The wheels of justice have ground slowly when it comes to the Santa Monica Airport, but yesterday a unanimous three-judge panel of the Ninth Circuit Court of Appeals kicked them into a higher gear with a ruling that upended the balance of power between the City of Santa Monica and the Federal Aviation Administration (FAA).
The unsigned, seven-page “Memorandum” decision reinstated the City’s lawsuit, filed in 2013, that asked that the federal courts declare what the City’s rights are to the land at the airport. In 2014 a district judge dismissed the case, ruling that the City had filed the action too late, i.e., after the applicable 12-year statute of limitations had expired. He ruled that the clock had begun to tick in 1948. That was when the City and the federal government signed a post-World War II “Instrument of Transfer” (IOT) that returned control of the airport to Santa Monica, but which contained a clause requiring Santa Monica to operate the airport in perpetuity. If the City didn’t operate the airport, then the IOT said that property the feds were transferring to the City would “revert.” In the lawsuit, Santa Monica argues that the perpetuity clause is unenforceable or, alternatively, that it was superseded by a subsequent agreement, in 1984, that allowed the City to close the airport after July 1, 2015.
In its appeal of the district court’s dismissal of the case, Santa Monica argued that it could not have known in 1948 that the land, as opposed to other property, could be subject to reversion, and that the 12-year period began in 2008, when the FAA first notified the City that if Santa Monica did not continue to operate the airport, the feds could claim the land.
It took almost two years for the City’s appeal to reach oral argument in the Ninth Circuit. Since hearing the case in March, however, the appeals court has acted fast. In yesterday’s ruling the court, echoing questions that one of its members, Judge Jacqueline Nguyen, had asked the federal government’s lawyer during oral arguments, found that the statute of limitations issue could not be decided separately from the substantive merits of the case. Specifically, whether the City was on notice in 1948 of a federal claim that would trigger the start of the 12 years depended upon whether the IOT threatened the City’s ownership of the land, as opposed to being applicable only to other property transferred from the feds to the City. Since the essence of the City’s case is that the IOT did not transfer ownership of the land, the court ruled that the scope of the IOT had to be determined before the statute of limitations issue could be determined. The court sent the case back to the district court for trial.
The Ninth Circuit judges went even further, however, and that’s where the ruling fundamentally changes the litigation landscape. While the court said it could not determine from the record what the City knew or should have known in 1948, and left that to the trial court, the judges were not satisfied with simply remanding the case. Instead, the court went out of its way to prospectively validate the City’s arguments that the 1948 perpetuity clause did not apply to the land, and prospectively invalidate as irrelevant the primary evidence the FAA has put forward as support for its argument that the perpetuity clause in the 1948 agreement is enforceable.
As for the City’s arguments, the court emphasized, by quoting three times from the IOT, that the IOT, including its penalties for violating the perpetuity clause, only applied to property transferred in the IOT. Pointedly, the judges reminded everyone that neither side disputed the fact that the City had owned title to the land when it leased it to the federal government during the War.
The evidence that the FAA has put forward to prove that the IOT did apply to the land consists chiefly of actions and legal opinions from the ’50s, ’60s and ’70s. For each case, the Ninth Circuit panel suggested reasons why the evidence could not prove that the parties understood the IOT to mean that the City could lose the land if it didn’t operate the airport.
The three judges, in effect, laid out the case the City should make at trial.
When asked by the Santa Monica Lookout News for the FAA’s reaction to the Ninth Circuit decision, a representative said that the agency was reviewing it. I imagine that this review will be accompanied by some consternation because, at the least, the FAA is now going to find itself in a place, an impartial federal court, where it did not want to be, litigating a question, the present day validity of the IOT, that it did not want to litigate.
On the other side of the coin, the decision validates a strategy that the City decided on a 2013 (disclosure: a strategy that I had advocated for previously), namely to seek a federal court declaration of its rights before doing anything that might precipitate a stronger reaction from the FAA.
Thanks for reading.
(The Ninth Circuit decision can be accessed here. It’s worth reading.)