UNITED STATES DEPARTMENT OF TRANSPORTATION, ET AL., PETITIONERS V. PARALYZED VETERANS OF AMERICA, ET AL. No. 85-289 In the Supreme Court of the United States October Term, 1985 On Writ of Certiorari to the United States Court of Appeals for the District of Columbia Circuit Reply Brief for the Petitioners In our opening brief, we argued that the court of appeals erred in requiring the Department of Transportation to promulgate regulations under Section 504 of the Rehabilitation Act of 1973, 29 U.S.C. 794, that would regulate the in-flight activities of commercial airlines. We demonstrated that airport operators, and not the airlines, are the "recipients" of the federal financial assistance granted under the airport aid statutes, and we further demonstrated that the court of appeals erred in creating a "program or activity" of "providing commercial air transportation" pursuant to which the airlines are deemed to be "indirect recipients" of federal aid to airport operators. In reply, respondents advance two primary arguments not relied upon by the court of appeals to support their contention that all commercial airlines using federally assisted airports are "recipients" of federal financial assistance; we address these arguments below. First and foremost, however, respondents argue that it is anomalous to provide handicapped passengers with accommodations mandated by Section 504 with respect to services delivered at the airport, but not to provide handicapped persons with protection against discrimination if they wish to fly on a commercial airliner. See, e.g., Resp. Br. 21. Respondents fail to acknowledge that Section 504 specifically limits the government's authority to extend regulatory coverage to the "recipients" of federal financial assistance, and, what is more, the statute reaches only the recipients' "programs or activities" that actually receive federal financial assistance. See, e.g., Grove City College v. Bell, 465 U.S. 555 (1984). Like the court of appeals, respondents approach this case as if it should be decided in accordance with respondents' notion of good public policy rather than on the basis of a careful analysis of the legal constraints imposed by Section 504 and this Court's decisions interpreting the statute's "program specificity" limitation. Whatever holes may be thought to exist in the statutory scheme, therefore, cannot be filled through judicial rulemaking. /1/ 1.a. Respondents appear to argue that passengers on commercial airlines are not only beneficiaries of the federal financial assistance given to airport operators, but the sole beneficiaries of that assistance. See, e.g., Resp. Br. 30-37 & n.10. The airlines, respondents contend, are therefore necessarily "indirect recipients" of federal aid to airport operators, serving as conduits for the flow of aid from the government to the ultimate benefit of passengers (Resp. Br. 29-40). /2/ Respondents seek support for their position both in the way Congress has determined to spend monies in the Airport and Airway Trust Fund and in Congress's allocation of the Trust Fund tax burdens among airport users (Resp. Br. 33-49). In their second and somewhat parallel argument, respondents contend that commercial airlines are "recipients" of federal financial assistance with respect to their in-flight activities because the airlines, like colleges with discriminatory admissions policies, are in a position to bar handicapped persons from receiving the benefits Congress intended to confer on passengers through aid to airport operators (Resp. Br. 63-70). Relying on a regulation (49 C.F.R. 27.7(b)(1)) that requires "recipients" to ensure that intermediate entities do not stand as an obstacle to the flow of benefits from the recipients to the ultimate beneficiaries, respondents argue that the airlines should be regarded as "indirect recipients" of federal financial assistance. As we demonstrate below, neither of respondents' theories is correct. The history and specific provisions of the airport aid statutes evidence a clear congressional intent to benefit interstate commerce and aviation in general, not just commercial carriers or their passengers. It is for that reason that Congress has earmarked most of the money in the Airport and Airway Trust Fund for runways, taxiways, and safety devices, because those items benefit the noncommercial as much as the commercial aircraft, and the cargo carrier as much as the passenger carrier. Similarly, Congress's intent to benefit aviation and commerce in general is evidenced by its decision to distribute the tax burden of aid to airport operators among all airport users, whether they be airlines, operators of private planes for business or pleasure, or travelling passengers. As for respondents' second argument, we will show that airlines are in no sense conduits of money, goods, or services between the government and passengers in flight. Airlines neither deliver nor prevent delivery of airport services to passengers. The reality is that it is the airport operator that is assisted and which therefore has an obligation to be nondiscriminatory in its relations with all who use it, including not only passengers but the airlines as well. In the circumstances of this case, however, the obligations of airport operators cannot be transformed into obligations of the airlines with respect to their in-flight activities. b. We agree with respondents' contention (Br. 30-37) that airline passengers are intended beneficiaries of statutes granting federal financial assistance to airport operators for the purpose of carrying out airport development and improvement projects. Respondents are plainly wrong, however, in their further contention that, if airline passengers are beneficiaries, then all other entities that also benefit from the same assistance must be "recipients" subject to regulation under Section 504. The fallacy in respondents' argument is that the airport operator obviously is the recipient; the airport grant legislation treats all other entities that benefit from the assistance, including passengers, alike, and all are "beneficiaries." The intend of Congress in passing the airport grant statutes and Section 504 is determinative on the issue of "recipient" status. Contrary to respondents' argument, however, Congress expressed no special intent to benefit passengers as such when it enacted the statutes providing assistance to airport operators. Instead, its purposes were much broader. That this is so is clear from the legislative history of the Airport and Airway Development Act of 1970, Pub. L. No. 91-258, 84 Stat. 219 et seq. (formerly codified at 49 U.S.C. (1976 ed.) 1701 et seq.) (hereinafter cited as the 1970 Act). As the House Committee on Interstate and Foreign Commerce explained (H.R. Rep. 91-601, 91st Cong., 1st Sess. 6 (1969)): In addition to the actual users of the airport and airway system -- such as airline passengers, general aviation, including private and business aviation operations, air freight forwarders, individual corporate and private shippers, etc. -- there are others who benefit substantially from aviation; primarily, perhaps, the military should be considered. From a civilian standpoint those who benefit indirectly include the aircraft manufacturers and all of those whose employment is directly or indirectly related to aviation. To illustrate, an aircraft or aircraft component manufacturer may employ thousands of persons who never fly, yet those persons' economic lives depend entirely on aviation. More indirectly, but still to be considered, are those who make their livelihood by providing services for the manufacturers' employees. The employees of such corporations indirectly support such nonaviation interests as real estate brokers and builders, doctors, dentists, school teachers, etc. This is brought forth here to establish the fact that air transportation in a true sense touches every American home, whether those in the home ever fly or not. Thus, Congress determined that federal financial assistance to airport operators was necessary not simply to benefit passengers, but to take account of the tremendous impact of the aviation industry on the nation's commerce. In the 1970 Act, for example, Congress explained that federal financial assistance to airports was necessary because "substantial expansion and improvement of the airport and airway system is required to meet the demands of interstate commerce, the postal service, and the national defense." 84 Stat. 219. The Airport and Airway Improvement Act of 1982, 49 U.S.C. App. 2201(a)(2) (hereinafter cited as the 1982 Act), contains a virtually identical statement of congressional purpose. Moreover, the "current and projected growth in aviation" (84 Stat. 219) that concerned Congress in 1970 was by no means limited to commercial air travel. On the contrary, Congress recognized the need to accommodate significant growth in five separate categories of civil aviation: air carriers and passengers, air cargo carriers, air taxis, private business flying, and private recreational flying. H.R. Rep. 91-601, supra, at 5. Huge growth was predicted not only in commercial aviation, but also in general aviation, which was expected to double its volume by 1980 (id. at 6). /3/ Two of the biggest problems identified by the House Interstate and Foreign Commerce Committee were safety in general and congestion at general aviation airports (id. at 5). Similarly, the House Committee on Public Works and Transportation in 1981 described the 1970 Act as follows (H.R. Rep. 97-24, 97th Cong., 1st Sess. Pt. II, at 2): Under the 1970 Act, Trust Fund revenues were used to fund a variety of programs. The Airport Development Program (ADAP) funded safety and capacity development at public airports of all sizes, both air carrier and general aviation airports. Additionally, a 1984 study prepared by Congress's Office of Technology Assessment pointed out that general aviation activities account for about one-half of all aircraft operations at FAA-towered airports. Office of Technology Assessment, Congress of the United States, OTA-STI-231, Airport System Development 27. Moreover, general aviation airports use proportionately more federal money than commercial airports (id. at 140-141). Since 1970, the number of general aviation aircraft in use has grown by 63% and the number of hours flown by 67% (id. at 141): As a result, general aviation now exerts particular pressure on the runways, taxiways, and other airfield components of a number of major commercial airports, often accounting for more than half of all takeoffs and landings. In short, Congress determined to provide federal financial assistance to airport operators for the benefit of all classes of "users," not merely passengers. Moreover, Congress intended all "users" to have the same status with respect to each other; all are the intended beneficiaries of federal financial assistance to airport operations. /4/ It is nonsensical to suppose that Congress meant that all "beneficiairies," including those who never even fly (see H.R. Rep. 91-601, supra, at 6), are to be treated as "recipients" under Section 504 when they use or benefit from an airport at which federal aid was expended. It is far more consistent with the legislative scheme to treat all categories of aviation, as well as the public at large, as beneficiaries of the assistance program, just as all sorts of vehicles, commercial and private, are the beneficiaries of federally assisted highways. c. That all entities using federally assisted airports are beneficiaries rather than recipients is made clearer from the fact that the "user" tax system that funds airport and airway development includes not only passengers, but all classes of aviation. Respondents stress (Br. 34-35) the high percentage of the Airport and Airway Trust Fund that comes from taxes on tickets paid by travelling passengers. But this fact attests to nothing more than the reality that there are enormous numbers of passengers, so that each pays relatively little, yet collectively their payments constitute the largest component of the Trust Fund. What is far more significant is that Congress intended all airport users to support the Trust Fund, thus equating the status of the airlines and other users to that of passengers. See, e.g., H.R. Rep. 91-601, supra, at 41, 49-50 (expressly comparing Airport Trust Fund to the Highway Trust Fund); see also id. at 40 (Congress specifically intended to require general aviation to pay "a larger share of air user charges than at present"). Congress reiterated its commitment to "user support" in the 1982 airport grant legislation. See H.R. Rep. 97-24, supra, Pt. I, at 54-56 (letter from Secretary of Transportation Drew Lewis to Speaker O'Neill). What is more, both the Secretary's recommendation to Congress and the legislation ultimately enacted in 1982 continued to treat all "users," including passengers, alike, by subjecting each category to the taxes necessary to support the grant program. See 26 U.S.C. 9502. /5/ 2. As part of their attempt to link airports and airlines in the "indissoluble nexus" created by the court of appeals (Pet. App. 50a), respondents argue (Br. 55) that the airlines have statutory authorization to "veto" airport operators' receipt of federal financial assistance. Respondents' argument is incorrect. Section 511(c) of the 1982 Act, 49 U.S.C. App. 2210(c), provides that, "(i)n making a decision to undertake any airport development project * * * , each sponsor of an airport shall undertake reasonable consultations with affected parties using the airport at which such project is proposed." The FAA has interpreted this provision in regulations and in a more detailed handbook, spelling out precisely the type of consultation that is required. Thus, pursuant to 14 C.F.R. 152.111(b)(10) and (11), an airport operator must consult with the airlines if the airport serves carriers and with the fixed-base operators (who rent space and furnish services, by subcontract or sublease, to general aviation) if the airport serves general aviation. The FAA's handbook prepared in connection with the 1970 Act explained that the scope of consultation will vary from airport to airport depending upon operational requirements, the relationship between the users and the sponsor and their financial commitments to each other. As long as users are afforded a reasonable opportunity to provide input prior to any final decision on proposed airport development, the fact that such users choose not to do so, or nonconcur in the proposed development, will not have the effect of nullifying any final decision by the sponsor. However, the project may not be approved unless the required consultation has been accomplished. Federal Aviation Administration, Dep't of Transportation, Airport Development Aid Program (ADAP) Handbook 74 (1979). /6/ The consultation process described in the FAA handbook hardly gives the airlines a "veto" over the plans of airport operators. /7/ In any event, respondents' "veto" argument is not responsive to our point (Gov't Br. 28) that Congress intended, in passing Title VI of the Civil Rights Act of 1964 and Section 504, to regulate only those entities that have control over whether they will receive federal financial assistance. Even if we assume that some airlines may occasionally exercise a certain level of influence over airport operators' receipt of federal funds, the airlines cannot change the fact that, for all practical purposes, all major airports have received federal funds for capital improvements. The airlines cannot, as a practical matter, detach themselves from the federally assisted airport system that Congress established to serve the needs of interstate commerce and the national defense. Under these circumstances, the airlines may not be deemed "recipients" of federal financial assistance to airport operators. Compare Grove City College v. Bell, 465 U.S. 555, 565 n.13 (1984) (colleges "remain free to opt out of the federal student assistance programs"). 3. Respondents erroneously contend (Br. 63-86) that regulations promulgated by the Department of Transportation (49 C.F.R. 27.5 and 27.7), as well as case law, support their theory that, whether or not the airlines are "recipients" of federal financial assistance within the meaning of Section 504, the airport operators, who unquestionably are "recipients," have a duty to ensure that the airlines also comply with Section 504. Respondents' argument begs the fundamental question in this case, which is whether the in-flight activities of the airlines constitute a federally assisted program or activity to which Section 504 applies. The regulations upon which respondents rely place restrictions upon recipients in the conduct of their federally assisted programs or activities. Thus, an airport operator, as a recipient, cannot deliver federally assisted airport services in a discriminatory manner. It cannot, for example, subcontract part of its federall assisted work to entities that will discriminate, nor can it deliver refreshment, refueling, or waiting room services through third parties that will discriminate. To apply these regulations to aircraft in flight, however, one has to begin with the premise that the federally assisted "program or activity" includes flying. But that would be beginning at the wrong end. The question presented in this case is whether flying is or is not part of the assisted program or activity. For the reasons explained in our opening brief (at 29-32), we maintain that it is not. The differences, moreover, between the situation in this case and the types of circumstances to which the regulations cited by respondents properly apply is readily apparent from an examination of the very cases upon which respondents rely. In Frazier v. Bd. of Trustees, 765 F.2d 1278 (5th Cir. 1985), a private firm contracted with a hospital to perform the hospital's federally assisted respiratory therapy services. The firm discharged one of its respiratory therapists, who then contended that her discharge was related to her history of mental instability, that the contractor was a "recipient" of the federal financial assistance (Medicare and Medicaid payments) given to the hospital, and that the contractor's action in dismissing her violated Section 504. The court of appeals agreed that the employee had stated a claim under Section 504, relying on regulations (45 C.F.R. 84.3(f) and 84.4(b)(4)) that defined "recipients" and required the hospital to ensure that no person was subjected to discrimination in its federally assisted programs "through contractual or other arrangements." Thus, the court of appeals held that the hospital's contract was obligated under Section 504 to deliver respiratory therapy services free of discrimination, just as if those services had been delivered by the hospital itself. By contrast, the in-flight activities of airlines are not a part of an airport's assisted program that the airport has delegated to a contractor. To be sure, the airlines carry out some of their functions in the airport, such as ticketing and baggage checking; as to these functions, Section 504 obligations apply. But the airport does not receive federal financial assistance for operating aircraft in flight. The hospital in Frazier, on the other hand, collected federal funds for work done by the contractor. This fundamental distinction clearly shows that the regulations upon which respondents rely do not impose Section 504 obligations either on the airlines directly (with respect to in-flight activities) or upon the airport to monitor the airlines' in-flight activities. /8/ Similarly, the airlines do not meet the definition of a "recipient" that was employed in Bob Jones University v. Johnso, 396 F. Supp. 597, 601 n.15 (D.S.C. 1974), aff'd, 529 F.2d 514 (4th Cir. (1975) (Table). The court there held that a "recipient" is "the intermediary entity whose nondiscriminatory participation in the federally assisted program is essential to the provision of benefits to the identified class which the federal statute is designed to serve." Thus, the court concluded that private sector colleges were entities whose nondiscriminatory participation was essential to Congress' plan of educational assistance for veterans. Respondents erroneously assume that the airlines in this case occupy the same role in the statutory scheme as the college in Bob Jones University. As we have demonstrated above, however, fulfillment of Congress's purposes in assisting airport operators requires the nondiscriminatory participation of those operators in the delivery of airport services to all who use or benefit from such services. Thus, it is the airport operators, and not the airlines, that parallel the college in Bob Jones University and whose nondiscriminatory participation in the federally assisted program is essential to the provision of benefits to those Congress intended to serve. The airlines, on the other hand, simply cannot be equated with the college in Bob Jones University when it comes to the delivery of airport services -- the only federally assisted program involved in this case. We reiterate that the determination whether an entity is a recipient or a beneficiary under any particular statutory scheme is ultimately a question of congressional intent. Congress's intent with respect to the delivery of airport services was expressed in the 1970 and 1982 Acts, discussed at pages 6-9, supra. We maintain that the purpose of those acts was to create a network of federally assisted airports. To be sure, all "flying" is ultimately benefitted, as is the public weal in general. But if the "program or activity" language of Section 504 is to mean anything at all, it must mean that the "recipient" that is subject to federal regulation is something less than every person or entity that ultimately benefits from the program Congress enacted. Respondents also rely (Br. 77-78) on 49 C.F.R. 27.7(b)(1)(v) (emphasis added), which prohibits recipients from "(a)id(ing) or perpetuat(ing) discrimination against a qualified handicapped person by providing financial or other assistance to an agency, organization, or person that discriminates on the basis of handicap in providing any aid, benefit, or service to beneficiaries of the recipient's program." Such reliance is misplaced. As before, respondents have reasoned from, not to, their conclusion. The regulation prohibits discrimination against the beneficiaries of the recipient's federally assisted program in that program. Here, the recipient's program is running an airport. The beneficiaries of that program, including the airlines themselves, are thus protected against discrimination by the airport operator on the basis of handicap (and, in the case of airlines, the handicap of any qualified employee). But the regulation itself does not cover in-flight activities, because they are not part of the recipient's program or activity. Nor do the airlines' in-flight policies discriminate against anyone in the use of airport services. The regulation merely assures that, if certain programs or activities are federally assisted, the recipient may not provide its own assistance to others who discriminate in those same programs, thereby paralleling the ban (see pages 13-15, supra) on a recipient's permitting its contractors to discriminate. /9/ 4. Finally, respondents assert (Br. 62 n.25) that the court of appeals did not reach the question whether the FAA's air traffic control system contstituted federal financial assistance to the airlines, and they contend that this Court need not consider the issue. We disagree. First, respondents conveniently ignore the fact that the Court granted the government's petition for a writ of certiorari on that question (see Pet. I). Second, as we pointed out in the petition (at 21-22 & n.15), the court of appeals held that the air traffic control system constitutes federal financial assistance to all airlines within the meaning of Section 504 (Pet. App. 40a), but it declined to define the program or activity covered by that assistance (id. at 44a-45a). Thus, if this Court were to reverse only that part of the decision below holding that federal assistance to airports requires airlines to comply with Section 504 in their "program or activity" of "providing commercial air transportation" (Pet. App. 50a), the Department of Transportation still would be left with a holding that all airlines receive federal financial assistance within the meaning of Section 504 by virtue of their use of the air traffic control system. Although it would be open to the Department to determine the relevant "program or activity" in the first instance, the Department still would presumably be required to promulgate regulations consistent with that determination. On the other hand, a decision by this Court that the air traffic control system is not federal financial assistance to airlines at all would obviate the need for further administrative and judicial proceedings regarding the scope of the "program or activity." For the foregoing reasons, as well as those set forth in our opening brief, the judgment of the court of appeals should be reversed. Respectfully submitted. CHARLES FRIED Solicitor General MARCH 1986 /1/ Similarly, it is irrelevant whether the Department of Transportation's draft proposal to make the regulations mandated by the court of appeals applicable to all commercial air carriers (see Resp. Br. 17-20) represents good policy. Respondents fail to acknowledge that the proposal has no legal status whatever; indeed, it does not even have the minimal status of proposed regulations. Instead, the proposal was transmitted to the Department of Justice with a request that it be approved for issuance as a Notice of Proposed Rulemaking. That request was denied on August 2, 1985, because the Department of Justice, acting pursuant to its Section 504 oversight authority (see Gov't Br. 12 n.10), concluded, as a legal matter, that the proposal was inconsistent with the program-specificity mandate of Section 504. In these circumstances, the proposal represents nothing more than interagency correspondence, and it simply has no relevance to the legal issues before this Court. /2/ Respondents assert (Br. 29-30) that, contrary to this Court's decision in Grove City v. Bell, supra, the CAB never considered the posibility that the airlines might be recipients by virtue of the receipt of "indirect aid," maintaining instead that only direct grants constitute "Federal financial assistance" for purposes of Section 504. Respondents mischaracterize the CAB's position. The only assistance programs ever administered by the CAB were direct subsidies to airlines. The FAA, a part of the Department of Transportation (see Gov't Br. 4 n.2), administered assistance to airports. As we explained in our opening brief (at 5-9), neither the FAA nor DOT ever purported to have the authority to regulate the in-flight activities of airlines under Title VI of the Civil Rights Act on the basis of those grants. Not surprisingly, therefore, the CAB stated in the preamble to its final Section 504 regulations that it had considered but rejected the contention that there were programs other than direct subsidies that "assisted" the in-flight activities of airlines. Pet. App. 88a-89a. The CAB had no occasion to, and did not, contend that it is impossible for any entity to be an indirect recipient of federal financial assistance. /3/ As used herein, the term "commercial aviation" refers to all passenger carriers formerly certified by the CAB, and the term "general aviation" refers to all other forms of civil aviation. /4/ If anything differentiates airlines from passengers as beneficiaries, it is that airlines pay a fee to the airport in exchange for using it. That fact further militates against the notion that the airlines are "recipients" of federal financial assistance to airports. /5/ As we noted in our opening brief (at 27 n.17), there is nothing in the legislative history of Title VI of the Civil Rights Act of 1964, 42 U.S.C. 2000d, or Section 504 to suggest that the relationship between specific taxes and federal grants should be determinative of the question whether an entity if a "recipient." As a general matter, taxes should not be regarded as "user fees" any more than they should be treated as "premiums" in the context of the Soecial Security insurance program. See Flemming v. Nestor, 363 U.S. 603 (1960). Instead, the significance of the tax system in the case of the Airport and Airway Trust Fund is that passengers are treated merely as one class of "user." /6/ The FAA handbook was written to implement 49 U.S.C. (1976 ed.) 1718(b). The House Committee on Public Works and Transportation, in considering the 1982 Act, stated that the same type of consultation described in the FAA handbook was to be continued under the 1982 Act. H.R. Rep. 97-24, supra, Pt. II, at 14. /7/ The statutorily-required consultation with the airlines is not to be confused with the so-called majority-in-interest clauses that some airlines have negotiated with airports. These clauses, pursuant to which certain airlines exercise considerable power over airport expansion that might open an airport to additional competitors and cited by respondents (Br. 55-56 & n.10) as authority for the proposition that airlines possess the authority to prevent airport operators from receiving federal grants, have been criticized as inconsistent with the pro-competition nature of airline deregulation. Report and Recommendations of the Airport Access Task Force 60-61 (1983). In any event, the clauses, which are entirely the product of bargaining between the airlines and the airports, have nothing to do with the matter at hand -- congressional intent in enacting the airport aid statutes. It also bears noting that a number of agency Section 504 regulations require recipients to consult with certain beneficiaries or their representatives, i.e., handicapped persons, with respect to the recipients' federally assisted programs or activities. See, e.g., 7 C.F.R. 15b.8(c)(1) (Department of Agriculture). Those who are consulted, including participants in the federally assisted programs or activities, have never been deemed "recipients" by virtue of such consultation. /8/ Although it does not detract from the force of our position, we note our disagreement with the court of appeals' conclusion in Frazier that the contractor was a "recipient" of federal financial assistance. The contractor received payments from the hospital as the result of an arms' length business transaction, and thus it was not in fact receiving federal financial assistance, either directly or indirectly. In any event, what is relevant here is that aircraft in flight, in relation to airports, are not comparable to the contractor in relation to the recipient hospital: the airlines simply are not contractors of the airport operators performing services that the operators would otherwise perform themselves. /9/ We note, moreover, that an "agency's authority under (Section 504) both to promulgate regulations and to terminate funds is subject to the program-specific(ity) limitation (implicit in Section 504)." North Haven Bd. of Educ. v. Bell, 456 U.S. 512, 538 (1982). Thus, the regulations cited by respondents must be read in light of the "program specificity" limitations mandated by North Haven and Grove City. Respondents' inability to demonstrate that "flying" is a federally assisted program makes the regulations upon which they rely totally inapplicable.