Indianapolis Airport Authority v. American Airlines, Inc.

FLAUM, POSNER, Bеfore COFFEY Judges. Circuit POSNER, Judge. Circuit Authority ap- Indianapolis Airport invalidating the user peals from a decision airlines; appel- imposes fees that it on carry among them lees are six airlines passengers percent than of the more Air- Indianapolis International who use the which each port. 15-year leases under August operated expired on of the airlines 31, 1980, parties had been because the leases, for new agree unable to on terms governmental airport authority local —a the Indiana body pursuant established §§ Act, 8-22- Ind.Code Airport Authorities (later ordinance seq. an 3-1 et —enacted amended) Sep- setting new fees effective airlines refused 1980. When the tember fees, almost which were the new leases, con- expired those in the double level, the Authori- paying at the old tinued to collect diversity action ty brought this and the airport they between the new fees and concessionaires the difference rentals pay. million. the district $2 the old—some successfully the airlines defended court The reasonableness of the concession сomply

their refusal to with the ordinance rentals themselves is issue ground on the that the fee schedule ordy bbe reasonableness case — a vane- unreasonable ordinance cbarged the airlines. The basis the air- (state federal) ty statutory and con- lineg, complaint however, about those feeSf grounds, per- also stitutional ig ig required to and has the court that were holdover suaded itg faüed to take eoncession rentals into tenants entitled under Indiana law to con- ¡n determining impose account what fees to paying tmue at the old lease rate until the on the air]jnes payments Authority stopped accepting The Indiana Authorities Act that rate. , ,, ,, , rr,, The mam issue is whether the airport authorities, . . . authorizes such as the ^ ’ airport „ , ,,(cid:127) , . , appellant, adopt To a schedule of v reason- n ’ £ authority, setting , , „ , , m a new schedule of fees ff f ,, . i, charges able and to collect them from all j. r ° airlines, disregard „ could the reve- for . °f facilities and services within the airport nues it obtains from concession- ?sers § district. IndCode 8-22-3- aires, agen- particular several сar rental n(9)' reasonableness is not de However’ airport’s park- operator cies and the of the fmed m the and the statute has not statute’ ing lot. The ordinance allocates the annual interpreted by been the Indiana courts with airport among operating costs of reference to the issues in this case. The mainly interstate different classes of user— Federal any Anti-Head-Tax Act forbids airlines, operators private planes (“gen- tax, agency levy fee, state to or collect a aviation”), -large- eral concessionaires— charge, charge, directly head or other or ly runway, hang- on the basis of how much indirectly, persons traveling in air corn ar, terminal, and other indoor and outdoor carriage persons rnerce or on the travel (For airport space each class uses. servic- ...,’ hig in air commerce 49 U.S.C. firefighting that have no es such as fixed § 1513(a), other than “reasonable rental obviously, the firemen and their locale— fees, charges, landing and other service equipment go wherever the fire is—a dif- charges operators from aircraft for the use ferent method of allocation is used that we § facilities,” 1513(b). airport °f 49 U.S.C. later.) discuss Since the concessionaires defined, Again, reasonableness is not but airlines, space only use much less than the history the statute has a and a context that airport’s a modest of the costs was fraction give meaning to the term. enable us to numbers, allocated to them—in round authorities, revenues, to raise had $100,000 agencies to the car rental imposing passen taken to “head taxes” on $900,000 operator parking airlines, gers emplaning airports. Congress at their compared to million to the $3 lot— The decided that “the head tax is an unneces requires ordinance the airlines to commerce, sary on interstate burden fees and other calculated discriminatory, stifling is and that it has a million, yield though to the full even $3 transportation,” effect on air most of airport gets its from concessionaires rent- which, course, H.R.Rep. is interstate. greatly al income that exceeds the costs 157, (1973). Cong., No. 93d 1st Sess. We allocated to the conсessionaires—about assume what is unreasonable un agencies million the ear rental $3.5 der the federal act is also unreasonable alone, compared and the lot to million, but, act; event, any under the state if $1 costs as we have said of about clash, there is a the federal act must of yield The ordinance thus is calculated to in prevail. course Another federal act is substantially a total income voked, costs, Airway Develop greater than its total excess be- § 1970, 1718(a)(1) ing approximated by difference be- ment Act of 49 U.S.C. § (1976 ed.), 2210(a)(1), tween the allocated to the now 49 U.S.C. costs regulatory power. receiving “Once airports fed- cised Con- requires which acts, Indianapolis air- courts are not free to gress as the review subsidies—such eral fair public regulations use on or other port “available taxes under the state —be unjust terms and without Commerce When and reasonable dormant Clause. Con- discrimination____” It is unclear whether ap- has struck the gress balance deems intended to be enforceable act was longer this propriatе, courts are no needed airlines; users, appellee as such burdening prevent States from com- necessary in this case not be but it will merce, and it not that the matters courts whether question, or determine resolve regulation invalidate the state tax or would user are unreasonable challenged under the Commerce Clause the absence act. under this congressional action.” Merrion v. Ji- Tribe, Apache carilla 455 U.S. Anti-Head-Tax the Federal Besides 894, 910, 102 S.Ct. 71 L.Ed.2d it, understanding important to Act here, Congress in the has acted Anti-Head- clause of invoke the commerce appellees Act, by forbidding Tax authorities § (Art. I, 3), cl. which the Constitution rates, directly unreasonable or interpreted forbid the states been Therefore, indirectly, to airlines. interstate against interstate commerce. discriminate challenged, when those rates are Arizona, See, e.g., Pac. v. Southern Co. 1515, 1519, question whether are consistent 65 S.Ct. U.S. (1945), congressional policy. and for this circuit’s with 89 L.Ed. 1915 application clause recent most by We are asked an amicus curiae Bernardi, 730 F.2d Co. v. W.C.M.Window bearing to consider the of the Convention Although the Cir.1984). (7th 486, 493-96 (“the on International Aviation Chica Civil authority a grant as written is of clause Convention,” known), go as it is 61 Stat. (and Congress regulate interstate for treaty States, A 1180. of the United see independent rather than an eign) commerce Bond, Airways British Ltd. v. Caledonian power, Supreme state the limitation on 1153, (D.C.Cir.1981), n. 665 F.2d 1159 3 the Court, a Mar building by on dictum John has the force of a federal (9 Convention stat v. 22 Ogden, shall in U.S. Gibbons regulate airport But it does 197-209, (1824), ute. not fees. Wheat.), 1, early 6 L.Ed. 23 powers It establishes Council with broad prohibiting the interpreted clause as of force, and the Council has recommended congres without need for stan its own action, require that sional state action that discrimi dards that See, reasonable, against interstate commerce. nates other but Wardens, e.g., Cooley provi v. Board 53 U.S. standards are issued under a these of (12 319, (1851). How.) 299, L.Ed. 996 Convention, 55, 13 relating sion of Article see, Kitch, controversial, e.g., Although “permissive” to the functions of the Coun Regulation and American Common cil, discharge actions in of taken those Market, Federalism, Regulation, in and In functions are not intended to have the 7, (Tarlock еd. terstate Commerce 20-22 force of law. 1981), interpretation this of the commerce together persuade Two facts us that practical clause can be defended on concluding court correct in district ground busy Congress is too —and that the ordinance was unreasonable under too fac maybe as Madison feared James applicable and federal state standards infringement of police every tionalized—to disregarding airport’s concession by separate of policy (implied a number Constitution) monopoly. revenues. first is We take provisions only judicial notice of fact six “common mar single United States be Eule, airports by in Indiana served airlines See goods and services. ket” for and that other than commuter airlines Indi Clause to Dormant Laying the Commerce (1982). Airport is the 425, anapolis But International Rest, Yale L.J. 431-32 91 part except exer- central the state Congress when one ground fails

1267 ducing prices. University Airport Lafayette. those Whether airline or Purdue for Dept, Transportation, passenger ultimately Federal bears the аn U.S. cost of See Administration, Airport depends National Aviation fee on the conditions of Plan: Revised Statistics System supply and demand rather than on who is tiny The ‍‌‌‌​‌‌​‌‌‌‌‌‌‌‌​‌​​​‌​‌‌​‌​‌​​​‌​‌‌​‌​​​​‌​​‌‌‌​‍Purdue at charge. recog- All assessed this was airport; compared Indianapolis by Congress passed nized the Anti- 22,940 passengers emplaned there in who S.Rep. Head-Tax Act. See No. 93d 1,382,- percent than 2 of the 1982 were less (1973), Cong., Cong. 1st Sess. U.S.Code Indianapolis that emplaned who at 1973, p. & Admin.News 1434. Transportation, Feder- Dept, of year. U.S. It should be clear without Administration, extended Aviation U.S. al price monopoly discussion that a is an un Activity Emplanement CY V(II-R)-29 1, 1983). price. (July monopoly— As no one reasonable Locational improbable type monopoly Indianapolis advanced the this lawsuit has proposition that the Purdue is a airport enjoys one of the traditional —is many (if feasible substitute for most or even by which prevent levers a state can passengers who now use the Indian- ed) unreasonably burden interstate com except apolis airport, we assume that merce, Note, Deregulation seе Airline origination for travelers whose or destina- Regulation, 93 Yale L.J. (and tion is near the borders the state (1983), and the Anti-Head-Tax Act was airports just who can therefore use passed pre as we said earlier in order to line, Louisville, in Chicago, across the state placing vent the of unreasonable burdens Cincinnati), by people traveling most transportation. on interstate air The Sen air to and from Indiana have to use the Report ate refers the “financial wind Indianapolis airport. falls” that states or cities could obtain imposing Therefore, equivalent head taxes or unless forbidden to do so law, passengers. taxes on the airlines or their Indianapolis federal Air- state or monopoly price S.Rep. supra, See No. at 17. If the port Authority can is, airport price Indianapolis airport monopoly for the use of its a did not have —that operating airport of the the power vastly excess cost it could not extract revenues service). sky (including costs, debt Of course the its which is what it has excess of Authority charged the limit. If the is not done thе combination of user fees and high price many people stop a would too rentals shown on this record. concession using airport. example, the For some of enough It for the airlines to is not fly traveling those out of the state would monopoly power; show airports in the state and switch out of small power being it must also show that this is major airport in a planes at the nearest rates, impose directly used to unreasonable state; drive, they or neighboring or would indirectly, pas or on the airlines or airline train, to their destination. take a bus or sengers, and not on other entities that are people these would be such But for most parties actual neither formal nor to this using the grossly inferior alternatives to Here the critical fact case. second comes Indianapolis airport would rather play, people which is that the use into who hefty premium even a than switch. Indianapolis airport the at the concessions difference And it would make no economic are, exceptions, passen rare airline premium chargеd to the whether this gers. Although airports adjacent some to or left directly as he came into passenger (the large cities Milwaukee for ex that carried airport or to the airline meeting airline, ample) have facilities attract charged If to him. it was Indianapolis airport nonpassengers, tick- and raise its turn around airline could parking by em- does not. The lot is used from Indian- to and prices passengers to et by people picking planing passengers and passenger to if it was apolis; charge by up deplaning passengers. The car rental re- absorb airline could 1268 will return to passengers way. them in this by emplaning de- used

agencies are Authority might the food decide to most of likewise The use passengers, planing users, This means that general-aviation the benefit of newsstands. it for stands and rental fee to pour “gold-plating”’ improve- it into when or charging a is as if it were give high- concessionaires ments would airline users imposing a airlines or to the landing fee services, higher quality er at a If traveler passengers. head tax on price, than wanted. Indiаnap- fly willing pay $140 is Authority’s problem The disre York, it should be a (say) New olis to garding setting concession income in its to him whether he of indifference matter analogies fees has in conventional user ticket, tax, head pays $10 for $100 utility regulation. Many regulated public or for the ticket parking; $120 for $30 good unregulated firms have affiliates. A with no head tax. parking, for and $20 (at example changes least before recent him is the total cost that matters What regulation in the structure and of the tele flight, rather to make the incur he must phone industry) is the manufacture of tele the cost is distribut- in which than the form phones regulated has never been a —which he must various items that among the ed activity by regulated affiliates of tele — buy. phone companies. telephone company A Indianapolis Airport According to might tempted regulation to evade rate figures, the annual cost to Authority's own by having manufacturing affiliate space rental and other ser- providing it of it) charge prices (nominally exorbitant lot and the car rental vices to the telephones by passing for on the ovеr million, yet it collects $1 agencies is telephone ratepayers in the rent from these con- in annual million $3.5 higher telephone rates form of service. recoup The concessionaires cessions. ratepayers up paying would end mo prices they charge their in the expense nopoly prices, despite regulation. reg passengers airline customers—the —and however, agencies, ulatory were alert up paying who end passengers thus danger successfully asserted the in net revenues that the million the $2.5 profits limit power to of the manufac from the concessionaires. Authority obtains See, turing e.g., subsidiaries. Illinois Bell paid ultimately concession When rentals — Comm’n, Tel. Co. v. Illinois Commerce (in the form of re- passengers or by the 443, 483-84, Ill.2d 303 N.E.2d prices) airlines—that duced ticket (1973); Kahn, Regula The Economics of times the cost that more than three (1970); cf. tion 28 n. Smith v. Illinois allocates to the concessions Authority itself Co., 133, 152-53, Bell Tel. 282 U.S. 51 S.Ct. the airline user fees that also are added to 65, 70, agency 75 L.Ed. 235 No passen- airlines or their fall on either the regulatory authority practices over the rate gеrs, is an exaction that is whol- the result Indianapolis Airport Authority; in ly disproportionate to the costs to the air- duty regulation the of falls to the stead serving pas- the airlines and their port of courts the enforcement of the state and therefore un- sengers, and is unreasonable forbidding 'federal statutes unreasonable federal It is der state and statutes. the just rates. But this means that we must unreasonable whether done to evade the imagine regula ourselves in the role of a statutes, price against or to discriminate tory agency (though more with circum passengers (heavy users the more affluent powers, scribed because of the limitations services), or for other rea- of concession places III judicial that Article on federal though is unreasonable even sons. And it see, power, e.g., Federal Radio Comm’n v. Authority’s that all of the we assume 464, Co., Elec. 281 50 airport General U.S. plowed back into income must be §§ 389, 390, (1930)) 8-22-3-11, S.Ct. 74 L.Ed. 969 that is development. See Ind.Code preventing airport -25, -28, charged authorities say how much of -29. No one can setting from exorbitant rates to airlines or overcharge from the airlines’ the extracted

1269 concessions, By charging airlines, or the passengers. its conces- their who will the in excess of rent far the cost to heavy sionaires end the cost of the bear rentals that Authority providing space them with Authority has charged its concession (while charging the and services airlines point aires. This was in Raleigh missed costs), landing equal to their full -Durham Authority v. Delta Air knowing try that the concessionaires will to Lines, Inc., (D.N.C. F.Supp. expenses passen- pass on their rental to the 1976), supports decision that (their customers), Authority gers is do- Authority’s treatment of its concession rev ing thing kind the same that the tele- enues. phone companies doing would have been if Actually, Pipe United Gas Line Co. allowed their had been sub- strengthens analysis. our The issue there indirectly exaggerated scribers costs whether, in deciding what cost of ser- companies had allocated to manu- vice allowance for federal income tax to True, facturing telephones. it is not exact- permit utility take, the Federal Power thing. telephone ly the same Thе subscrib- give Commission had utility the al- telephone if er has to have he wants lowance it would if be entitled to it filed a service, telephone heyday return, separate ‍‌‌‌​‌‌​‌‌‌‌‌‌‌‌​‌​​​‌​‌‌​‌​‌​​​‌​‌‌​‌​​​​‌​​‌‌‌​‍tax or could subtract the telephone regulation get he could the tele- savings utility tax by obtained phone telephone company. only from filing a consolidated return with affiliated passenger Indianapolis The who uses Inter- corporations that regulated. were not national does not have use the Court held that the prop- latter course was agency; car rental lot or a there er, 243-45, 386 U.S. at S.Ct. ways getting to and from the other though even treating amounted to a tax airport. But the existence of alternatives savings part unregulated obtained in destroy just limits—it does not Au- —the regulated activities as income to the firm thority’s power by to extract indirection the setting that had to be taken account in into profits monopoly locational makes just way, its rates. the same the district possible. big surplus in- Its of concession judge airport authority here forced the providing space come over the costs rentals, take account of concession nomi- other facilities and services to the conces- activities, nally unregulated obtained from sionaires show this. setting authority’s regulated rates to the cites cases such as FPC v. (the defendants). customers airline Co., Pipe United Gas Line 386 U.S. An amicus curiae defends the Authori- 1003, 1007, 18 L.Ed.2d 18 S.Ct. ty’s approach preventing as a method of (1967), proposition utility’s for the that a airport congestion. Suppose, argues, (here, unregulated income from activities Authority’s concession revenues rose to a concessions) should not be attributed to airport’s level where covered the en- (the regulated runways activities Then, analysis right, tire if costs. our airlines). other facilities used We fees and other quarrel proposition have no with the in the zero; would airlines have to be airlines point implicit out that in it is abstract but consequently would have no incentive to assumption that the customers for airport; economize on their use of utility’s unregulated services are different congestion resulting there would be regulated people from the customers for its passenger delays landing that stiff fees people, the services. If are the same leaving could avoided. have But aside the (if regula- utility permitted) can evade Authority fact that the introduced no evi- regulated its cus- tory ceiling on rates to Indianapolis airport is dence that prices charging them excessive by tomers (that is, existing crowded at the user fees they buy. unregulated services for the leases), expired point the fees set in the we Authority has tried to do This is what passengers, airport congestion problem in out that is a here, the airline it is since structure, level, airport patrons airport not of rates. No is capacity as their in time; flights the reduction number of congestion is a all congested landing the increase in the fee might Fri- offset peak periods, such as only at problem flight. logical per do not And the evenings. day —we congestion deal with only way say the conceivable, however, — no It is also that charge peak-period a periods is peak (as from matter what structure distinct Kahn, See, supra, at e.g., 1 surcharge. fees, level) landing airport or its Professor Ec- point of This is the 87-103. unduly congested. airspace become would financing, which kert’s criticism landing fees were offset reduc- high If Eckert, Air- cites. See amicus curiae passed that were tions in concession rentals (1972). He Congestion 20-27 ports and customers, the to the concessionaires’ on allowing airport authori- advocate does not place a airport might become so attractive greater than their revenues to extract ties be to and from that it would to travel system of variable land- costs; he wants high passengers despite the thronged with airlines to economize induce the ing fees to landing fees. prices, reflecting high ticket airways. airports and See use of on their an unlikely event there would be that Levine, Landing Fees and the Air- also (we compel- argument not decide how need Problem, 12 Law & J. port Congestion allowing ling argument) an 79, 91, (1969). have said 102-03 We Econ. fees, even to continue to those Indianapolis nothing prevent monopo- though temporary it wоuld obtain landing charging higher Authority from so, doing in order to limit ly profits by day or week or times of the fees at some to finance usage and enable shifting or year than at others Le- rapid expansion of its facilities. See out of a financing operations system of vine, sugges- supra, at 88. But there is no concession landing fees and combination Indianapolis airport any- is tion that And it is not landing fees alone. rentals to point. that where near inevitable, if true, at least or Authority con- used an invalid or even eliminated Authority reduced rentals, calculating landing would the concessionaires method of airline cession go drawing the considerable sums simply pocket must therefore back to the rentals, pay single now But unless there were a board. would be no better off passengers method, airline tell the Authori valid we could not compe- There is direct they are now. than ty charge; it must and no one what fees concessionaires, many of the among too, tition emphasize, that the says there is. We agencies; and there car rental such as the regulating a federal court powers of a concessionaire. competition to become limited than those of an rates are more City v. Products Co. Omega See Satellite agency. We can invalidate administrative (7th 694 F.2d 126-27 Indianapolis, rate, cannot fix the an unreasonable but we Cir.1982). rate; legislative is a or reasonable judicial rather than a func administrative conceivable, regime of even in a it is Now Reagan Farmers Loan & Trust tion. v. fees, that if the total reliance Co., S.Ct. U.S. peak-period fees raised its Authority therefore 38 L.Ed. 1014 We times its fees at other might have to lower must use do not hold income from making its in order to avoid approach, in “single register” cash which But overall. the airlines excessive single airport is treated as a cost the entire effect of the desired simply reinforce would center, reg “multiple than the cash rather redirecting surcharge peak-period case, by this approach, illustrated Moreover, ister” no busy periods. traffic to less airport is divided into different which the necessary if would offsetting reduction of which revenue-prоducing centers each generate surcharge did not peak-period way. The vice of must its own might not. Its revenue, additional ordinance, so far as the case before at least flights at the to reduce purpose would be concerned, is not that it makes the money, us is to make than period rather peak them, pay allocable airlines the costs or users but no landing fee to them. pay points even that it makes the concessionaires out that It collecting cost of much more than the costs landing general-aviation so allocable to fees from users (for parties no them concessionaires are very would be high maybe as much as — suit); that, by it is a combination of half the fee—and in that lieu of landing a rentals, airline user fees and concession imposes charge per fee a gallon of avia- airport authority imposed on the air- by general-aviation tion fuel consumed passengers lines and their a cost for the at airport. users There objection is no greatly use of the exceeds a substituting (as flowage fee it is reаsonable estimate of the costs that the called) for a in fee order to econo- impose airport. airlines on the collection, mize on the costs of but the flowage yield fee must revenues commen- Although posi we need take no surate general- with the costs allocated to single multiple tion on the versus “cash aviation users. flowage This fee does not. register” question we do need to consider $250,000 generates It only in revenues. Al- objections three other the airlines though the nearly ordinance doubled the ordinance, they make to the because are landing fees and other to the air- independent Authority’s refusal to airport, line users of the unchanged it left take account of in concession revenues set flowage fee that Authority had ting user fees. The first is that the ordi been charging general-aviation users nance should have allocated the costs of since 1971. The difference in the Authori- firefighting proportion in services to the ty’s treatment of airlines private experienced by number of fires each class planes making the former for the full — airport’s of users of the facilities over some (and more!) costs they impose on the period reasonable of time rather than main but, airport, inaction, through allowing the ly to ‍‌‌‌​‌‌​‌‌‌‌‌‌‌‌​‌​​​‌​‌‌​‌​‌​​​‌​‌‌​‌​​​​‌​​‌‌‌​‍the disagree. airlines. We The air get away latter to paying with little more port firefighting has elaborate facilities not than half of the impose costs not in respond grease order to enable it to to a —has justified. been flights by private And since hamburger fire stand or a car fire in planes are likely more to be intrastate than protect lot but to the airlines are, flights airline the effect leaving passengers plane and their should a catch flowage unchanged fee has been to shift fire in a crash or other accident. Air imposed by some of the costs local users of port costs that would not if be avoided users, are, to its interstate who particular stopped using class of users along customers, many of their non- (i.e., concessionaires) are not just residents of Indiana. This is the sort imposed airport by costs on the those Congress pre- discriminаtion wanted to users, and properly therefore are not allo vent the Anti-Head-Tax Act. ICC, cable to them. Cf. Illinois v. (7th Cir.1983). F.2d Thus the other issue that re firefighting properly bulk of the are costs quires discussion is whether the airlines allocable to the airlines. On similar are, holdover tenants. If then grounds we think the introduced whatever new ordinance the author enough enough barely evidence—if —to ity response enacts to our decision will support security its allocation of costs expira be retroactive to the date of the airlines, particularly light ab early tion of the leases. Several Indiana any contrary sence of evidence introduced cases in Employers’ discussed Liability item; (This is a minor the airlines. Corp., Assurance v. Enos Co. Coal anti-hijacking program are re costs of the (7th Cir.1972), F.2d 406-07 hold that if fee to the separate in a airlines covered a tenant premises does not vacate the contested.) is not expiration of his lease but continues to $400,000 make, Authority allocated accept, and the landlord continues to airport’s general-aviation payment lease, of the rental fixed in the of its costs 1272 of the automatically a holdover ten- “The conduct landlord ... is tenant right to an assertion of to the landlord are amount obligations

ant whose But This would be the if an of that rental. election. case offer by payment discharged paying indicates that Indiana the tenant to continue the usual recent case a more prevailing accepted view line with the was without reservations.” into rent has come tenancy (Second) (Land- con- Property that the presumption 2 Restatement that § by proof Tenant) 14.4, (1977). of a “may rebutted tinues comment e lord part of the land- on the contrary accepted intention the rent with reser- But here was ____” Addis, 411 Speiser v. Authority lord alone told the airlines vations. 439, (Ind.App.1980). course 441 Of N.E.2d not extend the unless it would leases Speis- wrong argue Authority is they agreed in the to substantial increases er, Appellate the Indiana decision of The airlines rental rate. knew cases, Court, which the earlier “overruled” Authority legal power unilaterally had the of the Indiana Su- two decisions inсlude impose (provided they new terms were 91, Harry, 127 Ind. Harry v. Court, preme reasonable).'' beginning September And v. (1891), Lautman 92, 562 26 N.E. 1, 1980, when the ordinance went into ef- Miller, 382, (1902). N.E. 761 Ind. 63 158 fect, they fully apprised Au- were of the appel- intermediate federal just But as an thority’s position fixed in may properly decline follow late court the ordinance were rates that would decision when con- Supreme Court U.S. By seek to collect from airlines. con- overrule the the Court would vinced tinuing to use the in circum- these so, opportunity if had the to do decision the airlines assumed the risk that stances States, e.g., Norris v. United see, 687 F.2d either the ordinance would be held valid (7th Cir.1982); Browder v. 899, 902-04 would have to the fees fixed (M.D.Ala.) 707, Gayle, 142 F.Supp. 717 or, in it if the ordinance was held invalid court), curiam, per (three-judge aff’d 352 fixing rea- and some substitute enactment 145, (1956); 903, 1 L.Ed.2d 114 U.S. 77 S.Ct. promulgated, sonable fees would Girouard, v. F.2d United States 149 pay those fees instead. have to Cir.1945) (1st (dissenting opinion), 765 summarize, agree To we with the district rev’d, 90 L.Ed. 328 U.S. 66 S.Ct. in judge that the ordinance is invalid disre- (1946), ap- may intermediate state 1084 so garding concession income and continu- pellate courts decline to follow earlier state ing flowage general-aviation the old fee for rea- supreme court decisions for same users, disagree we his but some of century especially when almost a son— and remand the other conclusions case if passed since the earlier And decisions. proceedings consistent with this further appellate we think the intermediate state opinion. raises some minor even, perhaps, court has made a correct or procedural evidentiary issues in this just prediction a defensible of what appeal require that are without merit and ques- if supreme state court would do parties no discussion. The shall bear their it, put tion were then we are bound to own costs this court. ruling diversity any in a case or follow its the issue is one of state other case where Part, Part, Affirmed Reversed Schwartz, v. See, Garris e.g., 551 law. Remanded. Cir.1977); (7th Wright, F.2d Practice and Pro- Cooper, Miller & Federal FLAUM, Judge, concurring. Circuit § pp. 94-95 cedure join portion majority I in that opinion holding that the airlines were not way usual of creat Although the Indiana I explicit holdover tenants under law. tenancy by an ing a holdover majority’s conclusion that agree with that he is communication from the landlord holdover, establishing the ordinances user fees for electing treat the tenant as Airport1 appeal.3 and on Indianapolis International are below the focus of the However, I argument reach result for invalid. airlines’ as to the unreasonable- majori- different from those reasons ness of the fees was that costs and reve- thus, only judgment I in the ty, and concur nues were allocated improperly in setting remaining as to the issues. Third, the significant, user fees. and most approach by the taken the majority does I not the address issue of whether the costs appeal, Indianapolis Airport In this the allocated, charged, and thus the fees require has asked court to airlines are majority unreasonable. The the airlines to the fees in established finds the existence monopoly price of a airport. its ordinances for use of the charged because the rent to the concession- argue ordinances, airlines the and aires is more than three times the costs particularly charged more the user fees Airport attributed to them under the Au- ordinances, them under the are invalid be- thority’s cost allocation method. ap- This Airport Authority the improperly cause al- however, proach, very the assumes issue among airport in located costs users set- that we have been asked to decide—-wheth- ting response argu- the fees. these correctly er the costs were allocated. If a ments, opinion the informs the majority larger percentage of the costs of the air- parties that the are ordinances invalid be- port properly should have been allocated to monopoly the and ex- cause has a concessionaires, disparity then the be- monopoly price tracts a from the conces- tween the rent and the costs would not be majority opinion sionaire users. The ar- great. as in The issue this case is whether gues that are invalid ordinances be- prohibit various federal and state laws charged cause the fees to the сoncession- accounting employed by cost method excessive, resulting aire are users an setting charged the user fees price being charged unreasonable to airline I appropriate airlines. deem it re- passengers. There are several difficulties strict a federal court’s involvement awith First, approach. with this whether the municipal corporation’s setting method of charged to the concessionaires are ex- property rates for the use of its rea- —for one, cessive is not at issue. No either comity judicial sons of and restraint —to appeal, argued the district court or on specific brought issues that are before charged the fees to the concession- the court. high. are aires too The concessionaires are Moreover, majority I believe that parties to this action. The ordinances opinion inappropriately question relies on statute apply do not even to most of Moreover, unnecessary is to its decision. The argued, them.2 no one has record, challenge the there is no evidence in the that the airlines ordinances on the 18(a)(1) price charged basis of three statutes: passengers total to airline section of Second, Airport monop- Airway Development unreasonable. the issue of Act § oly barely by amended, 1718(a)(1) parties mentioned of as 49 U.S.C. revenue, Indianapolis they 1. In addition International a source of nonaeronautical Airport, Airport Authority oper- though Indianapolis are treated as were a concession. general airports. ates four "reliever" aviation airports The fees at those are not at (consisting 3. In a voluminous trial court record here. 1,100 issue pages pleadings of over 800 of and over pages transcript), I could find handful argument impose certain to an 2. The ordinances fees for: references concessions, ground transportation namely monopoly. bus- has a The balance record vehicles; es, courtesy question the observation focused on the of allocation taxis and of costs deck; Similarly, catering operators; apрeal, truck and revenues. there was mobile monopoly parties’ employee parking public lots. It should no mention in the briefs. Moreover, majority true "conces- the statistics lots are not cited noted that the sions,” operated by prove airport's monopoly are not contained as are owned However, lots Airport Authority. because the the record before us. § 2210(a)(1) presented squarely to us as an neces- at 49 issue U.S.C. codified [now decision, sary to a we should not Federal Anti-Head Tax address it. ]; the (Supp.1982) § 1980) (Supp. (prior Act, IV 49 U.S.C. II amendment); and section 8-22-3- to 1982 1, 1980, Authorities 11(9) September Indiana Prior to §§ -35 Act, Authority’s Ann. 8-22-3-1 to charges to the were set Ind.Code airlines (West 1982). require the All three statutes through negotiated leases with the airlines. “reasonable” fees. As airport charge determining charged, to In the fees to be the notes, correctly we need not majority Authority operating Airport the totalled its standing airlines have expenses plus the the decide whether maintenance cost of its Airway Develop Airport and raise the to debt service аnd subtracted all revenues I would hold 1970. Because airport ment Act of users other than the airlines. from the stat violate Indiana Airport Authority that the ordinances The then set its fees in ute, federal Anti-Head Tax and because sufficient to recover from the an amount prob and unresolved poses Act difficult airlines the balance of the amount neces- I would not and do interpretation, sary pay expenses lems of to and debt service. question 31, of whether the ordi expired August not reach the the lease on Before 1980, the federal statute.4 parties attempted ‍‌‌‌​‌‌​‌‌‌‌‌‌‌‌​‌​​​‌​‌‌​‌​‌​​​‌​‌‌​‌​​​​‌​​‌‌‌​‍negotiate also violate to a nances Thus, whether “reason need not decide new lease but were unable to do so. In we thing 1980, means the same August Airport Authority passed the Act able” under 4-1980, Indiana statute.5 Fur ordinance which established fees as it does under the 1513(b) 1, charges thermore, clearly applies September effective 1980. section charged opera Airport Authority In only to “aircraft December to fees charged apply passed to fees ordinance which established tors.” It does not charges majority opinion February The thus fees and effective concessionaires. the reach of the statute and 1981. expanded regulation system of the market created determining by In the fees to be set Congress clearly had no intent to where ordinances, Authority relied on account- regulate. ing reports prepared by its staff and the (“Crenshaw potential firm & Associates Finally, I see no need to discuss of Crenshaw airport congestion Report”). Report The reducing Crenshaw divided means of methodology. airport into various cost centers. through rate-making Courts subject airport types There were two of cost centers: reve- experts are not on the financing. parties nue-producing nonrevenue-producing. management The among for our advice on Costs were then allocated the cost have not asked congestion.6 parties argued revenue-produc- have centers. Costs from each The is, congestion ing specif- were before this court that or is cost center to that be, problеm Indianapolis nonrevenue-produc- at ic center. likely even Costs Airport. ing among were allocated rev- International Until this matter is cost centers Airport mcrely airport’s profit, Raleigh-Durham 4. v. Delta restricts overall Inc., (E.D.N.C.1976), Lines, F.Supp. imposing any Air 1069 while not restrictions on from raising Note, a case the issue of the reasonableness of whom costs be recovered. See Air- fees, user court based its decision Deregulation Airport Regulation, line solely requiring on a state statute reasonable Yale L.J. 324 n. 35 See also Island charges. Aviation, Airport Authority, Inc. v. Guam (D.Guam 1982) (reasonable F.Supp. 959-60 thing 5. Whether "reasonable" means same 1513(b) fee is one that reflects actual § under under Anti-Head Tax Act as it docs under designed to make costs of facilities and is air- open question. the Indiana statute is As self-sustaining possible). port as as infra, under the discussed reasonable Indiana statute is one that reflects the extent of rate-making airport conges- impact 6. Thus, by use of facilities a user. Brief of Various Public tion was raised among component allocation of costs users is Authorities, Amici Curiae 13-16. Arguably, of reasonableness. the federal statute enue-producing using cost centers one of was increased to per $.6771 thousand management analysis methods: or rev- two pounds gross landing weight. Under the management analy- enue acres. Under ordinances, budgeted method, airport management deter- sis $2,917,129 have net income of for 1981. percentage mined what of the costs bene- September 1, 1980, After the airlines con- revenue-producing the users of éach fitted tinued to both rent and fees at cost center and then allocated the costs imposed the rates expired under the leases. accordingly. Under revenue acres court, The district following a bench tri- method, strictly costs were allocated ac- al, ruled that the rates and estab- cording space occupied by each reve- nue-producing cost center. lished the ordinances were unreasonable because the Authority’s method of among Costs were then allocated allocating costs and revenues failed to rec- revenue-producing users of each cost cen- ognize interdependencies between ter. concessionaires were considered aeronau- users building terminal tical and nonaeronautical users. The court center, and thus cost were allocated further held that the rates discriminated solely costs from that cost center. The against the general airlines and in favor of parking lot was considered to be user Finally, aviation.7 the court held that the center, parking lot cost and airlines were holdover tenants under Indi- solely thus it was allocated costs from that law, such, ana Airport as center. cost Users were divided into two by accepting rent from them had waived its classes: aeronautical and nonaeronautical. right imposed by to the rent the ordi- charged Aeronautical users were at a rate nances. to recover the costs attributed to them. appeal, Airport Authority On argues charged Nonaeronautical users were mar- rates, ket their that the holding attributed costs serv- district court erred in ing as a minimum. its rates and fees under the ordinances were It unreasonable. contends that the determining how to assess opinion improperly district court’s forces it users, against Airport aeronautical Au- thority to use revenues from divided users into classes. nonaeronautical airline Commercial users’ fees were as- users to Airport subsidize the airlines. The through landing sessed rental fees. Authority argues has broad discre- aviation General users’ fees were assessed adopting tion in rate-making methodolo- through flowage a fuel fee. That fee had gy. It general further maintains that the not been raised since 1971. The costs allo- flowage aviation fees were not discrimina- general cated to aviation totalled over tory, because it can use different methods $400,000. flowage The fuel fee recovered to collect fees from different classes of $250,000. approximately users. The ordinances increased the rates argue airlines that the district court lease, charged to the airlines. Under properly accounting found that the method paid per pounds the airlines thousand $.46 improper and that the Authori- gross landing weight per square and $17.55 ty misapplied improper its own methodolo- for rent in foot the terminal. Under ordi- gy. They argue general aviation 4-1980, pay nance the airlines were to discriminatory fee was because failed to per pounds gross thousand $.6015 recover the general costs attributable to weight per square foot in rent. $21.95 landing fee aviation. Under ordinance grounds part upon by feder- relied in on both other than those relied

7. district court reaching This al statutes its conclusions. lower court where the court used district incor- basing its preclude reasoning. does not this court Owens-Coming Fiberg- rect Beach v. solely statute. This decision on the Indiana (7th Corp., Cir.1984). las 728 F.2d n. 1 408 conclusions court a district court's affirm III benefit not One reflected in the fees charged to the pro concessionaires is the pro- Authorities Act The Indiana duction of customers lot for the authority “may board vides that an parties agree and concessions. The necessary reasonably or incident do all acts persons using airport parking the' lot purposes сhap- carrying out the of this passengers. and concessions are airline ter, following: including adopt To ... Thus, dependence there is a on the airlines of reasonable and to a schedule by the Raleigh- concessionaire users. them from all users of facilities and collect Cf. Airport Authority Durham v. Delta Air services within district ...” Ind.Code § Inc., 8-22-3-11(9) (West 1982). Lines, (E.D.N. F.Supp. Ann. Under statute, C.1976) (“[t]he authority directly depend a reasonable is one the differences in the extent of use reflects ent on the inflow and outflow of commer by facilities different classes of passengers cial freight, as served Evansville-Vanderburgh Airport users. airlines, provide people —traffic Lines, Authority District v. Delta Air who use majority of such services as Inc., 464, 467, Ind. 288 N.E.2d 137 restaurant, counter, parking space, ticket noted, very As the court “The con- concessions, etc.”). Orcutt, Daniel C. Exec cept implies of a fee that there are user utive airport, Director of the testified that different uses that can be identified and airport provides oppor an economic “[t]he charged the fee the amount of must relate tunity companies for these to conduct their Id., to that use.” 288 N.E.2d at 137. business, willing more Thus, the amount of the fee must opportunity, than the cost for that to have user, supplied relate to the benefits to the exposure Transcript to the traffic.” at according measured to the costs incurred dependence 208. The of the nonaeronauti supplying the benefits.8 produce cal users on the airlines to custom ers means that those users receive a sub important This conclusion has two corol- stantial benefit from the First, airlines. The charged laries. the fee to one user benefit, however, producing costs of relate supplying cannot to costs incurred in are entirely by borne the airlines. Under benefits to those other than user. statute, the Indiana that is unreasonable.9 Second, each user or class of users must testimony There was the trial about sev bear its full share of the costs of its bene- accounting eral different cost methods that fits. principle Violation of either would Airport Authority recog could use to lead to a fee that is unreasonable under dependency, by-prod nize that such as the Indiana law. is, joint-product uct and methods. It of that, Applying principles, these I find as course, unnecessary for court or the law, a imposed by matter of the rates any district court particular to endorse First, ordinances are unreasonable. method. charged to the airlines reflect cost Second, fairly flowage charged benefits to other the fuel attributable fee airport. Second, users of general the fees fail aviation users did not recover the reflect the extent of use general the users. costs allocated to aviation. The Thus, 8. The age occupied by measurement is the cost of benefit each user. the rental supplied, not the value of the benefit. Courts ignores to the concession users the costs ill-equipped partic- to determine the value of producing Similarly, the customer flow. ular benefits accorded to users. See Airport Authority passenger parking treated the Airlines, American Inc. v. Massachusetts Port Thus, separate lot as a cost center. (1st Cir.1977). Authority, 560 F.2d costs allоcated to it were the direct costs of operating percentage lot example, building 9. For in the terminal indirect costs allocated under the revenue acres center, cost the total cost attributable to the cost management analysis park- methods. The center was calculated. It was allocated then ing charged any lot cost center was not among (the the users various airlines and the producing the costs of its own customers. concessions) according square various foot- requires IV statute that the fee be related to provided the costs the services in the appeal, Both district court and on according to the extent of the determined Airport Authority has characterized charged meet The fee here fails to use. dispute accounting over cost methods as standard, and thus it is unreasonable. “single register choice between the cash However, requires in the nothing statute “multiple register method” and the cash former, according all users be assessed method.” In the that costs be collected treatеd as one cost center and revenues formula or same applied the nonaeronautical users are Airport Authority- from manner. the same charged to lower the fees to the airlines. general aviation may collect fees latter, In the is treated as a flowage fee rather than through a fuel centers, series of cost each of which must fee; landing but however it through a rate-making purposes. stand alone for fee, its that fee must to collect chooses Airport Authority contends that the district properly allocable to that recover the costs opinion apply court would force it to user. single register cash I un- method. do not Third, Airport Authority, determin- opinion the district court to re- derstand centers, landing in the ing cost included this, quire and I would not so hold. The land that was not cost center both area Indianapolis Airport Authority may estab- any existing zone for part of the clear many pru- lish as cost centers as it deems time not runway that was at that and land dent; among but it must allocate the costs airport.10 This had the by the even owned thеm, among the users of a cost cen- increasing the size of the effect of ter, fairly. Raleigh-Durham Airport See and thus of the amount area cost center Lines, Inc., Air v. Delta center under the reve- to that cost allocated (a multiple F.Supp. register at 1079 cash The users of that cost nue acres method. allocating system is reasonable method of thus commercial airlines —were center—the fairly applied). if regularly costs it is relation to that had no with costs Requiring Airport Authority to con- airport. their use of the This the extent of allocating does dependencies sider costs is unreasonable.11 public utility rule of rate- not violate the firefighting allo- costs were The unregulated ac- making that revenues from management analysis. according to cated regulat- cannot be used to subsidize tivities firefighting Although majority of the Ames, Smyth ed activities. See v. U.S. building, activity place in the terminal took In- 18 S.Ct. L.Ed. 819 allocated to most of the costs were stead, merely requires a fair allocation of argues Airport Authority airfield. The determining the revenues of the costs firefighting equip- that this is Moreover, because the Indiana activities. under personnel required are case ment and to concessionaires statute disaster, not to major regulated. Supreme is a aircraft there The Indiana Court emergencies that occur recognized the minor concessions are deal with meaning building. analysis “users” of an within the terminal This 8-22-3-11(9). statute, ‍‌‌‌​‌‌​‌‌‌‌‌‌‌‌​‌​​​‌​‌‌​‌​‌​​​‌​‌‌​‌​​​​‌​​‌‌‌​‍section Evansville-Vander- because reasonable under Airport Authority District Delta burgh the use. v. the extent of the costs to relates Airport Authority that the will clear from the record included land that 10. The runway seeking prefund capital expendi- land a future was not tures; in the clear zone of park Au- currently acquisition a trailer no costs for or construction acquire several trying to thority runway purchase has been or of the trailer of a future court parties However, not informed years. have park in the rate base. were included acquisition efforts. of the current status center its inclusion of the land in the cost unreasonable on different still be found court, opinion, found the in its district 11. grounds. supra See note 7. it result- because unreasonable of land inclusion capital expenditures. It is prefunding of ed in Inc., at Lines, 259 Ind. Air

N.E.2d 137.

V opin- majority agree I

Because ten- were holdover

ion that the airlines law, also agree I

ants under Indiana remanded the district

the case must be proceedings.

court for further III, Plaintiff-Appellant,

Joseph KREJCI

v. MATERIAL DEVELOP-

U.S. ARMY COMMAND,

MENT READINESS Defendants-Appellees. al.,

et

No. 83-1458. of Appeals, Court

United States Circuit.

Seventh

Argued Jan. 1984. May 1984.

Decided

Case Details

Case Name: Indianapolis Airport Authority v. American Airlines, Inc.

Court Name: Court of Appeals for the Seventh Circuit

Date Published: May 10, 1984

Citation: 733 F.2d 1262

Docket Number: 82-2774

Court Abbreviation: 7th Cir.