UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
TIARE ENTERPRISES, INC. )
)
Plaintiff, )
)
v. ) Civil Case No.15-1553(RJL)
)
UNITED sTATEs DEPARTMENT oF )
-\l dol `
TRANsPoRTATIoN ezal., § j §- Jt_ L § §
Defendants. ) MAR 3 l ZUW
_s+_ Cler|<, U.S. District and
MEMORANDUM OPINION Bankruptcy Courts
(March 3_|, 2017) [Dkts. ## 23, 271
Plaintiff Tiare Enterprises, Inc. (“plaintiff” or “Tiare”) seeks to overturn a 2015
decision by the United States Department of Transportation’s Departmental Office of Civil
Rights (“USDOT”) affirming an earlier 2014 decision by the Hawaii Department of
Transportation (“HDOT”) to decertify Tiare as an Airport Concession Disadvantaged
Business Enterprise (“ACDBE”). Currently before the Court are the parties’ cross-motions
for summary judgment See Pl.’s Mot. for Partial Summ. J. [Dkt. #23]; Defs’ Mot. to
Dismiss in Part and f`or Summ. J. [Dkt. # 27]. Upon consideration of the pleadings, record,
and relevant law, l find that USDOT’s decision to affirm the decertification decision Was
supported by substantial evidence in the administrative record and was not arbitrary and
capricious. Accordingly, defendants’ Motion to Dismiss in Part and for Summary
J.udgment is GRANTED, and plaintiff" s cross-motion f`or summary judgment is DENIED.
I.
BACKGROUND
Statutory and Regulatory Background
Congress has authorized USDOT to provide project grants to eligible airports as
part of the Airport lmprovement Program. 49 U.S.C. §47104. In addition to other
requirements that are not relevant here, the USDOT can only approve a grant if it receives
written assurances that “at least 10 percent of all business at the airport selling consumer
products or providing consumer services to the public are small business
concerns . . . owned and controlled by a socially and economically disadvantaged
individual . . .” 49 U.S.C. § 47107(e). In order to facilitate compliance with this
requirement, USDOT has promulgated detailed regulations to carry out the Airport
Concessionaire Disadvantaged Business Enterprise (“ACDBE”) program. The program,
and its implementing regulations at 49 C.F.R. Parts 23 and 26,l set forth the eligibility
requirements and required procedures for firms wishing to qualify as disadvantaged
business enterprises and work at airports receiving funds under the Airport lmprovement
Program.
Initial eligibility determinations for the ACDBE program are not made by the
USDOT, but by public or private entities (“recipients”) like HDOT, most of whom receive
funds from the USDOT. Recipients are required to apply the ACDBE regulations
promulgated by the USDOT when making eligibility determinations 49 C.F.R. § 23.3 l(a),
l 49 CFR Part 23 was promulgated separately to tailor a larger Disadvantaged Business Enterprises (“DBE”)
program to the airport-coneessionaire-specific ACDBE program. However, Part 23 states that the standards
and procedures set forth in Part 26 apply to the ACDBE program as well. 49 C.F.R. § 23.11, § 23.31 (a)
(2011).
§ 26.83 (2011). Under the regulations, ACDBEs must be at least 51% owned and
controlled by socially and economically disadvantaged individuals 49 C.F.R. § 23.3,
§ 26.69(b) (2011). lndividual applicants must prove by a preponderance of the evidence
that they are in fact socially and economically disadvantaged 49 C.F.R. § 26.6l(b).
However, citizens who are women or members of specified ethnic minority groups are
presumed to be socially and economically disadvantaged 49 C.F.R § 26.67 (2011).
Presumptively disadvantaged applicants need not prove their eligibility by a
preponderance, but they must certify in writing that they are in fact disadvantaged and that
their personal net worth does not exceed $ l.32 million. Id.; 49 C.F.R. § 23.35. Once
certified, a firm must demonstrate annually that it still meets ACDBE status. See 49 C.F.R.
§ 26.83 (i)_-(j); id. § 23.l(d), § 26.83(a) (2011). Every year, the ACDBE’s owner must
submit a sworn affidavit affirming its continued eligibility and its ability to meet the
disadvantaged status requirement Ia’. at § 26.83(}) (201 l).
ln 2013, a recipient agency could rebut a presumption of economic disadvantage in
two ways. First, if the owner’s annual statement showed that his or her net worth exceeded
$1,32 million, the presumption was rebutted automatically. 49 C.F.R. § 26.67(b)(l)
(2011). Second, if the recipient had a “reasonable basis” to believe that the individual was
not economically disadvantaged, the recipient could initiate proceedings to determine
whether the presumption should be rebutted and decertify the firm from ACDBE status.
Ia’, § 26.67(b)(2) (2011). ln order to initiate a decertification proceeding, the recipient had
to provide written notice and reasons for the proposed decertification Ia’. § 26.87(b) (201 l)
The recipient had to give the firm an opportunity for an informal hearing where the firm
3
could respond and provide evidence and argument in favor of continued certification Ia’.
§ 26.87(d)(l) (2011). The firm could also elect to forego a hearing and provide its response
and any arguments in writing. Ia’. § 26.87(d)(3). The burden of proof during a
decertification hearing was (and still is) on the recipient agency seeking decertification
rather than the firm who facing potential decertification; the recipient must show by a
preponderance of the evidence that the certification standards are not met. Ia’. Once a final
decision is made, the recipient must provide the firm with written notice of its decision that
includes specific references to evidence that supports each ground for decertification Id.
§ 26.87(g) (2011).
Once a recipient formally decertifies an ACDBE, the decertified firm may file an
administrative appeal with USDOT. Id. § 26.89 (201 l). USDOT is directed to affirm a
decertification decision unless the decision is “unsupported by substantial evidence” or is
“inconsistent with the substantive or procedural provisions” of the ACDBE certification
regulations Ia’. §26.89(f)(l). However, USDOT need not overturn a decision for a
procedural error unless it resulted in “fundamental unfairness to the appellant or
substantially prejudice[d] the opportunity of the appellant to present its case.”
Ia’. § 26.89(f)(3).
II. Factual and Procedural Background
Tiare Enterprises is a corporation owned and operated by Ms. Roberta Fithian
(“Fithian”). AR0481, 1[ l. Tiare operates concessions at airports in Hilo and Kona, Hawaii,
and has been a certified ACDBE since 1986. Ia’. M 5-6. On November 4, 2013, Fithian
filed a certified affidavit of her continued eligibility as an ACDBE. AR0088-93. ln her
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affidavit, she included a personal net worth statement reporting $1,226,630 in assets,
$243,044 in liabilities, and $983,5 86 in personal net worth. In November and December
2013, HDOT staff member Julie Rawlins corresponded with Fithian and requested
additional clarification and documentation regarding her assets and liabilities. See
AR0244-25, AR0247-48, AR025(), AR0252, AR0254-55.
On December 18, HDOT sent a written notice of its intent to decertify Tiare as an
ACDBE. AR()()74-78. As grounds for the proposed decertification, the notice stated that
Fithian’s personal net worth, properly calculated, was actually $1,782,591; the notice
asserted that she had understated the value of her real estate and “other” assets on her
personal net worth statement, and stated that it was not going to consider a supposed
$187,641 liability Fithian had claimed because she provided insufficient documentation to
establish its existence. Based on this calculation, the notice stated that she had
“accumulated wealth too substantial to need the program’s assistance” and could not
therefore be regarded as economically disadvantaged The letter indicated that participants
are required to cooperate fully with HDOT’s investigation, and that failure to cooperate
could constitute grounds for decertification; the notice did not specifically indicate whether
and how Tiare was uncooperative. AR()078. HDOT also stated (incorrectly) that the firm
had “the burden of demonstrating by a preponderance of the evidence that it meets
[ACDBE eligibility] requirements.” AR0074. The notice concluded by stating that Fithian
could request an informal hearing within 10 days of receipt of the letter. AR0078.
On December 20, Tiare’s counsel emailed HDOT and stated that it “intend[ed] to
invoke . . . [an informal] hearing, but would like to first speak with you.” AR0377. On
5
December 23, Tiare’s counsel emailed HDOT again and requested an extension to respond
until January 3 l, 2014. AR0378. On December 26, Rawlins replied to Tiare’s counsel,
stating “I understand from your e-mail that you will be requesting a hearing. I will forward
your email to [DBE Program Supervisor] Melanie Martin for her response regarding that
request.” ARO38(). On December 27, Martin responded to Fithian’s counsel and granted
Tiare an extension to January 3l, 2014 to respond to the decertification notice. AR()382.
She also stated “the firm may either submit information that may support the continued
certification of Tiare Enterprises, or request an informal hearing. . . .” Id.
On January 3l, 2014, Fithian submitted a written response to the decertification
proposal. ARO391. Fithian asserted that HDOT’s personal net worth calculation was
incorrect, and that her actual net worth was well below with $ l.32 million threshold
ARO396. In addition, Fithian argued that HDOT’s reliance on guidance from USDOT’s
General Counsel and its analysis in the notice was incorrect; HDOT should have simply
been focused on Fithian’s personal net worth and whether or not it rebutted the presumption
of economic disadvantage, as required in 49 C.F.R. 26.67(b). Fithian argued that HDOT
was instead bypassing the regulations and relying on USDOT guidance that was
inapplicable to determine that she was not economically disadvantaged AR0397.
On April 2, 2014, HDOT formally decertified Tiare on the grounds that it had “not
met the burden of proof regarding its claim of economic disadvantage” and failed to
cooperate with HDOT’s requests for information AR0424. The notice stated that a
finding of economic disadvantage could be based on an individual’s income, personal net
worth, or the fair market value of individual assets. ARO4l9. The notice stated that Tiare
6
was not economically disadvantaged because Fithian’s income placed her in the top 0.1%
of wage earners, “the strength of her personal net worth qualifie[d her] to own numerous
real estate properties in Hawaii,” and she had “successful access to capital and credit
opportunities.” AR0423-24. With respect to cooperation, the notice stated that Fithian did
not provide bank statements or loan documents that HDOT requested to establish the
existence of $ l 87,641 liability had she claimed, and did not provide a list of personal assets
worth $1,000 or more. AR0423. On April 24, 2014, Fithian’s counsel sent a letter to
HDOT, requesting an “informal hearing at which Ms. Fithian may respond to HDOT’s
proposed removal” of eligibility. AR0320. On May 6, 2014, HDOT responded stating that
the decertification was final, that the time to request a hearing had passed, and that Tiare
could appeal to the USDOT. AR0322.
Tiare administratively appealed HDOT’s decision to the USDOT, alleging inter alia
that HDOT failed to show that Ms. Fithian was economically disadvantaged, failed to grant
an informal hearing, and failed to inform Fithian of the correct burden of proof. AR0326.
On July 27, 2015, USDOT sent Fithian a letter formally notifying her that it affirmed
HDOT’s decertification decision on the grounds that there was substantial evidence to
support HDOT’s finding that her personal net worth exceeded $1.32 million, as well as
substantial evidence to support its finding that Fithian demonstrated an “ability to
accumulate substantial wealth.” AR0001-0016.
In September 2015, Tiare filed suit against defendants USDOT and DBE Appeal
Team Lead Samuel F. Brooks (in his official capacity) in September 2015, alleging that
USDOT’s affirmance of the decertification violated (l) Tiare’s Fifth Amendment right to
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due process of law,2 and (2) the Administrative Procedure Act, 5 U.S.C. § 706(2)(A) and
(2)(D). See Compl. 111 22-25 [Dkt. #l]. Tiare’s complaint specifically alleged that USDOT
erred in affirming the decertification because (l) HDOT ignored her request for an informal
hearing; (2) HDOT incorrectly calculated her net worth to exceed $ l .32 million; (3) HDOT
based its decertification on its conclusion that she “had a demonstrated ability to
accumulate wealth,” erroneously applying a regulation not in effect at the time of her
decertification; and (4) because Fithian did in fact cooperate with HDOT’s investigation at
all times. Compl. il l.
STANDARD OF REVIEW
Under Federal Rule of Civil Procedure 56(a), summary judgment is warranted “if
the movant shows that there is no genuine dispute as to any material fact.” Fed. R. Civ. P.
56(a). ln the context of a case where the plaintiff challenges an agency’s action under the
APA, the reviewing court will uphold the challenged action unless it finds that the action
is “arbitrary, capricious, and abuse of discretion, or otherwise not in accordance with law.”
5 U.S.C. § 706(2)(A). The Court’s review “is based on the agency record and limited to
determining whether the agency acted arbitrarily or capriciously.” Rempfer v. Sharfstein,
583 F.3d 860, 865 (D.C. Cir. 2009). The scope of review under the “arbitrary and
capricious” standard “is narrow,” and “a court is not to substitute its judgment for that of
the agency.” Motor Vehicle Mj?”s. Ass'n v. State Farm Mut. Auto Ins. Co., 463 U.S. 29, 43
1 ln its opposition to defendants’ cross-motion for summary judgmenl, f`l"iare stated that il did not oppose
USDOT’s motion to dismiss its l"ilih Amendment due process claim. Pl's Opp’n to Del"s.’ Mot. to Dismiss
in l"nit and for Summ. J. at 3. [Dkt. # 331 As a result the Court will dismiss Tiare’s due process claim and
focus its analysis here on the remaining APA claim.
8
(1983). The Court’s task is to determine whether the agency’s decision was “reasoned”,
i.e., whether “it considered the relevant factors and explained the facts and policy concerns
on which it relied, and whether those facts have some basis in the record.” Nat’l Treasury
Emps. Um`on v. Horner, 854 F.2d 490, 498 (D.C. Cir. 1988).
ANALYSIS
I. Substantial Record Evidence Supports the Finding that Tiare Waived Its Right to
an Informal Hearing.
Tiare argues that this Court must reverse and remand USDOT’s decision because
"‘HDOT deprived Tiare of its right to a hearing.” Pl.’s Mot. for. Summ. J. at 15. However,
the record shows that Tiare did not timely request an informal hearing, and thus USDOT
did not err in finding that Tiare “waived its right to have an informal hearing.” AR002.
Tiare is correct that HDOT was required to provide Tiare with “an opportunity for
an informal hearing, at which the firm may respond to the reasons for the proposal to
remove its eligibility . . .” 49 C.F.R. § 26.87(d). However, the regulations envision that
not every firm will invoke its right to a hearing, and states that firms “may elect to present
information and arguments in writing, without going to a hearing.” Id. § 26.87(e). The
administrative record demonstrates that Tiare submitted a written response to the proposed
decertification and did not request an informal hearing until after HDOT decertified the
firm. On December 20, 2013, two days after receiving the notice of intent to decertify,
Tiare’s attorney emailed HDOT. In that email, she stated that Tiare was going to invoke
its right to a hearing, but expressly stated that it was not invoking the right at that time,
stating “We do intend to invoke such [an informal] hearing, but would like to speak with
you first.” AR0377.
On January 30, 2014, the agreed-upon deadline for responding to the proposed
decertification, Tiare submitted written materials “in response to” the proposed
decertification AR 039l. Tiare claims that it “reiterated [its] intent to have an informal
hearing” in its written materials, but the response includes no such request, and simply
concludes with a statement that “[w]e are more than happy to meet with you regarding this
matter to address any questions and/or concerns that you may have.” AR0398; see Compl.
11 l2. This cannot reasonably be construed as a request for an informal hearing.
As such, Tiare did not attempt to invoke its right to a hearing until April 24, almost
three months after it submitted its written response and more than 3 weeks after HDOT
formally decertified Tiare. AR0319. As a result, USDOT was correct in finding that Tiare
waived its right to an informal hearing.
II. USDOT Did Not Aff"lrm HDOT’s Decertification Decision by Relying on Tiare’s
Alleged Failure to Cooperate.
The parties have also spilled much ink over HDOT’s finding that Tiare failed to
cooperate with its original investigation, and its conclusion that this failure constituted
independent grounds for decertification See Defs.’ Mot. to Dismiss and for Summ. J. at
24_25 [Dkt. # 27-1]; Pl.’s Opp’n to Defs.’ Mot. to Dismiss in Part and for Summ. J at 17-
19 [Dkt. # 32]. See AR0418, AR0423_424 (decertifying Tiare on grounds of non-
cooperation).
This discussion is misplaced_the Court’s proper role at this stage is not to sit in
direct review of HDOT’s initial decision, but to review USDOT’s decision to affirm that
10
decision on administrative appeal. After close review of the record, it is clear that USDOT
did not base its decision to affirm the HDOT on Tiare’s alleged failure to cooperate. In its
July 2015 letter to Tiare’s counsel, USDOT affirmed the decertification on the grounds that
HDOT met its burden of proof “regarding excess [personal net worth] and rebutting the
presumption of economic disadvantage.” AR0016. USDOT expressly stated in a footnote
that it “need not . . . determine whether Ms. Fithian’s failure to provide further information
or documentation was a failure to cooperate.” AR0012 at n. 10.3 Furthermore, USDOT
now explicitly represents to the Court that it “declined to affirm HDOT’s decertification
on the basis of HDOT’s conclusion that Tiare failed to cooperate with its certification
review” Defs.’ Mot. to Dismiss in Part and for Summ. J at 24. As a result, I will limit my
review of USDOT’s decision to the grounds it clearly relied on_i.e., that Fithian’s
personal net worth exceeded $1.32 million dollars, and that she demonstrated an ability to
accumulate substantial wealth such that she could not be regarded as economically
disadvantaged See AR001-16.
III. USDOT’s Decision that HDOT Properly Met its Burden of Proof is Not Arbitrary
and Capricious.
Tiare argues that HDOT improperly placed the burden of proof on Tiare during the
decertification proceeding Tiare further argues that it raised this issue in its administrative
3 USDOT’s letter affirming the decertification decision is admittedly not a paragon of clarity on the issue
of Tiare’s alleged failure to cooperate. In a separate footnote, USDOT stated “we . . . find that Tiare failed
to cooperate fully” and stated that “this ground alone is sufficient for affirming the certification.” AR0002
at n.4. However, given that the letter also stated that it need not determine whether or not Tiare cooperated,
it did not refer to the cooperation issue in its formal conclusions, and it expressly denies now that that the
affirmance Was based on the cooperation issue, I conclude that USDOT’s affirmance must stand or fall
without reference to Tiare’s alleged failure to cooperate.
11
appeal to USDOT, and that USDOT ignored this argument in its affirmance of the
decertification in violation of the APA. Pl’s. Mot. for Summ. J at 18-19.
During a decertification proceeding, the agency must prove by a preponderance of
the evidence that the individual is not socially and economically disadvantaged 49 C.F.R.
§ 26.67(b)(3). However, there is record evidence indicating that HDOT did not properly
understand the burden of proof, and represented to Tiare that ACDBEs possessed the
burden of proving their continued eligibility in a decertification proceeding In its notice
of intent to decertify, HDOT stated that the “firm has the burden of demonstrating by a
preponderance of the evidence that it meets [eligibility] requirements.” AR0074, AR0078.
When it decertified Tiare, HDOT appeared to state that Tiare “bore the burden of
demonstrating by a preponderance of the evidence that they meet the eligibility
requirements regarding economic disadvantage,” and determined that Tiare had “not met
the burden of proof regarding [its] claim of economic disadvantage.” AR0419, AR0424.
Tiare argues that the USDOT ignored its argument about the burden of proof, and
asserts that the failure to address a non-frivolous argument requires reversal. See Pl.’s Mot.
for Summ. J. at 18-19 (citing Frizelle v. Slal‘er, lll F.3d 172 (D.C. Cir. 1997) (holding
that agency’s failure to address party’s non-frivolous arguments was arbitrary).
However, the record shows that USDOT considered the appropriate burden of proof
in a decertification proceeding and determined that there was substantial evidence to show
that HDOT had actually met the appropriate burden of proof when it decertified Tiare, its
own misstatements notwithstanding Although USDOT did not dedicate a separate section
to Tiare’s burden-of-proof arguments in its administrative appeal decision, it is clear that
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USDOT understood and analyzed HDOT’s decision with the appropriate burden in mind
For example, the USDOT’s decision letter quotes in full 49 C.F.R. § 26.67(b)(3), AR0007,
which states that the entity seeking decertification has “the burden of demonstrating by a
preponderance of the evidence, that the individual is not socially and economically
disadvantaged,” and later, USDOT explicitly stated that the burden was on HDOT to
demonstrate Tiare’s ineligibility by a preponderance of the evidence, which it defined as
“somewhat more likely than not.” AR0013. When it reviewed the record, it did not accept
HDOT’s proffered valuations for the Walua Road and Mamala Hoa Highway properties
until it concluded that it “was more likely than not” that they were worth the values that
HDOT had used AR0014. Lastly, USDOT ended its decision by formally concluding that
HDOT “met its burden of proof regarding excess [personal net worth] and rebutting the
presumption of economic disadvantage.” AR0016. The various references to the burden
of proof, and the explicit conclusions that HDOT met that burden, enable me to reasonably
discern USDOT’s reasoning and determine that it was not arbitrary and capricious. Envt’l
Def. Fund, Inc. v. EPA, 465 F.2d 528, 537 (D.C. Cir. 1972) (“[l]f the necessary articulation
of basis for administrative action can be discerned by reference to clearly relevant sources
other than a formal statement of reasons, we will make the reference.”); U.S. Sugar Corp.
v. EPA, 830 F.3d 579, 642 (D.C. Cir. 2016) (“[W]e will uphold a decision ofless than ideal
clarity if the agency’s path may reasonably be discerned.”)
IV. Neither USDOT Nor HDOT Erred in Considering Relevant Factors Other than
Fithian’s Personal Net Worth.
Tiare argues that HDOT could only decertify Tiare by determining that Tiare’s
13
personal net worth exceeded $l.32 million, and that HDOT’s (and USDOT’s)
consideration of other factors was erroneous. ln it is original decertification letter, HDOT
determined that Fithian’s personal net worth exceeded $l .32 million, but it also determined
that her high income, her multiple real estate properties, and her access to capital and credit
opportunities further demonstrated that she was not economically disadvantaged AR0424.
USDOT affirmed this finding, stating that her high income, her property holdings, and her
assets on hand provided substantial evidence that she had an ability to accumulate
significant wealth, and was not disadvantaged AR0015-26.
ln 2013, at the time HDOT decertified Tiare, the governing regulations provided
two ways for a recipient to decertify an ACDBE firm. First, if an individual’s statement
of personal net worth exceeded $1.32 million, then the presumption of economic
disadvantaged was automatically rebutted 49 CFR § 26.67(b)(1). Second, if the recipient
had a “reasonable basis” to conclude that a presumptively disadvantaged person was not
“in fact” disadvantaged the recipient could start a decertification proceeding Id.
§ 26.67(b)(2). The regulation does not explicitly state what can form a “reasonable basis.”
According to Tiare, this meant that HDOT could only rebut Fithian’s presumption
by determining that her personal net worth exceeded $1.32 million Pl.’s Opp’n to Defs.’
Mot. to Dismiss in Part and for Summ. J. at 15 [Dkt. # 33]. l disagree. 49 CFR Part 26
also includes Appendix E, which states that agencies considering individual determinations
of social and economic disadvantage should “examine factors relating to the personal
financial condition of any individuals claiming disadvantaged status, including personal
income for the past two years, . . . personal net worth, and the fair market value of all
14
assets . . . .” Furthermore, the USDOT General Counsel has issued guidance to recipient
agencies about how to comply with 49 CFR Part 26. In that guidance, which was in effect
at the time of Tiare’s decertification, the General Counsel instructed recipients making
determinations of economic disadvantage to “look not only at the individual’s [personal
net worth] but also at his or her overall economic situation,” and states that it is appropriate
for recipients to “review the fair market value of the individual’s assets and determine it
that level appears to be substantial and indicates an ability to accumulate substantial
wealth.” Mem. in Supp. of Defs.’ Mot. to Dismiss in Part and for Summ. J at 22 n. 6 (citing
Official Questions and Answers (Q&A’s) Disadvantaged Business Enterprise Program
Regulation (49 CFR 26) at p. 2).
USDOT therefore takes the position that a recipient, when forming a “reasonable
basis” under §26.67(b)(2), could look at her overall economic situation in making a
determination of economic disadvantage l agree. This is a reasonable interpretation of
the regulation 49 CFR §26.67(a) refers to personal net worth, and says that the agency
can automatically decertify someone when their net worth statement itself shows that net
worth exceeds $1.32 million However, subsection (b), the provision that HDOT relied on,
does not cabin the analysis to personal net worth, or even refer to personal net worth at all.
Rather, it says that a recipient may initiate a decertification proceeding when it has a
“reasonable basis” to believe that an individual is not “in fact” disadvantaged Section
26.67 does not explicitly state what can constitute a “reasonable basis.” Appendix E
therefore provides helpful context and the General Counsel’s interpretive guidance
provides a reasonable interpretation stating that the recipient can look at factors other than
15
an ACDBE owner’s personal net worth. An agency’s interpretation of its own regulations
is entitled to deference unless “plainly erroneous or inconsistent with the regulation” Auer
v. Robbz`ns, 519 U.S. 452. 461 (1997); Lyng v. Pane, 476 U.S. 926, 939 (1986) (“[A]n
agency’s construction of its own regulation is entitled to substantial deference.”) Thus, it
was not erroneous for HDOT and USDOT to consider Fithian’s overall economic situation,
in addition to her personal net worth, when determining whether she was in fact
economically disadvantaged4
V. USDOT’s Decision that Fithian was Not Economically Disadvantaged Was Not
Arbitrary and Capricious.
Lastly, l conclude that USDOT’s determination that Fithian was not in fact
economically disadvantaged was not arbitrary and capricious. As I stated previously, my
role here is not to substitute my judgment As, l will not spend my time second-guessing
every jot and tittle of USDOT’s property valuations and value calculations lnstead, l must,
and will, simply determine whether USDOT arrived at a reasoned decision that considered
the relevant factors, explained its reasons, and had some factual basis in the record for its
4 ln November 2014, USDOT promulgated a revised regulation adding a new grounds for decertiiication;
if the “statement of personal net worth and Supporting documentation demonstrate that the individual is
able to accumulate substantial wealth, the individual’s presnn'iption of economic disadvantage is r¢-:l)utted.’1
49 C.F.R. § 26.67. The new provision says that the agency should consider the individual`s income and
the total fair market value of the individual’s assets when determining whether the individual has
demonstrated an ability to accumulate substantial wealth. Tiare argues that, since this provision Was not in
effect in 2013, HDOT’s consideration of these factors was an inappropriate retroactive application of the
provision This is not correct. Part 26’s Appendix E and the General Counsel’s interpretive guidance,
which also call for the consideration of these factors, were fully applicable when Tiare was decertified, and
the fact that the USDOT has clari£ied decertification proceedings by explicitly incorporating these factors
into § 26.87(b) does not render lhcir prior consideration inappropriate ln t`acl, when it proposed the new
regulation, the agency clearly explained that it was doing nothing more than “codify[ing] the existing
guidance to recognize that the presumption may also be rebutted if the individual’s personal net worth falls
below the cap, but the individual is, in fact, too wealthy to be considered disadvantaged by any reasonable
measure.”
16
decision USDOT clearly did so here.
With respect to Fithian’s personal net worth, USDOT reviewed the record and
determined that there was substantial evidence to show that her personal net worth
exceeded the $1.32 million cap. Rather than reflexively affirm HDOT’s calculation of her
assets and liabilities, USDOT conducted its own review of the administrative record and
determined that she had a personal net worth of approximately $1.5 million (as opposed to
HDOT’s higher calculation of approximately $1.8 million). USDOT rejected HDOT’s
decision to increase the valuation of Fithian’s two parcels of undeveloped land, on the
grounds that HDOT’s reliance on asking prices for comparable properties, rather than
actual sales prices, was insufficiently probative to alter the original valuation Fithian
provided ln addition, USDOT rejected HDOT’s incredibly tenuous assertion that Fithian
owned $385,000 of personal property simply because her home insurance policy had a
$700,000 property limit However, USDOT determined that there was sufficient evidence
to support HDOT’s valuations of the Walua Road and Mamala Hoa Highway properties,
causing her personal net worth to be higher than she initially reported5 USDOT also
concluded that it was reasonable for HDOT to disallow Fithian’s purported liability to her
5 In its appeal decision, USDOT stated that it was more likely than not that the Mamala Hoa Highway
condominium was worth $375,000. Fithian previously asserted that it was worth $111,800, which was less
than its $1 15,000 purchase price more than 30 years earlier! HDOT instead pointed to the 2006 sales price
of a unit in the same development to value the building at $375,000. USDOT also noted that the property
generated $84,000 in rent in a single year to reinforce its conclusion that the higher valuation was correct
ln its appeal, Tiare argues (and USDOT appears to concede) that the property did not in fact generate any
rental income. Tiare argues that this mistake about the rental income renders USDOT’s decision to adopt
the higher valuation arbitrary and capricious I disagree Given that Tiare offered a value of$l l 1,800, and
HDOT offered a $375,000 value tied to the sale of another unit in the same building, it was not erroneous
for USDOT to conclude that it was more likely than not that the development Was worth $375,000. After
all, common sense alone would tell you that a comparable property value Would be more reliable than a
30-year old purchase price.
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husband’s company because of its scant documentation and unorthodox accounting As
result, USDOT concluded that Fithian had a personal net worth of approximately $l.5
million, well above the $1.32 million net worth cap. USDOT’s administrative decision
carefully explains the factors that it considered and the evidence it relied upon, and as such,
it was not arbitrary and capricious.
USDOT also reviewed the record and determined that there was sufficient evidence
to support HDOT’s determination in accordance with USDOT guidance, that her overall
economic situation was such that she could not reasonably be considered economically
disadvantaged because her high income and substantial assets rebutted her presumption of
economic disadvantage ln so doing, USDOT clearly explained its reasoning and pointed
directly to undisputed record evidence about her income and liquid assets, as well as to
evidence showing the value of her real estate properties, to conclude that she could not be
considered economically disadvantage For these reasons, USDOT did not err in affirming
HDOT’s decertification of Tiare
CONCLUSION
For the foregoing reasons, Defendants’ l\/Iotion to Dismiss in Part and for Summary
Judgment is GRANTED in part, and plaintiffs Partial Motion for Summary Judgment is
DENIED. An Order consistent with this decision accompanies this Memorandum Opinion.
§ § 4
RICHARD J. LEON
United States District Judge
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