Petition for Writ of Certiorari — Dallas-Fort Worth International Airport Board v. Department of Transportation

Supreme Court brief2000

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~ 991745 may 1-20

No. ——

IN THE

Supreme Court of the United States

AMERICAN AIRLINES, INC.,

Petitioner,

Vv.

THE UNITED STATES DEPARTMENT OF TRANSPORTATION,

Respondent.

Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Fifth Circuit

PETITION FOR A WRIT OF CERTIORARI

DONALD B. VERRILLI, JR. CARTER G. PHILLIPS*

PAUL M. SMITH VIRGINIA A. SEITZ

JENNER & BLOCK SIDLEY & AUSTIN

610 Thirteenth Street, N.W. 1722 Eye Street, N.W.

Washington, D.C. 20005 Washington, D.C. 20006

(202) 639-6000 (202) 736-8000

MORRIS HARRELL ANNE H. MCNAMARA

MICHAEL V. POWELL LAURA A. EINSPANIER

LOCKE LIDDELL & SAPP L.L.P. R. BRUCE WARK

2200 Ross Avenue AMERICAN AIRLINES, INC.

Dallas, Texas 75201-6776 P.O. Box 619616, MD-5675

(214) 740-8000 DFW Airport, Texas 75261-9616

RICHARD ROTHMAN (817) 967-1284

WEIL, GOTSHAL & MANGES, L.L.P.

767 Fifth Avenue

New York, N.Y. 10153

(212) 310-8000

*Counsel of Record

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 -— WASHINGTON, D. C. 20001

QUESTION PRESENTED

Whether the Airline Deregulation Act’s preservation of

the “proprietary powers and rights” of local governments

owning airports permits local government authorities in the

same metropolitan area to contract between themselves to

finance, construct, and operate a modern, regional airport

that accommodates all types of commercial passenger traffic

into the metropolitan area, and then to limit their smaller

airports to specific types of air service (e. g., short-distance

passenger flights, private aviation, or airfreight)?

PARTIES TO THE PROCEEDING

In addition to the parties named in the caption, the

following parties participated before the Department of

Transportation or in the Fifth Circuit:

Continental Airlines, Inc.

Continental Express, Inc.

Legend Airlines, Inc.

Delta Air Lines, Inc.

Airports Council International, North America

American Association of Airport Executives ;

City and County of San Francisco, California

Greater Orlando, Florida, Aviation Authority

Allied Pilots Association

Southwest Airlines Pilots’ Association

RULE 29.6 STATEMENT

Petitioner American Airlines, Inc. is a direct, wholly

owned subsidiary of AMR Corporation. AMR Corporation has

issued shares to the public. American Airlines, Inc. has

outstanding debt securities that are publicly traded.

iil

TABLE OF CONTENTS

Page

SURFER UTE RMU UTNE 5 icc cae cbsucccanscuns i

POAMCE Ease OO) NESE: PIROCEOIINGS 6. ccc ee ceees ii

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ee eed Wh wks 5 als hk eek KY Tk ha ewes 2

ENP U UD OE IE TED ons 6 a a Sa hee es vee ou nes 2

Mereweere CF EHIE CASE ooo ii cece cacias 3

A. EE a 22s hoes yy on a ease es 3

B. FOCUNN TOGKEIOUN 2... wk cece. 5

.. FUGCAE PROCCOUIGS .. ww. we eee 10

REASONS FOR GRANTING THE PETITION ........ 11

I. The Court Should Grant Review Because the Fifth

Circuit’s Decision Conflicts with Prior Rulings of the

Colorado Supreme Court and the Second Circuit, As

Well as Consistent Interpretations of the ADA by

Executive Branch Officers over Many Years ....... 12

I]. The Court Should Grant Review Because the Fifth

Circuit and Department of Transportation Have Given

Such a Narrow Scope to the Proprietary Powers and

Rights of Local Governments Owning Airports That

it Will Be Impossible for Local Governments To Plan

for, Finance, and Construct the New Regional

Airports the Nation Needs ..................... 19

Se ree ee Peer eee heer re re 28

APPENDIX A:

Opinion, American Airlines, Inc. v. Department

of Transportation, 202 F.3d 788 (Sth Cir. 2000)... .. la

APPENDIX B:

Declaratory Order, Love Field Service

Interpretation Proceedings, Docket OST-98-4363,

1998 WL 911847 (Dep’t of Transp. issued

es I so ee RRL a eR 48a

APPENDIX C:

Order on Reconsideration, Love Field Service

Interpretation Proceedings, Docket

OST-98-4363, 1999 WL 21876 (Dep’t of Transp.

I FR Ey Re oe a vc ocak beaesaeee 128a

APPENDIX D:

Regulatory Provisions Involved ............... 152a

2 ce pes h Ab O08 eevee

APPENDIX E:

Dallas-Forth Worth, Tex., 1968 Regional Airport

Concurrent Bond Ordinance (Nov. 12, 1968) ..... 158a

APPENDIX F:

Order Instituting Investigation, /n re Dallas-Forth

Worth, Texas Regional Airport Investigation,

Docket 13959, CAB Order No. E-18719

(Aug. 20, 1962) ..... ‘is Disks ag wera 165a

APPENDIX G:

Order, /n re Dallas-Forth Worth, Texas Regional

Airport Investigation, Docket 13959, CAB Order

No. E-21341 (Sept. 30, 1964) ..........0...... 170a

APPENDIX H:

Order Remanding Proceeding to the Examiner,

In re Dallas-Forth Worth, Texas Regional Airport

Investigation, Docket 13959, CAB Order No.

Sncowae (AGE 59, PIG) oi eons os ns cece 172a

TABLE OF AUTHORITIES

CASES Page

American Airlines, Inc. v. Wolens, 513 U.S. 219

he PAP Rm bere el re 8

Arapahoe County Public Airport Authority v.

Centennial Express Airlines, Inc., 956 P.2d 587

(CR TOPE oo osceycuks eens eee 4, 01, 32, 43

British Airways v. Port Authority, 564 F.2d 1002

Cl CH SGT) sinc cs evnves's bua e sae 15

Central lowa Refuse Systems, Inc. v. Des Moines

Metropolitan Solid Waste Agency, 715 F.2d 419

(8th Cir. 1983), cert. denied, 471 U.S. 1003

Ub et ry er ay

City of Burbank v. Lockheed Air Terminal, Inc.,

Sit U2, GIRCIGIS) 6 6c tat aues ote eee eee +

City of Dallas v. Southwest Airlines Co., 494 F.2d 773

(Sth Cir.), cert. denied, 419 U.S. 1079 (1974) ..... 7,8

Cramer v. Skinner, 931 F.2d 1020 (Sth Cir.),

cert. denied, 502 U.S. 907°(1991) .............. 9 14

English v. General Electric Co., 496 U.S. 72 (1990)... 21

National Helicopter Corp. v. New York, 137 F.3d 81

COG C FORE ss ion sebdas eee i)

Vil

United States Trust Co. v. New Jersey,

ae Sie SOURED ccelal us ewes 4h eee sees pea 22

Western Air Lines v. Port Authority, 817 F.2d 222

(2d Cir. 1987), cert. denied,

Ee SI CU ENED. 6c Scien nk dd ne kuecspen 4,11, 13

Western Air Lines v. Port Authority, 658 F. Supp. 952

(S.D.N.Y. 1986), aff'd, 817 F.2d 222 (2d Cir.

1987), cert. denied, 485 U.S. 1006 (1988) ......... 14

STATUTES

i | rT ee ree 3,8

TP es Ek os ones Ahh ecu edener era 24

CP Rais UU PEINOS wok os Fa cues ka Seu heen eH 2,10

Glen ETE EEED enh dbo sks Oe aes 3, 8, 21

Ge a OUTED xi dnc neceseaaek 3, 4, 10, 21

Texas Transportation Code § 22.072 ................ 6

Texas Transportation Code § 22.074 ................ 6

LEGISLATIVE MATERIALS

126 Come: Te. FOGTO CSTE oc cc cen ccccucs 8, 21

124 Cong. Rec. 37,419-20 (1978) .........0....... 21

oie Oe Ti.) arene eee 21

Vill

H.R. Cont. Rep. No. 96-716 (1979), reprinted in

Pe A OE ee Ee we eee ea

IN THE

Supreme Court of the Hnited States

AMERICAN AIRLINES, INC.,

Petitioner,

V-

THE UNITED STATES DEPARTMENT OF

TRANSPORTATION,

Respondent.

Petition For A Writ Of Certiorari To The United States

Court Of Appeals For The Fifth Circuit

PETITION FOR A WRIT OF CERTIORARI

American Airlines, Inc. respectfully petitions for a writ of

certiorari to review the judgment of the United States Court of

Appeals for the Fifth Circuit in this case.

OPINIONS BELOW

The opinion of the court of appeals is reported at 202 F.3d

788, and is reprinted in the Appendix at la-47a. The

Department of Transportation’s Declaratory Order and Order

on Reconsideration are publicly available at 1998 WL 911847

(D.O.T.), and 1999 WL 218767 (D.O.T.), and are reprinted in

the Appendix at 48a and 128a.

JURISDICTION

The judgment of the court of appeals was entered

February 1, 2000. The jurisdiction of this Court is invoked

under 28 U.S.C. § 1254(1).

STATUTES INVOLVED

The pertinent paragraphs of Section 4(a) of the Airline

Deregulation Act of 1978, Pub. L. No. 95-504, 92 Stat. 1705

(1978), as now codified at 49 U.S.C. § 41713(b), are as

follows:

(1) Except as provided in this subsection,

a State, political subdivision of a State, or political

authority of at least 2 States may not enact or enforce

a law, regulation, or other provision having the force

and effect of law related to a price, route, or service of

an air carrier that may provide air transportation

under this subpart.

* * *

(3) This subsection does not limit a State,

political subdivision of a State, or political authority

of at least 2 States that owns or operates an airport

served by an air carrier holding a certificate issued by

the Secretary of Transporiation from carrying out its

proprietary powers and rights.

inant atm

Section 3(a) of the Airline Deregulation Act, as now

codified at 49 U.S.C. § 40101(a)(8), requires the Secretary of

Transportation to consider, as in the public interest:

encouraging air transportation at major urban

areas through secondary or satellite airports if

consistent with regional airport plans of regional and

local authorities... .

Section 29 of the International Air Transportation

Competition Act of 1979 (the “Wright Amendment”), as

amended by Section 337 of the Department of Transportation

and Related Agencies Appropriations Act of 1997 (the “Shelby

Amendment”), is set forth in the Appendix (Pet. App. 152a).

STATEMENT OF THE CASE

A. Introduction °

The single important issue presented by the decision below

is whether the Airline Deregulation Act (the “ADA”) preempts

the authority of local governments to implement regional plans

that allocate particular types of air traffic to specific airports.

The Fifth Circuit construed the preemption provision of the

ADA, 49 U.S.C. § 41713(b)(1), to forbid local governments

from imposing and maintaining such restrictions (and thus

from engaging in a critical component of regional planning)

except in “extremely limited” situations where the

governments can prove the restrictions are currently needed to

reduce noise, pollution or traffic congestion. (Pet. App. 31a,

34a). The Fifth Circuit reached this result notwithstanding

Congress’s express declaration in the ADA that the preemption

effected by § 41713(b)(1) “does not limit” local governments

from “carrying out [their] proprietary powers and rights” as

owners and operators of airports. 49 U.S.C. § 41713(b)(3).

The Fifth Circuit's strikingly crabbed reading of the scope of

local proprietary authority preserved by the ADA warrants

review by this Court.

First, the decision — and, in particular, its narrow

construction of the term “proprietary powers and rights,” 49

U.S.C. § 41713(b)(3) — directly conflicts with the decisions of

the Colorado Supreme Court in Arapahoe County Public

Airport Authority v. Centennial Express Airlines, Inc.,956 P.2d

587 (Colo. 1998), and the Second Circuit in Western Air

Lines v. Port Authority, 817 F.2d 222 (2d Cir. 1987), cert

denied, 485 U.S. 1006 (1988). Contrary to the decision below,

those courts have concluded that the ADA does not preempt a

local airport proprietor’s power to restrict some airports in a

regional airport system to serve particular types of air traffic.

This conflict is intolerable because local authorities are subject

to differing legal requirements — supposedly based on the same

federal statute — on an issue of fundamental local importance

based upon nothing other than the federal circuit or state in

which they happen to be located.

Second, there is a compelling need for this Court to settle

the scope of the proprietary powers and rights reserved to local

airport owners by the ADA. Congress did not expressly define

the “proprietary powers and rights” of airport owners, and this

Court in City of Burbank expressly left that issue open. See

City of Burbank v. Lockheed Air Terminal, Inc., 411 U.S. 624,

635-36 n.14 (1973). Guidance is urgently needed to provide

the predictability that is essential for local governments to plan,

finance, construct and operate regional airports, which will

become even more important as air traffic increases. Absent

clarification from this Court, municipalities will be unable to

raise revenue from the financial markets to support such

massive undertakings. If use restrictions cannot be enforced,

local authorities will have no way to ensure the investment

community that a planned major airport will be able to generate

sufficient revenue to support the bonds needed to construct and

mainiain it. Indeed, this uncertainty is made even worse by the

Fifth Circuit’s reasoning, which requires local governments to

show that use restrictions are “currently needed,” not that such

restrictions were reasonable when imposed. (Pet. App. 94a).

Thus, local authorities face the prospect that use restrictions

providing the needed assurances to support revenue bonds may

be preempted years in the future, even if they were a lawful

exercise of local proprietary powers when initially imposed.

Such a risk will cripple the prospects for long-term financing

of such projects.

B. Factual Background

This case arose in the metropolitan area of Dallas-Fort

Worth, Texas, and has produced highly publicized

disagreements among the cities of Dallas and Fort Worth,

several airlines, and the Department of Transportation (the

“Department”). The controversy began in the early 1960’s,

when the Civil Aeronautics Board (“CAB”) commenced a

series of proceedings to force consolidation of scheduled

passenger service at single, regional airports within several of

the Nation’s metropolitan areas. The CAB concluded that the

decentralized airport systems that existed within those areas,

with different air carriers serving different airports within the

same metropolitan area, diminished the total volume of service

available to each area and increased the cost and inconvenience

of air transportation to passengers. See In re Dallas-Fort

Worth, Texas Regional Airport Investigation, Docket 13959,

CAB Order No. E-18719 (Aug. 20, 1962) (Pet. App. 16Sa).

One of the CAB’s airport consolidation proceedings

targeted the Dallas-Fort Worth area, which was then served by

Love Field and Redbird Airport in Dallas, and Meachum Field

and Greater Southwest International Airport in Fort Worth.

After lengthy public hearings, the CAB ordered that “service

to Dallas and Fort Worth should be required through a single

airport which meets, without limitation, the present and future

requirements for transcontinental cargo and passenger

services.” CAB Order No. E-21341 (Sept. 30, 1964) (Pet. App.

170a). The CAB provided that the cities could “arrive at a

voluntary agreement concerning the location of the airport to

be used for the consolidated service” and the “transition to

service through [that] single airport” but warned that it would

“proceed promptly to issue a decision if agreement was not

reached within a limited time.” /d. The CAB observed that

Love Field’s limited size and location in a densely populated

area near downtown Dallas raised serious doubt as to whether

it could accommodate the area’s future air transportation needs.

CAB Order No. E-22028 (April 13, 1965) (Pet. App. 172a).

Prodded by the CAB’s orders, Dallas and Fort Worth

entered into a joint venture to finance, build, and operate the

new DFW Airport, to be located midway between the two

cities. The cities’ contract created the DFW Airport Board,

whose members are appointed by the two city councils, to

operate DFW Airport on the cities’ behalf. See Texas

Transportation Code §§ 22.072, 22.074 (authorizing contract)

(Pet. App. 155a-157a). The cities jointly own DFW Airport,

and jointly issue revenue bonds to finance its construction,

operation, and improvement. (Pet. App. 158a). The cities sold

revenue bonds in 1968 to finance initial construction, and have

issued additional revenue bonds almost every year thereafter to

finance improvements to the airport. In total, the cities have

issued nearly $2 billion in revenue bonds. The cities’ current

outstanding obligations on these bonds are approximately $1

billion.

To authorize the issuance of the bonds, the cities

concurrently enacted the same Regional Airport Bond

Ordinance (the “Bond Ordinance”) (Pet. App. 158a). In the

Bond Ordinance, the cities covenanted with each other (and the

purchasers of their bonds) to require all airlines serving the

cities’ existing airports to take the extraordinary step of

relocating their scheduled passenger operations to DFW

Airport. The cities also covenanted not to allow existing

airports to compete with DFW Airport for international and

interstate passenger service. (Pet. App. 162a). These

covenants were absolutely critical to the financing,

construction, and success of the new regional airport.' Each

bond incorporates, as part of the contract between the cities and

the bondholders, the covenants embodied in the Bond

Ordinance. Without these covenants, investors would lack the

assurance that DFW Airport would generate sufficient revenue

to support the bond obligations.

When DFW Airport opened in 1972, Dallas announced its

intention to close Love Field to scheduled passenger service

and directed American and other airlines using Love Field to

move all operations to the new airport. All carriers complied,

except for Southwest Airlines Co., which was at that time a

Texas intrastate air carrier authorized to operate only by the

Texas Aeronautics Commission. Southwest obtained an order

from state regulators enabling it to continue to use Love Field

for flights within Texas. See City of Dallas v. Southwest

Both the Dallas and Fort Worth City Councils expressly found that

the economic feasibility of DFW Airport depended on transferring the

existing air carrier services at Love Field and Fort Worth’s existing airports

to the new airport. Fort Worth’s then mayor has testified that “[DFW]

Airport would never have come into existence but for the commitment of

the cities to abandon their existing airports and to move all certificate

passenger service into the new regional airport.” Record, DOT Docket Item

47, pp. 18-19 & Tab 6.

Airlines Co., 494 F.2d 773 (Sth Cir.), cert. denied, 419 US.

1079 (1974).

In 1978, Congress enacted the ADA, which sought to

deregulate interstate air transport and promote maximum

reliance on competitive forces in that market. See generally

~ American Airlines, Inc. v. Wolens, 513 U.S. 219, 227-28

(1995). Congress included a preemption provision (49 U.S.C.

§ 41713(b)(1)) to ensure that states did not impose rate, route

or service regulations akin to those the ADA had eliminated on

the federal level. Congress recognized, however, that the

ADA’s otherwise broad preemption provision might be read to

interfere with traditional state and local prerogatives to finance,

build and operate airports. Congress therefore made explicit,

in the ADA itself, that § 41713(b)(1) “does not limit” the

authority of state and local governments in carrying out this

quintessentially local function. Respect for local authority was

likewise reflected in § 3(a) of the ADA, which listed among

factors that Congress found “as being in the public interest . . .

encouraging air transportation at major urban areas through

secondary or satellite airports, if consistent with regional

airport plans of regional and local authorities.” 49 U.S.C.

§ 40101(a)(8) (emphasis added). During floor debates, the

House sponsor specifically confirmed that the ADA did not

interfere with the agreement between Dallas and Fort Worth at

issue in this case. 124 Cong. Rec. 30,670 (1978).

Congress later reconfirmed its position respecting the

agreement. In 1979, Southwest Airlines utilized a short-lived

“automatic market entry” provision in the ADA to establish its

first interstate route from Love Field to New Orleans. Over the

objections of Dallas and Fort Worth, the CAB concluded it

lacked authority to deny Southwest’s plan. Southwest Airlines,

AME Investigation, 83 C.A.B. 644 (1979). Congress then

promptly enacted the Wright Amendment in 1980, which

forbade the CAB and its successors from certificating air

carrier service at Love Field, except for limited service

restricted to Texas and four contiguous states. The Wright

Amendmentalso contained an exception for “air transportation

provided by commuter airlines operating aircraft with a

passenger capacity of 56 passengers or less” at Love Field (the

so-called “commuter airlines exception”). (Pet. App- 152a).

The Conference Report explained that the Amendment’s

“most important point” is that it “provides a fair and equitable

settlement of a dispute that has raged in the Dallas/Fort Worth

area for many years.” H.R. Conf. Rep. No. 96-716 at 24

(1979), reprinted in 1980 U.S.C.C.A.N. 78, 86. See Cramer v

Skinner, 931 F.2d 1020, 1031 (Sth Cir.) (Wright Amendment

“carries out the agreement between Dallas and Fort Worth that

ended the competition between those cities for the area’s

principal airport”), cert. denied, 502 U.S. 907 (1991). The

Wright Amendment contains no preemption provision of its

own. The Conference Report explained “that the preemption

and proprietary rights provisions of [49 U.S.C. § 41713(b)(1)

& (3)| .. . apply to the authority to serve Love Field on

interstate flights authorized by the amendment.” H.R. Conf.

Rep. No. 96-716 at 26 (1979), reprinted in 1980 U.S.C.C.A.N.

78, 88.

Since 1980, scheduled passenger flights at Love Field have

been limited to destinations within Texas and the four

contiguous states. In 1997, however, Congress enacted the

Shelby Amendment as a rider to an appropriations bill. It

provides that the “commuter airline exception” to the Wright

Amendment includes flights in large jet airplanes from which

all but 56 seats are removed (Pet. App. 154a).

C. Judicial Proceedings

In late 1997, Fort Worth sued Dallas, the DFW Airport

Board, and Legend Airlines in Texas state court to enforce the

Bond Ordinance requiring all long-distance passenger service

to use DFW Airport. American intervened in that action.

Dallas and Legend pleaded as a defense federal preemption of

the cities’ agreement by the ADA and the Wright and Shelby

Amendments (Pet. App. 8a). The state trial court ultimately

rendered judgment that federal law did not preempt the Bond

Ordinance.

In response to the Texas lawsuit, the Department of

Transportation commenced the “interpretation proceeding”

trom which this case arises. Based solely on its interpretation

of the ADA’s commands, the Department issued a Declaratory

Order holding, inter alia, that the ADA preempted Dallas's

1968 agreement with Fort Worth to restrict Love Field, and

that the Wright Amendment impliedly preempted the

agreement (Pet. App. 48a-75a, 79a-101a). In other words, the

Department concluded that the ADA mandated preemption of

the 1968 agreement.

American and others petitioned the Fifth Circuit for review

of the Department’s Order. The Fifth Circuit held that the

covenants in the 1968 Bond Ordinance related to airline rates,

routes, or services, and were therefore preempted by Section

4(a) of the ADA, 49 U.S.C. § 41713(b). The court concluded

that the cities were not exercising “proprietary powers and

rights” within the meaning of the ADA preemption provision

when they agreed to limit use of Love Field, and thus were not

exempt from preemption under 49 U.S.C. § 41713(b)(3) (Pet.

App. 27a-36a). Having held that the Bond Ordinance’s

restrictions on the use of Love Field were preempted by the

ADA, the Fifth Circuit did not reach the Department's

ee ee

alternative ruling that the restrictions were impliedly

preempted by the Wright Amendment.’

REASONS FOR GRANTING THE PETITION

There is a pressing need for review of the Fifth Circuit’s

decision for two related reasons.

First, the ruling is flatly in conflict with the Colorado

Supreme Court's decision in Arapahoe County Public Airport

Authority v. Centennial Express Airlines, Inc., 956 P.2d 987

(Colo. 1998), as well as the Second Circuit’s decision in

Western Air Lines v. Port Authority, 817 F.2d 222 (2d Cir.

1987), cert. denied, 485 U.S. 1006 (1988). It is intolerable that

Denver and New York should be able to maintain use

limitations applied to smaller regional airports, while Dallas

and Fort Worth may not. The situation is particularly grave

because the Fifth Circuit’s ruling jeopardizes the commitments

on which more than $1 billion in outstanding bond obligations

rest.

Second, as this case illustrates, the present uncertainty over

the power of local authorities to engage in regional planning

needs to be resolved. Until the law is clarified, all local

governments that consider developing new regional airports —

and there are a number currently working on such projects —

will face the problem that investors and the public can receive

*The Fifth Circuit did state in a footnote that it need not reach the

question whether the Wright and Shelby Amendments impliedly preempted

the 1968 agreement because it was expressly preempted by “the

Amendments.” (Pet. App. 36an.17). Because the Amendments contain no

express preemption provision, the court cannot have meant what it said

literally. In context, it is plain that the court intended to state that it need not

decide the implied preemption issue because the ADA itself expressly

preempted the 1968 agreement.

no binding assurance about the future use of existing or

planned facilities. If use restrictions cannot be enforced, or can

be retroactively invalidated years later as the Fifth Circuit

permitted here. there is little prospect that local authorities will

be able to depend on the financial markets to raise the funds

needed for regional airports.

I. The Court Should Grant Review Because the

Fifth Circuit’s Decision Conflicts with Prior

Rulings of the Colorado Supreme Court and the

Second Circuit, as Well as Consistent

Interpretations of the ADA by Executive

Branch Officers over Many Years.

The Fifth Circuit's ruling has created serious conflicts

among the courts that have addressed the central issue

presented here. First, as the Fifth Circuit itself noted, there is

no way to square the ruling below with the decision of the

Colorado Supreme Court in Arapahoe County, 956 P.2d 587

(Pet. App. 33a-34a). Arapahoe County involved Centennial

Airport, located a few miles from downtown Denver, which by

its proprietor’s decision is restricted to private aircraft. A

Regional Aviation System Plan for the Denver area designates

the new Denver International Airport as the sole airport for

scheduled commercial passenger service into the region. 956

P.2d at 589-90. Centennial Express Airlines (“Express”)

announced its intention to commence scheduled passenger

operations between Centennial Airport and points in Texas and

Colorado. The Arapahoe County Airport Authority sued to

enforce its prohibition against scheduled passenger service at

the airport. —~

Poke a lhe) CN Mele oh

Ruling in favor of the Airport Authority, the Colorado

Supreme Court held:

. we believe that an airport proprietor’s

ban on scheduled passenger service falls squarely

within the proprietor’s exception. ... The power to

control an airport’s size exists at the core of the

proprietor’s function... ..

956 P.2d at 595.

The Fifth Circuit expressly acknowledged the conflict with

the Colorado Supreme Court, asserting that the Arapahoe

County opinion would “expand the regulatory role of municipal

owners far beyond the ‘extremely limited role’ envisioned by

the ADA.” (Pet. App. 33a-34a).2 As the Fifth Circuit

recognized, the decision of the Colorado Supreme Court in

Arapahoe County would plainly allow an airport proprietor to

restrict its airport to short-distance passenger operations (like

those permitted at Love Field), provided that another airport in

the same metropolitan area accommodates all air passenger

traffic on an unrestricted basis. Restricting classes of service

at an airport, on a basis that does not discriminate among

airlines, is part and parcel of a proprietor’s right to control the

size of its airports.

The Fifth Circuit’s decision also conflicts with the holding

in Western Air Lines, 817 F.2d 222, affirming 658 F. Supp.

*The Federal Aviation Administration (“FAA”) later disagreed

with the Colorado Supreme Court’s decision in Arapahoe County and

ordered the Airport Authority to accommodate scheduled passenger service

at Centennial Airport, even though the airport is not equipped to do so. That

dispute is still pending. See Centennial Express Airlines, FAA Order No.

1999-| (Part 16, Subpart G) (Feb. 18, 1999), petition for review pending as

No. 99-9508 (10th Cir. filed Mar. 10, 1999).

952, in which the Second Circuit held that it was within the

Port Authority's proprietary powers and rights to restrict use of

LaGuardia Airport to flights of 1,500 miles or less. The

Second Circuit so ruled even though the court assumed, for the

purpose of its analysis, that the Port Authority’s perimeter rule

is a form of “route regulation.” In an earlier case, the Fifth

Circuit correctly described the Port Authority’s perimeter rule

at LaGuardia and the Texas-plus-contiguous-states limitation

on Love Field as “similar” restrictions. Cramer v. Skinner, 931

F.2d at 1030 n.8. But the Fifth Circuit has now held that the

ADA preempts Dallas and Fort Worth from imposing such a

restriction in their Bond Ordinance, even though the Second

Circuit refused to preempt the Port Authority’s similar

restriction.

The Fifth Circuit’s attempt to distinguish Western Air

Lines is unpersuasive. The court assumed that the Port

Authority’s perimeter rule was justified by a need to reduce

ground congestion at LaGuardia (Pet. App. 32a). That

distinction fails for two reasons. First, there were two stated

purposes for the LaGuardia perimeter rule: “to reduce ground

congestion and maintain LaGuardia as a short and medium

haul airport by diverting longer haul air traffic to Kennedy and

Newark.” Western Air Lines, Inc. v. Port Authority, 658 F.

Supp. 952, 953 (S.D.N.Y. 1986), aff'd, 817 F.2d 222 (2d Cir.

1987), cert. denied, 485 U.S. 1006 (1988). In the decision

below, the Fifth Circuit focused only on the former.

Second, like the Port Authority's perimeter rule, the

restrictions on Love Field in the 1968 Dallas-Fort Worth Bond

Ordinance were imposed, in part, as a result of findings made

by the CAB after comprehensive studies that Love Field could

not handle the Dallas-Fort Worth area’s commercial air traffic

past the early 1970’s. Planning for the future, Dallas and Fort

Worth built DF W Airport to accommodate their area’s growing

traffic and thus to alleviate the looming problem of congestion

at Love Field. Under the Fifth Circuit’s analysis, Dallas

presumably could have restricted Love Field had DF W Airport

not been built before congestion overwhelmed Love Field. But

perversely, the Fifth Circuit reasoned that, because Dallas and

Fort Worth acted effectively to prevent gridlock at Love Field,

the cities now have no local interest sufficient to enforce the

very restrictions that prevented such congestion in the first

place. If not corrected by this Court, that ruling will stymie the

efforts of local governments around the Nation who seek to

enact responsible regional plans to meet airport needs of the

future.

The Fifth Circuit’s decision rests on the premise that

Congress intended local governments to play an “extremely

limited” role in matters that affect aviation. The Fifth Circuit

found support for this statement in National Helicopter of

America Corp. v. City of New York, 137 F.3d 81 (2d Cir. 1998).

National Helicopter, in turn, relied on British Airways Board

v. Port Authority, 564 F.2d 1002, 1010 (2d Cir. 1977), which

predated the ADA and addressed only the power of local

governments “to regulate planes in flight.” /d. Specifically,

British Airways dealt with the Port Authority’s attempt to ban

one type of aircraft, the Concorde, from landing at Kennedy

Airport even though the Concorde met the Port Authority’s

generally applicable noise regulations. The Second Circuit’s

unexceptional recognition in British Airways that loca!

governments have “extremely limited” authority to regulate the

airspace was never intended as a categorical description of

airport Owners’ proprietary powers and rights. Congress

certainly did not describe those powers and rights as

7 16

“extremely limited,” and the ADA is not susceptible to such a

reading.”

The Department’s ruling and the Fifth Circuit’s affirmance

of it are all the more suspect because they conflict directly with

the Department’s own position in support of a perimeter rule

for Ronald Reagan National Airport. The FAA justified that

rule as an exercise of its “legitimate” proprietary powers as

owner and operator of Dulles and National Airports.” On

August 14, 1981, then-Secretary of Transportation Lewis wrote

to Senator Bentsen as follows:

As you point out, the [ADA] has placed airline

decisions with airline management and not with the

Federal Government. However, the Act also

specifically preserved airport proprietors’

responsibilities and rights. The proposed [perimeter

rule at National] is, in large part, an exercise of our

responsibility as proprietor of two airports that have

a significant impact throughout the Washington area.

No air carrier will be denied service to Dulles;

therefore no air carrier will be denied service to

‘If anything, the Fifth Circuit’s decision conflicts with National

Helicopter Corp. I\t is true, as the Fifth Circuit noted, that the Second

Circuit held that the ADA preempted a New York City regulation that

prohibited sightseeing helicopters from flying across Manhattan over

Second Avenue and required regional helicopters flying north or south to

remain over the East or Hudson Rivers. That holding is unexceptional

because the regulation attempted to control the routes of aircraft while in

flight. But the Second Circuit sustained a municipal regulation designed to

reduce by 47% the number of helicopter operations at the City’s Manhattan

heliport, thereby affirming the City’s proprietary right to control the size of

its heliport.

* Brief for the United States as Amicus Curiae in Delta Airlines,

Inc. v. Port Authority, No. 87-333 at 6 (U.S. filed March 29, 1988).

Washington. Whether to serve Washington is an

airline decision. However, whether there should be a

long-haul or short-haul role designated for National

or Dulles Airports is a legitimate airport proprietor’s

decision.

Record, DOT Docket Item 47 at 2, Tab 10 (emphasis added).

Similarly, when the Department and the FAA defended that

perimeter rule before the Fifth Circuit, they wrote:

. . . [T]he FAA, like any other proprietor of

two or more regional airports, can promulgate rules in

order to distribute flights between the airports in a

rational manner. Courts have repeatedly upheld the

authority of airport proprietors to impose a variety of

controls in order to satisfy local needs or to

ameliorate local problems.

* * *

. [T]he CAB and the FAA . . . have

throughout the years consistently stated that an airport

proprietor may discriminate between types, kinds and

classes of aeronautical usage when the proprietor

operates more than one airport and seeks merely to

differentiate between types of aircraft using the

airports.°

The conflict created by the Fifth Circuit’s decision should

be resolved now. As matters stand, use restrictions in Denver

and New York are enforceable, while a virtually identical

, Response of the Federal Respondents in City of Houston v. FAA,

No. 80-2030 at 20-21, (Sth Cir. filed May 26, 1981) (footnote omitted)

Record, DOT Docket Item 47, Tab 11.

restriction in the Dallas-Fort Worth area is not. Local

authorities are thus subject to differing legal requirements

based solely on the happenstance of geographical location.

More importantly, the ramifications of the Fifth Circuit's

decision extend far beyond the continued enforcement of the

use restrictions related to DFW Airport. Across the Nation,

local governments have relied on their reasonable

_ understanding of the scope and nature of “proprietary powers

and rights” to limit the use of the airports they create and

operate. When Kansas City, Missouri, built a large, regional

airport some distance north of the city, it limited its old,

downtown airport to use by small aircraft. Similarly, there are

plans to build a new regional airport for commercial airline

service into western West Virginia and when that airport opens,

to limit the existing airports in Charleston and Huntington to

general aviation. Without knowing whether the Eighth and

Fourth Circuits will adopt the interpretation of the Colorado

Supreme Court and the Second Circuit on the one hand, or the

Fifth Circuit on the other, government entities in Kansas City

and West Virginia proceed at their peril in operating their

airports. Moreover, hundreds of publicly owned airports

around the Nation accommodate only small -private and

corporate aircraft. The Fifth Circuit's decision casts all such

arrangements into doubt.

pouwe wee =

ee ee ee

if. The Court Should Grant Review Because the

Fifth Circuit and Department of

Transportation Have Given Such a Narrow

Scope to the Proprietary Powers and Rights of

Local Governments Owning Airports That it

Will Be Impossible for Local Governments To

Plan for, Finance, and Construct the New

Regional Airports the Nation Needs.

the Fifth Circuit's decision gives such a narrow scope to

airport Owners’ proprietary powers that it will be impossible

for local governments to finance, build, and operate the new

regional airports the Nation will need over the coming years.’

This profound interference in a vital local governmental

function can only be justified by compelling evidence of

congressional intent, which is utterly lacking here. Thus, this

Court should grant review to clarify that Congress did not

intend to oust regional and local authorities from. their

traditional role in planning and operating airports. Such

clarification is necessary to ensure that regional and local

authorities can enact and implement long-term regional plans.

When Congress deregulated airlines in 1978, it not only

preserved, but expressly “/did] not limit,” the proprietary

powers and rights of the state and local governments that own

and operate most of the Nation’s airports. 49 U.S.C.

§ 41713(b)(3) (emphasis added). To be sure, Congress did not

provide a definition of the “proprietary powers and rights” of

local airport owners that were saved from preemption, and this

Court has expressly reserved that issue for consideration. See

City of Burbank, 411 U.S. at 635-36 n.14. But Congress

The FAA has projected that the Nation’s air passenger traffic will

rise by more than 50 percent in the next ten years and that airfreight traffic

will double during the same period.

plainly intended to preserve the ability of state and local

governments to exercise this important local function even if

it affects airline rates, routes or services. Otherwise, there

would have been absolutely no need to carve out an exemption

from the ADA’s preemption provision.

The Fifth Circuit agreed that “the precise scope of an

airport owner’s proprietary powers has not been clearly

articulated by any court.” (Pet. App. 31a). Nevertheless, the

Fifth Circuit asserted that the ADA restricts local airport

proprietors to an “extremely limited role” in aviation matters.

(Pet. App. 3la, 34a). In the Fifth Circuit’s view, local

governments owning airports may not restrict any type of air

traffic from any of their airports, or allocate different types of

air traffic among airports in the region, unless they prove a

“specific local interest,” based on “local problems arising at

and around their facilities,” that would justify their action.

(Pet. App. 31a). According to the Fifth Circuit, such local

interests might include alleviating noise, ground congestion, or

pollution (Pet. App. 32a). Although the court held open the

possibility that other types of “local interests” also might

justify such restrictions (Pet. App. 35a), it believed that the

implementation of comprehensive regional airport agreements,

such as that between Dallas and Fort Worth, fell outside the

protected sphere and were preempted.” (Pet. App. 35a).

Moreover, the Fifth Circuit affirmed the Department's view

‘The Department’s Declaratory Order states that the only

permissible “legitimate” reasons for a proprietor’s restrictions are

prevention of noise or other environmental problems, congestion, and

perhaps to protect a failing airport. (Pet. App. 8la-99a). But, as the

Solicitor General stated in the Brief for the United States as Amicus Curiae

in the Western case, supra n.6, had Congress intended to limit proprietors

to controlling noise or congestion or saving failing airports, “Congress

presumably would have drafted the provision more narrowly than it did.”

J a tt

Pa PIE AAA LDL ORDERING NMA Ae AORN pcre

that such restrictions may be upheld only if they are “currently

needed” (Pet. App. 94a), irrespective of whether they were

needed at the time they were imposed.

The Department’s Declaratory Order, which the Fifth

Circuit affirmed, was expressly not based on_ policy

considerations or administrative determinations regarding the

best way to operate the Nation’s airports. Indeed, the

Department emphasized throughout its Order that it was not

“taking discretionary action on its own,” (Pet. App. 78a) and

was “merely interpreting statutes that Congress has already

enacted, not creating new obligations and mandates on its own”

(Pet. App. 101a). Thus, the Department believed that the ADA

required preemption here, and the Fifth Circuit affirmed on

that basis. But nothing in the text of the ADA or the statute’s

legislative history supports the Fifth Circuit’s reading of the

statute, much less provides the kind of clear statement of

preemptive intent ordinarily required under the Supremacy

Clause. English v. General Electric Co., 496 U.S. 72, 79, 83

(1990). The language Congress chose reflects a specific

intention not to preempt to any degree the proprietary powers

of local governments operating airports. Congress started the

ADA’s preemption provision with the limiting phrase “[e]xcept

as provided in this subsection,” 49 U.S.C. § 41713(b)(1), and

then in the same subsection, Congress stated that the statute

“does not limit” local governments owning airports served by

federally certificated air carriers from “carrying out” their

proprietary powers and rights. 49 U.S.C. § 41713(b)(3). The

statutory structure thus also directly supports the conclusion

that local governments retain broad proprietary powers and

rights in operating airports.

The legislative history confirms that Congress intended in

the ADA to preserve airport owners’ proprietary powers.

Congressman Anderson of California, floor manager for the

ADA in the House, stated: “It was not the intent of the House

conferees to limit in any way the normal exercise of a

proprietors powers to determine the level and nature of service

to be provided at airports, subject to constitutional and

statutory limitations... .” 124 Cong. Rec. 38,526 (1978). See

also 124 Cong. Rec. 37,419-20 (1978) (similar statement

during Senate debate). Indeed, the Dallas-Fort Worth

agreement restricting Love Field was discussed during the

Congressional debates on the ADA, and the House sponsor

made clear that the ADA did not interfere with the agreement

between Dallas and Fort Worth. 124 Cong. Rec. 30,670

(1978).

Absent the clearest indication that Congress intended to do

so, the courts should not prohibit local governments owning

airports from entering into, and carrying out, regional airport

plans such as that at issue here. Beyond the requirements of

the Supremacy Clause, this is true for several reasons:

A. The Fifth Circuit's reading of the ADA will cripple

the ability of local authorities to raise revenues to implement

regional airport plans. State and local governments routinely

issue bonds payable only from the revenues from a new public

facility, and covenant not to operate competing facilities that

might divert revenues. Airport revenues come principally from

the rentals and landing fees paid by commercial airlines using

the airport, so it is important to channel such operations to the

new airport to protect that airport's financial integrity, even if

that means closing existing airports to such operations. The

realities of the market for municipal bonds often compel such

restrictions, and the federal courts have sustained similar types

of covenants against legal attack. See, e.g., United States Trust

Co. v. New Jersey, 431 U.S. 1 (1977) (Contracts Clause

prohibited retroactive repeal of bond covenant prohibiting the

Port Authority of New York and New Jersey from spending its

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revenues for rail transit); Central lowa Refuse Systems, Inc. v.

Des Moines Metropolitan Solid Waste Agency, 715 F.2d 419,

427 (8th Cir. 1983) (sustaining regulation requiring all solid

waste to be disposed of at municipal facilities financed by

revenue bonds), cert. denied, 471 U.S. 1003 (1985). Issuing

bonds to raise money necessary to build, operate, and improve

a new airport is at the heart of the proprietor’s role. There

simply is no basis for the Fifth Circuit’s decision that Congress

intended to make it impossible for local governments to

comply with the covenants that were a necessary incident to

that role.

Paradoxically, the only option the Fifth Circuit’s decision

allows local governments opening new airports is to destroy

their existing airports to prevent them from competing with the

new airport. There is no rational basis for compelling local

governments to make such a wasteful choice. Older, smaller

airports can be used for private aviation, thereby diverting

small, slower aircraft away from major regional airports.

Existing airports can accommodate freight service, and they

can be used (as Love Field has been used for 20 years and as

LaGuardia Airport is used) for short-haul flights. In the event

of bad weather, runway obstructions, or other emergencies at

the regional airport, existing airports can provide backup

landing alternatives for aircraft already in flight.

B. There is nothing about long-term regional airport

planning, such as that demonstrated by the Dallas-Fort Worth

agreement, that diminishes the Nation’s airport system or that

interferes in any way with the FAA’s ability to guide aircraft

through the Nation’s airspace. Indeed, the opposite is true.

The Dallas-Fort Worth agreement resulted in the opening of

DFW Airport, which dramatically increased and modernized

the airport facilities available within the Dallas-Fort Worth

area. Dallas and Fort Worth fully accommodate all air traffic

coming into their metropolitan region at one or more of their

airports. DFW Airport is open to all types of traffic. Dallas

restricts its Redbird Airport to small private aircraft, and has

held Love Field open only for short-distance flights within

Texas and the four contiguous states. Fort Worth’s Meacham

Field accommodates small private aircraft and for some periods

has accommodated limited intrastate passenger service between

Fort Worth and Houston. Fort Worth has restricted its new,

modern Alliance Airport to airfreight (Pet. App. 99a n.19).

The Dallas-Fort Worth plan does not interfere with the

FAA’s exclusive authority to manage the Nation’s airspace.

49 U.S.C. § 40103. Unlike the 11 p.m. curfew on jet aircraft

this Court held preempted in City of Burbank, 411 U.S. 624,

Dallas’s restrictions on Love Field have po potential for

requiring the FAA to divert planes in flight, or to create a

localized “fractionalized control of the timing of take-offs and

landings” that would compromise the FAA’s air traffic control

flexibility. The Bond Ordinance simply declares Love Field

not available as a point of origin or destination for scheduled

long-distance flights, just as if Love Field did not exist. Thus,

no airline would schedule long distance flights to take off from,

or land at, at Love Field. Nor is the restriction discriminatory.

No airline would operate long-distance flights from Love Field,

and al] could operate short-distance flights.

i Even if the Fifth Circuit is correct that local

governments must prove a “specific local interest” that would

be addressed by a particular restriction (and that requirement

is not supported by anything in the statute), the Dallas-Fort

Worth agreement was neither reached nor structured without

epee tee etree vyte

Sli a Wad Sad! Co 5

reason or justification, as the Fifth Circuit seemed to assume.

(Pet. App. 35a).’

Ironically, the CAB ordered Dallas and Fort Worth to

agree to designate a single regional airport and to transfer all

scheduled passenger service to that airport. Before that

agreement was made, the CAB held extensive evidentiary

hearings and the two cities conducted extensive environmental,

land use, and traffic studies that demonstrated the need for

focusing scheduled passenger service at a single regional

airport. When Dallas and Fort Worth completed their

agreement, they filed it with the CAB, whereupon the CAB

dismissed its proceeding, finding that the new DFW Airport

would satisfy the CAB’s requirement for the cities to provide

an adequate, single facility to accommodate all air

transportation needs of the Dallas-Fort Worth region. CAB

Order No. 73-9-82 (Sept. 21, 1973). Now, 30 years later, the

” The Fifth Circuit saw no local interest sufficient to justify the

restrictions that Dallas and Fort Worth placed on Love Field when they

formed their 1968 joint venture to finance, construct, and operate DFW

Airport even though: (1) the CAB had ordered the two cities to agree on a

single regional airport to serve their metropolitan area and to move all

passenger service to that airport; (2) the CAB had found that Love Field was

too small and confined by its surroundings to accommodate the area’s

traffic; (3) the cities undertook extensive land use, traffic and environmental

studies that supported concentrating all commercial passenger traffic at a

new, centrally-located regional airport; (4) the cities financed DF W Airport

with revenue bonds and restricted their other airports to protect DF W’s

revenues; (5) the cities’ agreement has been in effect for more than 20 years,

with countless third parties (including American) having made major

relocation and investment decisions in reliance on that agreement; and (6)

the Dallas-Fort Worth agreement has resulted in the construction of one of

the world’s largest and most important airports and has provided a level of

economic activity and commercial air service to the citizens of the Dallas-

Fort Worth metropolitan area that is surpassed only in much larger

population centers. These local interests plainly justify restrictions on airport

use.

Fifth Circuit and the Department (the CAB’s successor) have

ruled that same agreement exceeds the cities’ proprietary

powers. It is simply untenable for the federal government now

to assert that a regional airport plan adopted to comply with

prior federal directions was enacted for illegitimate purposes

and without adequate justification.

Although the Fifth Circuit did not specify the point in fime

at which local governments must prove to the satisfaction of

the courts that they have a specific “local interest” sufficient to

justify restrictions such as those imposed on Love Field in

1968, the court plainly required that such restrictions must be

continually justified at all times. The Department ruled that the

restrictions must be justified whenever a challenge is raised,

not only when the restrictions were imposed. In the

Department’s words, the proprietor must prove that the

restrictions “are currently needed.” (Pet. App. 94a). The Fifth

Circuit affirmed that position, paying scant attention to the

volumnious record evidence justifying the restrictions.

That shifting-sands ruling simply precludes long-term

regional airport planning. Even if, as here, local governments

act prudently and comprehensively in conducting studies, and

entering into agreements for the multi-year regional financing,

construction, and operation of airports within — their

metropolitan area (even with federal approval at the time), they

can never be certain that the Department or an airline seeking

to operate in violation of their agreement will not go to court

at some time in the future and have their agreement declared

preempted. As a result, the ability of local governments to

attract investors, and to induce carriers to undergo the

enormous expense and disruption associated with abandoning

one airport and launching operations in another, will be

crippled. Once a long-term agreement is signed or bond

ordinance enacted, its reasonableness or “legitimacy” must be

Der tee naam DP AEE CRORE ASAIN OCCT EAE

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i i alae AS Stead Dah Rat dh

tested as of the time of its making. Local governments cannot

be put to the disabling burden of proving the continued

“necessity” on a day-to-day basis into the future of agreements

they have made and implemented.

The Fifth Circuit’s decision is thoroughly unsound and

particularly unfortunate. Unless reviewed by this Court, it will

prevent regional airport planning by local governments

throughout the Nation. Without any evidence that Congress

plainly intended such a bizarre outcome, the Court should grant

plenary review.

EE — ee

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted,

Donald B. Verrilli, Jr.

Paul M. Smith

JENNER & BLOCK

601 Thirteenth Street, N.W.

Washington, D.C. 20005

(202) 639-6000

Morris Harrell

Michael V. Powell

LOCKE LIDDELL & SAPP

Lado

2200 Ross Avenue

Dallas, Texas 75201-6776

(214) 740-8000

Richard Rothman

WEIL, GOTSHAL &

MANGES, L.L.P.

767 Fifth Avenue

New York, N.Y. 10153

(212) 310-8000

May 1, 2000

Carter G. Phillips*

Virginia A. Seitz

SIDLEY & AUSTIN

1722 Eye Street, N.W.

Washington, D.C. 20006

(202) 736-8000

Anne H. McNamara

Laura A. Einspanier

R. Bruce Wark

AMERICAN AIRLINES,

INC.

P.O. Box 619616,

MD-5675

DFW Airport, Texas

75261-9616

(817) 967-1284

*Counsel of Record

a APPENDICES

..?

APPENDIX A

AMERICAN AIRLINES, INCORPORATED:

City of Dallas, Texas; Southwest Airlines

Company; Love Field Citizens Action Committee,

Petitioners,

DEPARTMENT OF TRANSPORTATION, Respondent.

The City of Fort Worth; Dallas-Fort Worth International

Airport Board,

Petitioners,

Department of Transportation, Respondent.

Nos. 99-60008, 99-60239.

United States Court of Appeals,

Fifth Circuit.

Feb. 1, 2000.

Parties including two interstate air carriers, cities of Dallas

and Fort Worth, and board of Dallas-Fort Worth regional airport

petitioned for review of United States Department of

Transportation (DOT) declaratory order resolving nature of air

passenger services permissible from Love Field airport in

Dallas, Texas. Three additional interstate air Carriers intervened.

The Court of Appeals, Emilio M. Garza, Circuit Judge, held

that: (1) order was not a substantive rule subject to notice and

comment period under Administrative Procedure Act (APA); (2)

DOT was not required to grant preclusive effect to rulings in

pending, previously initiated state law suit involving some of

same parties and issues; (3) ordinance adopted by Dallas and

Fort Worth imposing restrictions on airline passenger service

from Love Field airport was preempted by the Airline

Deregulation Act (ADA); (4) DOT's interpretation of commuter

airline exemption to Wright Amendment to International Air

Transportation Competition Act to include reconfigured

regional jets was reasonable; and (5) DOT ruling which allowed

commuter planes to provide through service if they first flew to

a point within Texas was reasonable interpretation of the Wnght

Amendment. :

Affirmed.

Michael Vance Powell (argued), Morris Harrell, Cynthia

Keely Timms, Locke, Liddell & Sapp, Dallas, TX, Anne

Hogan McNamara, Robert B. Wark, American Airlines Inc.,

Fort Worth, TX, for American Airlines, Inc.

Thomas Lawrence Ray (argued), Paul Maitland Geier,

Washington, DC, Marion L. Jetton, Robert B. Nicholson, U.S.

Dept. of Justice, Antitrust Div., App. Section, Washington,

DC, for Dept. of Transp.

Edward P. Faberman (argued), Ungaretti & Harris,

Washington, DC, for Legend Airlines.

R. Bruce Keiner, Jr. (argued), Crowell & Moring,

Washington, DC, Randall W. Wilson, Houston, TX, Emery

Lawrence Vincent, Susman Godfrey, Dallas, TX, for

Continental Express.

Robert W. Kneisley, Washington, DC, Michael Byrd,

Dallas, TX, James F. Parker (argued), Southwest Airlines

Co., Dallas, TX, for Southwest Airlines Co.

Lee L. Blackman, Richard Karl Simon, McDermott, Will &

Emery, Los Angeles, CA, for Airports Council Intern., North

America and American Ass'n of Airport Executives, Amicus

Curiae.

James E. Coleman, Jr., Lyndon F. Bittle (argued),

Carrington, Coleman, Sloman & Blumenthal, Dallas, TX, for

City of Dallas, TX.

Alan W. Harris (argued), Andrews & Kurth, Dallas, TX,

for Love Field Citizens Action Committee.

Dee J. Kelly, Sr. (argued), Brian Scott Stagner, Kelly, Hart

& Hallman, Fort Worth, TX, for City of Fort Worth.

Jonathan Glen Kerr (argued), Joseph Wilson Spence,

Steven James Graham, Shannon, Gracey, Ratliff & Miller,

Fort Worth, TX, Michael J. Goldman, Bagileo, Silverberg &

Gildman, LLP, Washington, DC, for Dallas-Fort Worth Intern.

Airport Bd.

Petitions for Review of an Order of the U.S. Department of

Transportation.

Before DUHE, BARKSDALE and EMILIO M. GARZA,

Circuit Judges.

EMILIO M. GARZA, Circuit Judge:

This consolidated appeal involves respondent Department of

Transportation's (“DOT's”) interpretation of federal law

governing airline service at Love Field airport. Petitioners

Dallas-Fort Worth International Airport Board (“DFW Board”’),

City of Fort Worth (“Fort Worth”), American Airlines, Inc.

(“American”), City of Dallas (“Dallas”), Southwest Airlines

Company (“Southwest”), and Love Field Citizens Action

Committee (the “Committee”) petition for review of DOT's

declaratory, procedural, and reconsideration orders. Legend

Airlines, Inc. (“Legend”), Continental Airlines, Inc.

(“Continental”), and Continental Express, Inc. (“Continental

Express’’) have intervened. For the reasons set forth below, we

affirm.

Prior to 1968, Dallas and Fort Worth operated independent

and competing airports. One of Dallas's airports was Love

Field. DOT's predecessor agency, the Civil Aeronautics Board

(“CAB”), found that the competition between Dallas's and Fort

Worth's airports was harmful. Accordingly, in 1964 CAB

ordered the cities to build a jointly-operated airport that would

serve as the region's primary airport. The cities responded by

creating the DFW Board and by jointly adopting the 1968

Regional Airport Concurrent Bond Ordinance (the

“Ordinance”). The Ordinance authorized the issuance of bonds

to finance the Dallas-Fort Worth Airport (“DFW”). Of critical

importance here is section 9.5 of the Ordinance, which

contained the cities’ agreement to “take such steps as may be

necessary, appropriate and legally permissible ... to provide for

the orderly, efficient and effective phase-out at Love Field,

Redbird, GSIA and Meacham Field, of any and all Certificated

Air Carrier Services, and to transfer such activities to the

[DFW] Regional Airport.”

The eight CAB-certified air carriers who were using the

Dallas and Fort Worth airports first signed “letter agreements”

and then later signed “use agreements” with the DFW Board,

agreeing to move their air services to DFW as specified in the

Ordinance. Southwest, which was solely running intrastate

flights from Love Field and thus was exempt from CAB

certification and pressure, refused to move to DFW and did not

Sign a use agreement. Litigation ensued over efforts to force

Southwest from Love Field, terminating with our statement that

“Southwest Airlines Co. has a federally declared right to the

continued use of and access to Love Field, so long as Love Field

remains open.” Southwest Airlines Co. v. Texas Int'l Airlines,

Inc., 546 F.2d 84, 103 (Sth Cir. 1977).

Congress deregulated the airline industry in 1978. Shortly

thereafter, Southwest applied for permission to provide

interstate service between Love Field and New Orleans. CAB

granted the application, concluding that it lacked power to deny

it. This prompted Congress to intervene by enacting the Wright

Amendment. See Pub.L. No. 96-192, § 29, 94 Stat. 35, 48-49

(1980). The Wright Amendment generally bans interstate

service from Love Field.’ However, it provides certain

' In its entirety, the Wright Amendment states:

(a) Except as provided in subsection (c), notwithstanding any

other provision of law, neither the Secretary of

Transportation, the Civil Aeronautics Board, nor any other

officer or employee of the United States shall issue, reissue,

amend, revise, or any certificate or other authority to permit or

otherwise authorize any person to provide the transportation

of individuals, by air, as a common carrier for compensation

or hire between Love Field, Texas, and one or more points

outside the State of Texas, except (1) charter air transportation

not to exceed ten flights per month, and (2) air transportation

provided by commuter airlines operating aircraft with a

passenger capacity of 56 passengers or less.

(b) Except as provided in subsections (a) and (c),

notwithstanding any other provision of law, or any certificate

or other authority heretofore or hereafter issued thereunder, no

person shall provide or offer to provide the transportation of

individuals, by air, for compensation or hire as a common

carrier between Love Field, Texas, and one or more points

outside the State of Texas, except that a person providing

service to a point outside of Texas from Love Field on

November |, 1979 may continue to service to such point.

and it is found consistent with the public convenience and

necessity to authorize, transportation of individuals, by air, on

a flight between Love Field, Texas and one or more points

- 6a

exemptions from this ban, two of which are significant here: (1)

the commuter airline exemption allows interstate “air

transportation provided by commuter airlines operating aircraft

with a passenger capacity of 56 passengers or less”; and (2) the

contiguous state exemption allows flights to and from

Louisiana, Arkansas, Oklahoma, and New Mexico, if the flights

do not “provide any through service or ticketing with another air

carrier’ and do not “offer for sale transportation to or from ...

any point which is outside any such State.” /d.

In 1996, Dalfort Aviation, the parent corporation of Legend,

announced plans to take advantage of the commuter airline

exemption by reconfiguring large commuter planes to hold only

56 seats. In response, the DOT General Counsel issued an

opinion holding that the exemption applied only to aircraft

originally configured to seat less than 57 passengers. The DOT

opinion was mooted by the 1997 passage of the “Shelby

Amendment” (collectively with the Wright Amendment, the

“Love Field amendments”). The Shelby Amendment defined

the term “passenger capacity of 56 passengers or less” in the

commuter airline exemption to “‘include[ ] any aircraft, except

within the State of Louisiana, Arkansas, Oklahoma, New

Mexico, and Texas by an air carrier, if (1) such air carrier

does not offer or provide any through service or ticketing with

another air carrieror foreign air carrier, and (2) such air carrier

does not offer for sale transportation to or from, and the flight

or aircraft does not serve, any point which is outside any such

State. Nothing in this subsection shall be construed to give

authority not otherwise provided by law to the Secretary of

Transportation, the Civil Aeronautics Board, any other officer

or employee of the United States, or any other person.

(d) This section shall not take effect if enacted after the

enactment of the Aviation Safety and Noise Abatement Act of

1979. Id.

aircraft exceeding gross aircraft weight of 300,000 pounds,

reconfigured to accommodate 56 or fewer passengers if the total

number of passenger seats installed on the aircraft does not

exceed 56.’ See Pub.L. No. 105-66, § 337, 111 Stat. 1425, 1447

(1997).* The Shelby Amendment also expanded the contiguous

states exemption to allow direct flights between Love Field and

airports within Kansas, Alabama, and Mississippi. See id.

* The Shelby Amendment provides in its entirety that:

(a) INGENERAL.--For purposes of the exception set forth in

section 29(a)(2) of the International Air Transportation

Competition Act of 1979 (Public Law 96-192; 94 Stat. 48),

the term “passenger capacity of 56 passengers or less”

includes any aircraft, except aircraft exceeding gross aircraft

weight of 300,000 pounds, reconfigured to accommodate 56

or fewer passengers if the total number of passenger seats

installed on the aircraft does not exceed 56.

(b) INCLUSION OF CERTAIN STATES IN EXEMPTION.-

-The first sentence of section 29(c) of the International Air

Transportation Competition Act of 1979 (Public Law 96-192;

94 Stat. 48 et seq.) is amended by inserting “Kansas,

Alabama, Mississippi.” before “and Texas”.

Federal Aviation Administration shall monitor the safety of

flight operations in the Dallas- Fort Worth metropolitan area

and take such actions as may be necessary to ensure safe

aviation operations. If the Administrator must restrict

aviation operations in the Dallas-Fort Worth area to ensure

safety, the Administrator shall notify the House and Senate

Committees on Appropriations as soon as possible that an

unsafe airspace management situation existed requiring the

restrictions.

Id.

The parties in this case responded in various ways to the

Shelby Amendment. Southwest began offering flights between

Love Field and Mississippi and Alabama. Legend has an-

nounced plans to offer longhaul service to states outside the

Love Field service area using large aircraft reconfigured to have

less than 57 seats. Continental Express plans to use regional

jets with less than 57 seats to fly between Love Field and

Cleveland. Continental Express and American offer intrastate

flights from Love Field to their hubs, in Houston and Austin

respectively.

In response, Fort Worth sued Dallas, the DFW Board,

Legend, Continental, and Continental Express in Texas state

court to block the proposed additional service from Love Field.

The state court found that the Ordinance was not preempted by

federal law and that Dallas was obligated by the Ordinance to

preclude airlines from flying between Love Field and areas

outside Texas and the four-state service area authorized by the

Wright Amendment. The state action is currently on appeal,

although the state appellate court has stayed the appeal pending

our resolution of this case.

While the state court action was pending, Dallas filed a

federal suit against DOT and Fort Worth requesting declaratory

relief on essentially the same issues involved in the state action.

The federal court has stayed that proceeding pending resolution

of the instant case.

At the urging of several of the parties, and while both the

federal and state actions were pending, DOT initiated the

interpretative proceeding that is the subiect of this petition for

review. DOT issued an order informing the parties in this

action’ that it intended to rule on four “federal law issues” and

* Notice of this order was not sent to the Committee. The Committee

subsequently learned of the proceeding and DOT granted its request for an

extension of time to file comments.

=“

allowing the parties an opportunity to submit comments on

these issues. Subsequently, in response to the parties’ initial

comments, DOT issued a procedural order which, inter alia,

granted the DFW Board's request to resolve a fifth legal issue

and granted several parties’ request for an extension of time in

which to file comments.

DOT ultimately issued a “Declaratory Order’ resolving the

five questions it had set forth. Specifically, DOT ruled that:

(i) the City of Fort Worth may not enforce any

commitment by the City of Dallas ... to limit

operations at Love Field authorized by federal

law, and the proprietary powers of the City of

Dallas do not allow it to restrict services at Love

Field authorized by federal law; (11) the ability

of the City of Dallas to limit the type of airline

service operated at Love Field is preempted by

the Wright and Shelby Amendments; (iii) any

airline operating aircraft with a passenger

capacity of no more than 56 passengers and a

gross aircraft weight of no more than 300,000

pounds may operate service with any type of

equipment and flights of any length from or to

Love Field, notwithstanding any claim that such

service violates any agreement between the

Cities of Dallas and Fort Worth; (iv) the Dallas-

Fort Worth International Airport Board may not

enforce any contract provision that allegedly

bars an airline from operating interstate airline

service at another airport in the Dallas-Fort

Worth metropolitan area; and (v) any airline may

offer through service between Love Field and

10a

any other point to passengers using a flight

between Love Field and another point within

Texas operated under subsection (a) of the

Wright Amendment, as amended by the Shelby

Amendment...

Declaratory Order at 58. In an accompanying “Procedural

Order,” DOT rejected various procedural objections raised by-

the parties. DOT subsequently reaffirmed its rulings on

reconsideration.

We have jurisdiction to review DOT's declaratory order by

this petition for review. See 49 U.S.C. § 46110(e) (“[A] person

disclosing a substantial interest in an order issued by the

Secretary of Transportation ... may apply for review of the order

by filing a petition for review in the ... court of appeals of the

United States for the circuit in which the person resides or has

its principal place of business.”). The standard of review we

apply differs according to the specific action DOT took. Our

review of DOT's interpretation of the statutes it is charged with

administering is governed by the two-step standard of review

established in Chevron, U.S.A., Inc. v. Natural Resources

Defense Council, Inc., 467 U.S. 837, 104 S. Ct. 2778, 81

L.Ed.2d 694 (1984). We first determine whether Congress

directly spoke to the precise question in issue. If the intent of

Congress is clear, then we, and the agency, must give effect to

the unambiguously expressed intent of Congress. See id. at

842-43, 104 S. Ct. at 2781. If Congress has not directly

addressed the precise question in issue, we ask whether the

agency's interpretation was “based on a permissible construction

of the statute.” Jd. at 843, 104 S. Ct. at 2782. As long as the

agency's construction of an ambiguous statute is permissible, it

must be upheld. See id.; Texas Oil & Gas Assoc. v. EPA, 161

F.3d 923, 937-38 (Sth Cir. 1998).

lla

However, we only engage in the Chevron analysis when

reviewing an agency's interpretation of a statute it was charged

with administering. When reviewing DOT's interpretation of a

statute it is not charged with administering, we do not grant

DOT Chevron deference. See American Forest and Paper Ass'n

v. EPA, 137 F.3d 291, 297 (Sth Cir. 1998) (“We do not, however,

accord Chevron deference to EPA's interpretation of the ESA,

because the ESA is not a statute that EPA is charged with

administering.”’).

Several of the parties challenge DOT's declaratory order on

procedural grounds. They argue that: (a) DOT violated the

Administrative Procedure Act (“APA”), (b) its order improperly

contravened the earlier state court ruling on the same issues, and

before issuing its order.

Fort Worth and the DFW Board argue that DOT's ruling

violated the APA in various ways. See 5 U.S.C. § 706 (directing

a reviewing court to “hold unlawful and set aside agency action,

findings, and conclusions found to be ... without observance of

procedure required by law’). Although DOT has already

rejected some of these challenges in its earlier rulings, we

review de novo DOT's interpretation and application of the

APA. See Professional Reactor Operator Soc. v. U.S. Nuclear

Regulatory Comm'n, 939 F.2d 1047, 1051 (D.C. Cir. 1991)

(“The Supreme Court has indicated, however, that reviewing

courts do not owe the same deference to an agency's

interpretation of statutes that, like the APA, are outside the

agency's particular expertise and special charge to administer.”’).

|2a

Several parties contend that DOT failed to provide them with

sufficient notice as required under § 554(b) or, alternatively, §

553, of the APA. We exercise plenary review over whether DOT

complied with applicable procedures. See Chemical Mfrs. Ass'n

v. EPA, 870 F.2d 177, 198 (Sth Cir. 1989).

DOT issued its declaratory order after conducting an informal

adjudication, pursuant to its authority under § 554(e) to “issue a

declaratory ruling to terminate a controversy or remove

uncertainty.” 5 U.S.C. § 554(e); See also Texas v. United

States, 866 F.2d 1546, 1555 (Sth Cir. 1989) (“The ICC's

declaratory order was issued after an informal adjudication

pursuant to the authority conferred by 5 U.S.C. § 554(e) to

‘issue a declaratory ruling to terminate a controversy or remove

uncertainty.’ Rendered in a specific factual context and

resolving only the questions presented by [the petitions], it

‘belongs to the genre of adjudicatory rulings.’ “) (citations

omitted). Several parties object to DOT's failure to adhere to

the APA's notice requirements for formal adjudications.

However, in the absence of a statute requiring an agency to

conduct its adjudication “on the record after opportunity for

agency hearing,” 5 U.S.C. § 554(a), an agency can define its

own procedures for conducting an informal adjudication. See

Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633, 655-

56, 110 S. Ct. 2668, 2680-81, 110 L.Ed.2d 579 (1990).

While the APA does not expressly require notice in informal

adjudications, courts have inferred a requirement that there be

“some sort of procedures for notice [and] comment ... as a

necessary means of carrying out our responsibility for a

thorough and searching review [of agency action].” Independent

U.S. Tanker Owners Committee v. Lewis, 690 F.2d 908, 923

(D.C. Cir. 1982). Here, DOT issued an order in which it

specified the legal issues on which it would rule, allowed the

l3a

parties to submit comments on these issues, and extended the

comment period at the request of several parties. It then ruled

“on precisely the issues that it identified. We find that DOT's

actions satisfied the minimum procedural notice requirements.

See id.

Fort Worth contends that DOT failed to comply with § 554(b)

by neglecting to notify parties that DOT would also be

considering a factual issue: the effect of increased service at

Love Field on DFW Airport. This argument fails for two

reasons. First, as noted, the formal notice requirement of §

554(b) does not apply to an informal adjudication. Second, the

parties were effectively on notice of this issue since it was one

that they could reasonably expect to arise given the issues of

which DOT gave notice. Cf. Boston Carrier Inc. v. Interstate

Commerce Comm'n, 746 F.2d 1555, 1559 (D.C. Cir. 1984)

(“The Commission is not burdened with the obligation to give

every applicant a complete bill of particulars as to every

allegation that carrier will confront.”). The fact that Dallas,

Continental Express, and Legend all submitted factual evidence

to DOT should also have put Fort Worth on notice that it could

submit its own factual evidence.

We also note the absence of anything in the record to indicate

that Fort Worth possesses any information bearing on the impact

of increased service at Love Field. Fort Worth has had three

opportunities to present or identify such evidence--during the

comment period, in its motion for reconsideration, and in its

brief on appeal--but has not demonstrated that it possesses

relevant factual information not considered by DOT. This

continued failure to identify the evidence it would have

submitted indicates that Fort Worth was not prejudiced by any

inadequacy in DOT's notice. See 5 U.S.C. § 706 (in reviewing

an agency determination, “due account shall be taken of the rule

of prejudicial error’); Friends of Iwo Jima v. Nat'l Capital

l4da

Planning Comm'n, 176 F.3d 768, 774 (4th Cir. 1999)

(“Moreover, the party who claims deficient notice bears the

burden of proving that any such deficiency was prejudicial.”).

We also reject the DFW Board's argument that DOT's order

amounts to a substantive rule subject to the notice and comment

provision of § 553. Agencies have discretion to choose between

adjudication and rulemaking as a means of setting policy. See

NLRB vy. Bell Aerospace Co. Div. of Textron, Inc., 416 U.S. 267,

294, 94 S. Ct. 1757, 1771, 40 L.Ed.2d 134 (1974); Mobil

Exploration and Producing North America, Inc. v. FERC, 881

F.2d 193, 198 (Sth Cir. 1989) (citing Bell Aerospace). In

determining whether an agency action constituted adjudication

or rulemaking, we look to the product of the agency action. We

also accord significant deference to an agency's characterization

of its own action. See British Caledonian Airways, Ltd. v. Civil

Aeronautics Bd., 584 F.2d 982, 992 (D.C. Cir. 1978) (“In the

present case we have, moreover, the Board's own assertion that

its order is purely interpretive, and this contention in itself is

entitled to a significant degree of credence.... While declaratory

orders differ in some respects from interpretive rules, the same

4a rationale should apply equally to an agency's characterization of

one of its rulings as a declaratory order.”). Since the APA

defines “adjudication” as the “agency process for formulating

an order,” 5 U.S.C. § 551(7), and DOT classifies its ruling as a

declaratory order, we find that the agency engaged in

adjudication rather than rulemaking. Furthermore, because

DOT's order interpreted the rights of a small number of parties

properly before it, DOT did not abuse its discretion by acting

through an adjudicatory proceeding. See British Caledonian

Airways, 584 F.2d at 992-94; Mobil Exploration, 881 F.2d at

199 (finding no abuse of discretion where, inter alia, an agency

proceeded by adjudication to resolve an issue affecting a small

number of parties).

————————

1Sa

Fort Worth, joined by American, also argues that it was

deprived of its right to a fair agency determination because of ex

parte contacts between Continental Express, Legend, and DOT.

Fort Worth cites specific instances when Continental Express

and Legend officials contacted DOT about the pending state and

federal court actions and asked DOT to intervene in these

actions. The officials suggested specific actions which DOT

could take and strongly advocated for DOT's intervention,

including by characterizing the state court proceedings in

unfavorable terms. DOT responded at one point with a written

letter answering four questions posed by Continental. DOT and

Legend do not dispute that the contacts took place, but they both

argue that the contacts were proper and did not bias DOT's final

decision.

DOT regulations prohibit certain ex parte contacts between

agency personnel and interested parties.” See 14 C.FR. §

300.2(a). Most of the contacts here fall outside these

regulations because they occurred before DOT instituted its

interpretation proceeding. See 14 C.FR. § 300.2(a) ( “[T]here

shall be no substantive communication in either direction

between amy concerned DOT employee and any interested

person outside DOT, concerning a public proceeding, until after

final disposition of the proceeding.) (emphasis added); id. §

300.2(b\4)(-v) (defining a public proceeding as a “proceeding

initiated by a docket filing, other than a petition for generally

applicable rulemaking, after the filing in the docket of an

* Fort Worth also relies on the APA ban on ex parte communications,

but this ban does not apply here, because it does not cover informal

adjudications. See 5 U.S.C. § 557(a), (d) (stating that the prohibition on ex

parte contacts applies “when a hearing is required to be conducted in

accordance with section 556 “); id. § 556 (governing formal hearings).

16a

identifiable written opposition to the initiating document’)

(emphasis added). Additionally, most of the contacts, including

those which occurred after DOT initiated its proceeding, did not

involve the merits of the proceedings but rather were

permissible requests to intervene in the state and federal action.

See Texas, 866 F.2d at 1550 (finding that an individual's request

for the Interstate Commerce Commission to intervene in a

pending state action was not an ex parte communication because

it did not involve the merits of the case).

The posture of the case presents more serious procedural

concerns. DOT and the state court issued contrary rulings on

some of the same issues in proceedings involving some of the

same parties.

Consequently, Fort Worth, the DFW Board, and American

(collectively “Fort Worth petitioners”) ask us to reverse DOT's

action because (1) DOT violated the full faith and credit statute,

28 U.S.C. § 1738, by not granting preclusive effect to the prior

state court ruling, and (2) DOT violated the Anti-Injunction Act

and corresponding common law principles of federalism by

issuing a declaratory order affecting a case currently pending

before a state court. DOT rejected these arguments in its earlier

* Although the state and DOT proceedings overlapped, neither tribunal

made significant efforts to accommodate the views of the other. The state

court essentially gave DOT one month to issue its declaratory order and

when DOT failed to do this, the state court ruled without the benefit of

DOT's views. DOT, on the other hand, did not issue its declaratory order

within the time set by the state court, did not attempt to intervene in the state

court action even though some of the parties there asked it to intervene, and

did not ask the state court to stay its ruling until DOT ruled on the same

issues. Instead, DOT rejected the state court's view in its order, noting only

the state court's lack of reasoning in support of its position.

17a

rulings, but we do not defer to DOT's ruling on these issues.

See American Forest and Paper Ass'n, 137 F.3d at 297.

The full faith and credit statute, 28 U.S.C. § 1738, generally

requires federal courts to grant preclusive effect to state court

judgments: “[t}he records and judicial proceedings of any court

of any ... State .... shall have the same full faith and credit in

every court within the United States ... as they have by law or

usage in the courts of such State ... from which they are taken.”

Id. The plain language of this section establishes that it does not

apply here: § 1738 applies only to “every court within the

United States,” and DOT is an agency, not a “court.” Id.

(emphasis added). The only other circuit to address fully this

issue agrees with this reading of § 1738.° See NLRB v. Yellow

® The Fort Worth petitioners rely on two district court cases which have

arguably held to the contrary. /n Torres v. Gardner, 270 F. Supp. | (D.P.R.

1967), the court stated in passing that “[t}he Administrative agencies of the

United States are no less bound that he [sic ] courts of the United States to

give full faith and credit to the decisions of the Courts of Puerto Rico.” /d. at

4. The court did not cite § 1738, and thus it might have relied instead on the

common law preclusion doctrines we discuss below. In Midgett v. United

States, 221 Ct. Cl. 171, 603 F.2d 835 (Ct. Cl. 1979), the court cited Torres

and stated: “Section 1738 of 28 U.S.C. imposes on a federal court presented

with a state court judgment the same force and conclusive effect as it has in

the state in which it is rendered. Administrative bodies of the United States

as well as courts are required to adhere to this requirement.” /d. at 845

(citation omitted). The court did not clearly indicate that it based its holding

on § 1738, as opposed to merely analogizing to § 1738.

We cannot conclude with certainty whether these cases relied on §

1738. To the extent they did, we believe the better rule, for the reasons stated

above and herein, is that § 1738 does not apply to agencies, but the rationale

underlying § 1738 extends to agencies through common law preclusion

doctrines. This rule is consonant with Supreme Court precedent and the

18a

Freight Systems, Inc., 930 F.2d 316, 320 (3d Cir. 1991) (finding-

that the NLRB, by virtue of its status as an agency rather than a

court, was not required to give full faith and credit to an earlier

State court judgment); cf Consolidated Oil & Gas, Inc. v.

FERC, 806 F.2d 275, 280 n.5 (D.C. Cir. 1986) (“We agree with

the FERC, though, that *[t}he fact that the state court ruled on

the same issue, regardless whether its ruling agreed with the

Commission's ruling, does not affect the Commission's authority

to determine its own jurisdiction.””’).

The Supreme Court adopted this plain reading of § 1738

when presented with the question of whether a federal court

must accord full faith and credit to an unreviewed state agency

proceeding. See University of Tennessee v. Elliott, 478 U.S.

788, 794, 106 S. Ct. 3220, 3224, 92 L.Ed.2d 635 (1986).

Reading § 1738's references to “courts” as not including

“agencies,” the Elliott court concluded simply that “* § 1738

governs the preclusive effect to be given the judgments and

records of state courts, and is not applicable to the unreviewed

state administrative factfinding at issue in this case.” Id. at 794,

106 S. Ct. at 3224.

plain text of § 1738, and it accounts for the concerns raised by the Midgett

and Torres courts.

Fort Worth also argues that United States v. ITT Rayonier, Inc., 627

F.2d 996 (9th Cir. 1980) addresses the question presented here. In /7T

Rayonier, the Ninth Circuit held that the Environmental Protection Agency

(“EPA”) was bound by res judicata from pursuing an enforcement action

when a prior enforcement action had been litigated in state court. See id. at

999-1004. The Ninth Circuit applied res judicata because it found that the

EPA was in privity with the parallel state agency which had pursued the state

enforcement action. See id. at 1002-04. /TT Rayonier is distinguishable

from the present case, because Fort Worth has made no showing that DOT

was in privity with any party in the state court action.

19a

Finding that § 1738 does not apply to agencies does not end

our inquiry, however, as courts “have frequently fashioned

federal common-law rules of preclusion in the absence of a

governing statute.” Jd. at 794, 106 S. Ct. at 3224. The Supreme

Court fashioned such a rule in Elliott, requiring federal courts to

grant preclusive effect to findings of fact by state agencies in

most subsequent federal actions. See id. at 796-99, 106 S. Ct. at

3224- 26 (holding also that no preclusive effect should be given

to state administrative agency factfinding in Title VII cases). To

determine whether common law preclusion should apply here,

we consider whether the policies favoring full faith and credit,

including repose and federalism concerns, See generally Allen

v. McCurry, 449 U.S. 90, 95-96, 101 S. Ct. 411, 415, 66 L-Ed.2d

308 (1980) (“[R]es judicata and collateral estoppel not only

reduce unnecessary litigation and foster reliance on

adjudication, but also promote the comity between state and

federal courts that has been recognized as a bulwark of the

federal system.”’), outweigh the federal interests present here,

See Midgett, 603 F.2d at 845 (“A judgment or decree of a state

court whose effect would restrain the exercise of sovereign

power of the United States by imposing requirements that are

contrary to important and established federal policy would not

be given effect in a federal court.”); cf Yellow Freight, 930

F.2d at 320 (discussing policy reasons why an agency should

not be bound by § 1738). See generally American Mannex

Corp. v. Rozands, 462 F.2d 688, 690 (Sth Cir. 1972) (suggesting,

in dicta, that § 1738 can be trumped by “well-defined

[competing] federal policies”); 18 Charles Alan Wright, et al.,

Federal Practice and Procedure § 4469, at 662-63 (1981) (“In

various settings, federal courts have found that vital federal

interests warrant rejection of the res judicata rules that state

courts would apply to their own judgments.”).

Applied here, the competing policy considerations weigh

against requiring DOT to grant preclusive effect to the state

20a

court proceeding.’ Cf. Yellow Freight, 930 F.2d at 320-22

(holding that the NLRB was not bound by an earlier arbitrator's

factfinding, even though the arbitrator's ruling was affirmed by

a state court, because essential evidence was not presented to

the arbitrator). First, the importance of repose here, while not

insubstantial, is limited by the posture of this case. At the time

the state court issued its ruling, parallel agency proceedings

were already underway.

Second, this case involves aviation regulation, an area where

federal concerns are preeminent and where DOT is charged with

representing those concerns. See Northwest Airlines, Inc. v.

County of Kent, 510 U.S. 355, 366-67, 114 S. Ct. 855, 863, 127

L.Ed.2d 183 (1994) (“The Secretary of Transportation is

charged with administering the federal aviation laws....”’);

Northwest Airlines v. Minnesota, 322 U.S. 292, 303, 64 S. Ct.

950, 956, 88 L.Ed. 1283 (1944) (Jackson, J., concurring)

(“Congress has recognized the national responsibility for

regulating air commerce. Federal control is intensive and

exclusive.”), quoted in City of Burbank v. Lockheed Air

Terminal Inc., 411 U.S. 624, 633-34, 93 S. Ct. 1854, 1860, 36

L.Ed.2d 547 (1973); 49 U.S.C. § 46101(a)(2) (granting the

Secretary of Transportation discretion to “conduct an

investigation ... about ... any question that may arise under this

part’). Additionally, this case involves the operation of flights

from Love Field, a matter on which Congress has twice

’ Because we resolve the matter on these grounds, we do not reach

DOT's alternative argument that the state court judgment should not be

granted preclusive effect because a Texas court would not grant the judgment

preclusive effect. See generally Matsushita Elec. Indus. Co., Ltd. v. Epstein,

516 U.S. 367, 374, 116 S. Ct. 873, 878, 134 L.Ed.2d 6 (1996) (“When faced

with a state court judgment relating to an exclusively federal claim, a federal

court must first look to the law of the rendering State to ascertain the effect

of the judgment.”).

2la

specifically legislated. DOT's interpretive order is the first time

that DOT, the agency specifically charged with administering

the Wright Amendment, has interpreted the Shelby Amendment.

See Cramer v. Skinner, 931 F.2d 1020, 1024 (Sth Cir. 1991)

(noting that “[t]he individual defendants in their official

capacity, DOT, and DOT's Office of Aviation Analysis enforce

the [Wright] amendment’); State of Kansas v. United States, 16

F.3d 436, 438 (D.C. Cir. 1994) (same). To allow the state court

effectively to foreclose the administering agency from further

consideration of the Shelby Amendment as to the parties which

appeared before the state court would trump the key federal

interests that motivated Congress to create DOT and give it

authority over these laws.®

Finally, applying full faith and credit principles to DOT in

this case would lead to inconsistent results. Cf Access

Telecommunications v. Southwestern Bell Tel. Co., 137 F.3d

605, 608 (8th Cir. 1998) (noting that the primary jurisdiction

doctrine, under which courts refer matters to agencies when the

matters are within agency jurisdiction, is motivated in part by

the desire “to promote uniformity and consistency within the

particular field of regulation”). Some of the parties before DOT

are litigating these issues for the first time. Forcing DOT to

grant preclusive effect to the state court ruling would lead to

inconsistent application of the Shelby Amendment to the parties

that did not appear before the state court.

* These key federal interests are arguably lessened by the fact that DOT

did not attempt to stay or intervene in the state court action; presumably if

the federal interests were that important, DOT would have taken one of these

actions. DOT's inaction is partially justified by the limited amount of time it

had to intervene, as the state court only stayed the proceedings before it for

one month. 40

22a

In sum, because of the important federal interests here, we

decline to hold that common law preclusion doctrines apply in

this case. Instead, DOT properly declined to give preclusive

effect to the state court judgment.’

The Fort Worth Petitioners also argue that DOT's actions

violated the Anti-Injunction Act, 28 U.S.C. § 2283, which

provides that “[a] court of the United States may not grant an

injunction to stay proceedings in a State court except as

expressly authorized by Act of Congress, or where necessary in

aid of its jurisdiction, or to protect or effectuate its judgments.”

28 U.S.C. § 2283. We “follow the weight of authority in

holding that [i]f an injunction would be barred by § 2283, this

” We reject the Fort Worth petitioners’ invocation of the so-called

Rooker-Feldman doctrine for the same reasons. “In a nutshell, the doctrine

holds that inferior federal courts do not have the power to modify or reverse

state court judgments.” Matter of Reitnauer, 152 F.3d 341, 343 (Sth Cir.

1998) (applying the doctrine where “[t}he district court ... made apparent its

displeasure with the manner in which the state court interpreted and applied

state law [and] such displeasure formed the basis for its reversal of the

bankruptcy court's order”). As we have previously noted, the Rooker-

Feldman doctrine is “very close if not identical to the more familiar principle

that a federal court must give full faith and credit to a state court judgment.”

Gauthier v. Continental Diving Servs., Inc., 831 F.2d 559, 561 (Sth Cir.

1987). Thus, we have not applied the Rooker-Feldman jurisdictional bar in

cases where we have found it inappropriate to require a federal court to give

full faith and credit to a state court judgment. See id. (not applying the

Rooker-Feldman doctrine where full faith and credit does not apply because

the state court judgment would not be entitled to preclusive effect under state

law). We follow this practice here. The Fort Worth petitioners have not

cited any cases where the Rooker-Feldman doctrine has been applied to an

agency ruling on matters of federal law previously addressed by a state court.

In light of the above-noted concerns, we See no reason to extend the

doctrine to this context.

23a

should also bar the issuance of a declaratory judgment that

would have the same effect as an injunction.” Texas Employers’

Ins. Ass'n v. Jackson, 862 F.2d 491, 506 (Sth Cir. 1988) (en *

banc) (quotation omitted) (alteration in original); see also

Travelers Ins. Co. v. Louisiana Farm Bureau Fed'n, Inc., 996

F.2d 774, 776 (Sth Cir. 1993) (“[T]he district court may not

consider the merits of the declaratory judgment action when 1) a

declaratory defendant has previously filed a cause of action in

state court against the declaratory plaintiff, 2) the state case

involves the same issues as those involved in the federal case,

and 3) the district court is prohibited from enjoining the state

proceedings under the Anti-Injunction Act.”) (emphasis in

original).

As a federal agency, DOT's proceedings are exempt from the

terms of § 2283, which applies only to proceedings 1n a “court

of the United States.” 28 U.S.C. § 2283; see also id. § 451 (“As

used in this title [,] [t]he term ‘court of the United States’

includes the Supreme Court of the United States, courts of

appeals, district courts constituted by chapter 5 of this title,

including the Court of International Trade and any court created

by Act of Congress the judges of which are entitled to hold

office during good behavior.”). Further, even where an action is

ongoing in a “court of the United States,” an agency's presence

as a party, together with the federal interest the agency

represents, can trump the application of § 2283. See Mitchum v.

Foster, 407 U.S. 225, 235-36, 92 S. Ct. 2151, 2158-59, 32

L.Ed.2d 705 (1972) (“[A] third exception [to § 2283], more

recently developed permits a federal injunction of state court

proceedings when the plaintiff in the federal court is the United

States itself, or a federal agency asserting ‘superior federal

interests.’ *); Texas v. United States, 837 F.2d 184, 186 (Sth Cir.

1988) (“Moreover, because a federal agency seeks the

injunction, the ICC's motion is not directly precluded by the

strictly enforced rule of the Anti-Injunction Act, 28 U.S.C.

24a

§ 2283.”); United States v. Lemaire, 826 F.2d 387, 388 n.2 (5th

Cir. 1987) (“The Act does not prevent the United States, or one

of its agencies, from acting to protect a federal interest.”). Thus,

§ 2283 does not restrict our ability to review the agency's

decision.

Fort Worth's authority to the contrary is unavailing. The case

before us is clearly distinguishable from United Credit Bureau

of America, Inc. v. NLRB, 454 U.S. 994, 102 S. Ct. 539, 70

L.Ed.2d 404 (1981) (Rehnquist, J., dissenting from denial of

certiorari), Where then-Justice Rehnquist dissented from the

denial of certiorari to argue that “the concerns of federalism and

comity comprehended by the Anti-Injunction Act should ...

apply to the NLRB.” /d. at 997-98, 102 S. Ct. at 541.'° In

United Credit, the NLRB ordered a party to dismiss a state court

action. It did this without “consider [ing] whether the state-

court proceeding interfered with its ability to consider or

dispose of [the agency petitioner's] charges.” United Credit,

454 U.S. at 998, 102 S. Ct. at 541 (noting that the state court

had not yet acted). Here, the state court action, at least at the

trial level, was completed, thus lessening DOT's intrusion and

strengthening its reasons for issuing its own interpretation of the

legal issues. Also, DOT's interest here is not its interest in

resolving an individual petitioner's claim, as in United Credit,

but rather its interest in avoiding piecemeal application of a

federal aviation statute.

Additionally, we do not believe that DOT vioiated general

principles of federalism by issuing its ruling. Although the Fort

Worth Petitioners correctly note that state courts are competent

to resolve matters of federal law, this does not prevent federal

'° We note in passing that, as a denial of a petition for certiorari, the

United Credit Bureau opinion is not binding authority. See Teague v. Lane,

489 U.S. 288, 296, 109 S. Ct. 1060, 1067, 103 L.Ed.2d 334 (1989).

25a

agencies from acting within their authority to protect federal

interests. Accordingly, the cases that the Fort Worth Petitioners

cite in support of their federalism arguments are clearly

distinguishable. See, e.g., Giles v. NYLCare Health Plans, Inc.,

172 F.3d 332, 339 (5th Cir. 1999) (holding that a district court

properly remanded a state law claim after dismissing federal

claims, even though one of the state law claims involved a

preemption defense, because “state courts, being of equal

dignity with federal courts, are equally competent to address

that potential defense’’).

As a final procedural objection, the Committee argues that

DOT improperly ruled without first preparing an environmental

impact statement (“EIS”). The National Environmental Policy -

Act (“NEPA”) directs “all agencies of the Federal Government

... [to] include [an EIS] in every recommendation or report on

proposals for legislation and other major Federal actions

significantly affecting the quality of the human environment.”

42 U.S.C. § 4332(2). DOT found that it did not need to prepare

an EIS, but because it is not charged with administering NEPA,

its decision to not prepare an EIS is not entitled to deference.

See American Forest and Paper Ass'n, 137 F.3d at 297.

The Committee argues that DOT's “decision” to allow

increased flights constitutes a “major Federal action” under

NEPA. We disagree. Agency decisions which “do not entail the

exercise of significant discretion” do not require an EIS.

Atlanta Coalition on Transp. Crisis, Inc. v. Atlanta Regional

Comm'n, 599 F.2d 1333, 1344-45 (Sth Cir. 1979). By enacting

the Shelby Amendment, Congress, not DOT, made the decision

to allow additional flights at Love Field. DOT merely issued an

interpretation of federal law that it was required to adopt under

26a

the relevant statutes.'' See Sugarloaf Citizens Ass'n v. FERC,

959 F.2d 508, 513 (4th Cir. 1992) (“Other Circuits have held

that when an agency has no discretion to consider

environmental values implementing a statutory requirement, its

actions are ministerial and not subject to NEPA.”); Goos v.

ICC, 911 F.2d 1283, 1296 (8th Cir. 1990) (“Because the ICC has

not been granted any discretion under section 1247(d) to base its

issuance of an NITU or CITU on environmental consequences,

we agree that it would make little sense to force the ICC to

consider factors which cannot affect its decision....”); Milo

Community Hospital v. Weinberger, 525 F.2d 144, 147 (1st Cir.

1975) (finding that no EIS was necessary where “consideration

of the factors that the appellant -has characterized as

‘environmental considerations’ could not have changed the

Secretary's decision”).'”

“

'' For example, 49 U.S.C. § 41713, which DOT interpreted here, does

not grant DOT discretion because Congress has defined the extent of federal

preemption and has specified which state rights remain. On the other hand,

when DOT applies § 41714(c), governing the award of slots to new entrants,

DOT is clearly granted discretion by the statute. See 49 U.S.C. § 41714(c)

(“If the Secretary finds it to be in the public interest and the circumstances to

be exceptional, the Secretary may by order grant exemptions from the

requirements under subparts K and S of part 93 of title 14, Code of Federal

Regulations, to enable new entrant air carriers to provide air transportation at

high density airports. *) (parentheticals omitted and emphasis added). Thus,

when applying § 41714, DOT follows NEPA. See, e.g., Applications of

Trans States Airlines, Inc., DOT Order 98- 4-21, 1998 DOT Av. LEXIS 159,

at *54-*55 (1998) (conducting an environmental assessment in a § 41714

determination).

The Committee also argues that DOT failed to follow its own

environmental procedures. The Committee relies on an FAA statement of

“Polices and Procedures on Considering Environmental Impacts” which, as

DOT notes, is inapplicable here because it “establishes Federal Aviation

Administration (FAA) policies and procedures.” DOT was not acting under

the auspices of the FAA in this case. Instead, DOT asserts that the relevant

27a

The Declaratory Order stated that DOT intended to rule on

four “federal law issues.” DOT's subsequent Procedural Order

added a fifth legal issue to the agency's docket. We review each

of DOT's rulings in turn.

We first turn to DOT's ruling that the preemption provision of

the Airline Deregulation Act (“ADA”), 49 U.S.C. §

41713(b)(1), preempted Dallas's and Fort Worth's obligations

under the Ordinance. In reaching this decision, DOT also

determined that Dallas's rights as the proprietor of Love Field

did not permit it to bar airlines from operating the services

authorized under the Shelby Amendment. On appeal, the Fort

Worth Petitioners argue that the power to restrict services at

Love Field falls within Dallas's rights as proprietor of the

airport. Thus, they argue, Dallas has an existing contractual

obligation to restrict service at Love Field so as to block airlines

from operating the services permitted under the Shelby

Amendment.

The ADA includes an express preemption provision, §

41713(b)(1), which generally prohibits states from enacting or

enforcing a law or regulation “related to a price, route, or

service of an air carrier.” 49 U.S.C. § 41713(b)(1). At the same

DOT guidelines still require major agency action before undertaking an EIS,

and we agree. See 44 Fed. Reg. 56420, 56424 (1979) (“An EIS shall be

prepared for any proposed major Federal action significantly affecting the

environment.” ); see also id. (requiring an environmental assessment when “a

decision has not been make [sic ] to prepare an EIS,” but noting that the

environmental assessment describes “the environmental impacts of a

proposed action”). The Committee does not cite any contrary authority in its

reply brief.

28a

time, the ADA reserves the state's authority to carry out its

“proprietary powers and rights.” 49 U.S.C. § 41713(b,3)

(hereinafter, the “proprietary powers exception”).

The proper standard of review to apply to DOT's preemption

determination is the subject of extensive debate and briefing

among the parties. It is also an issue of first impression before

us. The Fort Worth Petitioners contend that DOT's

interpretation of the proprietary powers exception should be

afforded no deference because DOT lacks both the authority and

the expertise to interpret this section of the ADA. DOT, Dallas,

and Continental Express argue that DOT's general authority to

administer the ADA inherently includes the power to administer

the statute's preemption provision. Consequently, they argue for

deferential review of DOT's preemption determination under

Chevron.

The Fort Worth Petitioners present several strong arguments

in favor of de novo review. A preemption determination does

indeed involve legal determinations, which are arguably more

within the expertise of the courts. See Colorado Public Utilities

Comm'n v. Harmon, 951 F.2d 1571 (10th Cir. 1991) (adopting a

de novo standard of review because “[a] preemption

determination involves matters of law--an area more within the

expertise of courts than within the expertise of the Secretary of

Transportation”). In reaching its decision, DOT interpreted

existing case law, a role more typically--and perhaps more

appropriately--left to the courts. Beyond this, the task of

defining what constitutes a “proprietary power” has traditionally

been left to the courts. See, e.g., National Helicopter Corp. of

America v. City of New York, 137 F.3d 81 (2d Cir. 1998)

(assessing the validity of restrictions on operation at a heliport).

Additionally, Congress appears to have evinced an intent to

codify the proprietary rights existing when the ADA was

enacted rather than an intent to allow DOT to define proprietary

rights. Cf. Western Air Lines v. Port Authority of New York and

29a

New Jersey, 658 F. Supp. 952, 956 (S.D.N.Y. 1986) (“The

legislative history of Section 1305(b)(1) indicates that the

airport proprietor would be permitted to take those actions

‘presently accepted as valid exercises of proprietary powers.’ **)

(internal citation omitted).

DOT. however, presents strong arguments supporting the

contrary position. DOT is charged with administering the

aviation laws asa whole. See Northwest Airlines, Inc. v. County

of Kent, 510 U.S. 355, 366-67, 114S. Ct. 855, 127 L.Ed.2d 183

(1994) ("The Secretary of Transportation is charged with

administering the federal aviation laws...."). Move significantly,

DOT is the “superintending agency” with respect to the

administration of the ADA. See American Airlines v. Wolens,

513 U.S. 219, 229 n.6, 115 S. Ct. 817 n.6, 824, 130 L.Ed.2d 715

(1995). The First Circuit has come close to holding that this

power encompasses the authority to interpret the preemption

section of the ADA. See New England Legal Foundation v.

Massachusetts Port Authority, 883 F.2d 157, 167 (1st Cir. 1989)

(finding that DOT was one of “two judicial actors with apparent

jurisdiction over the [preemption] subject matter which they

decided” ). Absent any clear evidence to the contrary, we are

nearly persuaded that DOT possesses the authority to interpret

the preemption provision of the ADA and that, consequently, we

should defer to its interpretation of that provision. See Texas Oil

& Gas Ass'n, 161 F.3d at 937. We need not, however, make this

final determination here. Because we conclude that DOT's

ruling that § 41713 of the ADA preempted the Ordinance was

correct under either standard of review, we decline to decide this

issue at this time.

‘

Congress passed the ADA in 1978 in an effort both to end

federal economic regulation of commercial aviation and to

promote competition within the airline industry. Fearful that in

30a

the face of federal deregulation, states would enact conflicting

laws regulating the airline industry, Congress enacted

§ 41713¢(b)(1) of the ADA, which provides that:

Except as provided tn this subsection, a State,

political subdivision of a State, or political

authority of at least 2 States may not enact or

enforce a law, regulation, or other provision

having the force and effect of law related to a

price, route, or service of an air carrier that may

provide air transportation under this subpart.

49 U.S.C. § 41713(b)1); See also New England Legal

Foundation, 883 F.2d at 173 ("In reducing federal economic

regulation of the field ... Congress obviously did not intend to

leave a vacuum to be filled by the Balkanizing forces of state

and local regulation.”). When enacting the ADA, however,

Congress also recognized that airport proprietors--the majority

of which are municipalities, See City of Burbank, 411 U.S. at

635, 93 S. Ct. at 1860--were best equipped to handle local

problems arising at and around their facilities. Accordingly, the

ADA provides that the preemptive effect of § 41713(b)(1) does

“not limit a State, political subdivision of a State, or political

authority of at least 2 States that owns or operates an airport ...

from carrying out its proprietary powers and rights.” 49

U.S.C.A. § 41713(b)(3).

_ The restrictions on service at Love Field under the Ordinance

appear to operate as limitations “relating to ... routes” within the

meaning of § 41713(b)(1), See Western Air Lines, 658 F. Supp.

at 952 (finding that a perimeter rule “relat{ed] to routes”), and

the parties present no significant argument to the contrary.

Consequently, the only issue before us is whether the power to

enforce the restrictions falls within the proprietary powers

exception. The Fort Worth petitioners contend that the

3la

restrictions on service at Love Field fall within Dallas's

proprietary powers.

The precise scope of an airport owner's proprietary powers

has not been clearly articulated by any court. See, e.g., id. at

956 (“The extent of ‘proprietary powers and rights’ has not yet

been established.”). However, several courts have examined

when an airport owner's enactment of a “perimeter rule”’’ or

similar route restriction falls within the proprietary powers

exception. These courts have recognized that local proprietors

play an “extremely limited” role in the regulation of aviation.

See, e.g., id. at 956 (*[A]irport proprietors have an ‘extremely

limited role’ in the system of aviation regulation ...."’) (quoting

British Airways Bd. v. Port Auth., 564 F.2d 1002, 1010 (2d Cir.

1977)). In defining the permissible scope of a proprietor’s

power to regulate under § 41713(b)(3), federal courts have

repeatedly held that an airport proprietor can issue only

“reasonable, nonarbitrary, and nondiscriminatory rules that

advance the local interest.” /d. at 958; see also National

Helicopter Corp. of America, 137 F.3d at 88-89 (limiting the

permissible subject matter of local regulations to “aircraft noise

and other environmental concerns at the local level”); British

Airways, 558 F.2d at 84 (stating that a proprietor “is vested only

with the power to promulgate reasonable, non-arbitrary and

non-discriminatory regulations that establish acceptable noise

levels for the airport and its immediate environs.”); cf. City and

‘An airport perimeter rule “establish{es] maximum permissible

distances of non-stop flights into and out of a given airport.” See Jonathan

Whitman Cross, Airport Perimeter Rules: An Exception to Federal

Preemption, 17 Transp. LJ. 101, 102 (1988). The Wight Amendment itself.

by allowing interstate service to only the four states bordering on Texas.

operates as a perimeter rule. Similarly, because § 9.5 of the Bond Ordinance

has been enforced so as to allow the range of flights permitted under the

Wright Amendment, it effectively operates as a perimeter rule.

32a

County of San Francisco v. FAA, 942 F.2d 1391, 1394 (9th Cir.

1990) (“Congress made it clear, however, that the power

delegated to airport proprietors to adopt noise control

regulations is limited to regulations that are not unjustly

discriminatory.”).

Courts applying this standard have upheld route restrictions

as within proprietary powers when they are targeted at

advancing a specific local interest. To date, courts have

permitted airport proprietors to enact regulations aimed at

monitoring noise levels, See Santa Monica Airport Ass'n v. City

of Santa Monica, 659 F.2d 100, 104 (9th Cir. 1981), tempering

environmental concerns, See National Helicopter of America,

137 F.3d at 88, and managing congestion, see Western Air Lines

Inc. v. Port Authority of New York and New Jersey, 817 F.2d 222

(2d Cir. 1987). See generally Cross, 17 Transp. L.J. at 106 (“An

airport authority's proprietary function permits it to enact

regulations benefitting citizens who live near the airport, such as

airport noise regulations or airport curfews.”’). In each of these

cases, the proposed restriction was targeted at alleviating an

existing problem at the airport or in the surrounding

neighborhood. For example, in Western Air Lines, the Second

Circuit upheld a 1,500-mile perimeter rule enacted by the Port

Authority at LaGuardia Airport as a reasonable means both of

alleviating congestion at LaGuardia and of preserving the

shorthaul status of that facility. See Western Air Lines, 817 F.2d

at 226. More recently, the Second Circuit considered the

validity of a special use permit that imposed significant

restrictions on the use of a local heliport. See National

Helicopter Corp. 137 F.3d 81. Finding that the proprietor

exception allowed municipalities only to promulgate

‘reasonable, nonarbitrary and non- discriminatory’ regulations of

noise and other environmental concerns at the local level,” id. at

88, the Second Circuit upheld only the restrictions that were

aimed at reducing noise or other environmental concerns at the

33a

heliport. Significantly, the court struck down the restriction on

sightseeing routes, finding that “Congress, the Supreme Court,

and we have consistently stated that the law controlling flight

paths through navigable airspace is completely preempted.” Id.

at 92.

The only case which might support the Fort Worth

Petitioners’ view of Dallas's proprietary powers at Love Field is

Arapahoe County Public Airport v. Centennial Express Airlines,

Inc., 956 P.2d 587 (Colo.1998). To the extent that Arapahoe

holds that it is within an airport owner's proprietary powers to

restrict service at a local airport without articulating a viable

purpose for the restriction, we view that case as deviating from

the generally accepted rule that we adopt here. In Arapahoe, the

\Colorado Supreme Court--without finding any purpose for the

restriction beyond the proprietor's bald assertion that it would

“strip” the airport Authority “of its ability and authority to

manage the Airport,” see id. at 591--upheld a municipal

proprietor's ban on all passenger service at Centennial Airport,

see id. at 595. We fear that under the rationale of Arapahoe,

virtually any regional regulation enacted by a proprietor would

fall within the proprietary powers exception. This would

In City of Houston, we touched upon the proprietary rights exception

when we upheld the FAA's authority to enact a | ,000-mile perimeter rule at

Washington National Airport. In that case, the FAA enacted the rule as a

means of limiting traffic at National, preserving the short-haul status of

National, and assuring the utilization of the flagging Dulles Airport nearby.

In relying on City of Houston for support, the Fort Worth Petitioners

overlook the fact that we explicitly avoided engaging in a full analysis of the

preemption provision in that case. Rather, we found that since the ADA

preempted state regulation of routes, the restrictions of § 41713 did not apply

to the FAA, a branch of the federal government. Thus, our decision in City

of Houston does little to advance the Fort Worth Petitioners’ argument.

34a

expand the regulatory role of municipal owners far beyond the

“extremely limited role” envisioned by the ADA.'”

We are not persuaded by the Fort Worth Petitioners’ attempt

to fit the restrictions at Love Field into the existing federal case

law defining the scope of proprietary rights. On its face, the

Ordinance is clearly not aimed at alleviating noise, pollution, or

congestion at Love Field, nor do the Fort Worth Petitioners

assert such claims. Rather, they extract from Western Air Lines

and City of Houston an overly broad rule that it is within an

airport Owner's proprietary powers to allocate traffic between

two airports so as to preserve the shorthaul nature of one

facility. Such a contention misses the import of both cases; that

a proprietor can enact a perimeter rule if it articulates a need for

the restriction. The Fort Worth Petitioners seem to overlook the

Western Air Lines court's repeated emphasis that the primary

goal of the restriction was to reduce congestion at LaGuardia,

and the allocation of traffic between LaGuardia and Kennedy

Airports was a means of attaining this goal. The court

specifically held that “‘a perimeter rule, as imposed by the Port

Authority to manage congestion in a multi-airport system,

serves an equally legitimate local need and fits comfortably

within that limited role, which Congress has reserved to the

' Arapahoe is also factually distinguishable from the present case.

First, while in Arapahoe, the court found that the ban on passenger service

did not constitute a restriction on “rates, routes or services” within the

meaning of the ADA, the restrictions under the Ordinance clearly amount to

route restrictions. Second, the passenger service at issue in Arapahoe had

never been permitted at Centennial Airport. In reaching its conclusion, the

court emphasized that “[t]he power to control an airport's size exists at the

core of the proprietor's function and is especially strong where, as here, the

prohibited use has never been allowed, or even contemplated.” Arapahoe,

956 P.2d at 595. In contrast, passenger flights on planes of all sizes have long

been permitted at Love Field.

35a

local proprietor.” Western Air Lines, 658 F. Supp. at 958.

Similarly, to the extent that City of Houston touched upon the

scope of proprietary powers, we spent the bulk of our opinion

emphasizing the fact that allocation of flights between Dulles

and National was necessary to encourage use of Dulles Airport

and ameliorate the overuse of National. See City of Houston,

679 F.2d at 1187. In neither case was re-allocation of flights

between airports a goal in and of itself.

The fact that the restrictions in the Ordinance do not advance

a local interest articulated in prior case law is not dispositive of

this issue. We do not limit the scope of proprietary rights to

those which have been previously recognized. Cf. Western Air

Lines, 658 F. Supp. at 957 (“Section 1304(b)(1) [recodified as

41713(b)(1) ] does not expressly limit proprietary powers to the

regulation of noise, although presumably Congress would have

so limited the section if that is what it had in mind.”’). Thus, we

are open to assessing whether the restrictions in the Ordinance

are reasonable and non-discriminatory rules aimed at advancing

a previously unrecognized local interest. The Fort Wo,th

petitioners fail, however, to offer a viable alternative

justification for the route limitations that might support

extending the recognized scope of a proprietor’s powers under §

41713(b)(3). To allow enforcement of the Ordinance under the

_ proprietary powers exception extends that exception beyond its

intended limited reach.'°

'° Finally. we need not reach the question of whether there is a “multi-

airport proprietor” requirement in either the case law or the ADA such that a

local proprietor can only enact route restrictions that allocate between two

airports if it owns both facilities. Since we find that the restrictions at issue

here are impermissible regardless of ownership, the issue of whether Dallas

controls both Love Field and DFW is irrelevant to our analysis.

36a

In sum, reviewing DOT's ruling de novo, we affirm the

agency's determination that § 41713(b)(1) of the ADA

preempted the Ordinance's restrictions on operations at Love

Field. Clearly, under the less stringent Chevron review, DOT's

interpretation of the preemption provision would also be

reasonable. Under either standard, DOT's interpretation is

affirmed.’”

We next review DOT's ruling that the Wright Amendment's

“commuter aircraft exemption” authorized carriers using jets

with passenger capacity of 56 seats or less to engage in long-

haul service from Love Field to any city in the United States.

DOT ruled and argues on appeal that the “commuter aircraft

exemption” imposes no geographical limitation on the service

that can be provided with smaller aircrafts and therefore

authorizes longhaul service at Love Field with any aircraft with

a capacity of less than 57 passengers. Not surprisingly,

intervenors Continental Express and Legend Airlines--each of

whom plan to offer longhaul service out of Love Field on

regional or reconfigured jets--agree with this position. The Fort

Worth Petitioners contend that DOT misinterpreted the Love

Field amendments and that the exemption authorizes only short-

haul service at Love Field.

Because the DOT is authorized to administer the Wright and

Shelby Amendments, see Continental Air Lines, Inc. v. Dep't of

Transp., 843 F.2d 1444, 1449 (Sth Cir. 1988) (Here, Congress

fashioned a specific provision which the agency (once CAB,

” DOT alternatively ruled that the Wright and Shelby Amendments

impliedly preempt the cities’ ability to enforce the Ordinance. Because we

find that the amendments expressly preempt enforcement of the Ordinance,

we decline to address this issue here.

37a

now DOT) has been called upon to interpret.”’), we review its

decision under the two-step Chevron analysis.

This inquiry most logically begins with a review of the

statutory text. Subsection (a)(2) of the Wright Amendment

exempts from the general ban against interstate flights at Love

Field “air transportation provided by commuter airlines

operating aircraft with a passenger capacity of 56 passengers or

less.” § 29, 94 Stat. at 48. Section (a) of the Shelby Amendment

defines the term “passenger capacity of 56 passengers or less”

to include “any aircraft ... reconfigured to accommodate 56

passengers or fewer if the total number of passenger seats

installed on the aircraft does not exceed 56.” § 377(a), L11 Stat.

at 1447. A plain reading of these provisions appears to permit

longhaul service at Love Field on a commuter airline with a

passenger capacity of fewer than 5 ag

The slightly more complicated issue here is what type of

aircraft is covered under the “commuter airline’ exemption.

DOT interpreted the commuter airline exemption as applying to

any aircraft--whether a “regional jet” or turboprop plane--with a

capacity of 56 passengers or less. Legend and Continental

Express agree with this interpretation. The Fort Worth

Petitioners, on the other hand, argue that the exemption in

subparagraph (a)(2) of the Wright Amendment applies only to

“commuter aircrafts” and not to regional jets. These differing

views, in addition to Congress's failure to define the term

'* In interpreting the commuter airline exemption in this manner, we

keep in mind that Congress enacted the Love Field amendments with the

intention of preserving Love Field as a primarily shorthaul facility. Cf.

Cramer vy. Skinner, 931 F.2d 1020, 1031 (Sth Cir. 1991). We are, however,

persuaded by DOT's argument that this interpretation will not undermine

Love Field's status as a primarily short-haul airport since both the Wright and

Shelby Amendments still place significant restrictions on the long-haul

service permitted on larger jets.

38a

“commuter airline,” persuade us that the meaning of that term is

ambiguous. See Continental Air Lines, 843 F.2d at 1454 (“The

language of the [commuter airline exemption] is, we are

persuaded, ambiguous.”’). Consequently, we turn to step two of

Chevron and assess the reasonableness of DOT's interpretation.

The Fort Worth Petitioners contend that DOT erred in failing

to interpret the phrase “commuter airline” as a limitation on the

commuter aircraft exemption. As an initial matter, to the extent

that American attempts to resurrect the argument that the term

“commuter airlines” cannot refer to an air carrier offering

longhaul service, we agree with and adopt the rationale of the

District of Columbia Circuit in Continental Air Lines. In that

case, the court upheld as reasonable DOT's interpretation of the

commuter airlines exemption as restricting the type of aircraft

that could operate unrestricted service at Love Field rather than

the class of airlines that could operate longhaul services at the

facility. See id. at 1454-55.

Fort Worth presents a different argument, namely, that the

term “commuter” limits the type of aircraft to the kind of

turboprop aircrafts that were in use at the time the Wright

Amendment was enacted. Regional jets, it contends, “cannot

qualify as ‘commuter’ aircraft.” We disagree. First, Congress

chose not to define “commuter airline” by reference to the kind

of planes with a limited passenger capacity in 1979 and we

decline to define that term for it here. Cf. Continental, 843 F.2d

at 1454 (“First, Congress might have defined ‘commuter

airlines’ with greater specificity by explicitly incorporating

definitional references to agency regulations, but it chose not to

do so. We cannot say ihat Congress meant to incorporate those

regulatory definitions absent indications of its intention to do so

in the statute or the legislative history.”). Furthermore, to

impose such a definition would essentially penalize those

EE ———

ianiesenaencemnensiiiiaieaiaiaminiaaiaiiaaiil

39a

airlines who chose to update their technology as the airline

industry advanced over the past twenty years.

Second, the Fort Worth Petitioners’ definition of a “commuter

airline’ essentially renders the Shelby Amendment meaningless.

The City of Fort Worth's contention that “the Shelby

Amendment merely permits the use of reconfigured jet aircraft

if the aircraft otherwise qualifies as a commuter aircraft” is

nonsensical since, under its own definition of a “commuter

airline,” a reconfigured jet would never qualify as a commuter

plane.” The more rational view is that the term “operating

aircraft with a passenger capacity of 56 passengers or less” as

defined by the Shelby Amendment, defines the term “commuter

airlines” so as to include all planes weighing less than 300,000

pounds, including regional jets, with a passenger capacity of

less than 57. Thus, our reading of the commuter aircraft

exemption leads us to conclude that DOT's interpretation of the

commuter aircraft exemption as permitting carriers using jets

with a 56-passenger capacity to engage in longhaul service at

Love Field is reasonable.

DOT found that, “[f]or the same reasons [the cities could not

directly limit services from Love Field], the DFW Board may

not prohibit or limit an airline's use of a competing airport”

through the use agreements. DOT Order 98-12-27 at 52.

The Fort Worth Petitioners also argue that DOT's interpretation violates

the agency's previous ruling that Congress enacted the Wright Amendment in

an effort to limit operations at Love Field to shorthaul service. In reality,

Congress always permitted limited longhaul service at Love Field. From its

inception, the Wright Amendment allowed for limited longhaul service on

aircrafts with limited capacity and, as stated above, we do not think that

DOT's ruling will radically alter Love Field's status as a primarily shorthaul

airport.

- 40a

Continental Express agrees with this ruling,” while the DFW

Board, Dallas, and Fort Worth argue that the use agreements are

not preempted. We again need not decide whether we must

defer to DOT's ruling on this point because we would uphold it

even if we reviewed it de novo.

In determining whether government contracts are subject to

preemption, the case law distinguishes between actions a state

or municipality takes in a proprietary capacity--actions similar

to those a private entity might take--and actions a state or

municipality takes that are attempts to regulate. The former

type of action is not subject to preemption while the latter is.

For example, in Building & Trades Council v. Associated

Builders, 507 U.S. 218, 226, 113 S. Ct. 1190, 122 L.Ed.2d 565

(1993), the Supreme Court held that a labor contract was not

preempted by the National Labor Relations Act because it was

not “government regulation” but rather “constitute(d]

proprietary conduct.” /d. at 232, 113 S. Ct. at 1199. More

recently, in Cardinal Towing & Auto Repair, Inc. v. City of

Bedford, Texas, 180 F.3d 686 (Sth Cir. 1999), we considered

whether a municipal ordinance and a contract entered into

pursuant to that ordinance were preempted as “law{s],

regulation[s], or other provision([s] having the force and effect of

law.” Id. at 691. Analyzing the contract and the ordinance in the

same manner, we held that neither was preempted because both

intervenor's brief that conditionally supports DOT's ruling on the use

agreement issue. Legend subsequently moved to strike American's proposed

intervenor brief. American's request to intervene is untimely, see Fed.

R.App. P. 15(d), and American has not shown that we should treat its

proposed intervenor brief as a supplemental brief under 5th Circuit Local

Rule 28.5. Accordingly, we DENY American's motions to intervene and to

file a brief as an intervenor and DENY as moot Legend's motion to strike

American's intervenor brief.

4la

were valid exercises of proprietary power rather than

impermissible attempts to regulate. See id. at 693-94; see also

Associated Gen. Contractors of America v. Metropolitan Water

Dist. of S. Cal., 159 F.3d 1178, 1182-83 (9th Cir. 1998) (holding

that labor contracts between a state entity and private groups

were not “laws” because they were not efforts to regulate but

rather “reflect{[ed] an owner's desire to contractually assure

peace and prosperity on particular projects”).

Thus, the critical inquiry here is whether the use agreements

represent a valid exercise of the cities’ proprietary powers. This

question is easily resolved. The use agreements are essentially

coextensive with the Ordinance, indicating in their breadth an

intent to achieve everything achieved by the Ordinance. Cf.

Cardinal Towing, 180 F.3d at 694 (looking to the scope of the

contract and the activity it covered to determine whether it

represented an attempt to regulate). They were enacted to effect

-the Ordinance, and the most recent version of the agreements

directly links the airlines’ obligations to the terms of the

Ordinance: “Airline agrees that it shall conduct its Certificated

Air Carrier Services serving the Dallas/Fort Worth areas to,

from and at the Airport, to the extent required by the terms of

the 1968 Regional Airport Concurrent Bond Ordinance.””"

Given this overlap, for the same reasons we have already

determined that the Ordinance is preempted as an improper

attempt to regulate, we must determine that the use agreements

are preempted as an impermissible attempt to regulate in an area

where the federal government has preempted state regulation.”

>! Earlier versions of the use agreements and the original letter agreements

contain similar language.

Thus. this case is distinguishable from the Supreme Court's recent

decision in Wolens, where the Court addressed a class action by passengers

against an airline over changes the airline made to its air- miles program.

See Wolens, 513 U.S. at 224-25, 115 S. Ct. at 822. The Court first found that

42a

See Skydiving Center of Greater Washington, D.C., Inc. v. St.

Mary's County Airport Comm'n, 823 F. Supp. 1273, 1284 (D.

Md. 1993) (finding that when federal law preempted a

municipal corporation's ban on off-site parachute landings, it

also preempted lease provisions between the corporation and the

skydiving center that incorporated this ban by reference).

— The parties favoring the use agreements contend that even if

the use agreements were preempted, the signatories waived their

preemption rights by voluntarily entering into the agreements.

DOT rejected this argument by finding that any waiver was

invalid as violative of public policy. See, e.g., Brooklyn Sav.

Bank v. O'Neil, 324 U.S. 697, 702-04, 65 S. Ct. 895, 900-01, 89

the passengers’ state consumer protection act claims were preempted by

federal law, because their claims related to “rates” and “services.” See id. at

228, 115 S. Ct. at 823-24. The Court proceeded to find, however, that the

plaintiffs could still pursue contractual claims against the airlines because.

unlike the consumer protection statute, the contracts were “privately ordered

obligations” which “did not amount to a State's enact{ment] or enforce|ment]

{of} any law.” /d. at 228-29, 115 S. Ct. at 824 (quotations omitted)

(alterations in original). It based this finding in part on the fact that

“[mJarket efficiency requires effective means to enforce private agreements.”

Id. at 230, 115 S. Ct. at 824.

As several of the parties note, Wolens is distinguishable from this case

because it did not involve a contract entered into by a state. Instead, the

contracting parties in Wolens were private actors. Thus, the only question of

state regulation in Wolens was the more tangential question of whether the

contract could be enforced in state court. See id. at 229 0.5, 115 S.Ct. at 824

n.5.

Additionally, although Wolens referred to the importance of contracts in

ensuring “market efficiency.” there has been no convincing showing here

that the parties entered into the use agreements for this purpose. Instead. it

seems that they entered into the use agreements to implement an agreement

between the cities to regulate airport use in the Dallas-Fort Worth area.

43a

L.Ed. 1296 (1945) (noting “that a statutory right conferred on a

private party, but affecting the public interest, may not be

waived or released if such waiver or release contravenes the

statutory policy,’ and holding that in the case before it,

employees could not wa‘ve their private rights to liquidated

damages because of the public interest at stake).

We need not address the waiver issue because we find it

inapplicable here. Section 41713 does not expressly announce

affirmative rights for airlines, but instead bars states from

regulating in certain areas. The airline signatories cannot

“waive” this preemption because there is no indication that the

federal preemption is limited to granting them individual rights.

Cf. Niswonger v. American Aviation, Inc., 411 F. Supp. 769,771

(E.D. Tenn. 1975) (holding, without analysis, that “[t}he lease

indenture of June 16, 1969 between American and the authority

violates 49 U.S.C. § 1349(a), a statute enacted for the protection

of the public, in so far as it grants American the exclusive right

for the use of the landing area and the air navigation facility at

the airport’).

Finally, we review DOT's ruling that the Wrigh. Amendment

permits an airline to offer through service from Love Field to

points outside the Love Field service area as long as the airline

uses a city within Texas as a connecting yom and a 56-

pansenge aircraft to get to that point. 23 While DOT,

** As an initial matter. we clarify the precise issue addressed in DOT's

Declaratory Order. DOT purportedly determined “[w Jhether the Wright and

Shelby Amendments allow an airline to offer through service from Love

Field to points outside the seven-state area within which unrestricted service

is permitted, if the airline uses a city within the seven-state area as a

connecting point and uses aircraft with no more than 56 seats for its flights

44a

Continental Express, and Legend Airlines argue that we should

uphold this ruling, every other party to this action--Dallas, Fort

Worth, the DFW Board, Southwest Airlines, and American

Airlines--contends that permitting an airline to offer through

service between Love Field and “the world” violates both the

plain meaning of and the congressional intent behind the Wright

Amendment. Once again, since DOT is charged with

administering the Wright Amendment, we review its ruling

under the two-step Chevron analysis. See Texas Oil & Gas

Ass'n, 161 F.3d at 937-38.

This issue arose from Continental Express's decision to offer

and advertise through service between Love Field and “the

world.” Continental Express flies passengers from Love Field

to Houston's Intercontinental Airport on an aircraft with a

maximum capacity of 56 passengers and then transfers them to

worldwide flights on large jets. Passengers taking advantage of

this service receive one ticket and, though they must change

planes, do not have to reclaim and recheck their luggage at the

connecting point.

As discussed above, subsection (a)(2) of the Wright

Amendment excludes from section (a)'s general prohibition

against interstate transportation flights out of Love Field that are

operated on an aircraft with a capacity of 56 passengers or less.

Subsection (c) of the Amendment permits flights between Love

Field and any point in Texas or one of the four contiguous states

between Love Field and the connecting point.” Declaratory Order at 18

(emphasis added); see also DOT Procedural Order at 3 (Sept. 3, 1998). The

substance of DOT's ruling, however, is geared towards the specific service

offered by Continental Express and therefore considered solely whether the

Love Field amendments permit an airline to offer through service through a

point within Texas. We limit the scope of our review to the narrower

question actually resolved by DOT.

45a

(later expanded to seven) on any size aircraft as long as “(1)

“ such air carrier does not offer or provide any through service or

ticketing with another air carrier or foreign air carrier, and (2)

such air carrier does not offer for sale transportation to or from,

and the flight or aircraft does not serve, any point which is

outside any such State.” § 29, 94 Stat. at 48.

DOT interpreted subsection (a)(2) as authorizing the service

offered by Continental Express. More specifically, DOT reads

the commuter airlines exemption to exempt planes with a

passenger capacity of less than 57 from all restrictions in the

Wright Amendment. Under this interpretation, the restrictions

on service in subsection (c)--including the restrictions on

through service--do not apply to aircrafts operating under the

commuter airline exemption. In contrast, the Fort Worth

Petitioners, Southwest Airlines, and the City of Dallas contend

that DOT's interpretation violates the plain language of the

Wright Amendment. Under their interpretation of the statute,

the restrictions on service in subsection (c)(2) apply to both

commuter flights under subsection (a)(2) and flights on large

aircrafts.

These two plausible yet conflicting readings of the relevant

provisions of the Wright Amendment, coupled with a lack of

legislative history illuminating the proper interaction between

subsections (a)(2) and (c)(2), convince us that Congress did not

speak directly to the issue before us. Accordingly, we move to

step two of Chevron and inquire whether DOT's interpretation is

a reasonable one. Under Chevron, an agency's interpretation is

“reasonable” if it is “not patently inconsistent with the statutory

scheme.” See Continental, 843 F.2d at 1452 (citations omitted).

We need not agree with DOT's interpretation in order to uphold

it as reasonable. See Exxon Corp. v. Lujan, 970 F.2d 757, 761

(10th Cir. 1992) ( “The agency's interpretation need not be the

only one it could have adopted, or the one that this court would

46a :

have reached had the question initially arisen in a judicial

proceeding.”’) (citation omitted).

We are persuaded that DOT's interpretation of the Wright

Amendment is a permissible one within the meaning of

Chevron. DOT grounds its ruling largely on the argument that

by imposing an express restriction on through service on large

jets operating under subsection (c)(2) but declining to impose a

similar restriction on commuter planes operating under section

(a)(2), Congress was evincing its intent to permit small aircrafts

to fly without such a restriction.” We view this reading of the

amendment as reasonable and not inconsistent with a statutory

scheme aimed at preserving Love Field as a primarily shorthaul

facility while still allowing some longhaul service. See H.R.

Conf. Rep. 96-716, at 24 (1979), reprinted in 1980

U.S.C.C.A.N. 78, 86 (stating that the Wright Amendment

“embodies a compromise which permits limited commercial

passenger service in interstate transportation at Love Field’).

This is not to say that we find DOT's interpretation to be the

only or the best reading of the Wright Amendment. In order to

™* Each party opposing DOT's position argues that it conflicts with the

agency's 1985 Order holding that Continental could not provide interlining

service on a large jet through a connecting point in Texas. See Love Field

Amendment Proceeding, DOT Order 85-12-51, 1985 WL 57886 (1985). In

that interpretive proceeding, DOT addressed whether airlines could provide

interlining service exclusively on large planes. There, DOT essentially

agreed with an earlier CAB ruling that an air carrier could not “evade the

[Wright] Amendment's restrictions by providing flights, for example,

between Love Field and Houston and then continuimg the flights between

Houston and points outside the five-state area.” 1985 WL 57886, at *

| 1(citation omitted). We agree with DOT that its prewious interpretation can

be distinguished on the grounds that DOT premised jits earlier order on an

interpretation of section (¢2) of the Wright Ame:ndment, whereas the

agency's decision here relies primarily on an interpretiation of section (a).

47a

reach its decision, DOT necessarily defined “air transportation

on 56-passenger capacity planes” as including air service

provided in part by such aircrafts. Similarly, it implicitly

defined intrastate service as including flights with only an

intrastate portion. These interpretations strain the meaning of

both terms. Furthermore, we note with concern the potential

impact of DOT's ruling. While it seems unlikely that permitting

interstate service outside of the Love Field service area on small

planes would have any impact on DFW's role as the Dallas

area's primary long-haul facility, it seems significantly more

likely that following the DOT ruling, airlines who already

operate small aircrafts will commence interlining service

connecting in Houston or another Texas airport. However,

determinations of this nature are directly within DOT's -

expertise, not ours, and we will not substitute our judgment on

aviation-related issues for their reasonable one. Accordingly,

we affirm DOT's ruling as a reasonable interpretation of the

Wright Amendment. |

For the foregoing reasons, we DENY the petitions for review

and AFFIRM DOT's orders.

48a

APPENDIX B

Posted 12/22/98 Order 98-12-27

[LOGO] 6:00 P.M. SERVED December 23, 1998

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 22nd day of December, 1998

LOVE FIELD SERVICE INTERPRETATION

PROCEEDING

Docket OST-98-4363

DECLARATORY ORDER

The Cities of Dallas and Fort Worth agreed in 1968 to

create Dallas-Fort Worth International Airport (“DFW”) as

the metropolitan area’s primary airport. The two cities agreed

to phase out service at their local airports, which included

Love Field, owned and operated by the City of Dallas, and

cause the airlines serving the area to use DFW for all

interstate flights. The cities’ goal of prohibiting all interstate

service at Love Field conflicted with Southwest Airlines’

plans to use the airport for interstate service. Congress

therefore enacted a federal statute authorizing a limited

amount of interstate service at Love Field. Section 29 of the

International Air Transportation Competition Act of 1979, 94

Stat. 35, 48-49 (1980) (“the Wright Amendment’). Last year

Congress amended the Wright Amendment to authorize

additional interstate service at Love Field. Section 337 of the

Department of Transportation and Related Agencies

Appropriations Act, 1998, P.L. No. 105-66, 111 Stat. 1425,

1447 (October 27, 1997) (“the Shelby Amendment’).

49a

In response to Congress’ enactment of the Shelby Amend-

ment, Fort Worth filed a suit in the Texas state courts seeking

to compel Dallas to block any airline from operating the

additional types of service authorized by that statute. Fort

Worth’s filing led to additional litigation in the state and

federal courts, including a declaratory judgment suit filed by

Dallas against this Department and Fort Worth. In general,

Fort. Worth, joined by American Airlines and the DFW

Board, contend that, under the cities’ 1968 agreement, Dallas

may allow airlines to operate only those Love Field services

permitted by the Wright Amendment. Dallas, Continental

Express, Southwest Airlines, and Legend Airlines (a

proposed new entrant that plans to operate longhaul service

from Love Field with aircraft reconfigured to hold no more

than 56 seats) contend that the federal law overrides the

cities’ agreement and that Dallas must allow airlines to

operate the additional services authorized by the Shelby

Amendment.

The litigation led most of the parties to ask the Department

to intervene in some manner in the dispute. The Department

began this proceeding to issue an interpretation of the

meaning of the relevant federal statutes in light of the parties’

requests and the importance of the issues. Order 98-8-29

(August 25, 1998). This Department, including the Federal

Aviation Administration (“FAA”), is responsible for

administering the relevant statutes. See, e.g., Cramer v.

Skinner, 931 F.2d 1020, 1024 (Sth Cir. 1991), cert. denied,

502 U.S. 907. The Department's issuance of an order

addressing issues involving Love Field is not without

precedent. The Department held a similar proceeding in 1985

in order to resolve other disputes over the interpretation of the

Wright Amendment. Order 98-8-29 at 1, 3, citing Love Field

Amendment Proceeding, Order 85-12-81 (December 31,

1985). The Court of Appeals affirmed the Department's

interpretation of the Wright Amendment. Continental Air

Lines v. DOT, 843 F.2d 1444 (D.C. Cir. 1988)

50a

The Department has received comments and reply com-

ments from all of the parties in the litigation, as well as

several airport parties, the unions representing the pilots at

American and Southwest, the Love Field Citizens Action

Committee, and Delta Air Lines. In general, the parties in the

litigation have taken the same position in their pleadings as

they have in court. Fort Worth, American, and the DFW

Board also urge the Department to dismiss this proceeding,

while Dallas, Southwest, Continental Express, and Legend

assert that the Department should issue a ruling on the federal

law issues.

After considering all of the parties’ arguments, the

Department has concluded that it has the authority and

responsibility to issue rulings on the federal law issues

presented by the dispute over additional airline service at

Love Field. The Department finds that the restrictions on

Love Field service sought by Fort Worth, American Airlines,

and the DFW Board are contrary to federal law and that the

Wright and Shelby Amendments largely permit (i)

unrestricted longhaul service with aircraft containing a

passenger capacity of 56 passengers or less and (ii) flights

with larger aircraft to cities in Kansas, Mississippi, and

Alabama, as explained in this order. The Department is

simultaneously issuing a separate order that addresses the

parties’ various procedural motions in this proceeding.

The Department's decision that Dallas may not block

airlines from operating services authorized by the Shelby

Amendment reflects Congress” intent in enacting the Wright

and Shelby Amendments and follows earlier decisions by the

courts and federal agencies interpreting the relevant federal

statutes.

This decision is also consistent with the FAA‘s recent

preliminary determination in an administrative proceeding

that a Colorado airport may not prevent an airline from

operating scheduled service when the airport allowed

_— SS

S5la 7

comparable flight operations by other firms. Centennial

Express Airlines et al. v. Arapahoe County Public Airport

Authority, FAA Docket Nos. 16-98-05 et al., Director's

Determination (issued August 21, 1998).

The Department is not holding that Dallas has no authority

to limit the level of operations at Love Field. Airport

operators may not regulate airline routes, as Fort Worth seeks

to do, but airport owners have authority to regulate most

aspects of airport operations. The Department's interpretation

here does not place in question the legitimate management

rights of airport owners. The Department is also basing its

decision on current circumstances. No one has tried to show

in this proceeding that the additional services authorized by

the Shelby Amendment could jeopardize DFW's role as the

area's principal airport.

FACTUAL AND LEGAL BACKGROUND

The Cities’ Agreement to Build DFW and Phase-Out Ser-

vice at the Local Airports

The restrictions on Love Field service initially grew out of

the two cities’ settlement of a long-standing dispute over the

Dallas-Fort Worth area’s airline operations. For many years

Dallas and Fort Worth operated separate airports (Love Field

was the Dallas airport) and fought over which airport should

be the metropolitan area's principal airport. The two cities

resolved the dispute in the 1960s by agreeing to build DFW

to replace their local airports and to end virtually all airline

service at Love Field and Fort Worth’s local airports. The

cities’ agreement resulted in large part from the threat by the

Civil Aeronautics Board (“the Board”) that it might

consolidate all of the area’s service at one of the local airports

if the cities did not settle their dispute. See City of Dallas,

Texas v. South-west Airlines, 371 F.Supp. 1015, 1019-1021

(N.D. Tex. 1973), aff'd on different grounds, 494 F.2d 773

(Sth Cir. 1974).

52a

Before the cities settled their dispute, Fort Worth’s major

airport was Greater Southwest International Airport, which

was demolished as a result of DFW's construction. Fort

Worth has another airport, Meacham Field, still useable by

airlines. Love Field was the Dallas airport used by the

scheduled airlines.

Each airline then serving Love Field under certificate

authority granted by the Board agreed to operate all of its

interstate service at DFW. See City of Dallas, Texas, supra,

371 F. Supp. at 1020-1021. Southwest, however, was oper-

ating intrastate flights under state authority and refused to

move. Its refusal led to years of litigation, as described below.

The Wright Amendment has allowed Southwest to provide

interstate service from Love Field and points in the four states

bordering Texas. Despite Southwest's continuing use of Love

Field for interstate service, DFW became the area’s primary

airport, as the cities desired, and has grown from 11.3 million

enplaned passengers in 1979 to 60.5 million enplaned

passengers in 1997. Continental Express Reply at 2.

Dallas and Fort Worth currently own DFW, which is

managed by the DFW Board. The DFW Board is a local

governmental body created and authorized under state law to

be the owner and operator of DFW.

The Terms of the Bond Ordinance

As part of their agreement, the two cities jointly passed a

bond ordinance, the 1968 Regional Airport Concurrent Bond

Ordinance (“the Bond Ordinance”). Whether the Bond

Ordinance limits Love Field service, and whether Dallas may

enforce any such limitations, lie at the heart of the parties’

current dispute. Exhibit 8 to the DFW Board's comments is a

copy of the Bond Ordinance. The key provision is section 9.5,

which obligated each city to move scheduled interstate

services to DFW as far as “legally permissible.” Section 9.5A

sets forth the cities’ obligation to transfer interstate airline

services to DFW:

53a

It is acknowledged and understood by the Cities that

they, in Love Field, Redbird, GSIA, and Meacham Field,

own and operate airports which by their nature are

potentially competitive with the operation of the

Regional Airport [DFWJ]. It is further acknowledged

that and recognized that the revenues to be derived from

those airport facilities are not, under the terms of this

Ordinance, pledged to the payment of the Bonds, except

under the circumstances described in Section 6.3 hereof.

Accordingly, the Cities each with respect to its own

individually owned airport facilities, as above named,

hereby covenant and agree that from and after the

effective date of this Ordinance, shall take such steps as

may be necessary, appropriate, and legally permissible

(without violating presently outstanding legal

commitments or covenants prohibiting such action), to

provide for the orderly, efficient and effective phase-out

at Love Field, Redbird, GSIA and Meacham Field, of

any and all Certificated Air Carrier Services, and to

transfer such activities to the Regional Airport effective

upon the beginning of operations at the Regional

Airport.

This section gives the DFW Board some authority to waive

this restriction:

From time to time hereafter, the [DFW Board] may

review the effect and application of such covenant, and

by concurring action of not less than eight (8) of its

members, the Board may reasonably limit its scope and

effect and may waive its application in specific instances

if it shall first determine that such action is necessary (1)

in the interest of public safety; (2) in the interest of

prudent and efficient operations at [DFW]; or (3) in the

interest of satisfying an overriding public need for

decentralized Certificated Air Carrier Services in the

Dallas-Fort Worth metropolitan region considered as a

whole.

54a

The DFW Board may not grant such a waiver if doing so

would substantially reduce DFW's revenues as defined in the

agreement,

Related obligations are contained in Section 9.5B of the

Bond Ordinance, which reads in part as follows:

In addition to the covenant of the Cities contained in

{paragraph 9.5A), the Cities further agree that they will

through every legal and reasonable means promote the

optimum development) of the lands and facilities

comprising the Regional Airport) at the — earliest

practicable date, thus to assure the receipt of Gross

Revenues therefrom to the maximum extent possible,

and neither the Cities nor the [DFW Board] will

undertake with regard to the Regional Airport, Love

Field, GSIA, Meacham Field or Redbird, any action,

implement any policy, or enter into any agreement or

contract which by its or their nature would be

competitive with or in) opposition to the optimum

development of the Regional Airport and the use of its

lands and facilities at the earliest practicable date; and

none of the airports of the Cities shall be put to or

developed for any use which by the nature thereof the

optimum use and development of the Regional Airport,

including its air and land space, at the earliest practicable

date will be impaired, diminished, reduced or destroyed.

The Bond Ordinance’s definition of “Certificated Air Car-

rier Services” includes (i) scheduled interstate services

operated under certificate authority granted by the Board or

any successor agency, (ii) scheduled services operated by

foreign airlines under authority granted by the Board or any

successor agency, and (iil) scheduled intrastate services

operated under authority granted by the Texas Aeronautics

Commission or any successor agency. The definition

excludes services provided by “air taxis” under exemption

authority granted by the Board or the Texas agency. Section

2.1G.

iia

55a

The Bond Ordinance by its terms does. not prohibit all

interstate service at Love Field. It conditions the cities’

obligation to transfer services to DFW by requiring them to

take that action “as may be necessary, appropriate, and

legally permissible (without violating presently outstanding

legal commitments or covenants prohibiting such action).” As

explained below, in the first round of litigation over

Southwest's use of Love Field, the district court read the

Bond Ordinance as requiring the phase-out of interstate

service only insofar as permitted by law. City of Dallas,

supra, 371 F.

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