Petition for Writ of Certiorari — Capital Leasing of Ohio, Inc. v. Columbus Municipal Airport Authority

Supreme Court brief1999

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OFFICE OG THE fo.bns

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Supreme Court of the Anited States

CAPITAL LEASING OF OHIO, INC.,

Petitioner,

COLUMBUS MUNICIPAL AIRPORT AUTHORITY,

Respondent.

Petition For A Writ Of Certiorari

To The United States Court of

Appeals For The Sixth Circuit

PETITION FOR-WRIT OF CERTIORARI

with Appendix

*LAURENCE E. STURTZ

E. HALLER

RECEIVED LEON FRIEDBERG

C ILE, PATCHEN & MURPHY, LLP

OCT 2 6 199 366jEast Broad Street

OFFiCE VE iHE CLERfolfmbus, OH 43215

SUPREME COURT, y. (619) 228-6135

Attorneys for Petitioner

*Counsel of Record

September , 1999

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LEGAL ADVANTAGE * 432 Wainut Street * Cincinnati, OH 45202 412 €*

(800) 581-2252

QUESTIONS PRESENTED FOR REVIEW

1. Does an airport authority, a statutorily created

governmental entity, violate the constitutional equal

protection rights of certain airport concessionaires where

the Authority unilaterally and arbitrarily (a) creates an

arbitrary class of concessionaires, and (b) imposes upon

only certain members of that class a fee for use of the |

Authority’s property of not only a percentage of income

derived from Airport-related business, but also an

additional fee consisting of an arbitrary percentage of all

the concessionaire’s income derived from the

concessionaire’s business wholly unrelated to the

Airport’s property or operations, where the additional

fee so imposed, contrary to state and constitutional law,

has no reasonable relationship to either any burden on

the Authority’ Airport facility or benefit to the

concessionaire from the Authority’s Airport property?

2. Is there any entitlement to a judicial

presumption of deference (as is typically given to a

legislative body where a court makes an equal protection

violation analysis) to the decision of an

administrator/functionary making an_ arbitrary,

unilateral determination on behalf of state governmental

entity to (a) create an arbitrary class of concessionaires,

and (b) impose upon only certain members of that class

a fee for use of the Authority’s property of not only a

]

percentage of income derived from the Airport related

business, but also an additional fee consisting of an

arbitrary percentage of all the concessionaire’s income

derived from the concessionaire’s business wholly

unrelated to the Airport’s property or operations, where

the additional fee so imposed, contrary to state and

constitutional law, has no reasonable relationship to

either any burden on the Authority’s Airport facility or

benefit to the concessionaire from the Authority’s

Airport property?

3. Is an airport authority, a state governmental |

entity, entitled to exercise extra-territorial jurisdiction

and to unbridled and arbitrary discretion in the

establishment of different fees for concessionaires

similarly situated for use of Authority property where

the fees so imposed, contrary to state and constitutional

law, have no reasonable relationship to either any

burden on the Authority’s Airport facility or benefit to

the concessionaire from the Authority’ Airport

property?

PARTIES TO THE PROCEEDING

AND RULE 29.6 STATEMENT

All parties are listed in the caption.

Capital Leasing of Ohio, Inc. has neither parent nor

subsidiary companies.

ili

TABLE OF CONTENTS

Description Page

Questions Presented for Review ...............

Parties to the Proceedings .............eee000.

Tate of Came 5 a ke eS

RS rr err ee ere ee eee

CONSTITUTIONAL AND

STATUPORY PROVISIONS 2... ccc nce ncescens

REASONS FOR GRANTING THE WRIT:

1. THE AUTHORITY'S FEE AS IMPOSED

UPON BUDGET HAS NO RATIONAL RELATION

TO THE BURDEN ON THE AIRPORT OR

BENEFIT TO BUDGET IN THE OPERATION OF

BUDGET’S AIRPORT CONCESSION, AND IS

ILLEGAL IF A TAX, AND IF NOT A TAX, FAILS

EVEN MINIMAL EQUAL PROTECTION

si ET Ps ee eo Lt fon)

A. An Additional Concession Fee,

Artificially Created, Which Imposes

upon Only Certain Concessionaires a

Privilege Fee for Use of a Governmental

Port Authority Airport Facility Which

Fee Has No Relation Either to the

User’s Burden upon the Facility or the

Benefit to the Concessionaire from the

Use of the Airport Violates Equal

Protection of the Law. ...............

B. Whether a Tax, or Rent, the Fee

~ Imposed by the Authority Must Pass

Equal Protection Analysis - Avoiding

the “FE Weel... sic

C. The Decision below Will Create a

Monopolistic Network of Governmental

Entities Creating Revenue While

Bypassing Established Constitutional

PURSES... . ck aaeee eee

2. THE DECISION OF THE AUTHORITY TO

IMPOSE AN ADDITIONAL FEE UPON BUDGET

CONSISTING OF A PERCENTAGE OF ITS NON-

AIRPORT BUSINESS IS ENTITLED TO NO

LEGISLATIVE DEFERENCE UPON THE

COURT’S REVIEW FOR EQUAL PROTECTION

VEURAREAN . » Za-sac arog ab ae eee

3. AN AUTHORITY, A _ STATE

GOVERNMENTAL ENTITY, MAY NOT

EXERCISE EXTRA-TERRITORIAL

JURISDICTION AND UNBRIDLED AND

ARBITRARY DISCRETION IN THE

ESTABLISHMENT OF DIFFERENT,

ADDITIONAL FEES FOR CONCESSIONAIRES ~

SIMILARLY SITUATED FOR USE OF

AUTHORITY PROPERTY WHERE THE FEES SO

IMPOSED, CONTRARY TO STATE AND

CONSTITUTIONAL LAW, HAVE NO

REASONABLE RELATIONSHIP TO EITHER ANY

BURDEN ON THE AUTHORITY’S AIRPORT

FACILITY OR BENEFIT TO THE

CONCESSIONAIRE FROM THE USE OF THE

AUTHORITY’S AIRPORT PROPERTY?....... 25

ee PPP ERP COC Terre PTET TCTs ee 28

TABLE OF AUTHORITIES

Table of Cases Page(s)

Federal Cases

Allied Stores of Ohio, Inc. v. Bowers,

358 U.S. 522 (1950) .......... 1, 11, 16, 25, 28

Capital Leasing of Ohio, Inc. v. Columbus

Municipal Airport Authority, 13

F.Supp.2d 640 (S.D.Ohio 1998) . 1, 15, 17, 18, 20

City of New Orleans v. Dukes, 427 U.S. 297

ia BET E RT Ee i Ue ny rea eee 2

Hampton v. Wong, 426 U.S. 88

2 ET Ce PTs EC 13, 21, 27, 28

Metropolitan Life Ins. Co. v. Ward, 470 U.S.

seossiih, canon See eee Cee EN eee a eae 25

United States v. Kokinda, 497 U.S. 720 (1990) . 11

Wheeling Steel Corp. v. Glandler, 337 U.S. 562

Sa EN CORY Pe ile Orr te ea 1, 16

Federal Constitution _

Fourteenth Amendment ........... 4, 14, 15, 20

State Cases

Associations. Conventions, Trade Shows, Inc. v.

The Ohio Expositions Commission, 1989 WL

52940 (Ohio App. May 18, 1989) ........ 42, 25

Vii

Associations, Conventions, Trade Shows, Inc. v.

Board of Franklin County Commissioners, 1991

WL 160044 (Ohio App. Aug. 15, 1991) .... 12,25

Cincinnati v. Roettinger, 105 Ohio St. 145, 137

Pe ER is os a ou Ci ee Sak ake ko wh kek 12

Fabrey v. McDonald Village Police Dep’t, 70 Ohio

St. 3d 351, 639 N.E.2d 31 (1994) ........... 11

Granzow v. Montgomery Cty. Bureau of Support,

54 Ohio St.3d 35, 560 N.E.2d 1307 (1990) .... 11

Sorrell v. Thevenir, 69 Ohio St. 3d 415, 633

Pee BOO LIGOE) oo ook cece cc wiensac 31, 35

State ex rel. Gortion v. Rhodes, 158 Ohio St. 129,

ge Fe. a 12

State Statutes

Ohio Rev.Code § 4582.01 ...............0.. 4

Ohio Rev.Code § 4582.21 ..............0.. 26

Ohio Rev.Code § 4582.31 ................. 27

Vili

| eae

PETITION FOR WRIT OF CERTIORARI

Petitioner Capital Leasing of Ohio, Inc. dba Budget

Rent-A-Car respectfully prays that a Writ of Certiorari

issue to review a final judgment and order of the United

States Court of Appeals for the Sixth Circuit.

OPINIONS BELOW

The decision of the Court of Appeals for the Sixth

Circuit was filed on June 18, 1999, and was not

recommended for publication. Appendix A. The trial

court’s decision was filed on July 15, 1998, and reported

as Capital Leasing of Ohio, Inc. v. Columbus Municipal

Airport Authority, 13 F.Supp. 2d 640 (S,D.Ohio 1998).

Appendix B. The trial court’s unpublished judgment was

filed on July 15, 1998. Appendix C.

JURISDICTION

This case arises from the trial court’s refusal to

follow this Court’s decisions in Wheeling Steel Corp. v.

Glandler, 337 U.S. 562 (1949), Allied Stores of Ohio, Inc.

v. Bowers, 358 U.S. 527 (1959), and their progeny

providing equal protection to citizens by requiring that

the Authority proceed upon a rational basis and not

resort to palpably arbitrary classifications of

concessionaires and so prohibit the Authority’s

imposition of additional fees consisting of a portion of

the concessionaire’s income unrelated to the Authority’s

Airport business locations or transactions upon only

certain members of a class of concessionaires. While the

Court below correctly acknowledged the applicability of

equal protection rights to the concessionaire’s disparate

treatment, it failed correctly to apply the applicable

standard necessary to justify the Authority’s disparate

treatment in allowing the Authority the unfettered right

to require concessionaires to adhere to a “take it or leave

it” requirement to pay an additional fee for the use of

Airport space consisting of a percentage of the

concessionaire’s non-Airport income.

Further, in contrast with the established standards

of judicial deference to legisiative decisions discussed in

City of New Orleans v. Dukes, 427 U.S. 297 (1976), the

issue here is whether a state governmental entity such as

the Airport Authority and similar governmental entities,

which are administrative and not legislative entities,

may exercise arbitrary discretion vel non, and whether

any degree of judicial deference to such arbitrary

administrative decisions is warranted where the decision

is not the product of a legislatively-generated

determination. The significance of this distinction can

not be overstated because the issue is especially crucial

where the decision under scrutiny is a purely revenue-

raising decision and is akin to, or has the effect of, a tax.

This is certainly an open issue, if not one of first

impression. The impact of these types of administrative,

unilaterally imposed revenue-generation decisions

constitutes not only an increasingly significant

component of a given municipality’s or state’s economy,

but also a significant portion of interstate commerce and

travel.

The case before the Court is thus uniquely

positioned for a clear decision upon these nationally

important points in a new, pervasive, and insidious

context because the Authority here unabashedly claims

the right, through the exercise of (i) extra-territorial

jurisdiction and (ii) a purely arbitrary discretion of an

unelected administrative functionary, to impose virtually

unlimited additional fees upon certain concessionaires

using a structure frankly described as whatever the

market will bear, without any consideration of, much

less compliance with, the constitutionally and state law

mandated standard of a reasonable relationship to either

the burden upon the Authority or the benefit to the

concessionaire. The Court cannot permit, as did the

Courts below, this type of delegated, unbridled right to

be coupled with the de facto power of such an authority

to impose whatever it can get away with, a concept

which mortally offends even the minimal equal

protection rights to which such governmental economic

functions are subject.

CONSTITUTIONAL AND STATUTORY PROVISIONS

The Due Process Clause of the Fourteenth

Amendment to the United States Constitution, U.S.

Const. Amend. XIV, § 1, provides: “No State shall... .

deprive any person of life, liberty, or property, without

due process of law” and is set forth in Appendix G. The

statute from which the Authority derives its authority to

impose fees is set forth in Appendix I.

STATEMENT OF THE CASE

Petitioner Capital Leasing of Ohio, Inc., doing

business as Budget (“Budget”) operates nine car rental

facilities in the Columbus, Ohio area. Appendix D-6.

One of Budget’s rental car service facilities is located

near, but not on, the property (the “Airport”) of

Respondent Columbus Municipal Airport Authority (the

“Authority”). Appendix D-7. The Authority is a public

entity that exists and operates under the authority of

and exercises the power granted by Chapter 4582 of the

Ohio Revised Code, Ohio Rev.Code §§ 4582.01 et seq.

Appendix I.

Budget has operated a car rental concession at the

Airport since 1982, including through a sales counter at

the Airport terminal. Appendix B-4. Currently, although

there is sales counter space available in the terminal for

some concessionaires to enter into rental agreements, no

rental cars are available at the Airport terminal itself.

Appendix B-5. All customers must be shuttled to and

from a given rental agency’s storage location to pick up

or drop off cars. Appendix B-5. Some concessionaires

use sales counters in the terminal and have their

facilities on or off the Authority property, others use no

sales counters and have facilities on the Authority

property, still others have neither sales counters nor

facilities on the Authority property. Appendix B-4 to B-6.

Budget has a counter on the Authority property, but its

car rental facility is located off the Authority property.

Appendix B-5.

Other concessionaires (such as food concessionaires)

have sales space at the terminal, but no other facilities.

Appendix B-5 to B-6. Yet other concessionaires (courier

companies, for example) have no physical presence at

the terminal, but use space at the terminal. Appendix D-

42 to D-43. Currently, each of these categories of

concessionaires is required to pay a different fee for the

use or access to the Authority’s Airport property.

It was Budget’s understanding that prior rental

concession agreements provided for a fee consisting of,

essentially, a percentage of business originating or

concluding at the Airport with certain exclusions. Thus,

whether a concessionaire had facilities exclusively on

Airport property, such as the type of service facility

operated by an operator such as Hertz (“on-airport”) or

one operated off the Airport property such as the one

operated by Budget (“off-airport”), concession fees were

directly and exclusively related to Airport generated

business (“Airport Business”). Appendix D-6. Income

generated from business that was not Airport related,

such as local customers who simply rented or returned

cars at the Budget off-airport facility (“Local” customers)

was not included in the calculation of the fees for

Budget’s use of and access to the Airport (“Non-Airport

Business”). Such business constitutes more 40% of the

business conducted by Budget at its off-airport facility.

Appendix B-17. -

In contemplation of the Authority building a new

terminal garage that would allow for concessionaires’

rental cars to be picked up and dropped off at the

terminal, the Authority required new mandatory

concession agreements with rental car companies.

Appendix D-18. It is these new agreements which were

the source of the disputes before the Court. In

particular, the fee imposed upon Budget, for the first

time, seeks to capture directly an arbitrary percentage of

all business generated at Budget’s off-airport facility

-6-

(both Non-Airport Business and Airport Business), not

just that business generated at or related to air travelers

who rent at the Airport.

The Authority accomplishes this goal through the

artifice of its requirement that rental car companies

renting counter space and garage space under the new

concession agreement designate a “Service Facility”

which would, at most, be used essentially only for the

storage and service of Airport rental cars. Appendix H-

14. No Airport Business customer will visit or engage in

any business at the Service Facility. Appendix B-21 to B-

22. Thus, for operators of off-airport facilities, such as

Budget, who can or do generate significant Non-Airport

Business at their Service Facility, these new mandatory

provisions require that the operator pay as a concession

fee a percentage not only of all income generated at

both the sales counter and at the Airport, but also at the

Service Facility, notwithstanding that, as is the case with

Budget’s off-airport service facility, only Non-Airport

Business income will be generated at the service facility.

The new concession agreement also provides that

any facility which the car rental concessionaire operates

within two miles of its “Designated Service Facility” will

be considered part of the car rental concessionaire’s

“Airport” operations. Appendix H-14. As a result, the

new concession agreement requires concessionaires with

off-airport designated service facilities, such as Budget,

Mii

to pay not only a percentage of its Airport Business as"

well as separate rent for garage space and counter space,

but also a percentage of Non-Airport Business to the

Authority as a fee for transacting business in the Airport

terminal. Appendix H.

The Authority required all bidders for the new

concession agreement to submit a fully signed and

executed concession agreement with their bids.

Appendix D-18. Failure to submit a bid without a signed

copy of the new concession agreement would have

resulted in outright rejection of the bid. Appendix B-13.

Thus, rather than a negotiated or arm’s-length

agreement, the concession agreement is a unilaterally

imposed contract, a “take it or leave it” proposition

determined by the Authority. Further, the new

concession agreement is for a period of 10, rather than

S years, Appendix H, so a failure to acquire a concession

would be virtually fatal to a nationally marketed car

rental franchise such as Budget’s.

The Authority thus demands a “Privilege Fee” on

Budget’s Local customer and Non-Airport Business

despite an admission by the Authority that Budget’s

Non-Airport Business or Local customers do not impose

any burden on the facilities of the Airport or even enter

onto its property during the rental transaction. Appendix

D-57 to D-58. Indeed, the Authority unabashedly

asserts, and is so supported by the rationale of the

-8-

decision below, that it could charge a concession or

privilege fee on ALL of Budget’s eight other off-airport

locations in the City of Columbus, not just its designated

service facility location near the Airport. Appendix D-39

to D-40.

Chillingly, the Airport stakes out the position that it

can charge virtually whatever it can get away with,

which the decision of the trial court below supports. So,

under the rationale of the court below, not only the

Authority but any government entity across the nation

authorized merely to “charge rent or fees” could

unilaterally and arbitrarily impose upon any vulnerable

user a fee of a portion of its entire national business

revenue (if the market would so bear), not merely rental

car companies as Budget, but any user such as a Federal

Express or a United Parcel Post, a McDonald’s, or a

Hilton Hotel, and on and on. Without proper

application of equal protection limits to the Authority’s

exercise of discretion, there is literally no stopping what

an Authority can get a way with.

The Authority’s position, when viewed in the light of

the required analysis, is properly seen as a direct, albeit

subtle, violation of equal protection rights as to Budget

on the specific facts of this case. In addition, but for this

Court’s review, the decision below would establish not

only an unlawful violation of Budget’s rights under the

subject concession agreement, but just as wrongfully

-9-

would permit the establishment of a national system of

non-legislative governmental entities with

administrator/functionary managers with both the

power (and now the right) to exercise unfettered

arbitrary, discretionary, extra-territorial jurisdiction for

the sole purpose of raising as much revenue as the

market will bear, yet avoid even the minimal equal

protection rights to which such governmental action is

currently subject. Put another way, the decision below

exempts acts by a governmental entity exercising

delegated discretion which the empowering government

itself could never exercise in the first place from equal

protection analysis.

Under the decision below, this carnivorous cadré of

unregulated functionaries will make these revenue-

driven determinations without the requirement that the

justification for the fees they impose be grounded in a

demonstrable analysis showing a reasonable relationship

between those fees and the burden/benefit of the

Authorities’ facility in providing the access or services in

exchange for those fees. It is unequal protection

incarnate to permit the decision below to stand because

it establishes as acceptable a governmental entity’s

unilaterally imposition as additional fees upon a

governmental facility user of a percentage of income

unrelated to the governmental facility without even the

minimal constitutional justification so well established

-10-

and otherwise required. This unjustified exception to

the usual minimal requirement of a governmental

rational basis which the decision below permits must be

corrected upon review by this Court.

SUMMARY OF THE ARGUMENT

The Authority, a state governmental agency, has,

inter alia, the power to charge rent or fees for the use or

services of the port authority. However, where not a

tax, such rent or fees for use or services can not be

motivated solely to raise money and can not consist of

palpably arbitrary or capricious categories of fee payers.

The fees or rent must have some rational relationship to

the purported governmental function, the operation of

the Airport facility (and not simply raising money), and

be demonstrably based upon either the burden placed

on the facility by the use or the benefit conferred upon

the user. This is a basic requirement of equal protection

under both federal and Ohio constitutional law. Allied

Stores of Ohio, Inc. v. Bowers, 358 U.S. 522 (1950);

United States. v. Kokinda, 497 U.S. 720 (1990); Fabrey

v. McDonald Village Police Dep’t, 70 Ohio St.3d 351, 639

N.E.2d 31 (1994); Sorrell v. Thevenir, 69 Ohio St.3d

415, 633 N.E.2d 504 (1994). The same equal

protection standard must be applied under Ohio

decisional and constitutional law. Granzow v.

it.

Montgomery Cty. Bureau of Support, 54 Ohio St.3d 35,

560 N.E.2d 1307 (1990); State ex rel. Gordon v. Rhodes,

158 Ohio St. 129, 107 N.E.2d 206 ( 1952); Cincinnati v.

Roettinger, 105 Ohio St. 145, 137 N.E. 6 (1922);

Associations. Conventions, Trade Shows, Inc. v. The Ohio

Expositions Commission, 1989 WL 52940 (Ohio App.

May 18, 1989) (“ACT I”) (attached as Appendix E);

Associations, Conventions, Trade Shows, Inc. v. Board of

Franklin County Commissioners, 1991 WL 160044. (Ohio

App. Aug. 15, 1991) (“ACT II”) (attached as Appendix

F).

The Authority, however, in a subtle derogation of

these protections, declares that it has the right to charge

whatever the market will bear under the rubric of rent

or a “privilege fee,” even where there is no actual or

even claimed rational basis for imposing such a fee upon

a concessionaire’s business income unrelated to the

Airport facility’s use.

Moreover, the decision of the Authority is not

entitled to any degree of judicial deference to legislative

determinations under the Court’s equal protection

analysis (assuming a rational basis for the fee’s

imposition, which there is not), where the legislative

process’ inherent political safeguards are totally lacking,

and there are no elected decision- makers, no legislative

hearings nor investigations, no promulgated regulations

or even actual legislative enactments.

At.

Here, to the contrary, the Authority’s Privilege Fee

is for the sole purpose of acquiring greater income. The

fee classification is not even a regulation and was not

determined or imposed by any legislative body. Instead,

the Authoritys fee is imposed upon an artificial

classification of concessionaires’ non-airport revenues

without a supported rational relationship between the

fee imposed and either the burden to the Authority

facility or benefit to Budget from the use of the Airport

thereunder. As such, such a determination by an

administrator/functionary is entitled to no judicial

deference. Cf. Hampton v. Wong, 426 U.S. 88 (1976).

Finally, it is a patent violation of equal protection for

an Authority to assert jurisdiction of and impose a fee

upon the non-airport business of an Airport

concessionaire where there is no rational relation

between the use or services of the Airport facility by the

concessionaire and the non-airport business, where there

is no demonstrable legislative policy or articulated

legitimate state interest (other than raising revenue),

and such non-airport business activities occur outside of

and are unrelated to the Airport facility.

«f%-

REASONS FOR GRANTING THE WRIT

THE AUTHORITY’S FEE AS IMPOSED UPON

BUDGET HAS NO RATIONAL RELATION TO

THE BURDEN ON THE AIRPORT OR BENEFIT

TO BUDGET IN THE OPERATION OF

BUDGET’S AIRPORT CONCESSION, AND IS

ILLEGAL IF A TAX, AND IF NOT A TAX, FAILS

EVEN MINIMAL EQUAL PROTECTION

ANALYSIS.

An Additional Concession Fee Artificially

Created Which Imposes Upon Only Certain

Concessionaires a Privilege Fee For Use of a

Governmental Port Authority Airport Facility

Which Fee Has No Relation Either to The

User’s Burden Upon The Facility or the

Benefit to the Concessionaire From The Use of

The Airport Violates Equal Protection of The

Law.

The Equal Protection Clause of the Fourteenth

Amendment commands that “[nJo State shall ... deny

any person within its jurisdiction the equal protection of

the laws.” Essentially, this is a direction that all persons

similarly situated should be treated alike. The Ohio

-14-

Supreme Court has held that Ohio's equal protection

limits are almost identical.to its federal counterpart,

Sorrell y. Thevenir, supra. Therefore, the analysis will be

the same under both Constitutions.

The Authority is a governmental entity, which

actions and regulatory conduct are subject to the

restrictions imposed upon state action by the Equal

Protection Clause of the Fourteenth Amendment’ to the

United States Constitution. The trial Court stated:

This Court is of the opinion that Budget’s

constitutional rights are assertable, both as to

equal protection and freedom of speech.

[footnote omitted.] Although the Port

Authority, like any other property owner, is free

to insist upon the terms and conditions it

imposes upon persons or entities desiring to

have access to or use its property, it cannot

impose conditions that are contrary to the rights

granted to all citizens under the United States

Constitution.

Mronically, the trial court properly recognized Budget'’s

constitutional rights, but mis-analyzed them as to equal protection, while

properly analyzing them in the context of free speech analysis. For

example, it stated: “[I]n this Court’s view, the Port Authority, even when

acting it its proprietary capacity, does not enjoy absolute freedom from

the constraints imposed by the Equal Protection Clause of the Fourteenth

Amendment.” Capital Leasing v. Columbus Municipal Airport Authority, 13

F.Supp. 2d at 655.

-_,

Capital Leasing v. Columbus Municipal Airport Authority,

13 F.Supp. 2d at 654.

The State must proceed upon a rational basis and

may not resort to a classification that is palpably

arbitrary .... The rule often has been stated to be that

the classification “must rest upon some ground of

difference having a fair and substantial relation to the

object of the legislation.” ... (I]f the selection or

classification is neither capricious nor arbitrary, and rests

upon some reasonable consideration of difference or

policy, there is no denial of equal protection of the law.

Allied Stores of Ohio v. Bowers, 358 U.S. at 527.

Wheeling Steel Corp. v. Glander, 337 U.S. 562 (1949).

Whether a Tax, or Rent, The Fee Imposed

by The Authority Must Pass Equal

Protection Analysis - Avoiding The “T”

Word

The Authority has been given broad authority by

Chapter 4582 of the Ohio Revised Code to increase, by

proper procedure, the property taxes of residents served

by the Airport. This is politically very unpopular. The

Authority does not claim to have levied a tax upon

Budget.’ Rather, without any supporting analysis or

principled bases, the Authority, through an

administrator/functionary, imposed the requirement of

a “designated facility” for concessionaires and through

this artifice seeks to impose a fee upon the non-airport

revenue generated at the designated facility.

In spite of state law requirements so to do, the

Authority made no study or analysis of what burden

upon the Airport facility the designated facility or its use

by Budget would create. Nor has there been any study

or analysis of what, if any, benefit to Budget a

designated facility would generate in relation to the

Airport. Instead, the Authority simply inquired as to

what other, similar Authorities were able to get away

with in charging a fee to concessionaires.°

“An Unfair Tax By Any Other Name”

Budget believes that the Privilege Fee at issue is an illegal tax

levied in a discriminatory fashion upon Budget, in violation of Budget’s

equal protection rights. The trial court found, however, the Fee as

imposed on Budget was not a tax. Capital Leasing of Ohio, Inc. v.

Columbus Municipal. Airport Authority, 13 F.Supp. 2d 640, 652 (1998).

Whether a discriminatory tax or a discriminatory usage or rental fee,

however, the Fee violates Budget’s equal protection rights.

‘The prospect of a national network of monopolistic, unbridled

governmental authorities motivated only to generate more income and

engaging in the blatant, collusive practices described by the Authority

without the limits of the legislative process or the minimal requirements

of equal protection is precisely why the decision below must be reversed.

oi.

The government’s unfair exercise of this unbridled

power is exactly what the constitutional equal

protections rights are designed to shield against.

Indeed, the decision below falls prey to the facile

explanation that this unfair treatment is “purely an

€conomic decision, is not arbitrary and has a rational

basis related to a legitimate governmental interest.”

Capital Leasing v. Columbus Municipal Airport Authority

13 F.Supp. 2d at 656. Yet, the decision below failed to

include in the analysis that the Authority’s mission is not

to raise revenues through fees and rents, but to operate

the Airport facility. The decision simply defines away

the equal protection violation and so misses the point

entirely: -

The Port Authority in the present case,

unlike Wayne County, is not imposing a fee on

all of the local income generated at Budget’s

Designated Service Facility. But whether the

fee is on all of the local income or on only

one half of that income is of no significance,

nor is the Port Authority’s motive for the

imposition of this fee on local income

determinative. The Significant and

determinative fact is that it is a fee charged

by the Port Authority for occupying space

and doing business in the terminal.

Capital Leasing v. Columbus Municipal Airport Authority,

13 F.Supp. 2d at 652 (emphasis added).

-18-

Contrary to the decision’s language, the motive for

and basis of the fee are of paramount significance. If,

assuming arguendo, the Privilege Fee as imposed upon

Budget was not a tax (as the decision below found),

then, as a user or rental fee it must rationally relate to

the purpose of governmental function, the operation of

the Airport facility (not revenue generation) to pass

Equal Protection Clause analysis. Ohio law‘ clearly

requires that the governmental entity such as the

Authority conduct an investigation or analysis to

determine that the fee required bears a reasonable

relation to either the burden upon the facility the use or

services create or the benefit derived by the

concessionaire from the use of the facility. This is a

central fallacy of the decision below, because the

Authority conducted no such investigation or analysis to

justify the fee on Budget’s N on-Airport Business (or even

the Authority’s Airport Business for that matter) -- the

only justification asserted was the Authority’s motivation

of revenue generation, which the decision below

erroneously upheld.

“Hobson’s Choice: Take It Or Leave It”

‘indeed, both ACT I and ACT II are decisions of the Franklin County

Court of Appeals, directly binding upon the Authority, which is itself

entirely in Franklin County.

-19-

Further fallacious was the holding below that, as to

its equal protection analysis, the court found that the

Authority’s Privilege Fee was “a fee imposed for the

benefit offered to the payer which the payer is free to

pay or not pay.” Capital Leasing, 13 F.Supp. 2d at 652.

Of course, the Authority's bidding process was anything

but Budget’s free will decision. Can a national rental car

business really ignore the commercial airport in the

fifteenth largest city in America, the largest city in Ohio,

indeed the capital city of Ohio? Obviously not.

Ironically, the court below itself made the right

analysis, but articulated it only in its discussion of the

free speech issues of the opnion:

This Court does not believe that the Port

Authority’s position that it has the unfettered

right to require Budget to give up its First

Amendment rights to obtain space in the

terminal on a “take it or leave ir” basis is

supported by... any other authority.

Capital Leasing v. Columbus Municipal Airport Authority,

13 F.Supp. 2d at 659.

A fortiori, the court below erred in failing to apply

this exact analysis to the same concession agreement in

determining the Fourteenth Amendment issue. Surely

the court below was erroneous in believing that the

Authority has the unfettered right to require Budget to

give up its equal protection rights to obtain space in the

-20-

terminal on a “take it or leave it” basis, but not its free

speech rights? Clearly, it should not! The error of the

decision below as to the Equal Protection rights violation

of the Authority’s imposed additional fee should be

corrected by this Court.

The Decision Below Will Create A

Monopolistic Network Of Governmental

Entities Creating Revenue While Bypassing

Established Constitutional Protections.

Airport authorities’ across the country, through

incremental devices such as the “designated facility” at

issue here, reach beyond their statutorily defined

parameters — customers, vendors and travelers — to

impose fees and taxes on people who never set foot on

airport property and business which does not arise in or

is related to their facility or its use. Indeed, It is the

opinion of the Authority that it has the power to

” It is important to note that Columbus’ Port Authority, although

statutorily created, is operated by an executive director and staff who

assert unbridled discretion to obtain revenue from whatever source

deemed necessary. The Authority is operated by career bureaucrats who

are un-elected and not deserving of the same deference with which this

Court has routinely shown towards legislative enactments. Therefore, a

more exacting standard of review is required to measure the rationality

of the Authority's policies. See, e.g.,Hampton v. Wong, 428 U.S. 88

(1976).

31.

exact a fee upon anyone touching upon the Airport

facility in an amount based upon any bases

whatsoever. Appendix D-40 to D-43.

Thus, it is clear that the discriminatory fee imposed

upon Budget (distinct from others similarly situated)

even though hidden under the sheep’s clothing of a

“designated facility” mechanism, is merely the first in

what will be a series of ever increasing burdens upon

unrelated income from concessionaires and other users.

Without the minimal shield of equal protection, what

will protect against the unbridled imposition of “fees” of

“whatever the market will bear”. . . just as the Authority

even now claims it has the power to do?

This unbridled government power to impose fees

and generate revenue without review by anyone is

chilling at best. At its worst, the decision below

portends a new era of un-checked government action

clothed in the absolute protection of “rent or fees.” This

Court’s review stands as the only and last chance for

correction this untenable position, for the state

legislatures will surely not step in to correct the

unchecked power of these delegated governmental

entities from creating revenues at whatever level the

market will bear.

Shall we next see the Authority require an Airport

hotel to pay a concession fee of a percentage of all the

company’s business generated in the city, or the state?

Shall we next see the Authority impose a “user fee” for

a UPS or FedEx consisting of a percentage of the

company’s state, national, or even international

revenue? Perhaps the Starbuck’s concession at the

Airport will be required to pay a percentage of its state

or national income (because it can be made so to do),

while the local coffee shop concession will only be

required to pay a percentage of its Airport business. Will

the McDonald’s franchise restaurant concession at the

Airport pay a percentage of its state or perhaps the

franchisor’s state or national revenue as a concession fee

(because it can be made so to do), while another

restaurant pays only a percentage of its on-airport

business?

Suppose a municipality created a highway port

authority with the power to impose rents and fees upon

a one mile stretch of highway . . . right in the middle of

an important thoroughfare. Would users be charged to

cross the facility based upon what the market would

bear? Drivers in a hurry or those driving an expensive

car could be charged more, while unhurried drivers or

those in beat up, used cars would be charged less.

Just as under each of these “far-fetched”

hypothetical situations, Budget is forced to pay fees that

its local competitors will not be required to pay, or

justify to their customers, under the new concession

agreement. Budget is not being treated in the same

2%.

manner as other concessionaires similarly situated, who

do business at, and generate revenue on, the premises of

Port Columbus International Airport. Budget, and those

similarly situated, is entitled to the equal protection

under the law that is denied by the decision below, and

which only this Court’s review can remedy. What, other

than market conditions, prevents the Authority (or any

other similar authority in Ohio or anywhere else in the

country) from doing whatever it wants, as the decision

below permits?

While these examples may seem far-fetched at first

blush, there is no practical limit (such as equal

protection) on what the Authority has the right and

power to do under the decision below. The Authority’s

power to impose rents or fees is essentially unlimited

under the decision below. Only the review and

correction of the decision below by this Court can avoid

this inevitable outcome.

THE DECISION OF THE AUTHORITY TO

IMPOSE AN ADDITIONAL FEE UPON

BUDGET CONSISTING OF A PERCENTAGE

OF ITS NON-AIRPORT BUSINESS IS

ENTITLED TO NO_ LEGISLATIVE

DEFERENCE UPON THE COURT”S REVIEW

FOR EQUAL PROTECTION VIOLATION.

The Court should not engage in the deference to a

legislature’s judgment as might otherwise apply in an

Equal Protection Clause analysis. See, e.g., Metropolitan

Life Ins. Co. v. Ward, 470 U.S. 869, 884 (1985). First,

the decision here is not a legislative decision, nor a

decision by a legislative body. Rather, it is the unilateral

decision by an administrative functionary without the

required investigation, analysis or justification required

under the applicable state law for the imposition of fees,

or for Equal Protection Clause compliance. Associations.

Conventions, Trade Shows, Inc. v. The Ohio Expositions

Commission, supra, Associations, Conventions, Trade

Shows, Inc. v. Board of Franklin County Commissioners,

supra; Allied Stores of Ohio, Inc., supra.

Here, there was no deliberative body, only an

administrative functionary. Here, there was no elected

official, only an appointed administrative functionary.

Here, there is no legislative hearing and fact-finding

process, no public hearings or testimony on relevant

factors, and no review by any authority (if the decision

below is sustained). Thus, none of the political and

factual justifications for legislative deference exist.

AN AUTHORITY, A STATE GOVERNMENTAL

ENTITY, MAY NOT EXERCISE EXTRA-

TERRITORIAL JURISDICTION AND

-25-

UNBRIDLED AND ARBITRARY DISCRETION

IN THE ESTABLISHMENT OF DIFFERENT

AND ADDITIONAL FEES FOR

CONCESSIONAIRES SIMILARLY SITUATED

FOR USE OF AUTHORITY PROPERTY

WHERE THE FEES SO _ IMPOSED,

CONTRARY TO STATE AND

CONSTITUTIONAL LAW, HAVE NO

REASONABLE RELATIONSHIP TO EITHER

ANY BURDEN ON THE AUTHORITY’S

AIRPORT FACILITY OR BENEFIT TO THE

CONCESSIONAIRE FROM THE USE OF THE

AUTHORITY’S AIRPORT PROPERTY?

While the Authority technically has city-wide

jurisdiction under its enabling statute, Ohio Rev.Code

§ 4582.21 et seq., this does not give it unbridled

discretion to act to collect rent outside of the Authority

property. So, while the Authority might buy and sell

property, advertise, issue bonds and notes, levy property

tax, and so on, city-wide, it can only:

[C]harge, alter and collect rentals or other

charges for the use or services of any port

authority facility and contract in the manner

provided by this section with one or more

persons, ..., desiring the use of services of the

facility, and fix the terms, conditions, rentals, or

other charges for such use or services... Such

rentals or other charges shall not be subject to

supervision or regulation by any other

authority, commission board, bureau or agency

of the state...

Ohio Rev.Code § 4582.31(V) (emphasis added).

Thus, it is clear while the enabling statute purports

to gives plenary-type authority to the port authority

determine rents and other charges, such power (to the

extent a permissible delegation of authority) is limited

to charges for the use or services of the port facility (the

Airport), not property which the authority does not own,

by the plain language of the statute.

Nor, in spite of the statutory language, can a

decision by an administrative functionary be entitled to

unreviewable and unbridled discretion without running

afoul of the equal protection provisions of both the state

and federal constitutions.

In Hampton v. Wong, 426 U.S. 88 (1985), the Court

reviewed a Civil Service Commission decision to exclude

aliens from competitive federal civil service jobs under

claimed plenary power over alienage, and the decision

was found to be lacking when exercised by the

administrative level:

The Civil Service Commission, like other

administrative agencies, has an obligation to

perform its responsibilities with some degree of

expertise, and to make known the reasons for

its important decisions. There is nothing in the

2%.

record before us, or in matter of which we may

properly take judicial notice, to indicate that the

~Commission actually made any considered

evaluation of the relative desirability of a simple

exclusionary rule on the one hand, or the value

to the service of enlarging the pool of eligible

employees on the other. .. .

Hampton v. Wong, supra, 426 U.S. at 115.

Likewise, the Authority here has failed to make or

disclose any investigation or analysis to justify the

imposition upon Budget of the additional fee of a

percentage of Budget’s Non-Airport Business as a

condition to renting space at the Airport, even though

such an investigation and analysis is required under

applicable state law and the Equal Protection Clause of

the United States Constitution. Associations. Conventions,

Trade Shows, Inc. v. The Ohio Expositions Commission,

supra; ACT II, supra; Allied Stores of Ohio, Inc., supra.

Conclusion

This Court must grant certiorari and reverse the

decision below because the decision effectively and

permanently precludes review of the arbitrary, extra-

territorial decisions of administrative/functionaries in

the operation of government facilities. Treating

arbitrary, discriminatory and unilaterally imposed fees

-28-

as neither taxes nor fiscal penalties subject to judicial

review because mere “economic decisions,” the court

below gave undeserved deference to non-legislative,

administrative decisions and precluded Budget receiving

effective equal protection under the Ohio and United

States Constitutions.

If allowed to stand, the decision below will create a

national chain of governmental erttities to exercise

unfettered discretion without even the minimal judicial

protection of the Equal Protection Clause. Nor is such an

extrapolation of the decision below at all far fetched, as

was discussed by this Court in another context (the

discriminatory state scheme to distribute state

dividends):

If the states can make the amount of a cash

dividend [a state service under state law]

depend on length of residence, what would

preclude varying university tuition on a sliding

scale based on years of residence - - or even

limiting access to finite public facilities,

eligibility for student loans, for civil service jobs,

or for government contracts by length of

domicile? Could states impose different taxes

based on length of residence? Alaska’s

reasoning could open the door to state

apportionment of other rights, benefits, and

services according to length of residency.

Zobel v. Williams, 457 U.S. 95, 65 (1982).

-29-

i |

The Court should not permit an administrative

entity to unilateral impose fees based exclusively on

what the market will bear, without a demonstrable

analysis and justification for the fees imposed grounded

in a rational relation between the cost of the services or

use or the actual benefit of the service or use.

Respectfully a carne '

v4 r a |

Laurence E. Sturtz_ | |

John E. Haller “J

Leon Friedberg

CARLILE PATCHEN & )

MURPHY LLP |

366 East Broad Street

Columbus, OH 43215

Telephone: 614/228-6135

Facsimile: 614/221-0216 |

Counsel for Petitioner

Capital Leasing of Ohio,

Inc. dba Budget Rent-A-Car

Table of Appendix Contents

6TH CIRCUIT FILINGS:

Final Opinion,

Ne a kk kkk kk we cs Al-A2

SOUTHERN DISTRICT OF OHIO FILINGS:

Memorandum and Order,

ee Ss B1-B85

Judgment,

ke eg ee ce ee C1-C3

Transcript Excerpts of Hearing Proceedings

4/23/99; 4/24/99; and 4/28/99

ES D1-D69

FRANKLIN COUNTY COURT OF COMMON PLEAS:

Final Opinion,

eg oy hen we E1-El11

Opinion,

tg he! sn F1-F21

CONSTITUTIONAL PROVISIONS:

The Fourteenth Amendment ........----+-. G1-G3

OTHER

Exhibit to Complaint filed in the

State Court on 3/28/98 ........5 eee ees H1-H151

STATUTES:

Ohio Rev.Code § 4582.31 2. .....55 552s eee 11-17

———

NOT RECOMMENDED FOR PUBLICATION

No. 98-3936

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

Capital Leasing of Ohio, On Appeal From The

Inc., d/b/a Budget United States District

Rent-A-Car Corp., Court For The Southern

District Of Ohio

Plaintiff-Appellant,

v. 6" Circuit

Court of Appeals

Columbus Municipal

Airport Authority Filed 06/18/1999

Leonard Green, Clerk

Defendant-Appellee.

Before KEITH, KENNEDY, and GILMAN, Circuit Judges.

PER CURIAM. Plaintiff Capital Leasing of Ohio, Inc.

d/b/a Budget Rent-A-Car of Columbus (“Budget”)

appeals from the District Court’s denial of Budget’s

request for an injunction against defendant Columbus

Municipal Airport Authority (“CMAA”) in this action

alleging (1) that CMAA exceeded its authority under

state law by imposing a fee or a “tax” on car rentals to

local, “non- airport” travelers at its location closest to the

Airport and (2) that this fee violates the equal protection

clause of the United States and Ohio Constitutions.

Appendix A - 1

Having carefully considered the record on appeal, the

briefs of the parties, and the applicable law, we are not

persuaded that the District Court erred in denying

plaintiffs request for an injunction for the reasons stated

in the District Court’s opinion of July 15, 1998 at 13

F.Supp.2d 640.

Accordingly, the judgment of the District Court is

AFFIRMED.

Appendix A - 2

REPORTED AT 13 F.SUPP.2D 640

Capital Leasing of Ohio,

Inc., d/b/a Budget

Rent-A-Car Corp.,

Plaintiff,

Columbus Municipal

Airport Authority

Eastern Division

Filed 07/15/1998

Defendant.

MEMORANDUM AND ORDER

HOLSCHUH, District Judge.

I. Procedural History

This case originated in the Common Pleas Court of

Franklin County, Ohio on March 18, 1998, when

plaintiff filed a complaint and a motion for a temporary

restraining order and preliminary injunction. On March

18, 1998, a judge of the state court denied plaintiffs

motion for a temporary restraining order. On March 31,

1998, plaintiff filed an amended complaint for a

temporary restraining order and injunction and for a

declaratory judgment. On April 3, 1998, defendant filed

Appendix B - 1

an answer to plaintiffs amended complaint and a notice

of removal of this action to this Court based on federal

question jurisdiction. On April 20, 1998, plaintiff filed in

this Court a new motion for preliminary injunction. On

April 23, 24, and 28, 1998, this Court held an

evidentiary hearing on plaintiffs motion for preliminary

injunction, which hearing, by agreement of the parties,

was consolidated with the trial on the merits under

Fed.R.Civ.P. 65(a)(2).

Subsequent to the hearing, post-hearing briefs were

filed by plaintiff and defendant on May 13, 1998 and

May 14, 1998, respectively, and on May 18, 1998, reply

briefs were filed by the parties. In a conference with

counsel on June 25, 1998, the Court requested that

certain documents missing from the record be submitted

as a part of the record and that the parties submit

supplemental briefs regarding the applicability of Int'l

Soc’y for Krishna Consciousness, Inc. v. Lee, 505 U.S. 672,

112 S.Ct. 2701, 120 L.Ed.2d 541 (1992). The parties

were in agreement that this be done, and on June 30,

1998, the additional documents and briefs were filed.

The defendant further agreed that the present

concession agreement with plaintiff and other car rental

companies would be extended to August 1, 1998 in

order for the Court to render its decision in this case.

The Court, having considered the record and the

arguments of the parties, now renders this decision on

Appendix B - 2

the merits of the issues raised by plaintiffs amended

complaint and its motion for an injunction.

II. Factual Background

The facts which form the background for the issues

raised in this action are essentially not in dispute. The

following narration is based partially on a stipulation of

facts agreed to by the parties.

Defendant, Columbus Municipal Airport Authority

(Port Authority),’ is a governmental entity created in

1990 by the City of Columbus, pursuant to the laws of

Ohio, to manage the operations of the Port Columbus

International Airport.”

Plaintiff, Capital Leasing of Ohio, Inc., d.b.a Budget

Rent-A-Car of Columbus (Budget),” a licensee of Budget

' Ohio Rev.Code § 4582.21 et seq.

? Prior to 1991, the City of Columbus, owner of the airport property,

operated the airport through its Department of Public Utilities and

Aviation, Division of Airports. In 1991, the City, pursuant to an Airport

Operation and Use Agreement, transferred to the Port Authority the

exclusive right and authority to occupy, operate, control, and use the

Airport and authorized the Port Authority to possess all of rhe powers and

authority provided or available to a port authority under the provision of

Chapter 4582 of the Ohio Revised Code, with certain enumerated

exceptions. (Port Authority's exhibit 26.)

3 Kevin Miles, General Manager of Budget, in referring to Budget

stated “We're a franchisee in Columbus, Ohio.” (Tr. Vol. II p. 35.) It

appears from Budget’s invoice that Budget is “An Independent Budget

System Licensee” (Budget’s exhibit Q.), presumably a licensee of Budget

Appendix B - 3

Rent A Car Corporation, is engaged in the business of

renting motor vehicles at various locations in the City of

Columbus. It is one of a number of car rental companies

that do business either inside the Columbus airport

terminal or near the airport terminal. Those companies

that are engaged in the business of renting automobiles

to travelers using the airport facilities are divided into

two general categories, “on-airport” operators and “off-

airport” operators.

On-airport operators, including Budget, are car rental

companies that have entered into agreements with the

Port Authority whereby they obtain space inside the

airport terminal for the location of counters and large

signs to attract air travelers who desire to rent vehicles

before leaving the terminal. In many cases, a reservation

for the rental may have been made in advance by the

customer or by a travel agent calling a telephone

number for a local Budget office or a toll-free number

for a national reservation office servicing various Budget

Rent A Car locations throughout the United States.

Because the Columbus airport has had no garage for

the storage of rental vehicles, it has been necessary for

the on-airport operators to store and maintain their

vehicles at office locations near the terminal. Customers

in the terminal who enter into rental agreements at the

Rent A Car Corporation. (Affidavit of Robert L. Aprati, General Counsel

for Budget Rent A Car Corporation, and Budget’s exhibit P.)

Appendix B - 4

terminal counters are then transported by the car rental

companies in their shuttle buses to their other facilities

in order to obtain the vehicle the customer has rented.

Customers can also proceed by shuttle buses directly to

the other facility, enter into rental agreements at that

office location and obtain their rental vehicles. Although

some car rental companies have leased space from the

Port Authority for the location of their storage,

maintenance and office facilities entirely on airport

property, Budget has not done so. For this purpose,

Budget primarily uses its office located on private

property leased by Budget at 1441 Stelzer Road,

Columbus, Ohio, which is adjacent to the airport’s

property and is a short distance from the terminal.

Budget does, however, lease adjoining property from the

Port Authority solely for the storage and maintenance of

its vehicles. At its Stelzer Road office, Budget rents cars

to both travelers who have arrived at the airport and

also to non-airport related or “local” customers.

On-airport rental car companies, like other

companies engaged in different business inside the

terminal, are referred to as concessionaires and have

entered into concession agreements with the Port

Authority. The car rental concession agreement,

whereby a car rental company obtains counter and sign

space inside the airport terminal, requires the company

to pay for this space a “privilege fee,” an amount based

Appendix B - 5

upon the concessionaire’s gross revenues. The terms and

conditions of the concession agreements are set forth in

detail and, until recently, have been for a term of five

years. Budget entered into such an agreement in 1987

and in 1993. The current agreement expired April 15,

1998, but, by agreement of the parties, has been

extended until August 1, 1998.

Off-airport car rental companies are companies that

have no agreements with the Port Authority and have no

counter space inside the terminal. They have access,

however, to the Port Authority’s property for the

purpose of transporting customers with their shuttle

buses between their off-airport offices and the airport

terminal. They are permitted to obtain access to the Port

Authority’s facilities by the payment of an “access fee”

which, together with other detailed terms and

conditions, is fixed by regulations adopted by the Port

Authority’s board.‘

Some car rental companies in recent years have

engaged in the practice of passing on to their customers

m Thrifty Rent-A-Car System, Inc. (Thrifty) is an off-airport car rental

company with a location on Stelzer Road. The owner testified that

initially off-airport car rental companies were not charged any fee for

doing business on airport property, were later charged a fee based upon

the number of shuttle bus trips, and are currently charged a fee based on

gross revenue from their airport business. The current access fee is 8% of

the gross revenue only from its airport customers. (Tr. Vol. II pp. 104-106,

118, and Port Authority's exhibit 17.) Thrifty passes on this cost to its

customers as an “access fee” on its invoices. (Tr. Vol. II pp. 119-20.)

Appendix B - 6

the charges imposed on the car rental companies for

doing business at airport facilities by carving out or

“unbundling” this overhead cost and adding it to the

amounts charged on their invoice to the customer for

time and mileage, together with charges for other

services the customer may desire to purchase, such as

insurance, cellular telephones, childrens’ seats, and taxes

imposed by governmental entities. For example, since

December, 1997, Hertz System, Inc. (Hertz), an on-

airport operator, adds this charge as “Apt Conc Fee

10%” (meaning Airport Concession Fee) on its invoice to

its Columbus airport customers. (Budget’s exhibit 0.)

The invoice is placed in an envelope (Budget’s exhibit N)

which contains the “Rental Agreement Terms and

Conditions” applicable to “the Hertz Corporation or the

independent Hertz System, Inc. licensee identified on

the Rental Record.” (the Columbus Hertz Rent-A-Car

Company is identified on the invoice as a “Hertz System

Licensee.”) Paragraph 7 of the rental terms and

conditions on the envelope concerns “Computation of

Charges,” and section 7(e) recites that:

“Sales/use/excise taxes, tax reimbursement and airport

related fees are charged as and where required or

permitted by applicable law.”°

> Hertz does not pass this cost on to all of its customers. Under

certain contracts with large volume customers, e.g., IBM, the airport

concession fee is not charged. (Tr. Vol. III pp. 17-19.)

Appendix B - 7

Hertz initiated the practice of unbundling its airport

concession fee and imposing it on its customers some-

years ago at the direction of its national licensor,

because off-airport companies were doing this and

advertising a lower rate. It was discontinued after a very

short time because, according to the Hertz witness, “I

think it was a combination of one of the competitors that

they were trying to compete with changing their policy

as well as some negative customer reaction.” Hertz, the

local licensee, resumed the practice on its own initiative

in December 1997. (Tr. Vol. III pp. 24-27.) It did not,

however, result in a reduction of the rates charged

airport customers but was added income to Hertz which,

according to Hertz, enabled it to participate in some of

the nationally advertised rates for Hertz rental cars. (Id.

at 34-36.) i

Budget also has engaged in this practice. in

September, 1997, Budget added this expense to the

customer’s invoice as an “airport fee.” (See, e.g., Budget

invoice and rental agreement CMH 18741, October 11,

1997 describing the charge as “10% AP Fee,” attached to

the stipulations of facts, and Port Authority’s Exhibit 15,

p. 1, describing the charge as “10% Airport Fee.”)° When

° Prior to September 1997, this concession fee cost was “built into the

rate.” (Tr. Vol. II p. 20.) According to Budget, it decided to pass this cost

on to the customer as a surcharge because the Port Authority was going

to increase the cost by including other items, in addition to just time and

mileage, as gross revenues on which the concession fee is based. (Id. at

Appendix B - 8

this practice came to the attention of Susan Warner-

Dooley, general counsel and director of properties and

administration of the Port Authority, she sent a letter on

October 9, 1997, notifying the car rental concessionaires

that the Port Authority did not consent to the use of the

terms “airport fee” as part of any separate statement of

the charge on their customers’ car rental contracts.

(Joint Exhibit 13.) Ms. Warner-Dooley was subsequently

contacted by Kevin Miles, General Manager of Budget,

who asked whether Budget could use the words “access

fee” to describe the separately stated charge. Ms.

Warner- Dooley testified that she informed Mr. Miles

that “access fee” was not prohibited by her October 9,

1997 letter’. (Tr. Vol. III pp. 75-83.)

Since that time, Budget has described this charge on

its invoice as “10% Access Fee.” (See, e.g., Budget

invoice and rental agreements in October, November,

and December 1997, attached to stipulation of facts, and

Port Authority’s exhibit 15, pp. 2-5.) Budget, unlike

Hertz, prints the terms and conditions of the rental

agreement on the back of the invoice form and not ina

21-23.)

” Ms. Warner-Dooley testified that she informed Mr. Miles that

“access fee” was not prohibited; she also testified, however, that she did

not authorize use of the terms. (Tr. Vol. III pp. 80-81.) Mr. Miles, on the

other hand, testified that Ms. Warner-Dooley told him to call the charge

“access fee.” (Tr. Vol. II pp. 19, 36-39.)

Appendix B - 9

separate envelope. There is no reference to or

description of this added “access fee” in the terms and

conditions printed on the back of the invoice form®. The

“10% Access Fee” appears on Budget’s list of charges

below its total time and mileage charge--appearing

sometimes in the space entitled “Drop Charge”--and just

before the “Sub Total” and “Tax and/or Surcharge”

spaces. When a customer calls the 1-800 number for the

national Budget Rent a Car reservation office and

informs that office that the location for renting the car is

Columbus, Ohio, the customer is told that there will be

a 10% “access fee.” If the customer asks about this

charge, Budget’s General Manager assumes that the

customer is told it is “an airport fee” (Tr. Vol. II pp. 15-

18) or a “concession fee.” (Tr. Vol. II pp. 19, 33.) He did

not know what travel agents actually say to customers

regarding this surcharge. (Tr. Vol. II p. 81.)

The controversy between Budget and the Port

Authority that resulted in this lawsuit arose in the

context of major changes being made in the airport’s

facilities under an expansion and remodeling project and

because of the Port Authority’s insistence upon

significant changes in its concession agreements with on-

’ By agreement of the parties, a complete copy of Budget's invoice

and terms and conditions as of April, 1998, was submitted post-bearing

as Budget’s exhibit Q.

Appendix B - 10

airport car rental companies’. Included in the

construction projects underway at the airport is a new

garage adjacent to the terminal which will have spaces

for the storage of vehicles of the on-airport car rental

companies. When this new garage is completed

sometime in the year 2000, it will not be necessary for

an arriving or departing air traveler to board a shuttle

bus and ride from or to the terminal in order to pick-up

a rental car or drop-off a rental car at the rental car

company’s other facility. That facility, however, would

still be used to service the rental car company’s local

customers, e.g., Budget’s Stelzer Road facility.

Since approximately August, 1997, the Port

Authority, in advance of the expiration of the current

concession agreements in April, 1998, has discussed

proposed terms and conditions of a new agreement with

car rental companies interested in operating in the

terminal as on-airport concessionaires. The proposed

agreement included terms, conditions and fees which

would be charged for the use of spaces in the new

garage when completed. All car rental concessionaires

® There is a lawsuit pending in the Court of Common Pleas of

Franklin County, Ohio, number 97CVH04-4335 in which the Port

Authority has brought an action against Budget, contending that Budget

has not paid its concession fees under its 1987 and 1993 concession

agreements. The parties agreed that the federal court is not being asked

to resolve any of the issues that are pending in the state court action. (Tr.

Vol. I pp. 4-5.)

Appendix B - 11

would rent this garage space, and the other facilities

previously used for storage and maintenance of vehicles

and renting cars to airport travelers would be used only

for maintenance and repair, to store vehicles not in use,

and to serve local traffic’’. The proposed agreement also

included provisions which are at the heart of the present

controversy.

As originally drafted by the Port Authority, section

4.6 of the agreement prohibited the car rental

companies from “unbundling” the amounts paid to the

Port Authority and passing this expense on to the

customers as a separate charge. (Joint exhibit 3, §

4.6.1.)"" According to Ms. Warner-Dooley, who drafted

10 When the new garage is completed, on-airport concessionaires will

complete the rental transaction inside the airport facilities and there no

longer will be shuttle buses operated by those companies between the

terminal and other locations. (Tr. Vol. I p. 8 .)

" Section 4.6.1 of the proposed agreement originally read as follows:

Concessionaire acknowledges that the payments by

Concessionaire to the Authority under this Agreement are for

Concessionaire’s use of facilities at the Airport, and that none of

those payments ‘eflects a fee that is imposed by the Authority

upon customers renting cars from Concessionaire. Nothing in

this Agreement shall be deemed to permit Concessionaire to

charge its customers a separate amount to allow Concessionaire

to recover the Privilege Fee, Space Rent or any portion thereof

directly from the customer.

(Joint exhibit 3.) (The parties stipulated that fourteen (14) documents

identified as “Stipulated Documents” could be admitted into evidence,

subject to any objections as to relevance. No objections as to relevance

Appendix B - 12

5 ene

the agreement for the Port Authority, there were

protests by the car rental companies when this was

disclosed in the Port Authority’s invitation to bid for

rental car concessions at the airport’. This initial

invitation to bid was published January 21, 1998 and

required that all bidders sign and return the proposed

agreement with their bids. (Joint exhibit 3.) As a result

of complaints by Budget and other car rental companies,

the Port Authority agreed to three addenda to the

proposed agreement.

Addendum Number 1, dated February 9, 1998, deals

with the garage under construction and the garage space

rent required to be paid to the Port Authority. Some car

rental companies, because of this added cost of doing

business as on-airport operators, had urged that the Port

were made, and the parties have referred to these documents as “joint

exhibits,” and they will be referred to by the Court in the same manner.)

12 Ms. Warner-Dooley testified that she investigated what other

airport authorities were doing with regard to the practice of rental car

companies charging their customers a separate amount for the concession

fee required by the airport authorities. She considered a report and

recommendations of the National Association of Attorneys General Task

Force on Car Rental Industry Advertising and Practices (Port Authority's

exhibit 18; Tr. Vol. III pp. 64-69) and various articles dealing with

practices of rental car companies. (Port Authority's exhibits 19-24; Tr. Vol.

Ill pp. 69-73.) These documents are admitted in evidence solely for the

purpose of establishing the fact that Ms. Warner-Dooley conducted an

investigation before drafting the prohibition in section 4.6.1 against

charging this fee to customers. They are not admitted for the purpose of

establishing the truth of the content of the documents in question.

Appendix B - 13

Authority impose this charge as a Customer Facility

Charge directly on car rental customers (Tr. Vol. III p.

117), similar to the $3.00 passenger facility charge

directly imposed by the Port Authority on travelers

purchasing an airline ticket. The Port Authority refused

to impose such a charge, but, as a compromise measure,

Addendum Number 1 authorized the car rental

companies to “unbundle” this expense and add it as a

separate charge to their customers as a “garage

recoupment surcharge.”"* The terms and conditions

under which this charge could be made, including its

location on the invoice, are spelled out in the

Addendum."

” According to Ms. Warner-Dooley, the operators also desired to

have the Port Authority require them to impose this charge directly on

their customers because of a concern over potential antitrust liability. An

opinion letter from an antitrust attorney, provided by the car rental

companies, indicated that there would be no violation so long as the

charge was authorized by the Port Authority, although not required or

even expressly approved by the Port Authority. (Tr. Vol. III pp. 209-210.)

'# Addendum No. 1 reads, in part, as follows:

Paragraph 4.6.1 Add the following first sentence:

“Concessionaire understands that the Authority does not support

the practice of transferring Concessionaire’s obligation for

payment of the Privilege Fee due herein to its [ ] customers.

However, Authority understands the Space Rent will be a

substantial increase over the prior rent for the concessionaires’

service facility. Therefore, the Authority does not require but will

not prohibit the separate statement of a Garage Recoupment

Surcharge on the terms and conditions specified herein.”

Appendix B - 14

New Paragraph 4.6.2 Add new paragraph 4.6.2 to

read: Garage Recoupment Surcharge Concessionaire is

permitted (but not required) to collect a Garage

Recoupment Surcharge only under the following

conditions:

1. Such surcharge is titled “Garage Recoupment

Surcharge”;

2. There is no reference to the Airport or the

Authority and there is no statement or

inference in writing or orally that the fee is

imposed by the Airport or the Authority;

3. Such Surcharge shall be immediately adjacent

to Concessionaire’s time and mileage charge

on the customer’s invoice;

4. If the Concessionaire elects to charge a

Garage Recoupment Surcharge,

Concessionaire complies with FTC

requirements with respect to this charge and

notifies the customer of the surcharge at the

time of reservation and again at the time of

execution of the contract;

5. The amount of the surcharge per rental car

transaction does not exceed the applicable

Annual Garage Recoupment as described [in

section 4.6.3].

(Joint exhibit 4.)

The Port Authority has interpreted its current

concession agreement as imposing a charge on the on-

airport car rental companies computed on the basis of a

percentage of their gross revenues at both their counters

Appendix B - 15

inside the terminal and at the facilities where they store

and maintain their vehicles, referred to in the proposed

agreement as “designated service facilities.” (Tr. Vol. III

p. 60.) The new agreement would specifically describe

this method of calculating the “privilege fee,”"® although

the percentage would now be applied to include income

not previously included, e.g., insurance charges, cellular

phone charges, etc. The percentage, however, is reduced

from 10% to 9.25%.’” Both Budget and Thrifty,”® car

' The Port Authority's position that Budget has violated its current

agreement by not including all of its income from the Stelzer Road office

is the subject of the lawsuit brought by the Port Authority against Budget

in state court. (Supra, footnote 9.)

"© Section 4.2.1 of the proposed agreement defines Gross Revenues

as follows:

Gross Revenue means the total amount charged by

Concessionaire during an Agreement Year, including any

separately stated fees, surcharges and other charges, in

connection with: (i.) Concessionaire’s Rental Car Business under

this Agreement; (ii.) any activities related directly or indirectly

to that business; and (iii.) any other business of Concessionaire

in the Operating Areas, in Concessionaire’s Designated Service

Facility, or elsewhere at the Airport.

(Joint exhibit 8.)

7 Each on-airport car rental company must also agree to pay a

minimum annual guarantee. The company pays the Port Authority the

greater of the minimum annual guarantee or the 9.25% privilege fee.

ad previous years, Thrifty has been an off-airport operator; Thrifty

plans to go on-airport under the proposed agreement. (Tr. Vol. II pp. 118-

Appendix B - 16

)

rental companies whose service facilities are not on

airport-owned property but on private property located

on Stelzer Road in close proximity to the airport,

protested against the inclusion of rental income from

these locations that is “local income,” i.e., car rentals to

customers for local, non-airport related use. (Tr. Vol. II

p. 84-85.) Both Budget and Thrifty informed the Port

Authority that 40% of the business conducted at their

Stelzer Road locations is with local customers. In

response, the Port Authority did not change its method

of calculating gross income in the proposed contract, but

it did, by Addendum Number 2, effectively reduce this

percentage fee on the local income from 9.25% to

4.625% by excluding 50% of the gross revenues from

local customers.

Addendum Number 2 paragraph 4.2.3.1 (exclusions

from Gross Revenue) reads, in part, as follows:

Add new sub-paragraph 4.2.3.1 to read:

“Local Traffic Fifty percent (50%) of the Gross

Revenue from each of Concessionaire’s

transactions with a Local Customer occurring at

Concessionaire’s Designated Service Facility. For

purposes of this Agreement, a Local Customer is

a customer residing within the Columbus

Metropolitan Statistical Area (MSA) as

19.)

Appendix B - 17

documented by a driver’s license showing an

address within the Columbus MSA.”

(Joint exhibit 5.)

Finally, Addendum Number 3 reflects a retreat by the

Port Authority from its initial desire to prohibit the

“unbundling” of the privilege fee and assessing it on the

car rental customer as a separate charge. Addendum

Number 3 recognizes that such a practice may occur and

that, if it does, such a charge must appear adjacent to

the time and mileage charges and a number of specific

words may not be used to describe this *648 charge.

Addendum Number 3 reads, in part, as follows:

Paragraph 4.6.1 Delete Section 4.6.1. Add

new Section 4.6.1 to read: “Concessionaire

acknowledges that the payments by

Concessionaire to the Authority under this

Agreement are for Concessionaire’s use of

facilities at the Airport, and that none of those

payments reflects a fee that is imposed by the

Authority upon customers renting cars from

Concessionaire. Concessionaire understands that

the Authority does not support the practice of

transferring Concessionaire’s obligation for

payment of the Privilege Fee due herein to its

customers. Concessionaire is prohibited from

using the following words, or any form thereof:

Airport, Authority, Government, Port Columbus,

Concession, Access, Passage, Cost of Doing

Business, Fee, Toll, Assessment, or Tax in

Appendix B - 18

describing any surcharge the Concessionaire may

impose on customers. Any charges made by

Concessionaire on its customers in an attempt to

recover its costs in operating under this

Concession Agreement must appear adjacent to

time and mileage charges. Concessionaire is

prohibited from stating or implying, in writing or

verbally, that the Airport or Authority imposes or

approves of any such direct charge to a customer.

The Authority understands the Garage Space

Rent will be a substantial increase over the prior

rent for the concessionaires’ service facilities.

Therefore, the Authority authorizes, but does not

require, the separate statement of a Garage

Recoupment Surcharge on the terms and

conditions specified herein.”

(Joint exhibit 6.)

III. Issues

Budget contends that any charge imposed by the Port

Authority on revenues at its Stelzer Road location from

car rentals to local, non-airport travelers (1) is a tax and

beyond the Port Authority’s ability to impose, and (2) is

a charge not imposed on other businesses that operate

in the terminal under concession agreements and hence

violates the Equal Protection clauses of the United States

and Ohio Constitutions’’. Budget also contends that the

” Budget also initially challenged a provision of the proposed

agreement dealing with the intentional diversion of airport related

Appendix B - 19

restrictions on its speech in describing the privilege fee

to its customers on its invoices is a violation of Budget’s

right to freedom of speech under the First Amendment

to the United States Constitution. Budget seeks an

injunction against the Port Authority to prevent the

enforcement of the challenged provisions.”°

IV. Discussion

A. Budget’s Claim that the Privilege Fee Cannot

Be Imposed on Revenue From Local Traffic

As noted earlier, Budget’s office on Stelzer Road,

adjacent to the airport property, rents *649 vehicles to

travelers using the airport facilities and also to local

customers who have no connection with the airport. The

proposed concession agreement requires that a car

customers (Joint exhibit 8, § 4.5 No Diversion ), but this dispute was

resolved by the parties prior to the hearing.

*° Prior to the hearing, the Court raised the question of its ability to

enjoin the collection of the charge on local car rentals if, as Budget

contends, it is in reality a tax, in light of the Tax injunction Act, 28 U.S.C.

§ 1341. Budget agreed to limit the relief sought regarding this issue to a

declaratory judgment. (Tr. Vol. I pp. 3-4.) However, the Court notes that,

should it find that the privilege fee is a tax, there would still be the

question of the Court’s ability to provide the declaratory relief sought by

Budget. The Tax Injunction Act “applies to declaratory as well as

injunctive relief.” Franchise Tax Bd. of California v. Alcan Aluminium Ltd.,

493 U.S. 331, 338, 110 S.Ct. 661, 107 L.Ed.2d 696 (1990); California v.

Grace Brethren Church, 457 U.S. 393, 408, 102 S.Ct. 2498, 73 L.Ed.2d 93

(1982); Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S. 293, 299, 63

S.Ct. 1070, 87 L.Ed. 1407 (1943).

Appendix B - 20

rental company doing business as an on-airport operator

designate a facility for car maintenance and storage for

all cars used as part of its airport rental car concession,

the facility to be known as the concessionaires’s

Designated Service Facility. (Joint exhibit 8, § 2.2.) It is

undisputed that Budget would be required to designate

its Stelzer Road location as its Designated Service

Facility. The agreement requires that “All Gross

Revenues generated at a Designated Service Facility

shall constitute Gross Revenues covered by this

Agreement.” (Id.) The agreement defines

“Concessionaire’s Rental Car Business” as including “the

rental or short-term leasing of cars and related

transactions at the Airport (including Concessionaire’s

Designated Service Facility) ...” (Id. at § 4.2.2) and

makes it clear that income from the Designated Service

Facility must be included as gross revenue on which the

9.25% privilege fee is calculated. Section 4.2.1 defines

gross revenue as follows:

Gross Revenue means the total amount

charged by Concessionaire during an Agreement

Year, including any separately stated fees,

surcharges and other charges, in connection with:

(i.) Concessionaire’s Rental Car Business under

this Agreement; (ii.) any activities related directly

or indirectly to that business; and (iii.) any other

business of Concessionaire in the Operating

Appendix B - 21

Areas, in Concessionaire’s Designated Service

Facility, or elsewhere at the Airport.

(Joint exhibit 8.)

It is therefore clear that Budget would be required to

pay the Port Authority’s privilege fee not only on its

income from airport-related car rentals but also on its

income from non-airport related or local car rentals at its

Stelzer Road location. As a result of complaints by

Budget and Thrifty, Addendum Number 2 included an

exclusion to gross revenues for 50% of the gross

revenues on local customers. According to Ms. Warner-

Dooley, the exclusion of 50% of the gross revenues due

to local car rentals “was our compromise to try to assist

the Budget, the Thrifty, that were having difficulties

with the combined increased costs with parking garage

space rent as well. It was also a recognition that [Budget

and Thrifty] do local advertising.” (Tr. Vol. III p. 142.)

The Port Authority did not exclude such local revenues

entirely from the privilege fee because, as Ms. Warner-

Dooley explained:

A. We look at, we need those revenues in order

to--yes, pay our operating expenses for

current capital improvements, future capital

improvements. That’s what these moneys are

going to, and we look at that factor, and that

was one of the balancing factors in looking at

a 50 percent exclusion for local traffic. That’s

Appendix B - 22

one reason, even though we decided to do a

compromise, we didn’t exclude all local

traffic. We need those revenues from 50

percent of the local traffic to help pay our

various costs.

. And you need the revenues from the 50

percent of the local traffic whether that local

traffic has any burden or any impact on your

airport, isn’t that correct?

. That is a price that is paid, yes, as part of the

concession.

. Isn’t it correct that you charge the 50 percent

income on the local traffic whether or not

there is any burden on the airport?

. That is correct.

. You're charging that because you, as the

administrator, saying that if you want to come

on this airport, that’s the fee I’m going to

assess you rental car companies; is that

correct?

. That is correct and because of the benefit you

get as a concessionaire, the exposure to all

Appendix B - 23

the local traffic that’s going through our

terminal.?!

1. The Tax Argument

There is no question regarding the power of the Port

Authority to impose charges for the use of its facilities.

Ohio Rev.Code § 4582.31 includes among enumerated

powers granted a port authority the power to “charge,

alter, and collect rentals and other charges for the use or

services of any port authority facility as provided in

section 4582.43 of the Revised Code.” Section 4582.43

of the Ohio Revised Code, in turn, provides that:

A port authority may charge, alter and collect

rentals or other charges for the use or services of

any port authority facility and contract in the

manner provided by this section with one or

more persons, one or more governmental

agencies, or any combination thereof, desiring

the use or services of the facility, and fix the

terms, conditions, rentals, or other charges for

such use or services.

- According to Ms. Warner-Dooley, the car rental concessionaires,

among all the concessions in the airport terminal, produce the highest

revenue for the Port Authority. “We are looking to get money in exchange

for the benefits” (Tr. Vol. III p. 52) and “we have the duty to get fair

market value from our leases. That would include our concession

agreements.” (Id. at 132.)

(Tr. Vol. III pp. 138-39.)

Appendix B - 24

eee

It is also clear that income generated from such rentals

or other charges must be used only for expenses of the

port authority. Section 4582.39 specifies that “rents and

charges received by the Port Authority shall be used for

the general expenses of the Port Authority and to pay

interest amortization, and retirement charges on money

borrowed.”

It is Budget’s position that the charge imposed on

local car rentals, although described as a privilege fee, is

in actuality a tax and beyond the power of the Port

Authority to impose, because it is imposed on

transactions that are purely local in nature and create no

burden on or cost to the Port Authority. To support its

position, Budget relies on Ohio law to the effect that a

charge imposed by a governmental entity that bears no

relationship to the burden on or cost to the

governmental entity is a tax. The cases cited by Budget,

however, are distinguishable.

In Ass’ns, Conventions, Trade Show, Inc. v. Ohio

Expositions Comm’n, 1989 WL 52940 (Ohio App. May

18, 1989) (ACT I ), the Ohio Expositions Commission

required a decorating company to sign an agreement to

pay the Commission a percentage of its gross receipts in

order to obtain access to the Exposition Center for the

purpose of doing business with an exhibitor who had

rented space in the building. Other companies that

provided goods and services to the exhibitors were not

Appendix B - 25

required to pay this charge. The Ohio appellate court

held that the Commission was a state agency operating

the building “for the benefit of the citizens of the entire

state and not for a local municipal corporation” (Id. at

*5) and thus was acting in a governmental capacity

rather than a proprietary capacity. It also held that the

required agreement did not involve any property right or

right to possession of the premises, but only the right to

come into the building to do business, and as such was

a permit or license. Because the amount charged greatly

exceeded the costs incurred by the governmental entity,

it was deemed to be a tax rather than a license fee. The

Court also found that there was no rational basis for

imposing this charge on decorators and not imposing it

on other similarly situated vendors and hence was a

denial of equal protection under the Fourteenth

Amendment to the United States Constitution. Ass’ns.

Conventions, Trade Shows, Inc. v. Bd. of Franklin

County Comm'rs, 1991 WL 160044 (Ohio App. Aug. 15,

1991) (ACT II ), dealt with the same issue with respect

to the Veterans Memorial building. The same appellate

court found that in that case a genuine issue of material

fact existed regarding whether the amounts charged by

the Board constituted a tax.

In contrast to the ACT I and ACT II cases, the charge

imposed on Budget is a charge for occupying space

inside the airport terminal for a counter and large signs

Appendix B - 26

LPO OEP > ©

a ee ae ag

and the associated benefits of being an on-airport

operator. Although, as previously noted, the name given

this charge is a “privilege fee,” it is similar, if not

identical to a space rental charge. It is not simply a

permit or license fee to enter the airport property, it is

a charge made for the benefits of occupying the Port

Authority’s property and doing business at that location.

The proposed contract sets forth in great detail the

rights and responsibilities of both the tenant and the

landlord, so to speak, and cannot in any way be

considered merely a regulatory license.

Apart from Ohio law, Budget argues that “other

states which have considered the same issue as is

present here have reached a similar conclusion.”

(Budget’s post-hearing brief, p. 19), citing, City of

Kenner v. New Orleans Aviation Bd., 603 So.2d 220

(La.App.1992) (Kenner ). In Kenner, a state statute

dealing specifically with charges imposed on “nontenant,

auto rental users of each airport in this state,” imposed

certain restrictions on those charges, including a

requirement that they “must be based on the cost to the

airport of the particular facilities or services used by

such nontenant, auto rental user.” A New Orleans

ordinance authorized the New Orleans Aviation Board to

impose charges on the nontenant auto rental companies

based upon a percentage of their gross business receipts.

The Louisiana Court of Appeals found that the ordinance

Appendix B - 27

and a required Permit Agreement conflicted with the

state statute in a number of respects, including the

above quoted requirement. The Court found it

“unnecessary to address whether or not the fee is an

illegal tax.” Id. at 227. Kenner clearly has little or no

application to the facts of the present case. It was based

on a conflict between a state statute and a local

ordinance dealing only with off-airport rental car

companies and did not involve, as does this case,

charges made by an airport authority for a concession

inside the airport terminal. Like the statute, the

ordinance dealt only with car rental companies “who do

not have leases or concession contracts with the Board.”

Id. at 224.

In the present case, the Port Authority clearly has the

authority to impose “rentals or other charges ... for the

use or services of any port authority facility” (Ohio

Rev.Code § 4582.43), and no Statutory restrictions are

imposed on the amount of those charges or the method

of calculating those charges. The Port Authority has

determined that the amount of the concession fee will be

9.25% of the gross income of the rental car company

occupying space inside the terminal and that the method

of calculating the 9.25% will be to include gross income

from both the rental car company’s airport counter and

its designated service facility. The fact that some part of

that gross revenue includes a portion attributed to local

Appendix B - 28

car rentals at the designated service facility does not

transform what is essentially a charge for rent into an

illegal tax. A rental car company must decide whether

the space and benefits of being inside the terminal are

worth the privilege fee, or rent, fixed by the landlord of

the premises, the Port Authority. As Ms. Warner-Dooley

testified on cross-examination:

A. It’s in no way a tax. It’s a privilege fee for

under a concession agreement, concession

opportunity, that is bid.

Q. And so if you want to come into the airport

and have a counter, you could submit yourself

to having a fee levied upon you for all the

business of the company no matter where you

have that business?

A. That is a business decision that bidders make.

Thrifty for a long time has stayed off airport

because of that.

Q. And you're saying that’s correct. That’s what

Budget has to do. They have to decide if they

will pay what you want from all their

businesses, whatever you choose to extract,

and then make the business decision?

A. They have to decide if they are willing to live

with the terms of the concession as proposed

and make that business decision.

Appendix B - 29

(Tr. Vol. III pp. 143.)

Budget makes the same argument here as was made

in Budget Rent-A-Car Sys., Inc. v. County of Wayne, 742

F.Supp. 947 (E.D.Mich.1990), affd, 951 F.2d 348 (6th

Cir.1991) (Wayne County ). In that case, Wayne County,

Michigan required in its contract with the Budget

company that “in consideration for an in-terminal

concession at the Detroit Metropolitan Airport, plaintiff

must pay 9.5% of its gross revenues derived from all

operations within three miles of the airport,” Id. at 948.

The Budget company argued that its local rentals bore

no relationship to its airport activities and therefore to

include those rentals in its gross revenues constituted an

illegal tax. In rejecting that argument, the district court

said:

Plaintiffs argument is without merit;

defendant’s system of access fees is not the

functional equivalent of a tax. Rather than

attempt to decipher the purposes for which every

individual who rents a car from every interminal

rent- a-car concessionaire, defendant has insisted

on the provision in question which applies to all

gross revenue a rent-a-car company receives

within three miles of the Airport.

Id. at 951.

The Port Authority in the present case, unlike Wayne

County, is not imposing a fee on all of the local income

Appendix B - 30

generated at Budget’s Designated Service Facility. But

whether the fee is on all of the local income or on only

one half of that income is of no significance, nor is the

Port Authority’s motive for the imposition of this fee on

local income determinative. The significant and

determinative fact is that it is a fee charged by the Port

Authority for occupying space and doing business in the

terminal. The fact that the computation of that fee is

based upon not only income from the airport counter

but also from the Designated Service Facility which

includes a portion of local rentals, does not transform

the concession fee into a tax. As in Wayne County,

Budget’s argument that such a fee constitutes an illegal

tax is without merit.

Budget attempts to discredit the Wayne County

precedent by arguing that it involved Michigan law

rather than Ohio law. It is a distinction without a

difference. The decision did not turn on any question of

Michigan law as opposed to Ohio law, nor does Budget

point out any variations. It turned instead, on the basic

difference between an involuntary tax imposed on some

activity for the benefit of the public and a fee imposed

for some benefit offered to the payer which the payer is

free to pay or not pay. As our Sixth Circuit said in U.S.

v. River Coal Co., Inc., 748 F.2d 1103, 1106 (6th

Cir.1984):

Appendix B - 31

the test has been variously stated, but the

chief distinction is that a tax is an exaction for

public purposes while a fee relates to an

individual privilege or benefit to the payer.

Budget also denigrates the Wayne County decision

because “the Sixth Circuit’s opinion is unpublished and

carries with it the restriction found in Rule 24 of the

Sixth Circuit Court of Appeals.” (Budget’s post-hearing

brief, p. 19.) Apart from the fact that Budget itself relies

on two unpublished state court decisions, ACT Iand ACT

II, supra, which under Rule 2(G)(1) of the Ohio

Supreme Court’s Rules for Reporting of Opinions are not

considered controlling authorities, under Sixth Circuit

Rule 24(c), an unpublished opinion may be cited if the

unpublished decision has precedential value in relation

to a material issue in a case and if there is no published

opinion that would serve as well. There are no other

decisions of the Sixth Circuit Court of Appeals, published

or unpublished, addressing a similar system of fees

assessed by an airport or airport authority, and this

Court is bound by the unpublished Sixth Circuit

decisions as well as by those that are published.

The first prong of Budget’s attack on the privilege fee

applicable to revenues from local car rentals as

constituting an illegal tax having no merit, the Court

turns to the second prong--the argument that imposition

of such a charge violates Budget’s right to equal

Appendix B - 32

protection under the Fourteenth Amendment to the

United States Constitution and Article I of the Ohio

Constitution.

2. The Equal Protection Argument

Budget’s argument that the Port Authority has

violated its right to equal protection under both the

Equal Protection Clause of the Fourteenth Amendment

to the United States Constitution and Article I of the

Ohio Constitution” is based upon its contention that

“the Authority cannot give any rational explanation or

basis as to why Budget will be required to pay

essentially 5% of its non-airport, local revenues as a fee

when other concessionaires at the Airport are not

charged a similar fee.” (Budget’s memorandum in

support of motion for preliminary injunction, pp. 19-20.)

In its post-bearing brief, Budget is somewhat more

specific as to an alleged discriminatory classification:

In this case, the Authority cannot give any

rational explanation or basis as to why Budget

will be required to pay essentially 5% of its non-

airport, local revenues as a fee when other

22 Ohio's Equal Protection Clause is co-extensive with the equal

protection guarantee in the Fourteenth Amendment to the United States

Constitution and is subject to the same analysis. See, Fabrey v. McDonald

Village Police Dep’t., 70 Ohio St.3d 351, 353, 639 N.E.2d 31 (1994);

Sorrell v. Thevenir, 69 Ohio St.3d 415, 422, 633 N.E.2d 504 (1994).

Appendix B - 33

concessionaires at the Airport, i.e., Enterprise,

Payless, UPS, Max & Erma’s are not charged a

similar fee.

(Budget’s post-hearing brief, p. 23.)

One very important and undisputed fact must be

recognized at the outset. All car rental companies, like

Budget, who desire to have counter space and signs

inside the terminal are considered as being in one

classification as car rental concessionaires, are treated

equally by the Port Authority, and are required to sign

the same concession agreement. To the extent the other

On-airport car rental concessionaires derive local

revenue from their Designated Service Facilities, one

half of that revenue would also be included as gross

revenue subject to the 9.25% privilege fee. No

discrimination among the members of this classification

has been alleged or proved.

It appears from Ms. Warner-Dooley’s testimony on

cross-examination that Anton Air Foods operates a

franchise of Max & Erma’s (presumably a restaurant), a

franchise for Massey’s Pizza and a subcontract for

Charlie’s Steak House in the airport terminal. (Tr. Vol.

III p. 145.) The terms and conditions and compensation

paid to the Port Authority under any concession

agreement with Anton Air Foods are not in the record.

United Parcel Service (UPS) is not a concessionaire

doing business inside the terminal. It is a courier service

Appendix B - 34

which has access to the terminal property and uses the

airport’s 1oading docks. (Tr. Vol. Ill P. 145.) It is nota

party to any concession agreement or contract with the

Port Authority, but it pays a $300.00 courier fee”* that

has been fixed by the Executive Director of the Port

Authority under guidelines adopted by him pursuant to

authority delegated to him by the Port Authority. (Tr.

Vol. III pp. 146-47.) The Executive Director also fixes

the fees charged the public for using the airport parking

lots and the public parking garage pursuant to that same

authority. The Port Authority distinguishes between

concessionaires, i.e. persons or business entities that

desire to occupy space inside the terminal and conduct

their business on airport property, from persons or

business entities that desire merely to have access to

airport property for some purpose. The former are

required to enter into a concession agreement; the latter

are required to pay a user charge or fee and are subject

to rules or regulations adopted by the Port Authority or

its designated representative. The Port Authority,

according to Ms. Warner-Dooley, is acting in a

proprietary capacity in requiring contracts of

concessionaires (“... how we set up the business terms,

is not because we are a governmental entity. It is

because we have an opportunity that people wish to bid

3 is not clear from the record whether this fee is paid on a weekly,

monthly, or annual basis.

Appendix B - 35

for.” Tr. Vol. III p. 144) and in a governmental capacity

in its regulation of traffic in and out of the airport,

including the traffic of off-airport car rental agencies

(“Our governmental authority comes in with the off-site

rules.” Tr. Vol. III p. 144.)

The reference to Enterprise and Payless is to two car

rental companies that apparently occupy somewhat

hybrid positions between on-airport car rental

concessionaires and off-airport car rental companies.

Enterprise has a location on airport property, not inside

the terminal but ‘at the Lane Aviation airplane hanger.

Payless similarly has a location on airport property, not

inside the terminal but at the Concourse Hotel. (Tr. Vol.

III pp. 167-68.) The Port Authority does not require

these companies to enter into the concession agreement

that is required of Budget and other car rental

companies having counters inside the terminal, but

instead has entered into separate contracts with these

companies “that refer to the off-site rules and set

parameters for operating.” (Tr. Vol. III p. 167.)** These

two car rental companies, having “access to the airport

hotel customers as well as airport hanger users,” pay a

24 The Concourse Hotel and Lane Aviation had entered into

agreements with Payless and Enterprise for servicing their customers at

their respective locations. Because their land leases required the Port

Authority's approval for this activity on airport property, the Port

Authority entered into separate agreements with Payless and Enterprise

as part of the approval process. (Tr. Vol. III pp. 92-93.)

Appendix B - 36

higher percentage fee than the 8% access fee off. airport

car rental companies are required to pay because of their

special positions and their proximity to the terminal. (Tr.

Vol. III pp. 167-69, 192.) Although the contracts with

these companies are not in evidence, Ms. Warner-Dooley

testified that these companies are not required “to pay

on their local business,” whereas Budget and other car

rental companies having counters inside the terminal are

required under the concession agreements to pay a

percentage of their gross income from local car rentals.

(Tr. Vol. III pp. 170-72.)

Although Budget, in its post-bearing brief, does not

include off-airport car rental companies in its list of

business entities allegedly receiving favored treatment,

the Court notes that their operations are governed by

“Rules Regarding Off-Site Parking Operators and Off-

Site Car Rental Operators.” (Port Authority’s exhibit 17.)

Under those Rules, any car rental company that “uses

the Airport by transporting customers to or from the

Airport other than pursuant to a contract with the

Authority for such services ... must obtain a license to

use the airport” and must pay a “User Fee,” based upon

a percentage of the Operator’s gross revenues?>. (Port

Authority’s exhibit 17, pp. 2- 3.) Gross revenues is

*° From July 1, 1994 to July 1, 1995, the fee was 5%; from July 1,

1995 to July 1, 1996, the fee was 6%: and from July 1, 1997, the fee has

been 8%.

Appendix B - 37

defined as all revenues received, derived or accruing to

an Operator from its operations conducted at, on, from,

or to the airport. (Port Authority’s exhibit 17, pp. 1-2.)

This is presumed under the Rules to include all

transactions occurring in whole or in part at or allocated

to locations of the operator within three miles of the

airport. This presumption of airport related transactions

can be rebutted, however, (and the income excluded

from the fee), by providing one of an enumerated list of

documents. (Port Authority’s exhibit 17, p. 2.) Thus, off-

airport car rental companies-- unlike on-airport car

rental companies--can avoid paying a fee on non-airport

related transactions.

While Budget refers to Max & Erma’s, UPS,

Enterprise, and Payless as being “concessionaires at the

Airport,” it is clear from the record that only Max &

Erma’s is considered by the Port Authority as a

concessionaire by virtue of conducting its business inside

the airport terminal. Although, as previously noted, the

concession agreement with Max & Erma’s is not in

evidence, Ms. Warner-Dooley testified that this business,

like Budget, pays “a concession fee, a percentage fee.”

(Tr. Vol. III p. 137) and that “on-airport concessionaires”

in exchange for the benefits and privileges of being

inside the terminal agree to pay “a percentage.” (Tr. Vol.

III p. 165.) With respect to Max & Erma’s, that fee is

apparently a percentage of the company’s gross income

Appendix B - 38

from the concessionaire’s airport operations. Although

Budget’s counsel questioned Ms. Warner-Dooley about

the ability to include in the concession privilege

agreement other Max & Erma’s locations off airport

property, this was never considered by the Port

Authority. (Tr. Vol. III p. 145.) The problem with

Budget’s comparison of its operations with Max &

Erma’s, apart from the obvious difference between a

restaurant and a car rental operation, is that there is no

evidence that the concessionaire that owns and operates

the franchise for Max & Erma’s restaurant inside the

terminal conducts any part of that business outside the

terminal, i.e., there is no non-airport related or local

income that could be subject to the privilege fee. In fact,

the evidence shows that the airport operator of the Max

& Erma’s restaurant inside the terminal does not have

any Max & Erma’s franchises off the airport property.

(Tr. Vol. III p. 145.)

Unlike the Max & Erma’s concession in the terminal,

the other businesses which Budget believes are more

favorably treated, i.e., UPS, Enterprise, and Payless do

engage in business off the airport property and receive

income from non-airport related, i.e., local, transactions,

as does Budget at its Stelzer Road location. Budget’s

complaint is that it must pay a privilege fee that includes

50% of its Stelzer Road local transactions whereas these

other business entities pay fees that do not include

Appendix B - 39

income from local transactions”. While this distinction

(particularly with reference to the car rental companies,

Enterprise and Payless) may be sufficient to raise an

equal protection argument, there is some question of

whether any claim of a denial of the constitutional right

to equal protection is applicable to the facts of this case,

as illustrated by the observation of the district court in

Wayne County:

In the case at bar, there is no legislation

involved; the government has not specifically

classified the car rental companies for different

benefits or burdens under the law. The

classification is the result of a contract entered

into at arms length and mutually agreed to by

both parties. It is questionable, then, whether

equal protection applies to this case. Defendant

maintains that constitutional analysis in a

- Budget has made no equal protection claim based on the fact that

off-airport car rental companies are permitted to describe the charge

made to their customers as an “access fee” whereas on-airport car rental

companies would be prohibited under the new concession agreement from

using that description to describe the charge made to their customers.

Although Ms. Warner-Dooley believes that the use of the term “access fee”

by off- airport car rental companies is misleading (Tr. Vol. III p. 113), the

Port Authority has not taken any action to prohibit its use by those

companies. (Id. at 114.) Ms. Warner-Dooley was not aware until the week

before the bearing that Thrifty was using that term, and Thrifty, presently

an off-airport car rental company, is scheduled to become an on- airport

car rental company and subject to the restrictions in the new concession

agreement. (Id. at 109-110.) She is not aware, and there is no evidence,

of how Payless and Enterprise describe the charges on their invoices. (Id.

at 192.)

Appendix B - 40

contractual context is inappropriate and

inapplicable. Accordingly, defendant moves

pursuant to Fed.R.Civ.P. 12(b)(1) to dismiss for

lack of subject matter jurisdiction. The Court

recognizes, however, that defendant was acting

pursuant to state law when it entered into the

contract in question, and by this officie! action,

created a classification that results in different

benefits and burdens. See, Columbus Bd. of Educ.

v. Penick, 443 U.S. 449 n. 5, 99 S.Ct. 2941, 61

L.Ed.2d 666 (1979). Accordingly the Court will

test the classification using an equal protection

analysis.

Budget Rent-A-Car Sys., Inc. v. County of Wayne, 742

F.Supp. at 949-50.

This Court is of the opinion that Budget’s

constitutional rights are assertable, both as to equal

protection and freedom of speech.”’ Although the Port

Authority, like any other property owner, is free to insist

upon the terms and conditions it imposes upon persons

or entities desiring to have access to or use its property,

it cannot impose conditions that are contrary to the

rights granted to all citizens under the United States

Constitution. In U.S. v. Kokinda, 497 U.S. 720, 725, 110

S.Ct. 3115, 111 L.Ed.2d 571 (1990), the Supreme Court

said that “[t]he government, even when acting im its

proprietary capacity, does not enjoy absolute freedom

ad Budget’s First Amendment right is discussed infra at pp. 656-669.

Appendix B - 41

from First Amendment constraints, as does a private

business ...” Similarly, in this Court’s view, the Port

Authority, even when acting in its proprietary capacity,

does not enjoy absolute freedom from the constraints

imposed by the Equal Protection Clause of the

Fourteenth Amendment.

The Wayne County court pointed out that the

Supreme Court has “provided the following guidance for

considering whether an economic regulation violates

equal protection guarantees,” referring to City of New

Orleans v. Dukes, 427 U.S. 297, 96 S.Ct. 2513, 49

L.Ed.2d 511 (1976). In that case, the Supreme Court

said:

When a local economic regulation is

challenged solely as violating the Equal

Protection Clause, this Court consistently defers

to legislative determinations as to the desirability

of particular statutory discriminations. Unless a

classification trammels fundamental personal

rights or is drawn upon inherently suspect

distinctions such as race, religion, or alienage,

our decisions presume the constitutionality of the

statutory discriminations and require only that

the classification challenged be rationally related

to a legitimate state interest. States are accorded

wide latitude in the regulation of their local

economies under their police powers, and

rational distinctions may be made with

substantially less than mathematical exactitude.

Appendix B - 42

. . . In short, the judiciary may not sit as a

superlegislature to judge the wisdom or

desirability of legislative policy determinations

made in areas that neither affect fundamental

rights nor proceed along suspect lines; in the

local economic sphere, it is only the invidious

discrimination, the wholly arbitrary act, which

cannot stand consistently with the Fourteenth

Amendment.

City of New Orleans v. Dukes, 427 U.S. at 303-04, 96

S.Ct. 2513 (internal citations omitted).

The Port Authority’s decision to require on-airport

rental car concessionaires to pay a privilege fee on a

portion of their non-airport related transactions

conducted at their Designated Service Facilities but not

requiring other business entities having access to the

airport to pay a fee on non-airport related transactions

is purely an economic decision, is not arbitrary and has

a rational basis related to a legitimate governmental

interest. There is a great difference between car rental

concessionaires that have a counter space and large

signs inside the airport terminal and persons or business

entities that do not. The space inside the terminal is

limited, and is available to a limited number of

businesses that desire to conduct their business inside

the terminal. (Tr. Vol. III pp. 161-62.) There is an

obvious business advantage of having a car rental

business located inside the terminal, not only with

Appendix B - 43

respect to customers and potential customers who travel

and desire to rent a vehicle, but also with respect to the

exposure to local traffic that goes through the terminal.

(Tr. Vol. III p. 139.) The Port Authority makes a

determination of what the market value is for the

concession in setting its fees (Tr. Vol. III p. 138) and

solicits bids for concession agreements incorporating

those fees.”

Courier services, such as UPS, conduct an entirely

different type of business, one that does not occupy any

terminal space but simply has access to loading docks for

the purpose of delivering and picking up packages.

Enterprise and Payless also do not occupy any terminal

space, but because they have counter locations in closer

proximity to the terminal, they are charged a higher fee

than off-airport car rental companies. Off-airport car

rental companies have the least advantages among the

car rental companies and, accordingly, the fee charged

by the Port Authority is less than that charged Budget

and other car rental companies.

There could be different methods used by the Port

Authority in determining the fees charged for use of or

access to its property, but, as the Supreme Court has

28 The obvious desirability of conducting business inside the terminal

and competition for the most favorable location is illustrated by the fact

that first choice as to counter space in the new garage is given to the

bidder submitting the highest minimum guaranteed privilege fee. (Joint

exhibit 3, p. 10.)

Appendix B - 44

said, the judiciary does not sit as a superlegislature to

judge the wisdom of the Port Authority’s methods. It is

clear to this Court that the fees charged the occupiers or

users of the airport property have not been fixed in an

arbitrary manner; that there is a rational basis for the

different fees charged to the different classifications of

occupiers and users of the property; and that there has

been no violation of Budget’s right to equal protection

under the Fourteenth Amendment to the United States

Constitution or Article I of the Ohio Constitution.

B. Budget’s Claim that the Restrictions on its

Speech Violate the First Amendment

1. The Applicability of the First

Amendment and Standard of

Review

The parties are at the opposite ends of the spectrum

cast by the First Amendment's protection of freedom of

speech.

Budget contends that the Port Authority’s

requirement that it agree to a contract that *657

restricts the language that can be used by Budget on its

invoices with reference to its privilege fee surcharge is a

clear infringement on Budget’s constitutional rights

Appendix B - 45

under the First Amendment”’. Its argument appears to

be based on two lines of Supreme Court cases. First,

Budget contends that a governmental agency’s ability to

restrict commercial speech is limited and is governed by

Central Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n

of NY, 447 U.S. 557, 100 S.Ct. 2343, 65 L.Ed.2d 341

(1980) (Central Hudson ), which sets forth a four-part

analysis to be applied in determining whether a

restriction on commercial speech meets constitutional

muster: 4

- Budget does not challenge another provision of the concession

agreement that deals with requirements regarding information concerning

fees and charges. Section 3.9.5 “Information Regarding Fees and Charges”

provides:

Concessionaire shal] not misrepresent to the public its prices

or the terms and provisions of its rental agreements or those of

its competitors. Concessionaire shall comply with all applicable

rules and regulations of the Federal Trade Commission and all

other governmental agencies. Concessionaire shall fully inform

each customer, prior to the execution of such customer’s rental

agreement, of all fees and charges applicable to such customer's

. rental. If the Authority determines, after notice and opportunity

for Concessionaire to comment, that any of Concessionaire’s

business practices are unreasonable, deceptive or

unconscionable, Concessionaire shall immediately cease such

practices upon receipt of a written order to do so from the

Authority. The Authority will give advance notice to

Concessionaire that the Authority considers a certain practice to

be unlawful or discriminatory and Concessionaire shall have an

opportunity to respond to the allegation.

(Joint exhibit 8.)

Appendix B - 46

In commercial speech cases, then, a four-part analysis

has developed. At the outset, we must determine

whether the expression is protected by the First

Amendment. For commercial speech to come within that

provision, it at least must concern lawful activity and not

be misleading. Next, we ask whether the asserted

governmental interest is substantial. If both inquiries

yield positive answers, we must determine whether the

regulation directly advances the governmental interest

asserted, and whether it is not more extensive than is

necessary to serve that interest.

Id. at 566, 100 S.Ct. 2343. Budget argues that the words

used to describe its surcharge--“Access Fee” (Port

Authority’s exhibit 15)--are not misleading; that this

language “accurately describe[s] the fee which they

[Budget] have decided to unbundle;” and that there is

no governmental interest that can justify prohibiting

Budget from using this language. (Budget’s post-hearing

brief, pp. 27-28.)

In addition, Budget relies on Bd. of County Comm'rs,

Wabaunsee County, Kan. v. Umbehr, 518 U.S. 668, 116

S.Ct. 2342, 135 L.Ed.2d 843 (1996) (Umbehr ), arecent

decision of the Supreme Court dealing with the

“unconstitutional conditions” doctrine. This doctrine

provides that the government “ ‘may not deny a benefit

to a person on a basis that infringes his constitutionally

protected ... freedom of speech’ even if he has no

Appendix B - 47

entitlement to that benefit.” Id. at 674, 116 S.Ct. 2342,

quoting, Perry v. Sindermann, 408 U.S. 593, 597, 92

S.Ct. 2694, 33 L.Ed.2d 570 (1972). Umbehr is the latest

in a line of Supreme Court decisions dealing with First

Amendment protection in the context of government

employees.” In Umbehr, the Court extended that

protection to independent contractors as well as to

employees. Budget’s argument is that “if a governmental

agency cannot regulate the speech of an at- will

contractor and use the exercise of the Right to Free

Speech as a grounds for terminating the contractual

relationship, the mere existence of a written contract

does not give the Authority the ability to regulate the

speech of Budget and the car rental concessionaires in

how they describe the charges which they pass through

to the car rental customer.” (Budget’s post-hearing brief,

p. 32.) Stated another way, the argument could be made

that the Port Authority cannot condition the receipt of a

benefit--a contract for an airport concession--on a

curtailment of the First Amendment’s right to freedom of

speech.

The Port Authority’s position is at the opposite end of

the spectrum. It contends that the First Amendment has

no application whatsoever in this case because of a

3° See also, O'Hare Truck Serv., Inc. v. City of Northlake, 518 U.S.

712, 116 S.Ct. 2353, 135 L.Ed.2d 874 (1996), decided the same day as

Umbehr.

Appendix B - 48

purported right of the Port Authority to condition the

grant of airport space on a requirement that Budget limit

its speech. According to the Port Authority, “[t]he

concessionaires can then make the business decision

either to accept the limitation upon their speech or to

forego the business opportunity of being an on-site

concessionaire. That choice is not a constitutional one.”

(Port Authority’s post-hearing brief, p. 34.) The Port

Authority’s position is illustrated by the following

colloquy with the Port Authority’s counsel:

THE COURT: Well, does Budget have any right

under the First Amendment to the United States

Constitution to describe its product in a manner

that is truthful and not misleading?* * * * * * You

believe they have no such right? They have no

such First Amendment right?

MR. GALL: They have no First Amendment right,

there is no First Amendment right implicated by

a contract provision such as this which requires

them to refrain from making these statements in

exchange for or as part of the consideration for

something the airport is selling to them. No sir, I

don’t. .

THE COURT: In other words, the Airport

Authority has the power to prohibit Max & Erma’s

from telling its customers that, your hamburger is

100% beef?* * * * * *

Appendix B - 49

—

MR. GALL: As a component of the consideration

of space at the airport, yes.

THE COURT: They give up that right?

MR. GALL: They can be required to give up that

right.

THE COURT: Is that your position?

MR. GALL: Yes, sir.

THE COURT: In other words, as a component to

having space at the airport, they can be required

to give up any First Amendment rights they have

to commercial speech that is not misleading. Is

that your position?

MR. GALL: They can be made to give up the right

that your Honor has described, yes.

(Tr. Vol. I pp. 40-42.) In support of this argument, the

Port Authority relies on Rust v. Sullivan, 500 U.S. 173,

111 S.Ct. 1759, 114 L.Ed.2d 233 (1991) (Rust ), in

which the Court upheld regulations that prohibited

abortion counseling in family-planning programs funded

under Title X of the Public Health Service Act, 84 Stat.

1506, as amended, 42 U.S.C. §§ 300 to 300a-6. The Port

Authority points to the following language in Rust:

By accepting Title X funds, a recipient voluntarily

consents to any restrictions placed on any matching

Appendix B - 50

funds or grant-related income. Potential grant recipients

can choose between accepting Title X funds--subject to

the Government’s conditions that th-v provide matching

funds and forgo abortion counseling and referral in the

Title X project--or declining the »adsidy and financing

their own unsubsidized program. We have never held

that the Government violates the First Amendment

simply by offering that choice.*! Id. at 199, fn. 5, 111

S.Ct. 1759. The Port Authority argues that the same

reasoning applies to the present case by analogy, i.e.,

Budget can choose between accepting the contract with

the language restrictions or declining to seek such a

contract.*?

The Port Authority’s second basic contention, “even

if the First Amendment were implicated” (Port

Authority’s post-hearing brief, p. 38), is that the Port

Authority has not violated Budget’s First Amendment

rights, because it has the right to prohibit actually or

31 In its supplemental post-hearing brief, the Port Authority also

relies on Nat’l Endowment for the Arts v. Finley, --- U.S. ---, 118 S.Ct.

2168, 141 L.Ed.2d 500 (1998), a June 25, 1998 decision of the Supreme

Court which followed Rust in the same context of governmental

restrictions of First Amendment rights in a government-subsidized

program.

32 The Port Authority also refers to cases involving a governmental

entity acting as a “market-participant” under the Commerce Clause,

U.S.C.A. Art. 1, § 8, cl. 3 as well as cases involving the Fourth

Amendment, none of which appears to the Court to substantially buttress

the Port Authority's argument regarding the First Amendment.

Appendix B - 51

inherently misleading speech entirely and to require that

potentially misleading speech be presented in a non-

misleading manner. Peel v. Attorney Registration and

Disciplinary Comm'n, 496 U.S. 91, 111, 110 S.Ct. 2281,

110 L.Ed.2d 83 (1990) (Marshall, J., concurring) (Peel).

It contends that Section 4.6.1 of the proposed

concession agreement is a constitutional effort to

prohibit Budget’s use of the term “Access Fee” because

it is actually or inherently misleading or, at a minimum,

potentially misleading. (Port Authority’s post-bearing

brief, pp. 42, 46.)

In the Court’s view, the present case does not fall

neatly into any of the categories of cases relied upon by

the parties to support their respective positions. This is

not a case involving a government subsidy program in

which the government has the right to insist “that public

funds be spent for the purposes for which they were

authorized,” Rust, 500 U.S. at 196, 111 S.Ct. 1759, and,

consequently, there is no First Amendment right to

speech that is contrary to the purpose of that subsidized

program. This Court does not believe that the Port

Authority’s position that it has the unfettered right to

require Budget to give up its First Amendment rights to

obtain space in the terminal on a “take it or leave it”

basis is supported by Rust or by any other authority.

Also, this is not a case in which a governmental unit

is exercising its power to regulate or license, as in

Appendix B - 52

Central Hudson and Peel; nor is it a case involving a

governmental unit’s relationship with its employees or

independent contractors as in Umbehr™. Budget’s

position vis-a-vis the Port Authority is not akin to an

employee or independent contractor performing some

function on behalf of the governmental unit; it is that of

a company seeking to rent space inside the airport

terminal for the location of its car rental counter in order

to do business with travelers using the terminal facilities.

In the view of this Court, the facts of this case come

within the ambit of the decisions of the Supreme Court

dealing with the right of a governmental unit, the Port

Authority in this case, as a proprietor, to manage its own

property and its internal operations and the restrictions

imposed on that management by the First Amendment.

In Perry Educ. Ass’n v. Perry Local Educators’ Ass’n., 460

U.S. 37, 103 S.Ct. 948, 74 L.Ed.2d 794 (1983), the

Court set forth different standards to be applied with

respect to government property and the exercise of free

= Although Budget presently has a contractual relationship with the

Port Authority, that relationship ends with the expiration of the present

contract or any extensions. With respect to the proposed new contract,

Budget, as all rental car companies, stands in the position of being a

bidder for a new contractual relationship with the Port Authority. In

Umbehr, the Court emphasized the limited nature of its decision and said

“[b]ecause Umbehr’s suit concerns the termination of a pre-existing

commercial relationship with the government, we need not address the

possibility of suits by bidders or applicants for new government contracts

who cannot rely on such a relationship.” Umbehr, 518 U.S. at 686, 116

S.Ct. 2342.

Appendix B - 53

speech on that property. In a traditional public forum or

a designated public forum, the government, in order to

enforce a content-based exclusion on speech, must show

that its restriction is necessary to serve a compelling

state interest and that it is narrowly drawn to that end,

Id. at 45-46, 103 S.Ct. 948, but with respect to other

government property, the standard is not that high.

Public property which is not by tradition or

designation a forum for public communication is

governed by different standards. We have recognized

that the “First Amendment does not guarantee access to

property simply because it is owned or controlled by the

government.” U.S. Postal Serv. v. Council of Greenburgh

Civic Associations, 453 U.S. 114, 129, 101 S.Ct. 2676,

69 L.Ed.2d 517 (1981). In addition to time, place, and

manner regulations, the state may reserve the forum for

its intended purposes, communicative or otherwise, as

long as the regulation on speech is reasonable and not

an effort to suppress expression merely because public

officials oppose the speaker’s view. Id. at 131, n. 7, 101

S.Ct. 2676. As we have stated on several occasions, “the

State, no less than a private owner of property, has

power to preserve the property under its control for the

use to which it is lawfully dedicated.” Id. at 129-130,

101 S.Ct. 2676, quoting Greer v. Spock, 424 U.S. 828,

836, 96 S.Ct. 1211, 47 L.Ed.2d 505 (1976), in turn

quoting Adderley v. Florida, 385 U.S. 39, 47, 87 S.Ct.

Appendix B - 54

242, 17 L.Ed.2d 149 (1966). Id. at 46, 103 S.Ct. 948.

More recently, the Court reiterated this basic distinction

in U.S. v. Kokinda, 497 U.S. 720, 725-26, 110 S.Ct.

3115, 111 L.Ed.2d 571 (1990):

The Government’s ownership of property does

not automatically open that property to the

public. U.S. Postal Serv. v. Council of Greenburgh

Civic Ass’n., 453 U.S. 114, 129, 101 S.Ct. 2676,

69 L.Ed.2d 517 (1981). It is a long-settled

principle that governmental actions are subject to

a lower level of First Amendment scrutiny when

“the governmental function operating ... [is] not

the power to regulate or license, as lawmaker, ...

but, rather, as proprietor, to manage [its] internal

operation([s]....” Cafeteria & Restaurant Workers

v. McElroy, 367 U.S. 886, 896, 81 S.Ct. 1743, 6

L.Ed.2d 1230 (1961). That distinction was

reflected in the plurality opinion in Lehman v.

City of Shaker Heights, 418 U.S. 298, 94 S.Ct.

2714, 41 L.Ed.2d 770 (1974), which upheld a

ban on political advertisements in city transit

vehicles ...

The Government, even when acting in its

proprietary capacity, does not enjoy absolute

freedom from First Amendment constraints, as

does a private business, but its action is valid in

these circumstances unless it is unreasonable, or,

as was said in Lehman, “arbitrary, capricious, or

invidious.” Ibid.

Appendix B - 55

The above principles have been applied by the

Supreme Court to an airport terminal operated by a

public authority. In Int’l Soc’y for Krishna Consciousness,

Inc. v. Lee, 505 U.S. 672, 112 S.Ct. 2701, 120 L.Ed.2d

541 (1992) (ISKON ), the Port Authority of New York

and New Jersey which owned and operated airports in

the greater New York area adopted a regulation

forbidding within the terminals the repetitive solicitation

of money or distribution of literature. A religious

corporation engaging in such activity contended that this

restriction violated its freedom of speech under the First

Amendment. In determining the standard to be applied

when a governmental unit is acting as a proprietor,

Managing its internal operations, the Court said:

It is uncontested that the solicitation at issue

in this case is a form of speech protected under

the First Amendment. Heffron v. Int'l Soc’y for

Krishna Consciousness, Inc., 452 U.S. 640, 101

S.Ct. 2559, 69 L.Ed.2d 298 (1981); Kokinda,

supra, 497 U.S. at 725, 110 S.Ct. 3115 (citing

Schaumburg v. Citizens for a Better Environment,

444 U.S. 620, 629, 100 S.Ct. 826, 63 L.Ed.2d 73

(1980)); Riley v. Nat'l Fed’n of Blind of N.C., Inc.,

487 U.S. 781, 788-89, 108 S.Ct. 2667, 101

L.Ed.2d 669 (1988). But it is also well settled

that the government need not permit all forms of

speech on property that it owns and controls.

U.S. Postal Serv. v. Council of Greenburgh Civic

Ass'ns., 453 U.S. 114, 129, 101 S.Ct. 2676, 69

Appendix B - 56

L.Ed.2d 517 (1981); Greer v. Spock, 424 U.S.

828, 96 S.Ct. 1211, 47 L.Ed.2d 505 (1976).

Where the government is acting as a proprietor,

managing its internal operations, rather than

acting as lawmaker with the power to regulate or

license, its action will not be subjected to the

heightened review to which its actions as a

lawmaker may be subject. Kokinda, supra, 497

U.S. at 725, 110 S.Ct. 3115 (plurality opinion)

(citing Cafeteria & Restaurant Workers v.

McElroy, 367 U.S. 886, 896, 81 S.Ct. 1743, 6

L.Ed.2d 1230 (1961)). Thus, we have upheld a

ban on political advertisements in city-operated

transit vehicles, Lehman v. City of Shaker

Heights, 418 U.S. 298, 94 S.Ct. 2714, 41 L.Ed.2d

770 (1974), even though the city permitted other

types of advertising on those vehicles. Similarly,

we have permitted a school district to limit access

to an internal mail system used to communicate

with teachers employed by the district. Perry

Educ. Ass’n v. Perry Local Educators’ Ass’n, 460

U.S. 37, 103 S.Ct. 948, 74 L.Ed.2d 794 (1983).

Id. at 677-78, 112 S.Ct. 2701 (emphasis added). The

Court found that airports are not public fora and are not

subject to a higher burden of justifying speech

restrictions than that of reasonableness.

The restrictions here challenged, therefore, need only

satisfy a requirement of reasonableness. We reiterate

what we stated in Kokinda: The restriction “ ‘need only

be reasonable; it need not be the most reasonable or the

Appendix B - 57

only reasonable limitation.’ “ 497 U.S. at 730, 110 S.Ct.

3115 (plurality opinion) (quoting Cornelius, supra, 473

U.S. at 808, 105 S.Ct. 3439). We have no doubt that

under this standard the prohibition on solicitation passes

muster. (emphasis that of the Court) Id. at 683, 112

S.Ct. 2701. In considering the reasonableness of a

governmental unit’s restrictions on speech in a nonpublic

forum, Justice O’Connor said: “the reasonableness of the

government’s restriction [on speech in a nonpublic

forum] must be assessed in light of the purpose of the

forum and all the surrounding circumstances,” quoting

Cornelius v. NAACP Legal Defense & Educ. Fund, Inc.,

473 U.S. 788, 809, 105 S.Ct. 3439, 87 L.Ed.2d 567

(1985). Id. at 687, 112 S.Ct. 2701 (concurring opinion).

It is evident that a standard of review based on

reasonableness is fact-based and is dependent on all the

circumstances surrounding the restriction and the reason

for its imposition. This is illustrated by Justice

O’Connor’s concurring opinion in ISKON in which she

found that the Port Authority’s ban on solicitation was

reasonable but the Port Authority’s ban on distribution

of written materials was unreasonable. Id. at 685-86,

112 S.Ct. 2701.

- Inthe present case, there are, of courses, facts which

are distinguishable from the facts in ISKON. Here the

Port Authority is restricting Budget’s speech, not by a

Board regulation as in ISKON, but by its insistence that

Appendix B - 58

Budget agree to the restriction as a part of an agreement

to do business inside the airport terminal. ISKON

involved restrictions on speech by a member of the

public inside the airport terminal; the present case

involves restrictions on speech by aconcessionaire inside

the airport terminal. Also, the Port Authority in the

present case does not seek to ban all speech by Budget

describing the additional charge to its customers but

only to require that Budget’s description of that charge

be made without the use of certain prohibited words.

While there are these and other dissimilarities in the

factual patterns in ISKON and in the present case, the

basic, fundamental unifying fact is that both cases

involve a governmental unit, a Port Authority, which is

seeking to impose speech restrictions on persons who

are using airport property operated by the Port

Authority in a proprietary capacity. In the Court’s view,

the manner in which the restrictions are imposed, the

type of person on whom the restrictions are imposed,

and the degree of that restriction, while relevant to the

issue of reasonableness, do not serve to remove this case

from the governing standard of reasonableness applied

in ISKON and related Supreme Court decisions dealing

Appendix B - 59

with restrictions on speech by government entities on

government-owned property."

Somewhat surprisingly, the Port Authority contends that

“the minimal First Amendment protection” given to

persons on airport property by the majority opinion in

ISKON (505 U.S. at 695, 112 S.Ct. 2701, Kennedy, J.,

concurring) does not apply in this case. It is the Port

Authority’s belief that ISKON is not applicable because,

“the public forum doctrine ... is only applicable when

noncommercial speech is involved.” (Port Authority’s

supplemental post-hearing brief, p. 2.) To support this

contention, the Port Authority points to Justice

Kennedy’s concurring opinion in which he states that

“the government cannot, of course. prohibit speech for

the sole reason that it is concerned that the speech may

be fraudulent.” Id., citing, Schaumburg v. Citizens for a

Better Env., 444 U.S. 620, 637, 100 S.Ct. 826, 63

L.Ed.2d 73 (1980).* The Port Authority contends that,

4 In Asian-American Cab Drivers Welfare Ass'n v. Shoenberger, 1992 ;

WL 330046 (N.D.Ill. Nov.5, 1992), which dealt with an alleged |

infringement of First Amendment rights by a prohibition of certain

commercial speech on airport premises, the court applied the

reasonableness standard of ISKON without discussing Central Hudson.

- Schaumburg struck down an ordinance that prohibited the

solicitation of contributions by charitable organizations that do not use at

least 75% of their receipts for charitable purposes. The Court

distinguished the speech involved in Schaumburg from purely commercial

speech. 444 U.S. at 632, 634, 100 S.Ct. 826. While the city had a

Appendix B - 60

“while [Justice Kennedy’s] statement is true as to

noncommercial speech, it is not with regard to

commercial speech.” Justice Kennedy’s concurring

opinion, however, is based on his belief that an airport

is a public forum and therefore subject to the higher

standards applicable to non-commercial or “pure” speech

in a public forum. The important point is that the

outcome in ISKON did not turn on the nature of the

speech involved--it can be agreed that the speech was

non-commercial or “pure” speech. The outcome turned

on the fact that the restriction by the government agency

dealt with the government agency’s own property and

the appropriate standard to be applied in that situation.

The Port Authority also refers to American Future

Sys., Inc. v. Pa. State Univ., 752 F.2d 854 (3d Cir.1984),

cert. denied, 473 U.S. 911, 105 S.Ct. 3537, 87 L.Ed.2d

660 (1985) (American Future Systems ) and Bd. of

Trustees of the State Univ. of N.Y. v. Fox, 492 U.S. 469,

109 S.Ct. 3028, 106 L.Ed.2d 388 (1989) (Fox ), cases

involving commercial speech activity in the context of a

public university’s property, in which the courts applied

the commercial speech standard of Central Hudson and

not the government-owned property standard most

legitimate interest in preventing fraud, the Court held that the ban was

overbroad in labeling such organizations as “fraudulent” and that the

city's interest in preventing fraud could be better served by measures less

intrusive than a direct prohibition on solicitation.

Appendix B - 61

recently applied in ISKON. Neither case, however,

supports the Port Authority’s position that the Central

Hudson standard must be applied to speech activity on

government-owned property if that speech is deemed to

be commercial speech. In American Future Systems, the

speech was found to be commercial, and the court

described the problem of deciding which line of cases

applies, i.e., those dealing with government-owned

property or those dealing with commercial speech:

This conclusion [that the speech was

commercial speech], however, forces us to

confront an unusual situation: the intersection

between government regulation of commercial

speech and the regulation of speech on

government- owned property. Although the

Supreme Court has set up a detailed analytic

framework for determining the constitutionality

of regulations in each of these situations, it has

not, to our knowledge, been faced with the

question of what test should be employed when

both factors are present. If the two modes of

analysis were equally applicable to the facts of

this case, we would have to determine whether

they yielded different results, and, if so, we

would have to choose between them in

determining the validity of Penn State’s

regulation.

American Future Sys., 752 F.2d at 862. The court noted

that the property in question, university dormitory

Appendix B - 62

rooms, “do [es] not fit neatly into either the public

forum or the non-public form mold,” and concluded that

“[oJur best course of action, therefore, is to pursue the

mode of analysis developed by the Supreme Court for

cases involving commercial speech.” Id. at 863.

The Fox decision also involved commercial speech in

a state-owned university and, again, in dormitory rooms.

The lawsuit was initially brought by a housewares

company desiring to have access to dormitory rooms to

sell its products and by students who desired to buy

those products. On appeal from the district court, “the

focus of the case shifted” because the housewares

company dropped out as a party. Fox v. Bd. of Trustees

of the State Univ. of NY, 841 F.2d 1207, 1208 (2d

Cir.1988). As the Court of Appeals said:

Since the case no longer involves the rights of

third persons to gain access to state-owned

property to give or receive speech, but rather the

free speech rights of students who, as dormitory

residents, have an undisputed right of access to

their rooms as well as certain privacy rights, the

public forum cases thought applicable by the

district court are inapposite.

Id. at 1212. The Court of Appeals then proceeded to

analyze the case under the Central Hudson four-part

analysis.

Appendix B - 63

In the Supreme Court, the state argued that, even if

the speech was not commercial speech, the Court should

uphold the state’s action because the dormitories are not

a public forum. The Court did not consider this question:

Pursuing such an analysis would require us to resolve

both legal and factual issues that the Court of Appeals

did not address. Since we find that the Court of Appeals

must be reversed on the basis of its own analysis, we

decline to go further. Bd. of Trustees of the State Univ.

of N.Y. v. Fox, 492 U.S. 469, 473 n. 2, 109 S.Ct. 3028,

106 L.Ed.2d 388.

In short, this Court does not believe that the cases

cited by the Port Authority support the proposition that

if the speech on a government-owned airport is deemed

to be “pure speech,” the reasonableness standard of

ISKON applies, but if found to be commercial speech,

the higher standard of Central Hudson’s four-part

analysis must be applied. In the view of this Court, the

Supreme Court’s recognition of the right of a

governmental entity, “no less than a private owner of

property,” to preserve the property under its control for

the use to which it is lawfully dedicated, is the polestar

for locating the proper test or standard to determine the

constitutionality of speech restrictions imposed by the

government owner on persons desiring access to the

owner’s property. Whether the speech in question is

deemed to be “pure” or “commercial,” while certainly a

Appendix B - 64

relevant factor in assessing all of the circumstances to

determine the reasonableness of the restriction, the

distinction should not require the imposition of two

different standards on the owner of the property. If, as

found by the Supreme Court, the reasonableness

standard is adequate to protect the First Amendment

rights of persons who are engaged in “pure” or non-

commercial speech on the airport property, it surely is

adequate to protect First Amendment rights of persons

who are engaged in commercial speech on the airport

property, speech which has been determined to have “a

subordinate position in the scale of First Amendment

values.” Ohralik v. Ohio State Bar Ass’n, 436 U.S. 447,

455, 98 S.Ct. 1912, 56 L.Ed.2d 444 (1978), rehearing

denied, 439 U.S. 883, 99 S.Ct. 226, 58 L.Ed.2d 198

(1978).

Budget’s position is that “ISKON stands for the

proposition that speech, at an airport, is protected by the

First Amendment of the United States Constitution,” but

Budget “questions whether this case applies at all to the

facts before the Court.” (Budget’s supplemental post-

hearing brief, p. 1.) Budget distinguishes ISKON because

it involved a total ban on certain speech at the airport

whereas the present case does not involve a total ban on

Budget’s speech at the airport. That difference, however,

simply reflects a variation in the extent of the

questioned restriction on speech, and while the scope of

Appendix B - 65

the restriction is an important factor in the application

of the reasonableness standard, as discussed infra, it

does not serve to prevent the ISKON standard from

being applied in this case.

2. Application of ISKON’s Standard of

Reasonableness to the Facts of this

Case

Two important facts are uncontested. First, the

“access fee” Budget charges its customers is not a fee

imposed by the Port Authority on car rental customers.

Second, the proposed Concession Agreement, as

previous concession agreements, requires the car rental

companies to pay the Port Authority compensation for a

counter inside the airport terminal and the benefits

attendant with doing business at that location. Although

denominated a “privilege fee,” the compensation

required to be paid, in the Court’s view, is the equivalent

of rental payments for space inside the terminal.”

Regardless of nomenclature, however, the “privilege fee”

is an integral part of Budget’s cost of doing business.

Budget, for competitive advantages, has carved out this

portion of its overhead costs and is passing it on to its

36 Ms. Warner-Dooley referred to the Port Authority in this context

as a “landlord” (Tr. Vol. III p. 144), the concession contracts being “similar

to leases” (Tr. Vol. III p. 162) or “rental agreements.” (Tr. Vol. III p. 163.)

Mr. Sturtz, counsel for Budget, also referred to the previous concession

agreements as “the old leases.” (Tr. Vol. II p. 6.)

Appendix B - 66

customers in the form of an “access fee.” (Port

Authority’s Exhibit 15.)

This practice, employed by some car rental

companies, of carving out or “unbundling” this portion

of their overhead and adding it to the companies’

advertised rates when the customer receives the total

charges for the car rental, has not been universally

approved.” An Illinois statute, for example, requires that

all car rental charges, including airport surcharges, must

be bundled into the advertised rental charges, a

requirement that has withstood constitutional challenge,

including a claim of First Amendment violation. Alamo

Rent A Car, Inc. v. Ryan, 268 Ill.App.3d 268, 205 Ill.Dec.

738, 643 N.E.2d 1345 (1994). In that case, Alamo

claimed that this requirement unconstitutionally

regulated Alamo’s commercial speech. In applying the

first inquiry of the Central Hudson standard,” i.e.

whether the speech in question is misleading, the Illinois

court said:

” See, e.g., the Automobile Rental Concession Agreement between

the Kenton County Airport Board, which operates the Cincinnati/Northern

Kentucky International Airport, and Freedom River, Inc., d.b.a. Budget

Rent a Car, which provides that “Concessionaire shall not list concession

fees payable to the Airport as a separate item on its customer’s rental

contracts or invoices.” (Port Authority's exhibit 25, 4 1.13E of Agreement.)

%8 The court apparently did not consider applying the ISKON

standard of reasonableness.

Appendix B - 67

Alamo’s claim does not make it past the first

inquiry. The speech affected by the bundling

requirement of subsection (f) is misleading and

therefore not protected speech. The advertising

does not apprise the public of the actual cost of

renting a car. Rather, it misleads the public into

thinking that the advertised rate, the base rental

rate, is the actual cost of the car rental. However,

when the customer comes to the rental counter

they are charged a significantly higher rate due to

additional charges. The State has an interest in

protecting the public from misleading advertising

which hampers the public’s ability to make an

informed decision on the selection of a rental car.

Therefore, a prohibition on this misleading

advertising i{s] not unconstitutional and Alamo’s

challenge to subsection (f) on first amendment

grounds must fail.Id., 205 Ill.Dec. 738, 643

N.E.2d at 1352.

In the present case, the Port Authority “does not

support the practice of transferring Concessionaire’s

obligation for payment of the Privilege Fee due herein to

its customers” (Joint exhibit 8, § 4.6.1), but it is not

seeking to prevent that practice.*? Instead, the contract

3° The affidavit of Robert L. Aprati, General Counsel for Budget Rent

a Car Corporation (Budget’s exhibit P), deals primarily with a non-issue

in this case. Mr. Aprati argues in his affidavit against any requirement

that the airport concession fee be included in the advertised rate and not

separately charged to the customers. While section 4.6.1 of the proposed

agreement with Budget originally prohibited the privilege fee from being

charged as a separate amount, this is no longer the case. Addendum

Appendix B - 68

requirement prohibiting the use of certain words

describing this charge is “to insure that the unbundled

fee is not described in a manner that further misleads

consumers.” (Port Authority’s post-hearing

memorandum, p. 46.) It is the Port Authority’s position

that the description used by Budget is actually false

because such a description implies that the surcharge is

imposed on the car rental transaction by the Port

Authority. (Port Authority’s post-hearing memorandum,

p. 43.)

Number 3 recognizes this practice and restricts how this additional charge

can be described. Mr. Aprati’s affidavit also contains his opinions

regarding the First Amendment and the effect of excerpted quotations

from an unnamed person in the Office of the Secretary of the Federal

Trade Commission and certain state officials, as well as excerpts from

concession agreements in some other airport facilities. His opinions

regarding the legality or wisdom of permitting the “unbundling” of

concession fees, in addition to being irrelevant, are not the proper

subjects of an affidavit. As the Sixth Circuit has said, an “affidavit is no

place for ultimate facts and conclusions of law.” A.L. Pickens Co., Inc. v.

Youngstown Sheet & Tube Co., 650 F.2d 118, 121 (6th Cir.1981), citing

6 Moore's Federal Practice, Part 2, § 56.21(1) at 56-1316 (Supp.1979).

Further, the Court notes, in passing, the following statement of Mr.

Aprati:

“S. That notwithstanding a diligent search, my office has

been unable to locate any specific case law concluding that

practices similar to the current industry practice of separately

stating and charging an airport concession fee are deceptive,

misleading or unfair.”

Mr. Aprati, who executed the affidavit in Illinois, does not refer to the

above decision of the Illinois Court of Appeals in Alamo Rent A Car v.

Ryan.

Appendix B - 69

This Court does not believe that the words “access

fee” can be found to be actually false or inherently

misleading. They do describe--in extremely abbreviated

form--the surcharge as a cost of using the airport

facilities or having access to those facilities. While this

may not be an utterly false or inherently misleading

characterization of the surcharge, it clearly is a

potentially misleading characterization. It does not in

any way identify this surcharge as being a recoupment

by Budget of a part of its overhead costs of doing

business at the airport and not a charge imposed directly

on the airport customer by the Port Authority. It appears

in close proximity to the listing of governmental taxes on

the car rental agreements, and a customer could well be

misled into believing that this additional charge is one

imposed by the Port Authority or some other

governmental entity.”

” When questioned by the Court regarding the Port Authority's effort

to prevent customers from believing that the surcharge is imposed on the

customer by the Port Authority, Thrifty’s owner testified:

THE COURT: But do you feel that [the Port Authority's effort]

would prevent you from telling the customer that this is an

amount that Thrifty pays the airport for its concession, and we

are passing that on to the consumer?

THE WITNESS: I guess my feeling is that the airport is getting

the revenue, and I'm not sure what the--their concern is about

having the customer know that we're collecting this revenue on

behalf of them. (emphasis added)

Appendix B - 70

There can be no doubt that the Port Authority has a

legitimate interest in assuring that travelers and others

using the airport facilities are not deceived or misled by

car rental companies and other concessionaires that do

business with those persons. Budget does not contend

otherwise. While it contends that its characterization of

the surcharge is not misleading, Budget also argues that

the prohibition against the use of the list of words

contained in section 4.6.1 would prohibit Budget from

using any of these words, even if used in an accurate

explanation of the abbreviated description. (Budget’s

post-hearing brief, pp. 32-33.) With regard to the latter

argument, Budget is correct.

Although the proposed agreement would prohibit

Budget from using any of the listed words in any

description of any surcharge Budget imposes on its

customers, Ms. Warner-Dooley, who drafted the

proposed agreement, did not intend that the prohibition

be that extensive. As she testified:

What I am trying to say is these words can be

used in a description, whether it appears on the

front or the back, but I don’t want these words

used in the actual surcharge itself because it’s

difficult to make the description without using

(Tr. Vol. II p. 114.) This, of course, is an illustration of the problem. The

surcharge is not collected on behalf of the Port Authority. It is collected

on behalf of the car rental company.

Appendix B - 71

these words, I understand, but giving the special

emphasis they will give as part of the short fee

surcharge, is what the customer is looking at

when they’re going through the charges. I want

these words, if nothing else, reserved for any

description. Let’s get something less implicating

the airport as to surcharge.

(Tr. Vol. III. pp. 198-99.) The problem is that section

4.6.1 is so sweeping in its prohibition that, the drafter’s

intention notwithstanding, it would, by its express

terms, prohibit Budget from using any of the listed

words, even if used in an accurate and non-misleading

description of the surcharge.

If section 4.6.1 of the proposed agreement had

stopped with the restriction that “Concessionaire is

prohibited from stating or implying, in writing or

verbally, that the Airport or Authority imposes or

approves of any such direct charge to a customer,” the

Court would have no difficulty in finding that the

restriction does not infringe on plaintiffs First

Amendment rights. The undisputed facts are that the

Authority does not impose this charge as a direct charge

to a customer (as it does with the $3.00 passenger

facility charge imposed on each airline ticket, see, Tr.

Vol. III pp. 76, 185-86) and that, while defendant is not

currently prohibiting the charge from being made by

Budget, it has not approved of this charge being assessed

by Budget against a customer. Therefore, defendant

Appendix B - 72

clearly has the right to prevent Budget from stating or

implying, in writing or verbally, something that simply

is not true. Such a restriction, in short, is clearly a

reasonable restriction on Budget’s speech, and Budget

would have no legitimate basis for complaint. Budget

does have, however, a legitimate basis for complaint

that section 4.6.1 in its present form is unreasonable due

to the sweeping prohibition against using any of the

listed words, or any form thereof. Literally enforced,

Budget could not describe the surcharge as “Budget’s

cost of doing business at the airport” which, as an

example, would be an accurate and non-misleading

description of the surcharge.*!

The proposed agreement specifically authorizes, with

respect to any recoupment of rent paid by Budget for the

use of the new garage, a description of Budget’s charge

to its customer as a “Garage Recoupment Surcharge”

under the following conditions:

1. Such surcharge is titled “Garage Recoupment

Surcharge”;

2. There is no reference to the Airport or the

Authority and there is no statement or inference

in writing or orally that the fee is imposed by the

Airport or the Authority;

41 As Budget’s general manager appropriately said, “We can’t even

call it what it is, the cost of doing business.” (Tr. Vol. II p. 51.)

Appendix B - 73

3. Such surcharge shall be immediately adjacent

to Concessionaire’s time and mileage charge on

the customer’s invoice;

4. If the Concessionaire elects to charge a Garage

Recoupment Surcharge, Concessionaire complies

with FTC requirements with respect to this

charge and notifies the customer of the surcharge

~at the time of reservation and again at the time of

execution of the contract; and

5. The amount of the surcharge per rental car

transaction does not exceed the applicable

Annual Garage Recoupment as described [in

section 4.6.3].

(Joint Exhibit 8, § 4.6.2.) Budget’s amended complaint

does not challenge the Port Authority’s right to require

that this expense--if passed on to the customer--be

described by the specific language set forth in the

contract and that the surcharge be conditioned upon

meeting the enumerated requirements set forth in

section 4.6.2 of the contract.** Budget makes no claim

*2 The amended complaint seeks a declaratory judgment and

injunctive relief only with respect to sections 4.5, 4.6.1 and 18.1 of the

proposed agreement. As noted earlier, Budget’s objection regarding

section 4.5 No Diversion, was settled by the parties. (Footnote 19, supra.)

Section 18.1 gives the Port Authority the right to obtain specific

performance of all obligations of the concessionaire which, Budget asserts,

gives the Port Authority the “ability to obtain injunctions to regulate the

content of the communications between [Budget] and its customers.”

(Amended Complaint 4 29.)

Appendix B - 74

OS OP) SA ane od

that these restrictions regarding garage rental expenses

are any infringement on its First Amendment rights, nor

has any argument or evidence been presented that

would support a finding that the provisions of 4.6.2 are

more extensive than necessary to serve the legitimate

governmental interest of preventing car rental customers

from being misled as to the true nature of the particular

expense of Budget being passed on to its customers in

the form of a surcharge.

In the opinion of this Court, the Port Authority could

require similar language with respect to Budget’s

surcharge for the cost of its concession inside the

terminal by simply changing the description of “Garage

Recoupment Surcharge” to “Concession Recoupment

Surcharge.”** The description would not be misleading

or potentially misleading--any more than the garage

recoupment surcharge--because it describes, in

abbreviated form, a charge for the concession cost paid

™ Budget agreed that it could “live” with this description. (Tr. Vol.I.

p. 27.) The Port Authority, however, apparently does not want the word

“concession” used, although its objection seems to be based more on

where the word appears on the invoice than on the word itself. (Tr. Vol.

I p. 36-37.)

Appendix B - 75

by Budget that is being recouped from its customers by

Budget.”

According to Ms. Warner-Dooley, she drafted the

prohibition against the use of the listed words, rather

than draft a required description, as she did with the

“Garage Recoupment Surcharge,” because she did not

want to extend any alleged antitrust protection to the

car rental companies with reference to their privilege fee

surcharge. (Tr. Vol. III pp. 211-216.)** The Court

believes that it is within the power of the Port Authority

to require that concessionaires that impose a surcharge

on persons using the airport facilities describe that

surcharge in language that would prevent airport

patrons from being misled

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