”
noting that “this distinction determines whether or not the
operator needs economic authority as an ‘air carrier’ from
14
[DOT],” id. ¶ 1. The circular acknowledges that “[p]ersons
operating as common carriers in a certain field” may be
providers of “transportation for hire which they perform in
other fields,” as long as they can “show that the private
carriage is clearly distinguishable from its common carriage
business and outside the scope of its holding out.” Id. at ¶ 4.h.
DOT failed to address this critical issue both in its cease-
and-desist order and in its brief to this court. This failure is all
the more baffling because CSI twice informed DOT that it
does not believe it is covered by the “air transportation”
portion of the Federal Aviation Act—once in CSI’s letter to
DOT dated November 19, 2009, and again in CSI’s brief
before this court. Yet DOT’s brief inexplicably claims, “It is
undisputed that CSI’s service is indirect air transportation.”
Resp’t’s Br. at 13-14. Not only is this a disputed point, it is at
the very heart of the present controversy.
Given DOT’s complete failure to explain its reading of
the statute, we find it impossible to conclude that the agency’s
cease-and-desist order was anything other than arbitrary and
capricious, and hence unlawful. Where we “cannot evaluate
the challenged agency action on the basis of the record before
[us], the proper course . . . is to remand to the agency for
additional investigation or explanation.” Fla. Power & Light
Co. v. Lorion, 470 U.S. 729, 744 (1985). It appears to us that
the law cannot support DOT’s interpretation, but we leave
open the possibility that the government may reasonably
conclude otherwise in the future, after demonstrating a more
adequate understanding of the statute.
V
For the foregoing reasons, the petition for review is
Granted.