Victory in the air

“Belts and suspenders.” That’s a phrase that we lawyers use to describe how we write contracts and other documents repeating the same concepts multiple times. (“Repeating” and “multiple times”—you see, belts and suspenders.)

Sometimes the belts and suspenders are verbiage, but belts and suspenders have a role in legal drafting, because sometimes you need them to make sure everyone knows what the parties to a contract have agreed to.

Take the 1984 Agreement between Santa Monica and the Federal Aviation Administration (FAA) that settled litigation over Santa Monica Airport (SMO). The agreement stated clearly that the City could not close SMO until July 1, 2015. That was the “belt,” but the agreement didn’t say explicitly that on July 1, 2015, the City could close the airport (which would have been the “suspenders”). The belt held for 24 years, during which time both the City and the FAA knew (and acted accordingly) that the intent of the agreement was that the City could close SMO July 1, 2015. When, however, in 2008 the FAA decided to change its interpretation of the agreement, the missing suspenders gave the FAA cover to tell Santa Monica that though it couldn’t close SMO before July 1, 2015, it couldn’t do so afterwards either. Until last week, the City and the FAA were scheduled to go to trial in August to determine this issue.

When in 2003 Santa Monica negotiated an increase in a 1994 grant from the FAA to build a blast wall at SMO, the intent of the parties was not to have the 2003 money extend the term of the 1994 agreement. The 2003 amendment to the 1994 agreement had a belt (a clause saying that nothing in the amendment altered any other provisions of the 1994 agreement, which presumably included the term), but not suspenders (an explicit mention that the new money would not extend the term). The FAA later ruled that the new money extended the term of the 1994 agreement, and until last week the City had that ruling on appeal in the Ninth Circuit.

I bring up these examples of the perils of contract drafting because they provide the context for Santa Monica and the FAA’s most recent attempt to settle their differences over SMO: the settlement agreement they entered into last Saturday, which U.S. District Court Judge John F. Walter confirmed yesterday.

That context is twofold: (1), that because of the lack of suspenders in the 1984 and 2003 agreements, instead of having closed the airport in 2015 the City was involved until last week in a multi-front series of court cases, which were expanding whack-a-mole style, and which would not be resolved for years (and possibly not ever successfully); and (2), because in reviewing the new agreement, based on past disappointments one wants to be sure the agreement has both belts and, where needed, suspenders.

Taking up first Context 2, let’s look in the new agreement for the suspenders that were missing in 1984: an express acknowledgement that at the end of the term of the agreement, Santa Monica can close the airport. The new settlement agreement has the belt (it provides that the City’s remaining obligations to SMO continue only until Dec. 31, 2028), but also has this language (in the last paragraph of Section VI):

“[Unless the City agrees otherwise] the Parties agree that the City may, in its sole discretion at any time on or after January 1, 2029, cease to operate the Airport as an airport and may close the Airport to all aeronautical use forever [on 30 days’ notice].”

Ahh! An explicit statement that the City of Santa Monica can close SMO on a date certain! The missing suspenders from the 1984 Agreement! (There are community members who are concerned that a future City Council would not exercise its right to close SMO, but it’s a more plausible risk that a future council would keep the airport open if the current one hadn’t entered into the settlement agreement. A future council burdened with expensive and unending litigation, that the City might well be losing, would be more likely to cave in. Remember the “visioning process” that the council instigated after the City lost the Class C&D litigation with the FAA?)

Western end of soon-to-be shortened SMO runway

—Western end of soon-to-be shortened SMO runway

But wait, there’s more. Perhaps the most important provisions of the new settlement agreement are two provisions that are true suspenders. Why? Because they don’t add anything substantive to the agreement, but are crucial. Both relate to the FAA’s future actions.

The first is in Section I, where the City and the FAA settle all their claims, including claims under the Notice of Investigation and Cease and Desist order that the FAA served on the City last year. But the second paragraph of Section I goes beyond the mutual release. In true suspender fashion the paragraph requires the FAA to send to all the private parties bringing FAA administrative actions against Santa Monica (“Part 16 complaints”) a letter requesting that they withdraw their complaints. Although the FAA can’t require private parties to withdraw Part 16 complaints, the form of the letter attached to the settlement agreement includes language where the FAA tells the complainants that it will now be the terms of the settlement agreement that apply to their case, and that if the City is in compliance with the settlement agreement, the FAA will presume that the City “is meeting its obligations to the FAA.”

But the second provision about the FAA’s future action is even more important. This is Clause VIII.F, “Defense of this Agreement.” In it both parties agree to “vigorously and actively defend” the settlement and its terms “against any challenge by any individual or entity.” This means that if any aviation business contends that the settlement agreement is invalid, and that Santa Monica doesn’t have the right to close the airport (or exercise any of the other powers it has under the agreement), the FAA will take the City’s side.

There’s a lot of angst, even anger, from anti-airport activists about the settlement agreement. Most of it arises understandably from disappointment that the City’s absolute right to close the airport has been delayed from July 1, 2015 to Jan. 1, 2029. I feel the same way: I’ll be 76 then and I’m not happy to wait that long. But the true causes of the wait are the suspenders missing from the 1984 and 2003 agreements, and the resulting litigation context, not this agreement.

Additional fears arise from anxious reading of the agreement itself. For instance, many are worried about an “avigation easement” the City grants to the FAA preventing interference with aeronautical activities, but it’s clear from the agreement (although honestly there could be some suspenders making it doubly clear) that this easement only applies to the 1500 or so feet of the runway that are being decommissioned under the agreement. (From Clause II.C: “such land shall be subject to an avigation easement” (emphasis added).)

As I said in my post earlier in the week, the anti-airport, pro-park groups will need to continue to be active. The settlement agreement doesn’t end anything. Christian Fry of the Santa Monica Airport Association told a KPCC radio audience that he feels hopeful that the settlement agreement will result in the preservation of the airport, because by reducing its size, it will be more acceptable to residents.

So nothing is over. Expect another initiative, Measure D.2. La luta continua.

Yet it’s incomprehensible to me that there are anti-airport people who don’t realize that they are in a drastically improved situation from where they were a week ago. The City has neutralized the FAA! What can aviation businesses do now that they don’t have the big bad FAA backing them up? Where do they go when they can’t, realistically, file Part 16 complaints? (By the way, they’re not happy about it.)

Moreover, the City wasn’t going to be able to close the airport for years, or even reduce air traffic; now it’s as if the City won the Class C&D litigation, the City has a clear path to taking over FBO services, and true, it’s 12 years away, but we have a firm, outside date to close SMO and reason to believe that date can be accelerated.

Finally, Santa Monica faced years of litigation, litigation it might lose, or which a new council might abandon. Aggressive new challengers like JetSuiteX were popping up all over, but now the City has the advantage.

How can the settlement agreement not be a victory?

Thanks for reading.

The SMO settlement, eternal vigilance, and the beginning of the end

Procrastination can pay. For the past two weeks the top item on my to-do list has read, “Blog on SMO—read dox.” “Dox,” meaning the pleadings and briefs that have been piling up in multiple pending Santa Monica Airport (“SMO”) court cases.

“Pending”—scratch that. The settlement announced Saturday between the City of Santa Monica and the Federal Aviation Administration (FAA) resolves all litigation between the City and the FAA. As for litigation with third parties, such as aviation businesses at SMO, the FAA agreed to defend the settlement against any challenges.

Happy now that I didn’t waste time reading those dox.

The settlement has been widely reported, even making the front page of Sunday’s Los Angeles Times. There have been many articles in the local press, such as here (Santa Monica Lookout News) and here (Santa Monica Daily Press).

Most attention has focused on the City’s getting from the FAA an absolute date, Jan. 1, 2029, by which the City can close SMO. Other important points include that the runway will be shortened to 3,500 feet, eliminating most larger (“C and D” class) jets and preventing charter services like JetSuiteX, which was already selling tickets, from operating. The City also strengthened its authority over operations at the airport.

Speaking broadly, most observers outside of Santa Monica expressed astonishment that the City got the FAA to agree that the airport could close, while within Santa Monica a considerable number of anti-airport activists are shocked that the City agreed to operate the airport for 12 more years. In fact, three members of City Council voted against the settlement for precisely that reason.

So—is it a good deal?

Well, as one of those anti-airport activists—one who believed the City’s case against the FAA was good—my initial reaction was shock. I mean, Jan. 1, 2029? It’s also impossible not to recall that this is not the first time the FAA has agreed the City could close SMO. The first time was in 1984, when the FAA agreed the City only had to keep the airport open until July 1, 2015. As of 2000 the FAA was acknowledging that after that date SMO’s future would be a “local land use matter.”

But then in 2008, for reasons I’ll get to, the FAA changed its mind. The feds said the City couldn’t close the airport in 2015; that when the 1984 agreement expired the parties would return to where they were in 1984, fighting again over the same issues. It hurts to say it, but as a result of the SMO saga, I’ve become a little more understanding of the Sagebrush Rebellion.

So is the agreement, as Council Member Kevin McKeown said to the Daily Press, a case of “snatching defeat from the jaws of victory?”

I don’t believe so, and let me explain why.

First, would there have been a victory to snatch defeat from? As I’ve written often, the City had a good case that it had the right to close SMO, but that doesn’t mean it would win. The City was facing a party, the federal government, with unlimited resources, an agency, the FAA, dedicated to keeping airports open, and an incoming administration that favors business. (Not to mention a president whose most potent symbol was his private jet.) It’s significant that the law firms representing the City in its cases against the FAA advised the City to take the settlement. That was advice coming from lawyers who are naturally competitive, who like to win, and whom, incidentally, the City would have paid millions in fees if the cases continued to be litigated.

The great example of allowing enthusiasm to influence litigation was the fiasco of the City’s attempt to ban from SMO class C and D jets, an attempt that resulted in litigation that the City lost catastrophically. It felt good to ban the jets, and everyone was certain that the City was in the right. Not only, however, did the City lose and spend a lot of money doing so, but it was that case that prompted the FAA to change its interpretation of the 1984 Agreement. In years when the City should have been lying low, waiting until 2015, the C and D litigation kicked awake the sleeping dog of the FAA.

The only certainties about litigation are that it costs a lot and that no one knows how it will turn out. There is a reason that city councils discuss litigation in closed session. Decisions about legal tactics are not best made in response to public comment.

In evaluating the settlement, one also has to consider the context, namely the threat from JetSuiteX to begin the equivalent of commercial air service at SMO. If JetSuiteX succeeded, no one knows how that might have changed the political dynamic. Inevitably the aviation industry will try another initiative to keep SMO open; the vote might go differently than it did in 2014 with Measure D if voters not negatively affected by SMO are using and benefiting from it.

One is reminded of the axiom that the price of liberty is eternal vigilance. (Something we are reminded of these days whenever we look at a newspaper.) The fight to close SMO is not over because the fight to keep it open is not over. The aviation industry is just as angry about the settlement as anti-airport activists. They’re fired up and they’re not ready to go.

What will be most important in coming years is that the City use its enhanced powers over the airport—enhanced more because the FAA has decided to wash its hands of SMO than because of any specific right the City obtained under the settlement—to continue to reduce operations at SMO until no one has a financial interest in keeping it open.

For those of us who want to close the airport and build a park there, it’s going to be essential to remain politically involved. Council Member Tony Vazquez, as quoted in the Daily Press, made the valid point in explaining his “No” vote on the settlement that he would “hate to see a future council cut a deal with the FAA to continue to operate this airport any longer than 12 years,” but that’s a political reality settlement or no settlement. Meaning that even if there were no settlement, a future council could decide to cease litigating against the FAA. At least the settlement neutralizes the FAA.

The settlement is not the end of SMO. But, apologies to Winston Churchill, it should be the beginning of the end.

Thanks for reading.

That boot dropped at SMO

Last week I asked whether the other shoe, namely an FAA boot, was about to drop with respect to the Santa Monica Airport (SMO), i.e., would the Federal Aviation Administration take action to stop the City of Santa Monica from further reducing aviation operations at SMO?

The answer came Monday, when the FAA served the City with a “Notice of Investigation,” accompanied by subpoenas. The FAA gave the City ten days to respond to questions as to whether City actions and policies, including a purported refusal to enter into leases with aviation businesses, eviction notices given to two “fixed base operators” (FBOs), and its own plans to take over FBO-type operations at SMO, violate federal requirements to operate the airport “on reasonable terms.” These requirements apply primarily because of the FAA’s own ruling that Santa Monica must keep the airport open until 2023 because of federal grants the City received in 2003 and “assurances” that go along with the grants. The City says the grant assurances expired in 2014 and has appealed the FAA’s ruling to the Ninth Circuit Court of Appeals.

What apparently motivated the agency to step in now, after the City has been chipping away at airport operations for more than a year, were eviction notices the City sent to Atlantic Aviation and American Flyers, the two FBOs that provide fuel at SMO, and the City’s plans to replace them with the City’s own operations, something the City, as owner of the airport, has the right to do. The City demanded that the two FBOs vacate by October 15. In its notice, the FAA “strongly recommends” that the City drop the eviction notices until everything is resolved with the FAA.

Based on language in the FAA’s notice of investigation, the investigation’s purpose is to provide the basis for the FAA to issue an order to the City to keep the airport running as it has been running, at least until the City’s litigation with the FAA has been resolved.

The FAA has also demanded that the City give the agency details about how the City plans to provide aviation services once the FBOs are gone. It’s the FAA’s position that the City must continue the same services as are provided there now, and that it must provide these services using its own employees. The City disputes that it has to provide the FAA with its plans, and it also disputes that it must provide the all the services that the FBOs currently provide. While it’s possible that these issues will be resolved informally with the FAA (the City told the FAA that it would “consult cooperatively” with the FAA), if the FAA issues an order based on its investigation, these issues will likely be litigated.

It’s presumptuous to suggest legal tactics without having access to all the information, but I can’t help but be reminded of the old tai chi adage that if you’re standing on railroad tracks and a train is bearing down, the way to stop the train from running you over is not to put your hands up and try to block it, but rather to step off the tracks. Meaning that it’s not in the City’s interests to find itself operating under the strictures of an FAA administrative order or, worse, an injunction. You never know how broadly an order or an injunction will extend.

It’s also going to take more than 16 days (Atlantic and American Flyers were told to vacate by Oct. 15) for the City to staff up for whatever FBO services it plans to provide. Many people want the City to close the airport immediately, but if the City evicts the FBOs and then offers nothing in the way of aviation services, that’s inviting an order from the FAA to freeze the status quo. If the City can’t go to court and show the judge a credible plan to maintain a reasonable level of aviation services, then there’s no way the City could get the order overturned.

It’s time for a little tai chi. The City should withdraw the eviction notices, as the FAA “strongly” recommends, to slow the FAA’s process down, and concurrently begin developing its plan to provide FBO services. The City can reinstate the eviction notices once it has its services plan ready to implement. One hopes this would forestall FAA direct action against the City during the time that the City is pursuing its Ninth Circuit appeal of the grant assurances case and as it gets ready for next summer’s trial in Federal District Court of the City’s action to confirm the City’s rights to close the airport.

* * *

In the good airport news department, Tuesday night the City Council approved concept plans for the expansion of Airport Park onto 12 acres of land that until 2015 were used to park airplanes. The park designers, Rios Clementi Hale Studios, will now proceed to develop detailed plans, with start of construction scheduled for 2018. City staff will now proceed to research funding options. Hint: Vote Yes on the County parks bond, Measure A on the November 8 ballot.

Thanks for reading.

SMO: Is a boot about to drop?

I became active in Santa Monica politics more than 20 years ago, and from the start of my involvement people told me that come 2015, the City would close Santa Monica Airport (SMO). That was when a 1984 agreement with the Federal Aviation Administration (FAA)—during which the City agreed not to close the airport—would expire. The City carefully timed the receipt of FAA airport improvement money so that its obligations (“grant assurances”) to operate the airport for 20 years afterwards would expire in 2014.

So much for plans. As 2015 drew closer, the FAA, which had told pilots and aviation businesses in 2000 that after 2015 the future of SMO would be a “local land use matter,” had a change of heart. In 2008 the agency told the City that the 1984 agreement had not altered an agreement the City had entered into in 1948 that said the City would operate the airport in perpetuity. Unfortunately, instead of immediately challenging the FAA on the 1948 agreement in court, the City pursued an aggressive but doomed strategy of trying to ban big jets, which ended in a costly defeat. Along the way, in 2003, the City accepted more money from the FAA, and failed to make it explicit that the new money did not extend the original 20-year period during with the City had to keep the airport open.

July 1, 2015, the final day of the 1984 agreement, rolled by and the City was not able to close the airport. For one thing, it was involved in an administrative action with the FAA concerning whether the 20-year grant assurances period had been extended from 2014 to 2023. After dragging its feet through its process, the FAA determined, unsurprisingly, that the City had to keep the airport open until 2023. The City has appealed that decision to the Ninth Circuit Court of Appeals, but that court is backed up and the City might not have a decision for two years.

With regard to the larger question whether the City would ever have the right to close SMO, it was only in 2013 that the City brought an action in federal court to clarify its rights under the 1948 and 1984 agreements. That case, after procedural setbacks and a then long wait while the Ninth Circuit Court of Appeals resolved the procedural issues, is now set to come to trial in August 2017, nearly four years after it was filed.

But the City has not done nothing since 2015. All the leases of City property (the City owns all land and buildings at the airport) terminated July 1, 2015, and since then the City has not entered into any leases with aviation entities, who therefore are operating under considerable uncertainty. The City has also made many aviation businesses at SMO much less profitable by taking from them the right to sublease space to other, often non-aviation, businesses. As a result of these and other factors, several important aviation businesses have closed up shop.

Since 2015 the City has had to explore an undefined boundary between what it could do to reduce operations at the airport and what actions the FAA would consider to be equivalent to closing the airport in violation of the grant assurances. At any time, the FAA could, or might, seek an injunction or take other actions to freeze operations at SMO until the courts had finally determined everyone’s rights, and that was something the City wanted to avoid. The City has done a good job avoiding FAA action so far, but we may have now come to the moment when the other shoe—an FAA boot—is ready to drop.

Recently—in August after the City Council announced its intention to close SMO as soon as it had the right to do so—the FAA sent the City a letter warning it not to do anything that would violate the City’s obligation to “operate the airport for public use on reasonable terms.” The agency warned that it had the right to issue orders against the City, or that it could go to court to seek an injunction.

The letter was a warning from the FAA, but by itself, without something triggering FAA action, it didn’t mean that much. After all, the FAA has held back so far, which I’ve interpreted as meaning they believed that there were risks in taking action against the City.

There may now be, however, the trigger. The City has now turned its attentions to the big fish at the airport, Atlantic Aviation, which is the FBO (“fixed base operator”) at SMO that handles the private jet traffic that has made SMO so unpopular. When the City Council announced last month its plans to close the airport as soon as legally possible, the council also voted to have the City become the FBO there, instead of Atlantic, by the end of the year. It’s not unlawful for the owner of an airport to be an FBO.

In response, last week Atlantic filed an administrative action with the FAA protesting the City’s failure to negotiate and conclude a lease with Atlantic to allow Atlantic to stay. The City responded to that by sending Atlantic an eviction notice. Then, on Monday of this week, Atlantic’s lawyers filed a motion with the FAA requesting that the FAA issue a cease and desist order to stop Santa Monica from evicting Atlantic.

What will the FAA do? Issue an order? Seek an injunction in court? Do nothing?

Thanks for reading.

Beginning the end at SMO

With the latest developments concerning the future of Santa Monica Airport (SMO), I’m willing to say that we’re at the beginning of the end. One way or another, the future of the airport will be sealed within two or maybe three years. I’m optimistic enough (I hope not foolish enough), to say that the end that we’re at the beginning of is the end of SMO as an airport.

So what’s happening? For one, Tuesday night the Santa Monica City Council will vote to close down aviation uses at SMO “as soon as legally permitted,” and with a goal of July 1, 2018. This action will be important, because formally deciding to close the airport will clarify the City’s position in at least two court cases. The council’s action, however, will not be the primary reason we’re at the beginning the end: merely saying something is so doesn’t make it happen.

More important to closing the airport was that last week the City lost an appeal at the Federal Aviation Administration. Yes, losing the appeal was good news. The appeal was of an FAA administrative decision that the City had to operate the airport until 2023 because of money it received from the FAA in 2003. The L.A. Times made a big deal about the City losing the appeal, saying that Santa Monica had “lost another round in effort to close” SMO, but in terms of the timeline to close the airport, in fact it was a victory for the City to get the FAA finally to make a decision, which the agency had continually delayed. The City should have lost this battle a year ago!

Now that the City has the decision, it can appeal it to a neutral forum, namely the Ninth Circuit Court of Appeal. Unfortunately the Ninth Circuit is backed up, and based on the experience with other SMO litigation it’s likely that the City won’t have a decision for at least 18 months. The City’s case is strong, however, as the FAA administrators had to stretch to rule against Santa Monica. I predict that the City will win this appeal.

Speaking of the Ninth Circuit, it’s mostly because of a Ninth Circuit ruling that I’m willing to predict that we are beginning the end. That was the decision back in May when a three-judge panel unanimously reinstated the City’s own case against the FAA. The City brought that case to have the courts declare that the City could close the airport notwithstanding a clause in a 1948 agreement under which the City agreed to operate SMO in perpetuity, but the trial judge in the case had dismissed the City’s complaint on procedural grounds. The City claims that the perpetuity clause is not enforceable; it’s impossible to read the Ninth Circuit opinion and believe that the judges disagree with the City.

As a result of the reversal on appeal, there will now be a trial on the merits, and as of last week there is a trial date: August 29, 2017. (See you in a year, on an Expo train to the federal courthouse in downtown L.A.)

Whoever loses at trial is bound to appeal, and so both the appeal of the FAA ruling and the City’s case against the FAA will grind on for at least two years. No doubt that’s why the City Council resolution to be voted on Tuesday calls for a goal of closing the airport July 1, 2018.

There are questions about what will happen in the meantime at the airport. Specifically, a number of anti-airport activists want the City to evict aviation tenants at the airport whose leases expired in 2015. In particular, the focus is on Atlantic Aviation, which is responsible for nearly all the jet traffic at SMO.

It’s hard not to sympathize with these activists and their arguments, since after a business loses its lease, that’s usually it. (No rent control for businesses!) But the City has walked a fine line on the leases—for good reasons, and to good effect. What the City has done is to take steps to reduce the profitability of the aviation businesses at SMO, and then negotiate with them to leave voluntarily. Primarily this has involved taking away lessees’ rights to grant subleases, which was a big source of profits. Using these strategies, which have included carrots as well as sticks, the City has caused two of the largest aviation businesses at the airport, Gunnell and Justice Aviation, to leave.

Originally the City’s caution with the leases arose from fear that that if the City evicted the aviation businesses, the FAA would seek an injunction, as it has in past litigation with the City, to freeze operations at SMO. In other words, the FAA would claim that the City was closing the airport de facto, and had to be stopped with an injunction.

So far the FAA hasn’t done that. We don’t know if the agency has held back because the City hasn’t given the agency grounds to do so, or because the agency is concerned that it would lose in court. We don’t know what would happen if the City evicts Atlantic, but certainly it would be better if Atlantic should choose to vacate as Gunnell and Justice have done.

The City now has another reason to be careful. Now that it has its cases where it wants them, in federal court, the City has to be cautious not to do anything that would annoy or anger the judges hearing the cases. Judges don’t like to be shown up. If a plaintiff is asking for relief from a judge, the judge doesn’t want to hear (from the defendant) that the plaintiff has gone off and taken its own action before the judge can make a decision.

As much as I wish we could wish the jets away, and turn SMO into a great park sooner, I have to take the side of caution and . . . patience.

Thanks for reading.

Santa Monica Airport: wheels of justice speed up a bit

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.)

How to plan a park; how to close an airport

A lot, as usual, is going on in Santa Monica, mostly of the garden-variety category, such as people filing petitions to stop change, but 30 years from now historians of the city are going to look back to our time mainly at two things: one, that on May 20, 2016, mass transit returned to Santa Monica, and two, that in 2016 the City and its residents were working hard to turn Santa Monica Airport (SMO) into the great park that people 30 years from now will take for granted. This post is about the airport.

To start, tomorrow night the Santa Monica Airport2Park Foundation is hosting an event where the public can learn more about the process, both procedural and intellectual, that is to going lead to the creation of a 12-acre expansion of Airport Park, representing the beginning of the conversion of the airport into parkland.

The event is a talk by designer Mark Rios, whom the City of Santa Monica has hired to design the new parkland. Tomorrow night Rios will give a preview of the public process for designing the park expansion that gets underway officially with a city-sponsored workshop in June. Rios will discuss his own process when tasked with designing a park, and what he sees as the challenges for this project. It’s worth mentioning that Rios is one of the most accomplished park designers in the country, if not the world. Among many other projects, he recently designed Grand Park in downtown Los Angeles. (He has also worked often in Santa Monica, so he knows the territory.)

Readers may also recall that in October 2013 Rios gave a fantastic talk, also sponsored by Airport2Park, showing how all over the world cities were turning airports and other industrial sites into parks. It was that talk that energized the political process to replace the airport with a park. Consider this is a return engagement for Rios.

The event is tomorrow night, at the Mt. Olive Church, 14th and Ocean Park Boulevard. Doors open at 6:30. For more information, and to RSVP, click here.

* * *

In March I wrote about a new “Part 16 Complaint” that aviation interests, including the National Business Aviation Association (NBAA) and the Airport Owners and Pilots Association (AOPA), had filed against the City with the Federal Aviation Administration (FAA). The NBAA and AOPA, and aviation businesses and pilots using SMO, alleged various ways by which the City was violating laws and FAA regulations in its operation of SMO. In particular, they complained that the City was not giving aviation businesses long-term leases.

When I wrote about it in March, the next step in the case was the City’s response to the complaint, which was due in April. The City filed its brief about a month ago. It is a relatively short (16 pages), but fascinating document. The City has engaged new aviation lawyers for this case, a firm called Anderson & Krieger, which has both an environmental practice and a strong practice representing municipal airports.

Initially the new lawyers’ brief follows, I have to say, a line of argument that I anticipated in my March post, namely that the City would use this new Part 16 action to make the argument that it has no obligations to any of the complainants because the City is no longer obligated to operate SMO. This is a logical argument to make from the twin facts that (i) the City has brought a case in federal court to prove that it has no obligations to operate the airport under the 1948 “Instrument of Transfer” by which the federal government returned to the City control of the airport after World War II, and (ii) the City is appealing the FAA’s 2015 administrative ruling that the City has to operate the airport until 2023 because of money the City received from the FAA in 2003. (In case you’ve lost track, the FAA’s “final” decision in that case is due June 15; if the FAA rules against the City, the City will appeal the case to the U.S. Court of Appeals.)

As anyone who has followed the federal litigation knows, the FAA has gone to extraordinary lengths to keep the question of the validity of the 1948 agreement out of court, and the City’s case about that is still marooned in the Ninth Circuit Court of Appeals. By bringing this case against Santa Monica, the aviation industry has, however, given the City the opportunity to litigate the 1948 agreement. As this latest brief, along many others the City has filed, shows, it’s not pretty for the FAA because in 2000 the FAA ruled, in another case involving leases, that after 2015 the City would have no obligation to operate SMO. The FAA is going to have to try to explain to a judge why it was wrong then.

Where the new brief goes further than any argument I predicted is that in it the City argues that the very fact that it is litigating its claims in good faith changes the legal landscape. While so far the aviation industry has used FAA administrative complaints to muddy the waters when it comes to the City’s rights, the City is turning the tables and arguing that the claims that it is litigating strengthen its rights as the owner of the airport land. As the brief states, “[u]ntil the City’s claims to be free of any continuing federal obligation to operate SMO as an airport have been resolved, the FAA cannot properly compel the City to give up the proprietary rights it is advancing in those [cases].”

Meanwhile, as has been reported, a major aviation business at SMO, and one of the complainants in the new Part 16 case, Justice Aviation, has settled with the City and is moving out. Justice is not the first nor will it be the last aviation business to leave. The City is already earning much higher rents from non-aviation tenants at SMO than it was from aviation businesses, rents that will someday pay for the operations of a park.

Thanks for reading.

P.S. After I posted this article earlier today, Airport2Park posted a terrific video interview of Mark Rios by Gavin Scott. The video was shot in Rios’ offices and it’s a great preview for his talk tomorrow night. To see the video, click here.

Anticipating future slow grinding of wheels of justice

In my last blog I discussed the Ninth Circuit’s review of the City of Santa Monica’s appeal of the procedural dismissal of the City’s lawsuit asking for a judicial “declaration” of the legal status of the Santa Monica Airport (SMO). This week the City took actions that will ultimately lead to a judicial determination of the City’s rights even if the Ninth Circuit dismisses the City’s case.

Namely, the City Council adopted a policy for leasing its properties at SMO, which include all the land, buildings, and other facilities at the airport used for both aviation and non-aviation activities. The City needed a leasing policy because last July all of the leases at the airport terminated concurrently with the expiration of the 1984 Agreement that settled litigation with the Federal Aviation Administration.

While many current tenants at the airport are, naturally, aviation businesses, the leasing policy hardly mentions aviation beyond saying that alternative fuels will be used within an “Airport Operations Area.” Instead it establishes criteria for granting leases that are all based on impacts on the surrounding environment, criteria that are the same for all activities. It lists examples of authorized uses under these criteria that are all low impact; none are aviation uses.

But then, the authorized uses also include “uses required by law.”

“Uses required by law.” Hmmm. Maybe you’re asking, “what uses does the law require?” Well, that’s a good question, and it’s one that leads to a prediction that at some point the City is going to deny a lease to an aviation business that in turn leads to the business or the FAA going to court to claim that the City, by not leasing to aviation businesses, is violating legal obligations to operate an airport.

In fact, the City’s leasing policies, or non-leasing policies, are already being challenged. In February the usual suspects—the National Business Aviation Association (NBAA) and the Aircraft Owners and Pilots Association (AOPA)—brought an administration action (called a “Part 16 Complaint”) in the FAA claiming that the City was not fulfilling obligations to operate the airport arising under statute, under the “grant assurances” it gave in a 1994 contract with the FAA (the subject of anther Part 16 proceeding), and under the 1948 “Instrument of Transfer” by which the federal government relinquished control of the airport back to the City after World War II. While the new Part 16 action raises several objections to City policies, a significant basis for it is the City’s not giving new leases to aviation businesses.

The City is not due to respond to the February complaint until late April, at which point we might see something about what the City considers its legal obligations to be. We already know, however, from the City’s federal lawsuit, that the City doesn’t believe it has any obligation to keep the airport open under the 1948 agreement, and we know from the City’s response in the grant assurances Part 16 action that it believes that the grant assurances expired in 2014. I doubt there are other statutory obligations the City is willing to acknowledge. It seems likely, then, that the issue will soon be joined, at least in the interminable bowels of the FAA administrative process, as to whether the City has any obligation to continue aviation operations at SMO.

But it’s a different question when the Part 16 complainants or the FAA will determine that they need to go to court to seek an injunction to force the City to lease property to aviation businesses to keep operations going at the airport. What straw breaks that back we don’t know. Some community members seem to think that the FAA, NBAA and AOPA will stand aside while all the airport’s aviation businesses go away, so long as the runway is left open for takeoffs and landings, but I suspect this is unlikely. At the same time the FAA has resisted having the 1948 agreement tested in court, and the NBAA and the AOPA showed such little faith in the 1948 agreement that they spent nearly $1 million in 2014 trying to preserve the airport by passing Measure D. The agency and the aviation business will have to strategize about what their best options are.

But it will be a good thing if and when that suit finally comes. Why? Because it will ultimately lead to a federal court, not the FAA, determining whether the 1948 agreement prevents the City from closing the airport, without the City having to close the airport. In other words, it will be as if the City gets past the procedural hurdles in the declaratory relief case, and can get an answer without taking the risk (by closing the airport) of a catastrophic loss (however remote that risk may be) under the 1948 agreement.

But there are complications. For one, so long as the grant assurances case is pending in the FAA the FAA will be able to say that the City is obligated to keep the airport operational independent of the 1948 agreement. Until the grant assurance case is resolved, courts might take the position that they needn’t venture into interpreting the 1948 agreement if the City couldn’t close the airport anyway.

Even more complicating, the courts might grant an injunction and then throw the whole thing back into the FAA for an administrative determination first. This could be worse than a complication, because if the FAA rules against the City, which, let’s face it, is likely, then the City will have to appeal an administrative ruling, and the courts give these a considerable level of deference.

All in all, the best outcome is for the Ninth Circuit to reverse the District Court and remand the City’s action for declaratory relief. But failing that, never fear, the City will someday get the FAA into court for a fair determination of the City’s rights.

Thanks for reading.

More slow grinding of the wheels of justice

A week ago Friday (March 11) a three-judge panel of the federal Ninth Circuit Court of Appeals heard arguments in the City of Santa Monica’s lawsuit against the Federal Aviation Administration (FAA) about the future of Santa Monica Airport (SMO). You’re probably wondering, of all the litigation the City has with the FAA, just which case was this? Well, it’s the case the City brought in 2013 to get what’s called “declaratory relief,” which means the City is asking the courts to tell the City and the FAA what their respective rights are with respect the airport before the City makes decisions about SMO’s future.

American legal doctrine disfavors courts making decisions before there is what’s called an “actual controversy,” but in certain circumstances, federal courts will declare ahead of time, before fateful decisions are made, what are the rights of parties to a potential dispute. The City has since 1981 expressed its desire to close SMO, but if it tries to do so and it doesn’t have the right to do so, it could potentially be subject to serious penalties. Given that risk, it would make sense for the courts to analyze the situation ahead of time and declare what the City’s and the FAA’s rights are before the City takes action.

One avenue for requesting declaratory relief when a party has issues with the federal government over the ownership of property is an action under the federal Quiet Title Act, under which the federal government has promulgated rules by which it can be sued. (The government starts with something called “sovereign immunity,” which means it can’t be sued, but under laws like the Quiet Title Act (QTA) it allows suits against under specific rules.) One of the rules under the QTA is that there is a 12-year “statute of limitations,” meaning that if you have a dispute with the feds over a piece of property, you have 12 years from the time you know of the feds’ claim against the property to bring your lawsuit.

The key document for the question whether the City has the right to close the airport is a 1948 agreement, the “Instrument of Transfer” (IOT),” between the City and the federal government whereby the feds transferred back to the City certain improvements made to the airport during World War II when the feds leased the airport from the City. In return for the transfer, the feds had the City promise to operate the airport in perpetuity. The City argues that the government’s rights under the perpetuity clause are not enforceable, or, if even if they were enforceable, they were voided by a subsequent agreement the City and the FAA entered into in 1984.

But to get a court to consider these arguments (the “merits” of the case), the City first has to get past the procedural hurdle of the 12-year statute of limitations. The feds’ position, and one that the District Court judge who heard the case in 2014 agreed with, is that the City was on notice in 1948 that the federal government had a claim on the City’s land, a “cloud” on its title. The City’s argument is that it was only in 2008, when the FAA informed the City that if the City closed the airport the FAA could demand ownership of the land (as opposed to demanding return merely of the non-real property that had been transferred in 1948), that the City knew of a federal claim against the land, and that the 12 years only started to run then.

It took more than two years from the District Court’s 2014 decision against the City for the City’s appeal finally to be heard by the Ninth Circuit panel, which goes to show that in the interest of justice Congress must expand the federal courts of appeal. They are, or at least the Ninth Circuit is, overwhelmed. It’s unconscionable that any case, but particularly one that affects so many people, gets stuck in its tracks for this long over a procedural issue. “Justice delayed is justice denied.”

So what happened at the hearing? It was interesting. (You can watch the hearing yourself at this link; the case starts at around the 3:00 hour mark and the hearing last about 45 minutes.) The three judges were generationally diverse: the legendary 92-year-old Harry Pregerson, who was appointed by Jimmy Carter, and who is now on senior status; Judge Richard Paez, appointed by Bill Clinton; and an Obama appointee who joined the court in 2012, Jacqueline Nguyen. They asked good questions of the lawyers from both sides, and it’s impossible to predict what they will do.

If you want to be optimistic that the City will win, the best question came from Judge Nguyen. She asked the U.S. Attorney, Alisa Klein, how the statute of limitations issue could be separated from the merits of the case, since whether the 12 years started to run in 1948 depends on what was the subject matter of the 1948 IOT. Meaning, that if the court found that the IOT only applied to non-real property, that would dispose of both the statute of limitations issue but also, incidentally, the whole case.

Not surprisingly, U.S. Attorney Klein fervently tried to keep the case limited to the procedural question; she repeatedly argued that the City would have ample opportunity to raise the substantive issues if it closed the airport and if (“hypothetically” she said) the government brought an action to enforce its rights under the IOT. (The statute of limitations only limits the City’s rights under the Quiet Title Act; it does not limit the City’s arguments in a case the government should bring against it for closing the airport.)

In the strongest moments of the presentation from Deanne Maynard, the attorney from the firm of Morrison and Foerster representing Santa Monica, she argued that it was precisely this “Sword of Damocles” that the FAA held over the City’s head that compelled the court, for reasons of justice, to allow the City’s case to proceed. It’s wrong that a local government should be forced to make important decisions without knowing what its rights are vis-à-vis the powerful federal government.

Still, I left the hearing more than half expecting that the judges will do what judges in our tradition often do, which is to search for the narrowest grounds for making their decision. In this case that would be the statute of limitations. The Justice Department sent Klein, a highly regarded and experienced appellate lawyer, from Washington to argue the case, indicating the government thinks it’s important. Given, however, that Klein went out of her way to disassociate her arguments from the question whether the 1948 perpetuity clause could actually be enforced, I was left with the impression that the case was important to the Justice Department not necessarily because of the airport alone, but because the department didn’t want a hole opened in the Quiet Title Act’s statue of limitations.

Anyway, no use guessing what the court will do. We’ll know soon enough . . . well, check that, we’ll know whenever they get around to it.

Thanks for reading.

Santa Monica Airport: the saga continues (and the struggle)

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)!