Alaska Airlines , Inc. Et Al . v. United States Department of Transportation

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued December 11, 2008 Decided August 7, 2009
No. 07-1209
ALASKA AIRLINES , I NC. ET AL .,
PETITIONERS
v.
UNITED STATES DEPARTMENT OF TRANSPORTATION ,
RESPONDENT
CITY OF LOS ANGELES ET AL .,
I NTERVENORS
Consolidated with 07-1223, 07-1273, 07-1276
On Petitions for Review of Orders of the
Department of Transportation
M. Roy Goldberg argued the cause for petitioners
Terminal 1 and 3 Airlines and the Air Transport Association
of America, Inc. With him on the briefs were Robert W.
Kneisley, Howard E. Kass, Robert P. Silverberg, Claire L.
Shapiro, and David A. Berg.
Steven S. Rosenthal argued the cause for petitioner the
City of Los Angeles and intervenor Airports Counsel

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International - North America. With him on the briefs were
Jeffery A. Tomasevich, J. D. Taliaferro, and Scott P. Lewis.
Douglas A. Tucker entered an appearance.
Mary F. Withum, Senior Trial Attorney, U.S. Department
of Transportation, argued the cause for respondent. With her
on the brief were Robert B. Nicholson and Nickolai G. Levin,
Attorneys, U.S. Department of Justice, Paul M. Geier,
Assistant General Counsel, U.S. Department of
Transportation, and Dale C. Andrews, Deputy Assistant
General Counsel.
M. Roy Goldberg argued the cause for intervenor
Terminal 1 and 3 Airlines. With him on the brief were Robert
W. Kneisley and Howard E. Kass.
Steven S. Rosenthal argued the cause for intervenors the
City of Los Angeles and Airports Counsel International -
North America. With him on the briefs were Jeffery A.
Tomasevich, J. D. Taliaferro, and Scott P. Lewis. Patricia A.
Hahn entered an appearance.
Before: GINSBURG, GARLAND , and KAVANAUGH , Circuit
Judges.
Opinion for the Court filed by Circuit Judge GINSBURG.
GINSBURG, Circuit Judge: Various airlines asked the
Department of Transportation (DOT) to declare unlawful
certain of the methods used by the City of Los Angeles to
calculate the rental rates they pay for terminal space at Los
Angeles International Airport (LAX). Both the City and the
airlines petition for review of the DOT’s Final Decision,
Alaska Airlines v. Los Angeles World Airports, Docket No.
OST-2007-27331, 2007 DOT Av. LEXIS 437 (Jun. 15, 2007)

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(Final Decision). We grant each petition in part, deny each
petition in part, and remand the matter to the DOT for further
proceedings.
I. Background
The airline petitioners (T1/T3 Airlines) rent space in
Terminals 1 and 3 at LAX. The City charges the airlines a
“base rent” for their terminal space plus a share of the
airport’s maintenance and operation (M&O) costs. Each
airline’s base rent and M&O charges are determined in part
by multiplying a fee per square foot by the amount of
terminal space the airline occupies; an airline’s rent may
change, therefore, if the City changes either the fee per square
foot or the way in which it calculates the amount of terminal
space occupied by the airline. When the leases of the T1/T3
Airlines expired and negotiations over new lease terms
reached an impasse, the City, seeking increased rental
payments to offset increased security costs and to pay for
planned airport improvements, adopted a new methodology,
increasing both the fee per square foot and the amount of
terminal space attributed to each airline.
The new methodology introduced three changes here
relevant. First, the City increased M&O charges for all
airlines operating out of LAX, including not only the T1/T3
Airlines but also airlines with leases that had not expired.
Second, the City changed the formula for calculating the
T1/T3 Airlines’ rent. Under the “useable space” formula
previously employed, the City had multiplied the rental fee by
the amount of space used exclusively by each airline. Under
the new “rentable space” formula, the City allocated to each
of the T1/T3 Airlines a share of the terminal’s common areas,
such as corridors and stairwells, thus increasing its square
footage and hence its base rent. Finally, the City newly based

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the fee per square foot for the T1/T3 Airlines upon the “fair
market value” (FMV) of the space, whereas under the expired
contracts, the rental fee had been based upon the “historical
cost” of the space.
Airlines in other terminals continue to pay rent based
upon the historical cost of useable space; the City is unable to
impose its new methodology upon these carriers because they
have long-term leases, entered into in the 1980s and still in
effect. The City nonetheless increased those airlines’ M&O
charges, but after the airlines filed suit, ultimately settled for a
lesser increase.
The T1/T3 Airlines complained to the DOT that the new
charges imposed by the City were unreasonable and, as
compared with the charges paid by airlines using other
terminals, unjustly discriminatory. The DOT assigned the
matter to an Administrative Law Judge, who recommended
the DOT rule in favor of the T1/T3 Airlines in most respects.
Recommended Decision of U.S. Administrative Law Judge
Richard C. Goodwin, Docket No. OST-2007-27331 at 77-78
(Dep’t of Transp. May 15, 2007). The DOT rejected much of
the ALJ’s recommendation and held: (1) The increase in
M&O charges was reasonable and non-discriminatory; (2) the
rentable space methodology unjustly discriminated against the
T1/T3 Airlines; and (3) the City may use fair market value
rather than historical cost in setting terminal fees but the
particular method it used was unreasonable as applied to the
T3 Airlines; because the T1 Airlines did not file a separate
written complaint with the Secretary of Transportation within
the time required by statute, the DOT did not consider
whether the fair market value method was unreasonable as
applied to them. Final Decision, 2007 DOT Av. LEXIS 437,
at *1.

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Both the T1/T3 Airlines and the City petition for review
of the Final Decision. The T1/T3 Airlines argue (1) the
increase in M&O fees is unjustly discriminatory; (2) it was
unreasonable for the City to use fair market value but, if the
City was permitted to use fair market value, then the DOT
should have decided whether its use was unreasonable as
applied to the T1 as well as the T3 Airlines; and (3) the DOT
erred by declining to consider whether LAX has monopoly
power. For its part, the City argues (1) the DOT should not
have considered whether the M&O fee increase was
unreasonable; (2) the method it used to determine fair market
value was reasonable; and (3) the rentable space methodology
does not unjustly discriminate against the T1/T3 Airlines
because they are not entitled to the benefits for which the
airlines with long-term leases bargained.
II. Analysis
This case arises under 49 U.S.C. § 47129(a)(1), which
provides that, upon written request, the DOT “shall issue a
determination as to whether a fee imposed upon one or more
air carriers ... is reasonable.” To approve of a fee increase,
the DOT must have “receive[d] written assurances ... that ...
air carriers making similar use of the airport will be subject to
substantially comparable charges.” 49 U.S.C. § 47107(a)(2).
The DOT’s “findings of fact are conclusive if supported by
substantial evidence; and we will affirm [its] decision unless
it is arbitrary and capricious, an abuse of discretion, or
otherwise not in accordance with law.” City of Los Angeles
Dep’t of Airports v. DOT (LAX I), 103 F.3d 1027, 1031 (D.C.
Cir. 1997) (internal citations omitted).
We begin by considering the challenges to the M&O fee
increase. Next, we turn to the DOT’s assessment of the
City’s use of FMV. We then determine whether the DOT

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erred in holding the City’s rentable space methodology was
discriminatory. Finally, having analyzed the DOT’s
treatment of particular aspects of the City’s new methodology
for calculating rent, we consider the airlines’ overarching
objection to the DOT’s analysis, namely that the agency
should have considered whether LAX has monopoly power in
a relevant geographic market.
A. M&O Charges
Although the DOT held the M&O fee increase was
reasonable, the City petitions for review on the ground that,
because the increase was imposed “pursuant to a written
agreement with air carriers using the facilities of an airport,”
49 U.S.C. § 47129(e)(1), the DOT did not have the authority
to determine whether it was reasonable. The agreements to
which the City refers are the T1/T3 Airlines’ leases, which
had expired, and pursuant to which the T1/T3 Airlines were
occupying terminal space as holdover tenants upon a month-
to-month basis. According to the City, the continuing
application of the expired leases and the City’s reliance upon
the clauses in each allowing for “adjustment” of the M&O
rent deprives the DOT of authority to review the
reasonableness of the increase. The DOT, however, held the
“written agreement” exception did not apply because “[a]
standard or boilerplate ‘holdover’ agreement, creating a
tenancy at will on a month to month basis, subsequent to lease
expiration, does not constitute the type of written agreement
that forecloses a § 47129 proceeding.” Final Decision, 2007
DOT Av. LEXIS 437, at *104.
The T1/T3 Airlines challenge neither the DOT’s
authority nor the reasonableness of the increased M&O
charge but rather argue the result of the increase was unjustly
discriminatory vis-à-vis other airlines at LAX, in violation of

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49 U.S.C. § 47107(a)(2). The City nonetheless disputes the
DOT’s decision that the “written agreement” exception did
not apply “because,” it says, it fears “the future effects of
[the] incorrect ruling.” Because the airlines do not challenge
the decision under 49 U.S.C. § 47129, there is no case or
controversy as to whether the “written agreement” exception
applies; even if we held the DOT lacked authority to consider
the reasonableness of the increase in M&O charges, that
holding would not have any effect on the charges. Because
“no justiciable ‘controversy’ exists when parties ... ask for an
advisory opinion,” Mass. v. EPA, 549 U.S. 497, 516 (2007)
(citing Hayburn’s Case, 2 U.S. (2 Dall.) 409 (1792)), we
cannot decide the question presented by the City.
We reject the T1/T3 Airlines’ argument that the increase
in M&O fees was unjustly discriminatory. As of the date of
the Final Decision, all airlines operating out of LAX were
paying the increased M&O fees. At some time between that
date and the filing of the T1/T3 Airlines’ petition for review,
the City and the airlines operating out of the other terminals
agreed, in settlement of their dispute, to a lesser increase in
the M&O fee. Although the DOT could not have foreseen the
outcome of that litigation, the T1/T3 Airlines argue the
Department should have considered the possibility that the
other airlines would either prevail in or reach a favorable
settlement of their dispute with the City.
The DOT did not act unreasonably in refusing to consider
the range of potential outcomes in the litigation between the
City and the other airlines. The DOT could not determine
whether the T1/T3 Airlines were being unjustly discriminated
against without knowing whether the other airlines had
achieved a favorable result with the City, much less whether
the result was so favorable as to constitute unjust
discrimination against the T1/T3 Airlines. The DOT’s

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decision to base the Final Decision upon what it knew, rather
than upon what it might have predicted, was not arbitrary and
capricious.
B. Rent Per Square Foot
Both the T1/T3 Airlines and the City find fault with the
DOT’s treatment of FMV. The T1/T3 Airlines argue the
Final Decision is arbitrary and capricious because the DOT
failed to explain why, although an airport may not use FMV,
as measured by opportunity cost, when setting airfield rental
rates, it is permitted to use opportunity cost in setting FMV
rates for space inside a terminal. The City objects to the
DOT’s dual requirements that, in using FMV to set terminal
rates, the City may look to the opportunity cost of devoting
the space only to “other aeronautical uses,” and must use an
independent appraiser to determine FMV. Finally, the T1
Airlines argue the DOT erred in holding the City’s use of
FMV was unreasonable as applied only to the T3 Airlines on
the ground that the T1 Airlines had failed to complain to the
DOT within the time allotted by statute.
1. Airfield vs. non-airfield space
In LAX I we held the Anti-Head Tax provision of the
Federal Aviation Act does not prohibit an airport from
considering its opportunity cost in setting airfield fees. 103
F.3d at 1034. We directed the DOT on remand to decide
whether an FMV methodology that considers the most
valuable alternative use of the land would more accurately
“reflect [its] true cost.” Id. In Air Transport Association of
America v. DOT (ATA), 119 F.3d 38, 40 (1997), we reviewed
the subsequent Policy Statement, in which the DOT
distinguished between “airfield fees — aeronautical fees
charged for the use of runways, taxiways, ramps, aprons, and

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roadway land,” and the fees for the use of all other airport
space. Id. The Policy Statement required airports to set
airfield fees based upon “historic cost” but allowed them to
use “any reasonable methodology,” including opportunity
cost, to set non-airfield fees. Id. In vacating the Policy
Statement we observed: “[T]he [DOT] simply has not
explained why fair market valuation may be appropriate for
other portions of the airport, but [is purportedly] too difficult
to use in valuing airfield assets.” Id. at 44.
The T1/T3 Airlines argue the DOT has again failed to
explain its disparate treatment of fees for airfield and for non-
airfield (i.e., terminal) space. The Final Decision merely
tracks the Policy Statement, asserting it is “within [the
DOT’s] discretion” to allow an airport to consider opportunity
cost when setting non-airfield fees, Final Decision, 2007
DOT Av. LEXIS 437, at *157, and adds that nothing in the
“controlling decisional guidance precludes the use of FMV,”
id. at *153. Both statements may be true, but neither is a
reasoned basis for allowing an airport to use opportunity cost
as a measure of FMV for one type of airport space and not
another. We must therefore grant the T1/T3 Airlines’ petition
and again remand the matter to the DOT either to justify or to
abandon its disparate treatment of airfield and non-airfield
space.
2. Other aeronautical uses of terminal space
Although it approved of using FMV in theory, the DOT
went on to hold the City may not base terminal rents upon a
measure of FMV that takes account of what non-aeronautical
users, such as retail merchants, would be willing to pay for
terminal space. The City argues this limitation was arbitrary
and capricious because the DOT failed to offer a satisfactory
explanation for its disparate treatment of aeronautical and

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non-aeronautical uses. The DOT supported its position with
the observation that “airports have grant assurance obligations
to operate the facility for aeronautical purposes.” Id. at *152.
In LAX II we upheld the DOT’s decision to bar setting
airfield rates based upon the opportunity cost of non-
aeronautical uses, City of Los Angeles v. DOT, 165 F.3d 972
977-79 (1999), because the City was legally obligated to use
the airfield land as an airport. Id. at 976 (“The Department ...
concluded that it would be unreasonable for the City to
recover compensation through its landing fees for a ‘lost
opportunity’ that does not lawfully exist”). The DOT offers
the same rationale to justify the prohibition against
considering non-aeronautical uses for space inside the
terminal.
Although an airport is obligated to use non-airfield space
to support airport services, the DOT does not suggest all non-
airfield space must be dedicated solely to aeronautical uses,
which would be to deny the obvious; these days commercial
airports feature many retail vendors of food, clothing,
toiletries, periodicals, and more. A commercial airport
foregoes lost opportunities aplenty when it leases to an airline
space it could lease to a non-aeronautical tenant. The
difference between the airfield and the terminal is that
aeronautical and non-aeronautical uses cannot coexist in the
airfield; safety, among other reasons, precludes retail or other
non-aeronautical operations on the tarmac or runways. In the
terminal, by contrast, aeronautical and non-aeronautical
businesses are compatible, perhaps even complementary. It
makes no sense, therefore, to say the City may not rely upon
the rental value of retail space in calculating the FMV of
terminal space leased to airlines because “airports have grant
assurance obligations to operate the facility for aeronautical
purposes.” Final Decision, 2007 DOT Av. LEXIS 437, at

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*152. An airport does not cease to operate for aeronautical
purposes because it also rents terminal space to a retailer.
The DOT’s decision to limit the City’s use of FMV to the
consideration of lost aeronautical opportunities is therefore
arbitrary and capricious. We grant the City’s petition in this
respect and direct the DOT on remand, either to justify or to
abandon its objection to the City’s considering non-
aeronautical uses when setting terminal rents based upon
FMV.
3. Third-party appraisal
The City also argues it was arbitrary and capricious for
the DOT to require that it obtain “a neutral third party
appraisal,” id. at *151, in order to determine the FMV of
rental space. The DOT’s concern was that the City’s
“establishment of fair market value was not an objective
determination, but rather a determination established ... in-
house” by the City itself. Id. at *158. The City objects to the
notion that an in-house appraisal may not be objective and
reliable. Be that as it may, one need not consult precedents to
see that requiring an independent appraisal to ensure an
objective determination of the FMV for terminal space is
neither arbitrary nor capricious but only a prudent
acknowledgement of human nature and institutional
incentives.
4. Timeliness of T1 Airlines’ objection
An air carrier may appeal to the DOT for review of an
airport charge per 49 U.S.C. § 47129(a)(1)(B), as follows:
The Secretary of Transportation shall issue a
determination as to whether a fee imposed
upon one or more air carriers ... by the owner

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or operator of an airport is reasonable if ... a
written complaint requesting such
determination is filed with the Secretary by an
affected air carrier within 60 days after such
carrier receives written notice of the
establishment or increase of such fee.
When the T1/T3 Airlines filed their complaint, only the T3
Airlines had received notice that their non-airfield rent would
be based upon FMV. The City did not give notice to the T1
airlines until after the complaint had been filed. The ALJ
advised the T1 Airlines that because the complaint had
already been filed, it was unnecessary to “revise” the
complaint in order for the T1 Airlines to join the T3 Airlines’
arguments against the City’s use of FMV. Upon review,
however, the DOT held “[t]he reasonableness of the market
method [as applied] to the T1 Carriers ... is outside the scope
of this proceeding.” Final Decision, 2007 DOT Av. LEXIS
437, at *15 n.5.
In support of their petition for review by this court, the
T1 Airlines argue the ALJ’s invitation equitably tolled the 60
day requirement. The DOT responds that the 60 day
requirement limits the agency’s jurisdiction and therefore
could not be equitably tolled.
As the Supreme Court has observed, “the law typically
treats a limitations defense as an affirmative defense that the
defendant must raise at the pleadings stage and that is subject
to rules of forfeiture and waiver .... [and] permit[s] courts to
toll the limitations period in light of special equitable
considerations.” John R. Sand & Gravel Co. v. United States,
128 S.Ct. 750, 753 (2008). Some statutes of limitations
however,

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seek not so much to protect a defendant’s
case-specific interest in timeliness as to
achieve a broader system-related goal .... The
Court has often read the time limits of these
statutes as more absolute, ... forbidding a
court to consider whether certain equitable
considerations warrant extending a limitations
period. As a convenient shorthand, the Court
has sometimes referred to the time limits in
such statutes as “jurisdictional.”
Id. (internal citations omitted).
In Zipes v. Trans World Airlines, the Supreme Court held
the statute that required filing with the Equal Employment
Opportunity Commission a claim under Title VII of the Civil
Rights Act of 1964 was not jurisdictional because “it does not
speak in jurisdictional terms or refer in any way to the
jurisdiction” of the tribunal. 455 U.S. 385, 394 (1982). Nor
does § 47129(a) speak in jurisdictional terms or refer in any
way to the Secretary’s authority. The statute simply requires
the Secretary to issue a determination upon receiving a
timely-filed written complaint; it is silent as to whether the
Secretary may, in his discretion, act upon a complaint that
does not meet all the formalities. Cf. Wilbur v. CIA, 355 F.3d
675, 676-78 (D.C. Cir. 2004) (per curiam) (finding
jurisdiction where agency, in its discretion, accepted appeal
four years after deadline).
The DOT argues its interpretation of the statute is owed
deference pursuant to Chevron U.S.A. Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837: If the
Congress has “directly spoken to the precise question at
issue,” id. at 842, then we must “give effect to the
unambiguously expressed intent of Congress,” id. at 843; if

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instead the “statute is silent or ambiguous with respect to the
specific issue,” then we defer to the DOT’s interpretation so
long as it is “based on a permissible construction of the
statute.” Id. Here the statute is silent as to whether the
Secretary may exercise his jurisdiction without having
received a timely-filed complaint. But the DOT’s
interpretation is not based upon a permissible construction of
the statute because it ignores both John R. Sand & Gravel and
Zipes. The former case teaches that a statute of limitations
ordinarily serves only as an affirmative defense, 128 S.Ct. at
753, the latter that a statute of limitations is “jurisdictional”
only if it speaks in jurisdictional terms.
Consequently we hold the 60-day time limit in 49 U.S.C.
§ 47129(a) is not a jurisdictional requirement but is rather the
type of limitation that, when raised as an affirmative defense,
is subject to rules of forfeiture, waiver, and equitable tolling.
Accordingly, on remand the DOT must consider any
argument the T1 Airlines have preserved that the 60-day
limitation ought not be enforced against them.
C. Rentable Space
Because the T1/T3 carriers and the airlines with long-
term leases are “making similar use of the airport” but are not
“subject to substantially comparable charges,” the DOT held
the rentable space methodology used by the City ran afoul of
the requirement of non-discrimination in 49 U.S.C. §
47107(a)(2). The City disputes neither that the rentable space
methodology leads to substantially higher charges for the
T1/T3 Airlines, nor that the T1/T3 Airlines and the long-term
lessee airlines make similar use of airport common areas.
Instead the City argues, as it did before the DOT, that the
T1/T3 Airlines are not situated similarly to the long-term
tenants, which struck their bargains with LAX more than two

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decades ago. This distinction, the City contends, creates a
“reasonable classification” such that the two groups may
lawfully be charged different rates.
The City also argues the Final Decision is contrary to law
because the DOT improperly placed upon it the burden of
persuasion that the difference in rents was based upon a
reasonable classification. In Port Authority of New York and
New Jersey v. DOT (Newark), we considered a petition filed
by several airlines for review of a DOT decision denying their
claim of unjust discrimination under § 47107. 479 F.3d 21,
39-45 (2007). In that case the airport did not charge
Continental Airlines certain fees it charged other airlines
because Continental, unlike the others, operated and
maintained its own terminal. Id. at 42. We held the airline
complaining of unjust discrimination had the burden of
showing another airline making similar use of the airport was
not subject to comparable charges. See id.; 49 U.S.C. §
47107(a)(2). On the other hand, as we said, the statutory
exception for a difference based upon a reasonable
classification, see 49 U.S.C. § 47107(a)(2)(B), “could
arguably be viewed as an affirmative defense,” as to which
“the agency is free to choose which party bears the burden of
proof,” 479 F.3d at 42. We were quite clear, however, the
DOT “would violate [§ 556(d) of the Administrative
Procedure Act] if it placed the full burden of persuasion on
the [airport] as to the reasonableness of the proposed fees.”
Id. at 43 n.17; see 5 U.S.C. § 556(d) (“the proponent of a[n]
... order has the burden of proof”).
Before the DOT in this case, the City argued “it can
reasonably distinguish between airlines who signed long-term
leases in the 1980s ... on the one hand, and airlines who did
not sign leases of that duration ... on the other hand.” Final
Decision, 2007 DOT Av. LEXIS 437, at *166. In support of

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this affirmative defense, the City pointed to its need “to
expand LAX for the 1984 Olympic Games,” which the long-
term leases facilitated. Id. at *175. There is indeed evidence
in the record that the airlines with long-term leases got them
in return for their part in helping LAX secure financing for
the needed expansion, whereas at least some of the T1/T3
Airlines declined the same offer. Because the City asserted
and placed evidence in the record that the rate differential was
based upon a reasonable classification, thus perfecting its
affirmative defense, the burden rested upon the complaining
T1/T3 Airlines to persuade the DOT that the City’s
classification was not reasonable. See Newark, 479 F.3d at 43
n.17.
There is no mention in the Final Decision of any
evidence the T1/T3 Airlines introduced to show the City’s
distinction between the long-term tenants and the T1/T3
Airlines was not reasonable; the T1/T3 Airlines simply stated
the size of the fee disparity and that the various airlines made
similar use of their terminal space. The DOT nonetheless
ruled as follows:
Because carriers making similar use are not
being charged on a comparable basis, and
because [the City] has not offered an adequate
justification for this practice, we think the use
of the rentable space methodology in [this]
context ... violates the prohibition against
unjust discrimination.
Final Decision, 2007 DOT Av. LEXIS 437, at *149-50. By
holding the City’s justification “inadequate” without pointing
to any evidence to that effect put forward by the T1/T3
Airlines, the DOT effectively assigned the burden of
persuasion to the City, whereas the Administrative Procedure

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Act places that burden squarely upon the complaining airline.
5 U.S.C. § 556(d); see Newark, 479 F.3d at 43 n.17.
Because the DOT failed to require the T1/T3 Airlines to
put forward evidence that the City’s distinction between long-
and short-term tenants was unreasonable, the Final Decision
contains no discussion of whether the economic conditions
facing LAX and the airlines in the 1980s justified the
disparate treatment of the long-term tenants. We therefore
grant the City’s petition to the extent of directing the DOT on
remand to revisit the T1/T3 Airlines’ complaint of
discrimination and to apply to them the burden of persuasion
that their disparate treatment is unjust.
D. Monopoly Power
We now turn to the elephant in the room: Whether LAX
had monopoly power over the provision of commercial
airport services in a relevant geographic market. LAX’s
monopoly power vel non is relevant both to whether the City
could lawfully consider evidence of fair market value to set
rental rates for terminal space and to whether the rentable
space methodology unjustly discriminated against the T1/T3
Airlines. The extent to which market value may be
considered “fair” is surely affected by whether the market is
competitive rather than dominated by a government with
monopoly power. Whether it was unjust for the City to
charge the T1/T3 Airlines, but not the other airlines, rent for a
portion of terminal common areas might also be affected by
the City’s alleged monopoly position; a more competitive
market might have led to rent based only upon area used
exclusively by an airline. See Ill. Tool Works Inc. v. Indep.
Ink, Inc., 547 U.S. 28, 44 (2006) (observing price
discrimination “is strong evidence of market power”).

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In the Policy Statement under review in ATA, the DOT
responded this way to airlines’ concern that airports would
exercise monopoly power in setting fees:
The carriers’ claims ... are not supported by
the Department’s experience .... Airport
proprietors generally seek to improve air
services for their communities. This objective
would be frustrated by charging exorbitant
fees for aeronautical facilities .... In the
extraordinary situation, the Department would
consider airline complaints concerning
significant disputes through an expedited
administrative procedure (14 CFR Part 302).
Policy Regarding Airport Rates and Charges, 61 Fed. Reg.
31,994, 32,007 (1996). In their complaint, the T1/T3 Airlines
unmistakably raised the issue when they alleged the City “has
monopoly power over access to LAX, and airlines must have
access to LAX on fair and reasonable terms in order to serve
the Los Angeles region effectively.” Joint Complaint in
Opposition to New Terminal Charges at Los Angeles Int’l
Airport at 22. The ALJ did not overlook this issue; he found
LAX had monopoly power. The DOT, however, disregarded
that finding because it said the “issue was not within the
scope of the Instituting Order.” Final Decision, 2007 DOT
Av. LEXIS 437, at *185.
The Policy Statement clearly stated the DOT would
consider whether an airport impermissibly exercised
monopoly power if an airline sought its review using the
procedure the T1/T3 Airlines followed. The T1/T3 Airlines
raised the issue in their complaint, but the DOT failed to
include the issue in the Instituting Order. See Instituting
Order, Docket No. OST-2007-27331 (Dep’t of Transp. March

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16, 2007). It was arbitrary and capricious for the DOT,
having invited airlines to raise the monopoly power issue,
when it was raised to ignore it without good and sufficient
reason. On remand the DOT must explain why this case does
not present the “extraordinary situation” in which alleged
monopoly power is relevant to a fee dispute or, if it cannot,
then go on to consider whether LAX had monopoly power in
a relevant geographic market.
III. Conclusion
For the foregoing reasons, we grant both the City’s and
the Airlines’ petitions in part, deny both in part, and remand
this matter to the DOT for further consideration. With respect
to the Airline petitioners, we uphold the increased M&O fees
as non-discriminatory, and direct the DOT to explain why an
airport may use FMV to set non-airfield rates but not airfield
rates. We further hold 49 U.S.C. § 47129(a) is not a
jurisdictional statute of limitation and direct the DOT to
determine whether the 60 day filing requirement should be
tolled with respect to the T1 Airlines. Finally, we direct the
DOT on remand to consider whether LAX has monopoly
power and, if so, how that affects the City’s methods for
calculating the rent to be paid by the T1/T3 Airlines.
As to the City’s petition, on remand the DOT shall
explain or abandon its position that, in establishing the FMV
for non-airfield space, the City may consider only “other
aeronautical uses.” We find no fault with the DOT’s
requirement that FMV be established by an independent
appraisal. Finally, we hold the DOT unlawfully placed the
burden of persuasion upon the City to justify its use of
different methods for determining rentable space for the
T1/T3 Airlines and the long-term tenants.

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So Ordered.

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