The Santa Monica Airport (SMO) has been in the news a lot recently. As readers probably know, the Federal Aviation Administration (FAA), after a self-serving delay of six months, finally issued a “Director’s Determination” in the “grant assurances” case. This case is the FAA administrative proceeding that airport users brought in 2014 claiming that Santa Monica was obligated to operate the airport until 2023 because the City received federal money in 2003 for airport improvements. Not surprisingly, the FAA Director determined that the City was so obligated—more about that decision below.
But there has been news about SMO beyond the FAA decision.
In the litigation front, another group of airport users filed a class-action suit against the City protesting takeoff and landing fees that the City began collecting in 1985, alleging that the City failed to follow notice requirements and used the money for non-airport purposes. (Who knows about whether proper notice was given way back then, but the claim about the money is hard to figure, given that when the City raised fees in 2013, the airport fund was $13 million in the red.)
But as aviation interests get more desperate, expect even more litigation (at the same time, of course, that the FAA is doing everything it can to prevent the City’s case in federal court from proceeding). In an appeal for funds, the Santa Monica Airport Association recently promised its members that it would soon file a new administrative law proceeding with the FAA against the City, this time to protest the City’s recent actions to restructure aviation leases, assume control over fuel sales, and otherwise try to bring airport operations under the City’s control.
On the other side of the coin, a few weeks ago the City announced the hiring of Nelson Hernandez to advise City Manager Rick Cole specifically on airport policies. Hernandez has extensive administrative experience in both local and federal government, and the idea is that he will, with the goal of establishing City control over SMO, coordinate City actions and policies respecting the airport that are now scattered among several departments.
Getting back to the FAA Director’s Determination in the grant assurances case, the most important fact is that this “decision” did not even come from a purportedly independent administrative law judge, but from the FAA administrator in charge of compliance with FAA rules (in fact, an acting administrator). The ruling reads more like a brief than a judge’s decision. The good news is that the decision was a necessary step to get the FAA into federal court, where the facts and law can ultimately be heard in a neutral forum.
Besides the layers of delay, what’s unfortunate about the case is that if the contract drafting in 2003 had been better, there would be no need for the litigation. As an entertainment lawyer by trade, whose job it is to write contracts, I find this particularly galling. The facts are that in 1994 the City signed a contract with the FAA to get funding for improvements at the airport; in return the City promised to keep operating the airport for at least 20 years, i.e., the City’s obligations would expire in 2014. In 2003 the City and the FAA signed an amendment to the 1994 agreement that increased the amount of funding the City received (by about $240,000).
Unfortunately, the amendment was vague on a crucial point, namely whether the new money extended the term (to 2023) or whether the 2014 expiration date still applied. The amendment did have a “savings clause” stating that all provisions in the original agreement that weren’t amended would remain in force, and the City is relying on this to argue that the expiration date was not changed. The City is also arguing that since the FAA prepared the agreement, any ambiguities should be interpreted against the FAA. While it’s true that the form agreement should be clearer, the City’s argument is legalistic and would have been unnecessary if the savings clause had included language specifically including the expiration date in what provisions remained in force.
The FAA is countering with a legalistic argument of its own, namely that if there was no extension of the term, there was no consideration for the new money. The agency is also arguing that under federal statutory law the City could not take the money if the term were not extended. I suspect that when the case ultimately reaches federal court, the judge there will be looking to determine what the intent of the parties was. I doubt that the City could have had the intent of extending of the term when it accepted the money, but again, the contract is not clear. If the contract as drafted had been clear about the term, and if the FAA and the City didn’t agree on the term, then presumably there wouldn’t have been the increase in the grant that they are fighting about now.
When negotiating a contract, a lawyer’s purpose is to get the best deal for the client. When drafting a contract, the purpose should be to make the contract clear enough that no one has to litigate to find out what it means. I often recite an old Italian proverb to clients: Conti chiari, amicizia lunga—“clear accounts, long friendship.” I’m not saying that with a clear contract the FAA and the City of Santa Monica would be friends, but at least they wouldn’t be heading to court over the expiration date for the grant assurances.
In the litigation so far the City and its lawyers spent unnecessary time and energy arguing that the airport users who brought the case didn’t have standing to do so, in part because the City had not done anything to close the airport and so the issue was not ripe. I have to attribute these arguments to the customary zeal of litigators since (just as in the City’s federal case) it’s in the City’s interest to get these issues decided. I hope that when the City appeals the Director’s Determination, the City drops the standing arguments and focuses on the meaning of the 2003 amendment.
However, in the “fair is fair” department, the City should make a hypothetical argument of its own. Even if the City is obligated to keep Santa Monica Airport open until 2023 because of the money received in 2003, the ultimate issue will be what the FAA’s remedy would be if the City tries to close the airport before then. Would the FAA be able to get an injunction requiring the City to continue to operate the airport, or could the City satisfy its obligations by paying back the 2003 money? At the moment, that’s a theoretical question because the City hasn’t tried to shut down (all or part of) the airport. Perhaps the City should push the issue by declaring it will close the airport, but in any case, as the case wends its way through the FAA’s appeal process and into federal court, the City should try to get an answer to its hypothetical.
Thanks for reading – and Merry Christmas (if you celebrate that) and Happy New Year (if this turns out to be my last post for 2015)!