Guidebook for Through-the-Fence Operations (2014)

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32 CHAPTER THREE LEGAL INTERESTS AND PRINCIPLES 3.1 Introduction 3.2 Legal Interests 3.3 Legal Principles Established Through FAA Decisions 3.4 Legal Principles Established Through Court Rulings 3.5 Wrap-Up 3.1 INTRODUCTION In addition to federal and state obligations (discussed in Chapter 2: Airport Sponsor Obligations), legal interests and principles pertaining to TTF operations have been established through a multitude of FAA decisions and court rulings. Beyond the FAA decisions and court rulings discussed in this chapter, the U.S. Constitution (Constitution) protects the rights of people to freely acquire, use, and dispose of property. The Fifth Amendment of the Constitution states “… nor shall private property be taken for public use, without just compensation.” Further, the Fourteenth Amendment of the Constitution states “… nor shall any State deprive any person of life, liberty, or property, without due process of law…” While the U.S. Supreme Court has taken steps to better define the Fifth and Fourteenth Amendments as it pertains specifically to property rights, the U.S. Congress has not adopted significant legislation addressing property rights. In addition to the Constitution and limited federal law, state legislatures, agencies, and courts have varying laws, decisions, and rulings related to property rights. As a result of the state-to-state variations and nuances, this guidebook does not address state laws, decisions, and rulings relating to property rights and TTF operations. In the alternative, this chapter discusses the legal interests and principles that are based on federal laws, FAA decisions, and court rulings, which are common to all states. Airport management and policymakers should seek legal counsel in these areas to gain a better understanding of the variations and nuances that have been established within the state that the airport sponsor operates within. Regardless of the type of property owner or user (i.e., an entity that holds certain property rights through an agreement), each party has certain property rights commonly known as a “bundle of rights,” as depicted in Figure 3-1. However, a property owner may voluntarily limit certain bundled rights through agreement, as discussed in this chapter. Figure 3-1: Property Owner Bundle of Rights Interestingly, the majority of FAA decisions and court rulings discussed in this chapter involve commercial aeronautical TTF activities. Therefore, airport sponsors should carefully assess the advantages, disadvantages, and impacts associated with all TTF activities (especially commercial aeronautical TTF activities) before permitting, restricting, or prohibiting TTF operations (as discussed in Chapter 5: Assessing TTF Operations). ACRP Report 114: Guidebook for Through-The-Fence Operations

ACRP Report 114: Guidebook for Through-The-Fence Operations 33 3.2 LEGAL INTERESTS AIRPORT SPONSOR’S INTERESTS IN AN AIRPORT An airport sponsor of a federally obligated airport has multiple legal interests in the airport, especially as it relates to the property (i.e., land) of the airport. First and foremost, from the perspective of this guidebook, are the airport sponsor’s federal obligations. While the airport sponsor is normally the owner of the airport property, the airport sponsor may voluntarily limit certain “bundled rights” by accepting AIP funds, surplus or non-surplus land, and agreeing to comply with the Airport Sponsor Assurances (as discussed in Chapter 2: Airport Sponsor Obligations). The intent of voluntarily limiting certain “bundled rights” through agreement with the FAA is to ensure that the airport is planned, developed, operated, and managed for the benefit of the public in a way that will not adversely affect the safety, utility, or efficiency of the airport. Second, and nearly as important, is the protection of the remaining elements of the “bundled rights” pertaining to the airport property. These rights can be protected by stipulating the terms and conditions for accessing and using the airport by operators, tenants, and users (including TTF entities). Such terms and conditions can be conveyed and enforced through ordinances, policies, standards, rules, and regulations (as discussed in Chapter 4: Airport Planning, Management, and Compliance Tools) and further stipulated in agreements with TTF entities accessing and using the airport (as discussed in Chapter 6: Structuring TTF Operations). Airport management and policymakers should take proactive and reactive steps (as necessary) to protect the airport sponsor’s “bundled rights” when assessing, structuring, and managing TTF operations. In addition to an airport sponsor’s obligations associated with the planning, development, operation, and management of the airport, airport sponsors are commonly responsible for protecting and promoting the health, safety, and general welfare of the residents governed by the airport sponsor and the owners/users of property located on and adjacent to the airport. This can be accomplished through the adoption of ordinances, zoning codes, and building codes (as discussed in Chapter 4: Airport Planning, Management, and Compliance Tools). PROPERTY OWNER’S INTERESTS IN LAND LOCATED ADJACENT TO AN AIRPORT As discussed in Section 3.1: Introduction, a property owner has the right to possess, control, exclude, enjoy, and dispose of property. However, the owner of property located adjacent to an airport may only exercise these rights to the extent that it does not unlawfully interfere with the same rights of another property owner (including the airport sponsor). Further, the property owner is also bound by the ordinances, zoning codes, and building codes adopted by the county or municipality having jurisdiction. Beyond ordinances and codes, a governmental agency has the ability to exercise the power of eminent domain and take property with just compensation. When property is located adjacent to a federally obligated airport, the property owner has no legal obligation to adhere to any ordinances, policies, standards, rules, and regulations promulgated specifically for the airport by the airport sponsor. However, the property owner may voluntarily agree to be bound by such ordinances, policies, standards, rules, and regulations in an agreement with the airport sponsor (as discussed further in this chapter) in return for being granted TTF access to the airport and being given the right to engage in TTF activities on the TTF property.

34 SOURCE OF AUTHORITY FOR TTF ACCESS An owner/user of property located adjacent to a federally obligated airport does not have the legal authority to access (or provide access to) the airport from the property. TTF access can only be granted by the airport sponsor through agreement between the airport sponsor and the property owner/user (as discussed in Chapter 6: Structuring TTF Operations). It is also important to note that the airport sponsor has no federal obligation to grant TTF access. In return for granting TTF access, an airport sponsor should require that the property owner/user enter into a TTF agreement, pay all applicable rents and fees, and adhere to all ordinances, policies, standards, rules, and regulations promulgated by the airport sponsor for the airport (in general) and TTF access (in particular). REGULATING TTF ACTIVITIES VERSUS TTF ACCESS 3.3 LEGAL PRINCIPLES ESTABLISHED THROUGH FAA DECISIONS In addition to the FAA policies and guidance related to TTF operations (discussed in Chapter 2: Airport Sponsor Obligations), a more in depth understanding of the FAA’s compliance decisions related to TTF operations can be obtained by reviewing a number of FAA Director’s Determinations and Final Decisions relating to complaints filed under Part 16 pertaining specifically to TTF operations. It is important to note that an FAA decision relating to a Part 16 complaint is only applicable to the airport sponsor against which the complaint was filed. While the FAA considers (1) the unique situation and/or the circumstances at the subject airport, (2) the specific issues brought forth by the complainant, (3) the specific responses of the responding airport sponsor, and (4) prior FAA decisions on related matters, the FAA’s decision cannot be applied to all airport sponsors. In other words, the FAA may rule differently depending on the specific situation and/or circumstances. Within this context, the primary legal principles established through FAA decisions on issues related to TTF operations include the following: Airport sponsors are not obligated to permit TTF operations – for any reason. Decisions involving TTF operations must include the determination of what best serves the interests of the public, which may include permitting, restricting, or prohibiting TTF operations. Further, airport sponsors can take the appropriate amount of time (i.e., should not rush) to assess the opportunity and make the right decision. Airport sponsors are obligated to protect on-airport FBOs and SASOs – from the financial and operational impacts that may be associated with TTF operations. However, permitting a commercial aeronautical TTF activity alone does not necessarily result in non-compliance with federal obligations. Airport sponsors may establish fees for TTF operations utilizing different methodologies – than those used to establish fees for on-airport operators, tenants, and users. Additionally, fees associated with TTF operations may not necessarily apply (or need to apply) to on-airport operators, tenants, and users (including based or transient aircraft). ACRP Report 114: Guidebook for Through-The-Fence Operations While an airport sponsor has the legal authority to govern TTF access, the activities occurring on TTF property are beyond the airport sponsor’s legal authority (unless the airport sponsor and the local county or municipality are the same entity or the TTF entity grants legal authority to the airport sponsor in an agreement). In addition to granting TTF access, the airport sponsor should require (within the TTF agreement) that the TTF entity grant the airport sponsor the legal authority to govern TTF activities on the TTF property through the airport sponsor’s ordinances, policies, standards, rules, and regulations.

ACRP Report 114: Guidebook for Through-The-Fence Operations 35 The FAA does not consider the reasonableness of fees imposed by the airport sponsor on TTF operations to be an FAA matter. However, it is important to note that the FAA has ruled on this issue in the past and has consistently ruled in favor of the airport sponsor. Further, the FAA has ruled that charging a fee for TTF operations that is equal to the airport lease rate for equivalent square footage is reasonable. The right to engage in self-service fueling (on-airport) does not extend to a TTF property. Airport sponsors are obligated to impose reasonable restrictions on TTF operations – to protect the safety, utility, and efficiency of the airport for the benefit of the public while also ensuring compliance with federal obligations. Airport sponsors must maintain a current airport layout plan (ALP) – at all times and all airport development must be consistent with the FAA approved ALP including the designation and existence of TTF access points. Proposed TTF operations should be coordinated with the FAA. Figure 3-2 illustrates the geographic locations of federally obligated airports where complaints associated with TTF operations were filed under Part 16 and legal principles were established through the FAA issued Director’s Determinations and Final Decisions. Figure 3-2: Airport Geographic Locations of FAA Decisions on TTF Operations NATIONAL AIRLIFT SUPPORT CORP. V. FREMONT COUNTY BOARD OF COMMISSIONERS CANON CITY In 1998, the National Airlift Support Corporation (NASC), a civilian skydiving operation at the Canon- City-Freemont Airport (Airport), filed a complaint with the FAA pursuant to Part 16 against Freemont County (Airport Sponsor) as the owner and operator of the Airport in Canon City, Colorado. NASC was operating at the Airport and the company wanted to purchase additional parcels of land in an industrial center complex located adjacent to the Airport to expand its operations. The request was denied as the zoning of the industrial center complex did not permit businesses that do not produce an industrial product. NASC alleged that the Airport Sponsor denied the company the opportunity to lease and develop land at the Airport in violation of Assurance 22 (Economic Nondiscrimination) as a crematorium was located in the industrial center complex and that zoning codes were not being equally enforced as a result. Subsequently, NASC proposed to purchase or lease a separate parcel of land located adjacent to the Airport, but the company’s request was denied. After that, the

36 The FAA determined that the Airport Sponsor was not in violation of Assurance 22 and Assurance 23 (Exclusive Rights) as FAA action is not necessary when an airport sponsor is in the process of developing operating restrictions. NASC appealed the decision and the FAA upheld its initial decision to dismiss the complaint. UNITED AIRCRAFT SERVICES INC. V. HANCOCK COUNTY PORT AND HARBOR COMMISSION AND HANCOCK COUNTY BOARD OF SUPERVISORS In 2000, United Aircraft Services Inc. (United), an on-airport FBO located at the Stennis International Airport (Airport), located in Bay St. Louis, Mississippi, filed a complaint with the FAA pursuant to Part 16 against Hancock County Port and Harbor Commission and the Hancock County Board of Supervisors (Airport Sponsors), the co-owners, operators, and sponsors of the Airport. United alleged that the Airport Sponsors failed to charge comparable rents and fees to the Airport’s on-airport FBO and TTF FBO engaged in commercial aeronautical TTF activities and failed to require that the TTF FBO (Philips Aviation) adhere to the Airport’s minimum standards in violation of Assurance 24 (Fee and Rental Structure) and Assurance 22 (Economic Nondiscrimination). The FAA determined that the TTF entity engaged in commercial aeronautical TTF activities pays $35,100 per year to the Airport Sponsors whereas United pays $37,100. Additionally, the fuel flowage fee, gross receipts fee, and tiedown fees for each FBO (on-airport and TTF) are similar. The FAA found that permitting a commercial aeronautical TTF activity alone does not constitute a violation of the Airport Sponsors’ federal obligation to protect on-airport FBOs and SASOs – as the market for the commercial aeronautical TTF activity was demonstrated to the Airport Sponsors by a petition in support of the TTF entity. The TTF entity engaging in commercial aeronautical TTF activities was occupying less space and using fewer (Airport Sponsors’ financed and owned) facilities than United. If the TTF entity was leasing on-airport land for the construction of hangar and office space, the TTF entity would be paying less per square foot than the Airport Sponsors were charging the TTF entity for TTF access and the rights granted to engage in commercial aeronautical TTF activities. As such, the FAA dismissed the complaint as the Airport Sponsors’ treatment of United and the TTF entity engaged in commercial aeronautical TTF activities did not constitute unjust economic discrimination in violation of Assurance 22 (Economic Nondiscrimination). AMAV INC. V. MARYLAND AVIATION ADMINISTRATION In 2005, AmAv, a corporation providing 14 CFR Part 135 aircraft charter services and desirous of conducting non-commercial aeronautical TTF activities, filed a complaint with the FAA pursuant to Part 16 and subsequent appeal against the Maryland Aviation Administration (Airport Sponsor), owner and operator of Martin State Airport (Airport) in Baltimore, Maryland. AmAv alleged that the Airport Sponsor had unreasonable policies, standards, rules, and regulations relating to non- commercial self-fueling in violation of Assurance 22 (Economic Nondiscrimination). During the appeal, AmAv argued that the FAA’s initial determination to reject AmAv’s argument that a 3-year agreement for an on-airport fuel storage facility is unjustly discriminatory and unreasonable in light of the other agreements at the Airport which ranged from 10 to 30 years. However, the Airport Sponsor allowed AmAv to engage in temporary non- commercial aeronautical TTF activities (specifically, relating to non-commercial self-fueling) during the construction phase of the on-airport fuel storage facility. ACRP Report 114: Guidebook for Through-The-Fence Operations Airport Sponsor decided that it would no longer negotiate or consider entering into any agreements for any portions of the Airport or the surrounding property. The Airport Sponsor argued that NASC failed to establish a reasonable basis to warrant additional investigation and indicated that NASC had entered into an agreement with the Airport Sponsor for on-airport property.

ACRP Report 114: Guidebook for Through-The-Fence Operations 37 The FAA determined that allowing temporary non-commercial self-fueling demonstrated that the Airport Sponsor had allowed and therefore had not denied AmAv’s right to engage in non-commercial self-fueling. SANFORD AIR, INC. V. TOWN OF SANFORD In 2005, Sanford Air, Inc. (Sanford), an on-airport FBO located at Sanford Airport (Airport), filed a complaint with the FAA pursuant to Part 16 against the Town of Sanford (Airport Sponsor) which owns and operates the Airport in Sanford, Maine. Sanford alleged that the Airport Sponsor imposed disparate fees between Sanford and a competing TTF FBO (Presidential Aviation) which had TTF access to the Airport for engaging in commercial aeronautical TTF activities – resulting in violation of Assurance 22 (Economic Nondiscrimination) and Assurance 23 (Exclusive Rights). The initial decision rendered by the FAA indicated that no violation had occurred as the Airport Sponsor offered Sanford the same rate as Presidential Aviation and that the assurances do not require that retroactive rate adjustments be made. Furthermore, the FAA determined that the two competing FBOs were not similarly situated as the term of each agreement was different, that different rents and fees were appropriate, and that the presence of two competing FBOs indicated that an exclusive right had not been granted. Upon appeal, the FAA also indicated that Sanford had voluntarily renegotiated the term with the Airport Sponsor and agreed to pay higher fees as consideration for extending Sanford’s agreement. Also, the agreement for Sanford was entirely different as Presidential Aviation had a TTF agreement (not a lease agreement) that granted TTF access and the right to engage in commercial aeronautical TTF activities. Presidential Aviation did not have any rights to lease on-airport land and improvements to conduct commercial aeronautical activities. The FAA dismissed the case and affirmed the Director’s Determination due to lack of sufficient basis for a reversal. M. DANIEL CAREY AND CLIFF DAVENPORT V. AFTON-LINCOLN COUNTY MUNICIPAL AIRPORT JOINT POWERS BOARD In 2006, M. Daniel Carey and Cliff Davenport, individual tenants at the Afton-Lincoln County Municipal Airport (Airport), filed a formal complaint pursuant to Part 16 against the Afton-Lincoln County Municipal Airport Joint Powers Board (Airport Sponsor) which owns and operates the Airport in Afton, Wyoming, for alleged violations not related to TTF operations. In considering the appeal, the FAA affirmed its initial determination that the Airport Sponsor did not deny the right to non-commercial self-fueling as this right does not convey a right to engage in non-commercial aeronautical TTF activities (specifically, relating to non-commercial self-fueling) that do not meet reasonable minimum standards and rules and regulations. However, during its investigation, the FAA reviewed information relating to the fees being charged for residential TTF access. The administrative record included an undated advertisement for residential hangars in the Afton Airpark, which is located adjacent to the Airport. When contacted, the advertising company stated that a TTF agreement would not be necessary and that no fees were being charged by the Airport Sponsor for TTF access to the Airport. Subsequently, the FAA contacted a representative of the Afton Airpark, who had served on the Board of the Airport Sponsor in the past, and was informed that an annual fee of $400 was being charged to each airpark property owner for residential TTF access to the Airport. This claim was confirmed by the respondent’s attorney who indicated that the fee is collected as part of the Afton Airpark Homeowners Association fees. The FAA determined that a fee of $400 is reasonable for residential TTF access and found that the respondent had not violated Assurance 24 (Fee and Rental Structure).

38 WADSWORTH AIRPORT ASSOCIATION INC. V. CITY OF WADSWORTH AND WADSWORTH CITY COUNCIL In 2006, the Wadsworth Airport Association Inc. (Wadsworth), a non-profit corporation comprised of approximately 40 aircraft owners with TTF access to Wadsworth Municipal Airport (Airport) for non- commercial aeronautical TTF activities, filed a complaint with the FAA pursuant to Part 16 against the City of Wadsworth, Ohio (Airport Sponsor), which owns and operates the Airport. Wadsworth alleged that the Airport Sponsor unjustly discriminated against aircraft within city limits in violation of Assurance 22 (Economic Nondiscrimination) and Assurance 24 (Fee and Rental Structure) as aircraft located in areas outside the city limits were able to use the Airport without limitation and without paying the maintenance fee that aircraft located within the city limits were required to pay. The Airport Sponsor passed an ordinance imposing maintenance fees on aircraft that were based at the Airport or elsewhere within the city limits that had TTF access to the Airport for more than 30 days per year. The maintenance fees imposed, which were based on aircraft weight, did not apply to transient aircraft or aircraft based in areas outside of the city limits with TTF access to the Airport. The FAA dismissed the complaint and recognized that the Airport Sponsor may use different mechanisms and methodologies to establish fees. Furthermore, it is not uncommon for political subdivisions to levy fees or taxes on property owners located within the jurisdiction of the political subdivision and while a fee or tax may be applicable to aircraft, this does not mean that the FAA has jurisdiction. The FAA further concluded that transient aircraft users do not have the same access to the Airport and business relationship with the Airport Sponsor as aircraft located on TTF property and as such, are not considered similarly situated. It is also important to note that Assurance 22 (Economic Nondiscrimination) does not prohibit discrimination. It does, however, prohibit unjust discrimination. Airport sponsors are permitted to make reasonable distinctions among different types of users of an airport. JETAWAY AVIATION V. BOARD OF COUNTY COMMISSIONERS, MONTROSE COUNTY COLORADO In 2006, a TTF entity, JetAway Aviation (JetAway), filed a complaint with the FAA pursuant to Part 16 Airport (Airport). JetAway desired to engage in commercial aeronautical TTF activities and submitted a solicited proposal to become an FBO at the Airport. The Airport Sponsor awarded the FBO to Jet Center Partners (Jet Center), and subsequently, JetAway entered into a non-commercial land lease agreement for on-airport land located adjacent to JetAway’s TTF property for the parking and moving of aircraft. The Airport Sponsor entered into an FBO agreement with Jet Center and JetAway submitted another proposal to become a second FBO at the Airport. In order to allow time to review specific concerns with the existing agreements authorizing TTF activities, the Airport Sponsor offered to vote on the proposal at a future meeting. JetAway wanted the proposal reviewed at an earlier meeting so that JetAway could commence FBO activities on the same day as the Jet Center, if the Board approved JetAway’s proposal. The FAA found that the Airport Sponsor did not grant an exclusive right to the Jet Center as it is not unreasonable or unjustly discriminatory for the Airport Sponsor to take additional time to consider the impacts of the proposed commercial aeronautical TTF activities. The FAA also believed that the issues could be resolved informally as the Airport Sponsor and Jet Center both stated that an additional FBO would be feasible, that sufficient on-airport property was available, and that JetAway’s proposal met the existing minimum standards. ACRP Report 114: Guidebook for Through-The-Fence Operations against Montrose County, Colorado (Airport Sponsor), which owns and operates the Montrose Regional

ACRP Report 114: Guidebook for Through-The-Fence Operations 39 JETAWAY AVIATION V. MONTROSE COUNTY In 2006, JetAway filed a second complaint. JetAway was denied the right to engage in commercial aeronautical TTF activities by the County. JetAway alleged, among other issues, that the Airport Sponsor unjustly discriminated against JetAway and granted exclusive rights to the existing on-airport FBO (Jet Center) in violation of Assurance 22 and Assurance 23. JetAway alleged that TTF access for engaging in commercial aeronautical TTF activities was unreasonably denied by favoring the on-airport FBO and the Airport Sponsor granted an exclusive right to the on-airport FBO through unreasonable terms imposed on JetAway to conduct commercial aeronautical TTF activities, including aircraft fueling. JetAway leased land from One Creative Place, LLC (the owner of the TTF property and a related company) which had the ability to access the Airport pursuant to a TTF agreement with the Airport Sponsor. In addition to the complaint, JetAway filed an action in District Court to obtain clarification regarding the scope of the services that could be provided to the general public under the TTF agreement. The Court ordered that One Creative Place was permitted to self-fuel aircraft owned and operated by One Creative Place, but that One Creative Place could not commercially fuel any non-owned aircraft. The FAA dismissed the complaint as the evidence presented by JetAway was insufficient to eclipse the Airport Sponsor’s responsibilities to make decisions that best serve the aeronautical interests of the public. Furthermore, the Airport Sponsor offered JetAway on-airport land to become an on-airport FBO, but the offer was declined. The FAA emphasized that airport sponsors have no obligation to allow TTF operations even if a TTF entity has a preferred parcel of land located adjacent to the airport that may be conducive for the provision of commercial aeronautical TTF activities. By offering on-airport land, the Airport Sponsor illustrated that an exclusive right had not been granted. 3.4 LEGAL PRINCIPLES ESTABLISHED THROUGH COURT RULINGS An easement granting TTF access does not negate the right of the airport sponsor to require a TTF agreement and require payment of appropriate rents and fees. An airport sponsor may deny TTF operations – without violating the Racketeer Influenced and Corrupt Organizations Act and the Sherman Antitrust Act or depriving an entity of its constitutional right to make the best use of its property. Prohibiting TTF operations does not violate interstate commerce laws. An airport sponsor may establish reasonable ordinances, policies, standards, rules, and regulations for TTF operations – and this will likely not result in inverse condemnation. TTF entities must comply with municipal ordinances promulgated where the property exists – regardless if there is a TTF agreement in place or if the agreement requires compliance with applicable ordinances. The primary legal principles established through court rulings on issues related to TTF operations include the following:

40 Figure 3-3 illustrates the geographic locations of federally obligated airports where litigation associated with TTF operations has occurred and legal principles were established through court rulings. Figure 3-3: Airport Geographic Locations of Court Rulings on TTF Operations JADE AIRCRAFT SALES, INC. V. CITY OF BRIDGEPORT Organizations Act (RICO) and the Sherman Act, as well as 42 U.S.C. § 1983 claims based on procedural and substantive due process, equal protection, and state statutory and common law. The court rulings are as follows: The court held that municipal corporations, such as the Airport Sponsor, were not capable of forming the requisite mental state for committing a crime and, therefore, could not be liable under RICO. The court held that Jade did not have standing to bring a Sherman Act claim because Jade had not actually suffered an injury because of the denial. The court noted that Jade still had numerous issues to resolve before being able to develop the business such as obtaining zoning approval, FAA approval, and financing. The court allowed the equal protection claim to move forward because there were material questions of fact regarding whether the Airport Sponsor denied valuable government benefits to Jade because Jade had refused to donate the land to the state without compensation. The court dismissed the procedural and substantive due process claims because Jade could not establish that the company had a protectable property interest of which it was deprived and the Airport Sponsor was not obligated in any way to do business with Jade. ACRP Report 114: Guidebook for Through-The-Fence Operations In 1983, Jade Aircraft Sales (Jade) sued the City of Bridgeport, Connecticut (Airport Sponsor), in Connecticut District Court, which had denied a TTF agreement to allow access to the Igor I. Sikorsky Memorial Airport (Airport). Jade alleged violations of the Racketeer Influenced and Corrupt

ACRP Report 114: Guidebook for Through-The-Fence Operations 41 STANDRIDGE FLYING SERVICE V. DEPARTMENT OF TRANSPORTATION U.S.C. § 1983 claim that Standridge had been denied a constitutional right to make the best use of property. The court held that Standridge had failed to show any discrimination or deprivation of use of property. On appeal, the U.S. Court of Appeals, Eighth Circuit affirmed, determining that the appeal was frivolous. In a related proceeding, the Eighth Circuit granted the Mayor’s request for costs and attorney’s fees for defending against a frivolous appeal. OXLEY V. CITY OF TULSA Oxley was the owner of a residence located adjacent to the Airport. In 1975, the Airport Sponsor began pursuing a plan to expand the Airport and, as part of the plan, intended to eliminate, through purchase, the residential uses in the vicinity of the Airport of which Oxley’s property was identified as one. Oxley refused to sell and the Airport Sponsor instead rezoned the property for commercial and light industrial uses. However, Oxley felt unable to competitively develop the property because of the Airport Sponsor’s zoning codes and Oxley brought an inverse condemnation action, alleging that the property had been unconstitutionally taken without just compensation. Oxley attempted to show that the property had been taken by way of refusal to provide low cost TTF access. The court held that the refusal of the Airport Sponsor to grant TTF access did not constitute a taking. The court explained that once it is determined that a taking occurred, the proximity to other facilities, such as an airport or a major highway, is a factor that can be considered when assessing the taking’s value. However, a refusal to grant TTF access to such facilities cannot constitute a taking. NORTHEAST JET CENTER, LTD. V. LEHIGH-NORTHAMPTON AIRPORT AUTHORITY violation of Northeast’s equal protection rights under the Fourteenth Amendment of the Constitution. Northeast argued that it had the right to enter into a TTF agreement with the Airport Sponsor because the sponsor had granted a TTF agreement to another entity. This case was settled and dismissed with prejudice against Northeast. In 1990, Northeast sued the Airport Sponsor in a separate action alleging similar and additional grievances. The court ruled against Northeast on the TTF related portion of the claim relating to equal protection. The court held that the claim should be dismissed for lack of evidence. In particular, the court considered the Airport Sponsor’s argument that although the Airport Sponsor had entered into a TTF agreement with another entity, the FAA subsequently requested that the Airport Sponsor stop granting TTF agreements in general. Therefore, the court reasoned that the Airport Sponsor had declined to grant Northeast a TTF agreement not because the Airport Sponsor was acting discriminatorily, but “solely to acquiesce to a recent FAA mandate.” In 1983, prospective TTF entities, Standridge Flying Service and Wayne Standridge (Standridge), sued the FAA and the Mayor of Lake Village, Arkansas (Mayor), in the Arkansas District Court, who had refused to grant a TTF agreement to access the Lake Village Municipal Airport (Airport), alleging a 42 In 1984, John T. Oxley (Oxley), owner of land located adjacent to the Tulsa Airport (Airport), sued the City of Tulsa, Oklahoma (Airport Sponsor), in Tulsa County District Court, alleging that, among other things, the Airport Sponsor’s refusal to grant a TTF agreement constituted an unconstitutional taking In 1986, a prospective TTF entity, Northeast Jet Center (Northeast), sued the Lehigh-Northampton Airport Authority (Airport Sponsor) of the Lehigh Valley International Airport (Airport) in Allentown, Pennsylvania, in Pennsylvania District Court, alleging a cause of action under 42 U.S.C. § 1983 for of property owned by Oxley. The trial court rejected this argument and the Supreme Court of Oklahoma affirmed the trial court’s ruling on appeal.

42 NELSON V. McMINN COUNTY McMinn County Airport (Airport) in Athens, Tennessee. The trial court rejected Nelson’s argument and held the Airport Sponsor had acted reasonably. The court did not give weight to the fact that the Airport Sponsor had previously allowed for the creation of a new TTF agreement at the Airport in 1968. On appeal, the Tennessee Court of Appeals affirmed. EDDINS ENTERPRISES, INC. V. TOWN OF ADDISON Further, Eddins alleged that, under its existing agreements with the Airport Sponsor, it had free TTF access to the Airport. The Texas Court of Appeals rejected most of Eddins’ arguments and required that Eddins obtain a TTF agreement and pay applicable TTF access fees before accessing the Airport. Eddins owned two TTF properties. The first TTF property had direct Airport TTF access and the second TTF property had TTF access to the Airport through a ground lease of Airport property. In 2001, the Airport Sponsor enacted an ordinance on TTF operations. First, Eddins argued that the ordinance violated a state statute requiring that any fees imposed by a local government be “reasonable and uniform” and “established with due regard to the property and improvements used.” The court rejected this argument because TTF access fees were based on several factors, which showed that the Airport Sponsor had adequately considered (1) the fair market value of the property, (2) the square footage of the property, (3) a return-from-leasing multiplier, (4) a financing factor, and (5) a tax factor. Second, Eddins argued that its existing TTF agreement granted TTF access without being required to obtain a permit or pay a fee which was rejected by the court because the TTF agreement contained a “compliance with laws” clause which required Eddins to comply with the reasonable ordinances promulgated by the Airport Sponsor. Third, Eddins made the same arguments from the perspective of the second TTF property. In response, the Airport Sponsor argued that the ground lease did not address TTF access. As such, TTF access was not a permitted use and thereby prohibited. The court disagreed, finding the agreement silent in this regard (i.e., that the agreement did not prohibit or grant access). However, since the lease for the second TTF property contained a “compliance with laws” clause, the court held that Eddins was subject to the ordinances promulgated by the Airport Sponsor. JETAWAY AVIATION V. BOARD OF COUNTY COMMISSONERS OF MONTROSE COUNTY COLORADO 2006, the Airport Sponsor sued JetAway, seeking an injunction to prohibit JetAway from performing unauthorized FBO activities, such as selling aviation fuel, providing deicing services, and providing ground power unit services, pursuant to the TTF agreement. Later in 2006, JetAway sued the Airport Sponsor, seeking an injunction ordering the Airport Sponsor to allow JetAway to continue constructing an on-airport apron to be used in connection with the commercial aeronautical TTF activities. These three cases were consolidated and the court rejected all of ACRP Report 114: Guidebook for Through-The-Fence Operations In 1994, Charles E. Nelson (Nelson) sued McMinn County (Airport Sponsor) in the Eastern District of Tennessee District Court, alleging that the Airport Sponsor had acted arbitrarily and capriciously in denying Nelson’s offer to establish a TTF operation or engage in a sale-leaseback arrangement at the In 2001, a TTF entity, Eddins Enterprises (Eddins), sued the Town of Addison, Texas (Airport Sponsor), in the 160th Judicial District Court, alleging that the Airport Sponsor’s ordinance requiring TTF entities to have a TTF agreement and pay TTF access fees to the Addison Airport (Airport) violated a state statute. In 2005, a TTF entity, JetAway Aviation (JetAway), sued the County of Montrose, Colorado (Airport Sponsor), in Colorado District Court, alleging that JetAway’s TTF agreement granted the right to sell aviation fuel on JetAway’s TTF property located adjacent to the Montrose Regional Airport (Airport). In

ACRP Report 114: Guidebook for Through-The-Fence Operations 43 JetAway’s arguments. On appeal, the Colorado Court of Appeals affirmed most of the trial court’s decision, but remanded some of the claims to the trial court for further factual development. On remand, the trial court found in favor of the Airport Sponsor for the remaining claims. On appeal a second time, the appellate court affirmed. JetAway desired to provide on-airport FBO products, services, and facilities, but the Airport Sponsor selected another company, Jet Center Partners (Jet Center), to do so. Nevertheless, JetAway continued the TTF operations and expanded its commercial aeronautical TTF activities to include FBO products, services, and facilities and JetAway also began construction adjacent to and on the Airport in anticipation of being able to expand its FBO activities without the permission of the Airport Sponsor. JetAway also advertised its ability to provide a full range of FBO products, services, and facilities. In 2008, the court made a number of findings and conclusions relevant to this guidebook including the following: JetAway was prohibited from offering services other than those listed in the Airport’s Minimum Standards – including fueling other than self-fueling – because the standards were incorporated into the TTF agreement; JetAway was allowed to provide GPU services, but the company was prohibited from providing deicing services based on the understanding at the time the parties entered into the TTF agreement; JetAway was required to apply and pay for an access permit; and the land lease agreement for the on-Airport apron could be rescinded by either party because of a mistake regarding the size of the property and the agreement could be terminated by the Airport Sponsor because JetAway breached the agreement by performing fueling services on the on-airport premises without approval. In 2009, the appellate court affirmed most of the trial court’s decision, but reversed and remanded some issues to the state trial court for further factual development including the questions of (1) whether JetAway was permitted to perform commercial aircraft maintenance services under the TTF agreement; (2) whether the Jet Center met the elements of a Colorado Consumer Protection Act claim, in light of the appellate court’s finding that the Jet Center had demonstrated an injury in fact; and (3) whether JetAway or the Airport Sponsor were entitled to attorney’s fees as a prevailing party under the TTF agreement, in light of the appellate court’s remanding the issue relating to the interpretation of the provision of commercial aircraft maintenance services in the TTF agreement. In 2011, the trial court considered the remanded issues and made several findings. First, the court found that the Airport Sponsor should not be compelled to issue a TTF access permit to JetAway because of the company’s violations of the TTF agreement after the June 30, 2008 order. Second, the commercial aircraft maintenance services issue was moot because the Airport Sponsor had properly revoked JetAway’s TTF access permit. Third, the court found that the Airport Sponsor was the prevailing party on two issues—what aircraft maintenance could be provided and whether the Airport Sponsor should be required to issue a TTF access permit—and therefore was entitled to attorney’s fees for these two issues. COLORADO Sherman Antitrust Act (Sherman Act), denial of equal protection under the Fourteenth Amendment of the Constitution, and the creation of an unconstitutional burden on interstate commerce. JETAWAY AVIATION, LLC V. BOARD OF COUNTY COMMISSIONERS OF MONTROSE COUNTY, In 2007, JetAway sued the County of Montrose, Colorado (Airport Sponsor), and others in Colorado District Court, alleging that the defendants had acted collusively to prevent JetAway from providing FBO services at the Montrose Regional Airport (Airport). JetAway alleged violations of the federal

44 In 2004, JetAway purchased land located adjacent to the Airport that had TTF access rights. A building, which was originally designed for non-commercial aeronautical TTF activities, was located on the land. Without an agreement permitting the conduct of commercial aeronautical TTF activities, JetAway began providing FBO services. In 2005, the Airport Sponsor issued a Request for Proposals (RFP) that provided the Airport Sponsor with broad latitude to select a proposer (if any) and negotiate the provision of FBO services at the Airport. JetAway submitted a proposal based on its existing facility in which the land would be conveyed to the Airport Sponsor and then, would be leased back to JetAway. Additionally, JetAway proposed to lease some Airport land from the Airport Sponsor and build an apron. Jet Center Partners (Jet Center) submitted a competing proposal which outlined a plan to construct a hangar, terminal building, and vehicle parking area on leased Airport land. The Airport Sponsor decided to negotiate with Jet Center and finalized an on-airport FBO agreement. JetAway initiated litigation against the Airport Sponsor and Jet Center in state and federal court and filed two Part 16 complaints with the FAA as well (discussed in this chapter). The Colorado District Court rejected the Sherman Act argument because the situation was not one of horizontal bid rigging (as alleged), nor did it evidence an injury to competition. Rather, the Airport Sponsor issued an open-ended RFP and simply selected Jet Center. Second, the court rejected the equal protection argument because there were many legitimate business reasons for the Airport Sponsor to select the Jet Center. Discrimination, if it was a reason at all, was not the sole reason for the decision. Third, the court rejected the interstate commerce argument because the economic effects of the market, if any, were local, and the court did not find any damage to interstate commerce. KINGMAN AIRPORT AUTHORITY, INC. V. HAYS without entering into a TTF agreement and paying TTF access fees. Hays argued possession of an easement that permitted access to the Airport without paying TTF access fees and filed counterclaims under 42 U.S.C. § 1983, alleging breach of contract and negligent misrepresentation. The Arizona Court of Appeals rejected Hays’ arguments and held that the continued use of the Airport would require that Hays enter into a TTF agreement with the Airport Sponsor and pay applicable TTF access fees. Hays held an easement that was rooted in two documents. First, the conditions, covenants, and restrictions in the property deed designated certain roads within the TTF property as aircraft easements which adjoined the Airport boundary. Second, a resolution by the Mohave County Board of Supervisors identified certain roads as “airport access roadways.” Hays presented evidence that the Airport Sponsor had allowed other parties to access the Airport without a TTF agreement or payment of TTF access fees and that the sponsor’s Director of Economic Development testified that several property deeds intended to create an implied right to access the Airport. However, the court disagreed and held that the easement ended at the Airport gate. The court rejected Hays’ argument that this would provide a “bridge to nowhere” and indicated that the easement was more like a “bridge to a toll road.” ACRP Report 114: Guidebook for Through-The-Fence Operations In 2007, plaintiff Kingman Airport Authority (Airport Sponsor) sued TTF entity Carl Hays, Jill Gernetzke- Hays, and M-14P (Hays) in the Superior Court in Mohave County, seeking to enjoin Hays from using the Kingman Airport (Airport), in Kingman, Arizona, and engaging in commercial aeronautical TTF activities

ACRP Report 114: Guidebook for Through-The-Fence Operations 45 YAKIMA AIR TERMINAL-MCALLISTER FIELD V. M.A. WEST ROCKIES CORPORATION The Washington Court of Appeals found that the facts were not fully developed and it remanded the case to the trial court. West leased a certain on-airport apron to use in connection with the adjacent TTF property. As stipulated in the TTF agreement, West agreed to pay monthly rent and if the Airport Sponsor ever drew from the security deposit, West agreed to make a payment for late rent and replenish the security deposit within a certain period of time. In 2009, the FAA issued Order 5190.6B strongly discouraging commercial aeronautical TTF activities. In 2010, West failed to pay rent and the Airport Sponsor (1) applied the security deposit to the outstanding rental amount and (2) sent a notice to West as stipulated in the TTF agreement. West replenished the deposit, but the next month’s rent and various administrative fees were due as well. Once again, West made a payment, but the parties disputed whether the payment was timely and whether the Airport Sponsor had applied it to the security deposit or the rental payment. The court held that the resolution of these two issues was critical to deciding whether West was actually in breach of its TTF agreement when the company was evicted from the Airport. 3.5 WRAP-UP This chapter outlined the legal interests and principles established by the U.S. Constitution, federal and state statutes, FAA decisions, and court rulings. First, property owners (both TTF entities and airport sponsors) enjoy certain property rights commonly known as a “bundle of rights” including possession, control, exclusion, enjoyment, and disposition. Neither party is obligated to give up any one or more of these rights unless willing to do so by agreement. For example, an airport sponsor may give up some rights in return for AIP funds and a TTF entity may give up rights in return for TTF access and the right to engage in TTF activities. Several key legal principles have been established through FAA decisions including: Airport sponsors are not obligated to permit TTF operations. Airport sponsors are obligated to protect on-airport FBOs and SASOs from entities engaged in commercial aeronautical activities (including those on TTF property) who are not meeting or abiding by similar policies, standards, rules, and regulations. Airport sponsors should establish rents and fees for TTF operations. The FAA does not consider the reasonableness of TTF fees to be an FAA matter. The right to engage in self-service fueling (on-airport) does not extend to a TTF property. Airport sponsors must maintain compliance with the federal obligations at all times. A current ALP must be maintained at all times and TTF operations should be coordinated with the FAA. Additionally, there were several key legal principles established through court rulings including: An easement does not negate the airport sponsor’s ability to require a TTF agreement and payment of rents and fees. An airport sponsor may deny or prohibit TTF operations without violating the Racketeer Influenced and Corrupt Organizations Act, the Sherman Antitrust Act, interstate commerce laws, or constitutional rights. Reasonable ordinances, policies, standards, rules, and regulations will likely not result in inverse condemnation. TTF entities must comply with ordinances promulgated by municipalities where the property exists. In 2010, a TTF entity, M.A. West Rockies Corporation (West), sued the City of Yakima, Washington (Airport Sponsor), which owns and operates Yakima Air Terminal-McAllister Field (Airport) in Washington District Court, challenging West’s eviction from the Airport.