Southwest Airlines Co. v. Transportation Security Administration, 650 F.3d 752

After 9/11, Congress created TSA to take over airport screening from private airlines; TSA funds screening via fees, including an airline fee capped at the 2000 costs of screening passengers and property.
Initial cost data came from airlines; GAO later determined total 2000 screening costs were $448 million, more than airlines claimed, prompting TSA to recalculate fees.
GAO’s $448 million included screening of non-passengers; TSA’s cap, however, was for costs of screening passengers and property only.
On remand, TSA commissioned SH & E to estimate the share of screenings attributable to passengers (about 61%) and non-passengers (39%), yielding about $420 million for 2000 costs.
The airlines submitted Campbell Aviation Consultants’ alternative estimate ($305 million) based on different assumptions and data; TSA conducted a thorough review and found Campbell insufficient.
TSA issued refunds to airlines based on the SH & E estimate; airlines challenged TSA’s reliance on SH & E and the adequacy of its explanation for rejecting Campbell.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether TSA’s remand decision was arbitrary and capricious for relying on SH&E over Campbell	Southwest argues Campbell should have been accepted or better explained.	TSA adequately reviewed Campbell and found it inferior; deference due to data-poor environment.	TSA acted within APA review; deference maintained and rejection of Campbell justified.
Whether TSA adequately explained why it rejected DOE/DOT data and DOT estimate	Airlines contend TSA ignored contradictory evidence (DOT data) without adequate explanation.	TSA explained Campbell data limited and relied on SH&E; DOT data not shown reliable.	Court upheld TSA’s explanation as adequate given the evidence, within deferential review.
Whether TSA’s process violated due process or disclosure norms by withholding SH&E data until letters issued	Airlines claimed due process and disclosure issues in informal adjudication.	Informal adjudications require minimal procedural safeguards; no prematurity obligation to disclose.	No due process violation or mandatory disclosure requirement found.
Whether TSA impermissibly delegated decision-making to SH&E	Airlines argued improper delegation of fact-gathering input.	SH&E performed fact gathering; TSA evaluated and weighed the data; no improper delegation.	Delegation deemed legitimate as fact gathering with agency evaluation.

Southwest Airlines Co. v. TSA, 554 F.3d 1065 (D.C. Cir. 2009) (deference to agency in data-poor cost determinations; remand guidance)
American Wrecking Corp. v. Sec'y of Labor, 351 F.3d 1254 (D.C. Cir. 2003) (agency must adequately consider conflicting views)
AFL-CIO v. Chao, 409 F.3d 377 (D.C. Cir. 2005) (deferential review; agency determinations require rational explanation)
United Mine Workers v. Mine Safety & Health Admin., 626 F.3d 84 (D.C. Cir. 2010) (rejection of contrary evidence requires reasoned explanation)
AT&T Wireless Servs. v. FCC, 270 F.3d 959 (D.C. Cir. 2001) (need for a rational connection between facts found and choices made)
Marsh v. Or. Natural Res. Council, 490 U.S. 360 (U.S. 1989) (classic example of where substantial agency expertise is needed in factual disputes)
Chenery Corp. v. SEC, 332 U.S. 194 (Sup. Ct. 1947) (administrative agencies must provide reasoned explanations for rejecting alternatives)