FAA Response Brief

[NOT YET SCHEDULED FOR ORAL ARGUMENT]

No. 14-1168

IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

_____________________

FLYTENOW, INC., Petitioner,

v.

FEDERAL AVIATION ADMINISTRATION, ADMINISTRATOR, Respondent.

_____________________

ON PETITION FOR REVIEW FROM THE FEDERAL AVIATION ADMINISTRATION

_____________________

BRIEF FOR THE RESPONDENT _____________________

BENJAMIN C. MIZER Acting Assistant Attorney General RONALD C. MACHEN JR. United States Attorney MARK R. FREEMAN (202) 514-5714 SYDNEY FOSTER (202) 616-5374 Attorneys, Appellate Staff Civil Division, Room 7513 U.S. Department of Justice 950 Pennsylvania Ave., N.W. Washington, D.C. 20530

USCA Case #14-1168 Document #1541908 Filed: 03/11/2015 Page 1 of 86

CERTIFICATE AS TO PARTIES, RULINGS, AND RELATED CASES

Pursuant to D.C. Circuit Rule 28(a)(1), the undersigned counsel certifies as

follows:

A. Parties and Amici

Petitioner is Flytenow, Inc., and the respondent is the Administrator of the

Federal Aviation Administration.

B. Rulings Under Review

The ruling under review is a legal interpretation issued by the Federal Aviation

Administration on August 14, 2014, which appears in the Joint Appendix (JA) at

JA 61-62. There is no official citation for the legal interpretation, but it is available on

Westlaw at 2014 WL 4185827.

C. Related Cases

This case has not been before this Court or any other court, and counsel is not

aware of any other related cases within the meaning of D.C. Circuit Rule 28(a)(1)(C).

s/Sydney Foster Sydney Foster


TABLE OF CONTENTS

Page CERTIFICATE AS TO PARTIES, RULINGS, AND RELATED CASES GLOSSARY STATEMENT OF JURISDICTION ................................................................................. 1 STATEMENT OF THE ISSUES ....................................................................................... 1 PERTINENT STATUTES AND REGULATIONS ....................................................... 2 STATEMENT OF THE CASE .......................................................................................... 2 A. Statutory and Regulatory Background .......................................................... 3 B. Factual and Procedural Background ............................................................. 8 SUMMARY OF ARGUMENT ......................................................................................... 12 STANDARD OF REVIEW ............................................................................................... 15 ARGUMENT ....................................................................................................................... 15

I. THE FAA REASONABLY CONSTRUED ITS REGULATIONS .......................................................................................... 16

A. The agency reasonably concluded that Flytenow pilots

are common carriers and thus require Part 119 certificates ........................................................................................... 16

B. Flytenows attacks on the FAAs interpretation of its own

regulations are meritless .................................................................... 21

II. FLYTENOWS REMAINING CONTENTIONS ARE BARRED AND, IN ANY EVENT, LACK MERIT .............................. 31

A. Review of Flytenows unexhausted statutory and

constitutional claims is barred under 49 U.S.C. 46110(d). ........ 31


B. The FAAs decision is consistent with the Administrative Procedure Act and the Federal Aviation Act ................................... 32

C. The FAAs decision is consistent with the Constitution ................ 38 CONCLUSION ................................................................................................................... 48 CERTIFICATE OF COMPLIANCE CERTIFICATE OF SERVICE ADDENDUM

ii


TABLE OF AUTHORITIES

Cases: Page Aeronautical Repair Station Assn v. FAA,

494 F.3d 161 (D.C. Cir. 2007) ......................................................................................... 42 Air Line Pilots Assn, Intl v. Quesada,

276 F.2d 892 (2d Cir. 1960) ............................................................................................. 40 Air Transp. Assn of Am., Inc. v. FAA,

291 F.3d 49 (D.C. Cir. 2002) ........................................................................................... 37 Alaska Profl Hunters Assn v. FAA,

177 F.3d 1030 (D.C. Cir. 1999), abrogated, Perez v. Mortg. Bankers Assn,

2015 WL 998535 (S. Ct. 2015) ................................................................ 6, 20, 24, 25, 33 Alexander v. United States,

509 U.S. 544 (1993) .......................................................................................................... 47 American Wildlands v. Kempthorne,

530 F.3d 991 (D.C. Cir. 2008) ......................................................................................... 12 Appalachian Power Co. v. EPA,

208 F.3d 1015 (D.C. Cir. 2000) ....................................................................................... 33 Association of Flight Attendants-CWA v. Chao,

493 F.3d 155 (D.C. Cir. 2007) ......................................................................................... 36

* Auer v. Robbins, 519 U.S. 452 (1997) .............................................................................................. 15, 21, 37

Board of Trs. of State Univ. of N.Y. v. Fox,

492 U.S. 469 (1989) .......................................................................................................... 46 Central Hudson Gas & Electric Corp. v. Pub. Serv. Commn,

447 U.S. 557 (1980) .................................................................................................... 15, 46

*Authorities upon which we chiefly rely are marked with asterisks.

iii


Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984) .......................................................................................................... 36

Christensen v. Harris Cnty.,

529 U.S. 576 (2000) .......................................................................................................... 37 City of Olmsted Falls v. FAA,

292 F.3d 261 (D.C. Cir. 2002) ......................................................................................... 32 City of Santa Monica v. FAA,

631 F.3d 550 (D.C. Cir. 2011) ......................................................................................... 15 Coeur Alaska, Inc. v. Southeast Alaska Conservation Council,

557 U.S. 261 (2009) .......................................................................................................... 37

* Continental Air Lines, Inc. v. Dept of Transp., 843 F.2d 1444 (D.C. Cir. 1988) ....................................................................................... 32

Cronin v. FAA,

73 F.3d 1126 (D.C. Cir. 1996) ................................................................................... 16, 32

* CSI Aviation Servs., Inc. v. U.S. Dept of Transp., 637 F.3d 408 (D.C. Cir. 2011) ........................................................................ 4, 30, 35, 43

FAA v. Landy,

705 F.2d 624 (2d Cir. 1983) ............................................................................................... 6

* FCC v. Beach Commcns, Inc., 508 U.S. 307 (1993) .................................................................................................... 38, 39

Ford Motor Co. v. Tex. Dept of Transp.,

264 F.3d 493 (5th Cir. 2001) ........................................................................................... 45 Go Leasing, Inc. v. NTSB,

800 F.2d 1514 (9th Cir. 1986) ................................................................................... 42, 43 Gorman v. NTSB,

558 F.3d 580 (D.C. Cir. 2009) ............................................................................... 5, 17, 35 Heller v. Doe ex rel. Doe,

509 U.S. 312 (1993) .......................................................................................................... 38 iv


* Holder v. Humanitarian Law Project, 561 U.S. 1 (2010) .............................................................................................................. 41

Jifry v. FAA,

370 F.3d 1174 (D.C. Cir. 2004) ....................................................................................... 36 Johnson v. Cal. State Bd. of Accountancy,

72 F.3d 1427 (9th Cir. 1995) ........................................................................................... 45 Kansas v. United States,

16 F.3d 436 (D.C. Cir. 1994) ........................................................................................... 46 Liberty Coins, LLC v. Goodman,

748 F.3d 682 (6th Cir. 2014) ........................................................................................... 45 Merrifield v. Lockyer,

547 F.3d 978 (9th Cir. 2008) ........................................................................................... 38 National Oilseed Processors Assn v. OSHA,

769 F.3d 1173 (D.C. Cir. 2014) ....................................................................................... 41 Nordlinger v. Hahn,

505 U.S. 1 (1992) .............................................................................................................. 39 Ohralik v. Ohio State Bar Assn,

436 U.S. 447 (1978) .......................................................................................................... 44 Pearson v. Shalala,

164 F.3d 650 (D.C. Cir. 1999) ................................................................................... 46, 47

* Perez v. Mortg. Bankers Assn, 2015 WL 998535 (S. Ct. 2015) ....................................................................... 6, 20, 25, 33

Pittsburgh Press Co. v. Pittsburgh Commn on Human Relations,

413 U.S. 376 (1973) .......................................................................................................... 45 Professional Pilots Fedn v. FAA,

118 F.3d 758 (D.C. Cir. 1997) ......................................................................................... 40 Sorrell v. IMS Health Inc.,

131 S. Ct. 2653 (2011) ...................................................................................................... 44 v


Town of Barnstable v. FAA,

740 F.3d 681 (D.C. Cir. 2014) ................................................................................... 15, 37 Trans Union Corp. v. FTC,

245 F.3d 809 (D.C. Cir. 2001) ......................................................................................... 42 Trans Union LLC v. FTC,

295 F.3d 42 (D.C. Cir. 2002) ........................................................................................... 46

* United States v. Williams, 553 U.S. 285 (2008) .............................................................................................. 45, 46, 47

Virginia State Bd. of Pharmacy v. Va. Citizens Consumer Council, Inc.,

425 U.S. 748 (1976) .......................................................................................................... 46

* Whitaker v. Thompson, 353 F.3d 947 (D.C. Cir. 2004) ......................................................................................... 44

Wisconsin v. Mitchell,

508 U.S. 476 (1993) .......................................................................................................... 44 Woolsey v. NTSB,

993 F.2d 516 (5th Cir. 1993) ..................................................................................... 39, 40 Statutes:

* 5 U.S.C. 553(b)(A) ............................................................................................................. 33 5 U.S.C. 706(2)(A) ............................................................................................................. 15 5 U.S.C. 706(2)(B).............................................................................................................. 15 28 U.S.C. 2112(b)............................................................................................................... 12 28 U.S.C. 2412(d)(1)(B) .................................................................................................... 47 49 U.S.C. 106(f)(3)(A) ................................................................................................... 3, 35 49 U.S.C. 106(g) ................................................................................................................. 35

vi


49 U.S.C. 106(g)(1)(A)....................................................................................................... 35 49 U.S.C. 40102(a)(2) .............................................................................................. 4, 34, 39 49 U.S.C. 40102(a)(5) .............................................................................................. 4, 34, 39 49 U.S.C. 40102(a)(8)(A) .................................................................................................... 3 49 U.S.C. 40102(a)(23) ............................................................................................ 4, 34, 39 49 U.S.C. 40102(a)(25) ............................................................................................ 4, 34, 39 49 U.S.C. 40113(a) ..................................................................................................... 1, 3, 35 49 U.S.C. 41101(a)(1) ........................................................................................................ 35 49 U.S.C. 44701-44711 ..................................................................................................... 1

* 49 U.S.C. 44701 ................................................................................................................. 36 49 U.S.C. 44701(a) ............................................................................................................... 3 49 U.S.C. 44701(a)(5) .................................................................................................. 17, 35 49 U.S.C. 44701(c) ............................................................................................................... 3 49 U.S.C. 44701(d)(1)(A)-(B) ........................................................................................... 39

* 49 U.S.C. 44702(a) ........................................................................................ 3, 4, 17, 34, 35

* 49 U.S.C. 44705 ................................................................................................ 4, 17, 34, 35 49 U.S.C. 44711(a)(2)(A) .................................................................................................... 3 49 U.S.C. 44711(a)(2)(A)-(B) ............................................................................................ 44 49 U.S.C. 44711(a)(2)(B) ..................................................................................................... 6 49 U.S.C. 44711(a)(4) ................................................................................................ 4, 6, 44

vii


49 U.S.C. 44711(a)(5) .............................................................................................. 6, 17, 44 49 U.S.C. 46110 ............................................................................................................. 1, 31 49 U.S.C. 46110(a) ............................................................................................................... 1 49 U.S.C. 46110(b) ............................................................................................................ 12

* 49 U.S.C. 46110(d) ............................................................................... 2, 13, 16, 31, 32, 38 1986 Ohio Legis. Serv. Ann. 5-963 .................................................................................... 45 Ohio Rev. Code Ann. 4728.01(A) ................................................................................... 45 Regulatory Materials: 14 C.F.R. 1.1 ................................................................................................ 5, 27, 33, 35, 37 14 C.F.R. 61.56(a) ................................................................................................................ 6 14 C.F.R. 61.56(c) ................................................................................................................ 6 14 C.F.R. 61.81-61.95 ........................................................................................................ 3 14 C.F.R. 61.102-61.117.................................................................................................... 3 14 C.F.R. 61.103(g) .......................................................................................................... 4, 5 14 C.F.R. 61.109(a) .......................................................................................................... 4, 5 14 C.F.R. 61.109(b) ......................................................................................................... 4, 5

* 14 C.F.R. 61.113 ................................................................................... 7, 10, 19, 27, 33, 37 14 C.F.R. 61.113-61.117.................................................................................................... 4 14 C.F.R. 61.113(a) ..................................................................................... 7, 19, 23, 25, 27 14 C.F.R. 61.113(c) ............................................. 7, 8, 9, 18, 19, 20, 22, 23, 25, 26, 27, 36

viii


14 C.F.R. 61.113(c) (1998) ................................................................................................ 27 14 C.F.R. 61.118(b) (1985) ............................................................................................... 20 14 C.F.R. 61.118(b) (1997) ............................................................................................... 27 14 C.F.R. 61.121-61.133.................................................................................................... 3 14 C.F.R. 61.159(a) ............................................................................................................ 40 14 C.F.R. 91.155(a) ............................................................................................................ 40 14 C.F.R. 110.2 ............................................................................................................ 26, 40 14 C.F.R. pt. 119 ..................................................................................................................... 5 14 C.F.R. 119.1(a)(1) .................................................................................. 5, 17, 29, 33, 35

* 14 C.F.R. 119.1(a)(1)-(2) ..................................................................................................... 8 14 C.F.R. 119.1(a)(2) ......................................................................................................... 29 14 C.F.R. 119.1(e) ................................................................................................................ 5 14 C.F.R. 119.5(a)-(b) .......................................................................................................... 5 14 C.F.R. 119.5(g) ........................................................................................................ 5, 44 14 C.F.R. 119.5(k) .......................................................................... 6, 14, 29, 37, 44, 46, 47 14 C.F.R. 119.5(l) ............................................................................................................. 44 14 C.F.R. 119.21 .................................................................................................................. 5 14 C.F.R. 119.21-119.25.................................................................................................... 5

* 14 C.F.R. 119.21(a) ................................................................................................ 17, 33, 35 14 C.F.R. 119.21(a)(1)-(3) ................................................................................................. 40 14 C.F.R. 119.21(a)(4)-(5) ........................................................................................... 6, 40

ix


14 C.F.R. 119.23 .......................................................................................................... 25, 26 14 C.F.R. 119.25 .................................................................................................................. 5 14 C.F.R. 119.33-119.36.................................................................................................. 47 14 C.F.R. 119.33(a)(2) ................................................................................................... 5, 44 14 C.F.R. 119.33(b)(2) ................................................................................................... 5, 44 14 C.F.R. 119.39 ................................................................................................................ 47 14 C.F.R. pt. 121 ..................................................................................................................... 5 14 C.F.R. pt. 121, SFAR 38-2, 4 (1995) .......................................................................... 20 14 C.F.R. 121.1(a) .............................................................................................................. 40 14 C.F.R. 121.436(a)(1)-(2) ............................................................................................... 40 14 C.F.R. pt. 125 ..................................................................................................................... 5 14 C.F.R. pt. 135 ..................................................................................................................... 5 14 C.F.R. 135.1(a)(1) ....................................................................................................... 40 14 C.F.R. 135.243(a) ........................................................................................................ 5, 6 14 C.F.R. 135.243(b)(1)-(2) .......................................................................................... 6, 41 14 C.F.R. 135.243(c)(1)-(2) ................................................................................................. 6 14 C.F.R. 135.293 ................................................................................................................ 6 28 Fed. Reg. 8157 (Aug. 8, 1963) ................................................................................. 19, 26 29 Fed. Reg. 4717 (Apr. 2, 1964) ........................................................................................ 26 50 Fed. Reg. 23,941 (June 7, 1985) ..................................................................................... 20

x


60 Fed. Reg. 65,832 (Dec. 20, 1995) .................................................................................. 20 62 Fed. Reg. 16,220 (Apr. 4, 1997) ......................................................................... 20, 26, 27

* FAA Advisory Circular No. 120-12A (JA 30-32) ............. 4, 10, 17, 19, 20, 30, 35, 41, 43

* In re Transocean Air Lines, Inc., 11 C.A.B. 350 (1950) (JA 1-22) .............................................................. 11, 17, 30, 41, 43 Legal Interpretation to Mr. Atwood, 1993 WL 13581152 (FAA 1993) ........................ 28 Legal Interpretation to Don Bobertz (FAA 2009) (JA 38-40) .............................. 7, 22, 23

* Legal Interpretation to D. David Brown (FAA 1976) (JA 24-25) ........ 11, 20, 21, 23, 24 Legal Interpretation to Peter Bunce (FAA 2008) (JA 33-34) ............................................ 8

* Legal Interpretation to Thomas H. Chero (FAA 1985) (JA 28-29) .... 7, 8, 11, 20, 22, 23 Legal Interpretation to Wayne M. Del Rossi, 2010 WL 3070407(FAA 1987) ............. 28 Legal Interpretation to Andy Dobis (FAA 2014) (JA45-46) ........................................... 24 Legal Interpretation to Mark Haberkorn

(FAA 2011) (JA 41-44) .................................................................... 7, 8, 21, 22, 23, 41, 42 Legal Interpretation to John W. Harrington, 1997 WL 34613525 (FAA 1997) ........... 24 Legal Interpretation to Joseph A. Kirwan, 2005 WL 4994728 (FAA 2005). .......... 24, 28

* Legal Interpretation to Hal Klee (FAA 1985) (JA 26-27) ................................... 11, 20, 23 Legal Interpretation to Ron Levy (FAA Office of Regional Counsel, Eastern Region 2005) (Pet. Addendum 10-11) ............................................................ 24

* Legal Interpretation to Rebecca B. MacPherson (FAA 2014) (JA 57-60) ......................................................... 10, 11, 18, 19, 20, 22, 27, 28

Legal Interpretation to Guy Mangiamele (FAA 2009) (JA 35-37) ......................... 7, 8, 22 Legal Interpretation to Taylor S. Perry, 2010 WL 3070407 (FAA 2010) ...................... 25

xi


Legal Interpretation to Bob Shaw, 2008 WL 2204585 (FAA 2008) .............................. 28 Legal Interpretation to Mike Sommer, 2010 WL 4038518 (FAA 2010) ....................... 24 Legal Interpretation to Paul D. Ware (FAA 1976) (JA 23) ................................. 21, 24, 30 Legal Interpretation to John Yodice, 1978 WL 390805 (FAA 1978) ............................ 21 Rule: Fed. R. App. P. 16(a) ............................................................................................................ 12

xii


GLOSSARY

FAA Federal Aviation Administration

JA Joint Appendix

Pet. Br. Petitioners Brief


IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

_____________________

No. 14-1168 _____________________

FLYTENOW, INC.,

Petitioner,

v.

FEDERAL AVIATION ADMINISTRATION, ADMINISTRATOR, Respondent.

_____________________

ON PETITION FOR REVIEW FROM THE FEDERAL AVIATION ADMINISTRATION

_____________________

BRIEF FOR THE RESPONDENT _____________________

STATEMENT OF JURISDICTION

Pursuant to its authority to regulate aviation safety, see 49 U.S.C. 40113(a),

44701-44711, the Federal Aviation Administration (FAA) issued a letter interpreting

several FAA regulations on August 14, 2014. Joint Appendix (JA) 61-62. Petitioner

Flytenow, Inc. (Flytenow) filed a timely petition for review on September 5, 2014.

See 49 U.S.C. 46110(a). This Court has jurisdiction under 49 U.S.C. 46110.

STATEMENT OF THE ISSUES

Flytenow operates a website on which pilots may post information about

upcoming flights to attract passengers willing to pay a pro rata share of the pilots


operating expenses. The FAA concluded that such pilots hold themselves out to the

public as available to provide transportation in exchange for compensation and thus

are common carriers. Accordingly, the FAA determined that Flytenow pilots must

obtain the necessary certificate under FAA regulationsknown as a Part 119

certificateto provide that flight service. The questions presented are:

1. Whether the agencys decision is consistent with governing regulations.

2. Whether 49 U.S.C. 46110(d) bars this Court from considering Flytenows

statutory and constitutional challenges because no such objections were raised before

the agency.

3. If not barred by 46110(d), whether the agencys decision is consistent with

the notice-and-comment requirements of the Administrative Procedure Act; the

Federal Aviation Act; the Due Process Clause of the Fifth Amendment; and the First

Amendment.

PERTINENT STATUTES AND REGULATIONS

Pertinent statutes and regulations are reproduced in the addendum to this brief.

STATEMENT OF THE CASE

Petitioner Flytenow operates a website on which a pilot may post information

about upcoming flights to attract passengers willing to pay a pro rata share of the

pilots operating expenses. Flytenow requested a legal interpretation from the FAA

regarding the companys business model. The FAA concluded that pilots who

2


participate in Flytenows website are common carriersi.e., persons who hold

themselves out to the public (or a segment of the public) as available to provide

transportation for compensation. Because Flytenow pilots are common carriers, the

agency concluded that they must obtain a certificate under Part 119 of the FAAs

regulations, which requires that they comply with certain stringent safety

requirements. Flytenow petitions for review.

A. Statutory and Regulatory Background

1. Congress assigned to the FAA Administrator (Administrator) the

responsibility to promote safe flight of civil aircraft in air commerce. 49 U.S.C.

44701(a). The Administrator is required to carry out his duties in a way that best

tends to reduce or eliminate the possibility or recurrence of accidents in air

transportation. Id. 44701(c).

To that end, Congress has directed the FAA to promulgate several categories

of regulations of particular relevance here. See generally 49 U.S.C. 106(f)(3)(A),

40113(a). First, the FAA issues airman certificates authorizing individuals to serve

as pilots. Id. 44702(a), 44711(a)(2)(A); see also id. 40102(a)(8)(A) (defining

airman). The agency issues several types of airman certificates, such as student

pilot certificates, private pilot certificates, and commercial pilot certificates. See,

e.g., 14 C.F.R. 61.81-61.95, 61.102-61.117, 61.121-61.133. The eligibility

requirements and operating rules associated with each type of certificate are distinct.

3


For example, to be eligible for a private pilot certificate, the type of certificate most

pertinent here, a pilot seeking to operate a single-engine or multiengine plane

generally must have at least 40 hours of flight experience. Id. 61.103(g), 61.109(a),

(b). A person holding a private pilot certificate, in turn, is authorized to engage in

certain aircraft operations but not others. Id. 61.113-61.117.

Second, Congress instructed the FAA to regulate persons who wish to provide

transportation by air as a common carrier. The FAA issues air carrier operating

certificate[s] authorizing persons to operate as air carrier[s] if those persons are

properly and adequately . . . equipped and able to operate safely under relevant

statutes, regulations, and standards. 49 U.S.C. 44705; id. 44702(a), 44711(a)(4).

Congress defined air carrier[s] to include persons who undertak[e] . . . to provide

interstate or foreign aircraft transportation to passengers as a common carrier for

compensation. Id. 40102(a)(2), (5), (23), (25). Although the statute does not define

the term common carrier, the FAA has interpreted that term to mean any person

who (1) . . . hold[s] out [to the public or a segment of the public] . . . a willingness

to (2) transport persons or property (3) from place to place (4) for compensation.

FAA Advisory Circular No. 120-12A (JA 30); see also CSI Aviation Servs., Inc. v. U.S.

Dept of Transp., 637 F.3d 408, 415 (D.C. Cir. 2011).

As relevant here, Part 119 of the FAAs regulations governs any person

operating or intending to operate civil aircraft as a common carrier, whether as an

4


air carrier or as a commercial operator, a closely related category.1 14 C.F.R.

119.1(a)(1). See generally id. pt. 119. Any person proposing to offer common carrier

service must obtain a Part 119 certificate prior to commencing operations, unless an

exception to the certificate requirement applies. See id. 119.21, 119.25; see also id.

119.5(a)-(b), (g), 119.33(a)(2), (b)(2); cf., e.g., id. 119.1(e) (listing certain exceptions).

The operations of Part 119 air carriers and commercial operators are generally

subject to more stringent safety regulations than other air operations. See 14 C.F.R.

119.21-119.25 (citing id. pts. 121, 125, 135). For example, whereas a private pilot

can generally operate a plane with only 40 hours of prior flight experience, see id.

61.103(g), 61.109(a), (b), pilots operating under Part 119 must, at a minimum, hold

a commercial pilot certificate and have additional flight experience, with the amount

depending on the size of the aircraft and the type of operation. See, e.g., id.

1 The regulatory definition of the term air carrier is based on the statutory definition and includes persons who transport passengers by air as a common carrier for compensation or hire in commerce in interstate, overseas, or foreign settings. 14 C.F.R. 1.1. The term commercial operator encompasses (1) persons operating as common carriers in intrastate settings, and (2) persons transporting passengers for compensation but who are not common carriersi.e., persons who do not hold themselves out to the public or a segment of the public as available to provide transportation servicesin intrastate, interstate, overseas, or foreign settings. See id.; see also Gorman v. NTSB, 558 F.3d 580, 589-91 (D.C. Cir. 2009) (explaining statutory authority for issuing commercial operator certificates and holding that commercial operators include persons operating in the intrastate setting). For present purposes, the distinction between air carriers and commercial operators is not material; the salient point is that Part 119 governs any person who operates civil aircraft as a common carrier.

5


135.243(a), (b)(1)-(2), (c)(1)-(2) (explaining, e.g., that certain Part 119 pilots must

have 500 hours of flight experience and others must have 1,200 hours of flight

experience); id. 119.21(a)(4)-(5) (making certain operations subject to Part 135

requirements); see also, e.g., Alaska Profl Hunters Assn v. FAA, 177 F.3d 1030, 1033

(D.C. Cir. 1999), abrogated on other grounds, Perez v. Mortg. Bankers Assn, 2015 WL

998535 (S. Ct. 2015); FAA v. Landy, 705 F.2d 624, 628 (2d Cir. 1983).2

Regardless of which type of certificate a person is issued, Congress specified

that no person may operate an aircraft in violation of the terms of the certificate or

any related regulations. 49 U.S.C. 44711(a)(2)(B), (a)(4), (a)(5). In addition, [n]o

person may advertise or otherwise offer to perform an operation subject to [Part 119]

unless that person is authorized by the [FAA] to conduct that operation. 14 C.F.R.

119.5(k).

2. In general, FAA regulations forbid persons who hold private pilot

certificates from transporting passengers or property in exchange for money. Under

2 As another example, Part 119 pilots in command of an aircraft must pass certain recurrent safety checks. For example, certain Part 119 pilots must annually pass (1) a written or oral examination testing the pilots knowledge of enumerated safety requirements and procedures; and (2) a practical competency check to determine the pilots competence in various skills and techniques. 14 C.F.R. 135.293. By contrast, pilots in command operating under the general operating rules in Part 91 of the FAAs regulations are generally not subject to any such recurrent tests or checks. Instead, every other year, those pilots generally need only satisfactorily complete a flight review consisting of one hour of flight training and one hour of ground training that addresses a more limited set of topics. See id. 61.56(a), (c).

6


14 C.F.R. 61.113(a), no person who holds a private pilot certificate may act as pilot

in command of an aircraft that is carrying passengers or property for compensation or

hire; nor may that person, for compensation or hire, act as pilot in command of an

aircraft. That principle, however, is subject to several exceptions, including what is

known as the expense-sharing rule: A private pilot may not pay less than the pro rata

share of the operating expenses of a flight with passengers, provided the expenses

involve only fuel, oil, airport expenditures, or rental fees. Id. 61.113(c).

In prior legal interpretations, the FAA has explained that 61.113(a) and (c) do

not bar a private pilot from accepting payment from his passengers for enumerated

operating expenses as long as he remains responsible for paying his pro rata share of

those expenses and as long as the pilot and the passengers share a common

purpose.3 The FAA has stated that the common purpose requirement is satisfied

where the destination was dictated by the pilot . . . , and both [the pilot] and [the]

passengers have personal business to conduct [at the destination], thus establishing

that the purpose of th[e] flight is not merely to transport [the] passengers in

3 E.g., Legal Interpretation to Mark Haberkorn (FAA 2011) (JA 43); Legal Interpretation to Don Bobertz (FAA 2009) (JA 39); Legal Interpretation to Guy Mangiamele (FAA 2009) (JA 36-37); Legal Interpretation to Thomas H. Chero (FAA 1985) (JA 28).

7


exchange for compensation.4 The expense-sharing rule thus permits casual expense

sharing by a pilot wishing to take some friends or acquaintances with him on a trip.

Legal Interpretation to Thomas H. Chero (FAA 1985) (JA 28). See also, e.g., Pet. Br. 12,

19-20 (agreeing that a common purpose is required to satisfy 61.113(c)).

B. Factual and Procedural Background

1. Flytenow operates a website on which pilots can post information about

upcoming flights to attract passengers willing to pay a pro rata portion of the pilots

operating expenses. Any member of the public may use Flytenows service and pay to

become a passenger on a posted flight: although individuals must apply for

membership to the website, there is no indication in the record that Flytenow

denies membership to any prospective passenger. JA 47. Once individuals are

accepted as members, they have access to Flytenows flight-listing service. JA 47.

A Flytenow pilot may post on the website the dates, times, and points of

operation of any upcoming flight, provided the flight involves a plane under a certain

size.5 JA 47, 49 n.10. Prospective passengers who are Flytenow members may view all

4 Haberkorn Interpretation (JA 43); see also Mangiamele Interpretation (JA 36-37); Legal Interpretation to Peter Bunce (FAA 2008) (JA 33); Chero Interpretation (JA 28).

5 Flytenow does not permit pilots to list flights involving airplanes with a seat configuration of 20 or more passengers or a maximum payload capacity of 6,000 pounds or more. JA 49 n.10. That restriction tracks the FAAs regulations, which specify that the operation of such airplanes requires a Part 119 certificate without regard to whether the operator is a common carrier. See 14 C.F.R. 119.1(a)(1)-(2).

8


flights posted by pilots and request to be a passenger on any such flight. JA 47-48. A

pilot may then accept or reject the prospective passengers request for any reason. JA

48. If a pilot and passenger connect through the website, the website enables the

pilot to accept pro rata reimbursement from the passenger for expenses identified

in 14 C.F.R. 61.113(c)fuel, oil, airport expenditures, and rental fees. JA 48.

According to Flytenows brief, Flytenow facilitates this transaction by transferring

payment from the passenger to the pilot at the conclusion of the flight. Pet. Br. 13.

2. a. In February 2014, Flytenow sent the FAA a letter requesting that the

FAAs Office of the Chief Counsel provide a legal interpretation regarding its

website. JA 47-50. Flytenows letter described the website and requested that the FAA

address whether Flytenowor a pilot or passenger using the websitewould run

afoul of the Federal Aviation Regulations. JA 49; see also JA 47-48. Flytenow offered

its own proposed analysis, contending that (1) pilots who use the website share

operating expenses consistent with 14 C.F.R. 61.113(c); and (2) pilots who use the

website are not common carriers under Part 119 of the FAAs regulations. JA 48-49.

At no point did Flytenow assert that the FAA was required by statute or the

Constitution to permit it to operate its website or to permit pilots and passengers to

use its website, nor did Flytenow request that the FAA address any statutory or

constitutional questions.

9


b. In August 2014, the FAA responded to Flytenows request, explaining that

pilots posting flights on Flytenows website to offer flight services to paying strangers

are acting as common carriers and thus require a Part 119 certificate. JA 61-62.

The FAA explained that it had recently addressed Flytenows questions in a

legal interpretation issued to Rebecca MacPherson regarding a materially identical

web-based scheme operated by an entity called AirPooler. JA 61 (referencing Legal

Interpretation to Rebecca B. MacPherson (FAA 2014) (JA 57-60)). In the

MacPherson Interpretation, the FAA observed that FAA Advisory Circular No. 120-

12A describes common carriage as (1) a holding out of a willingness to (2) transport

persons or property (3) from place to place (4) for compensation, FAA Advisory

Circular No. 120-12A (JA 30). JA 58. The FAA concluded that pilots participating in

the AirPooler scheme satisfied all of the elements of common carriage, only the first

and fourth of which were in dispute. See JA 59-60.

The FAA reasoned in the MacPherson Interpretation that, because AirPooler

passengers paid AirPooler pilots a pro rata share of the pilots operating expenses in

exchange for transportation, the operations in question were for compensation for

purposes of the common carriage analysis. JA 59-60. The FAA explained that this

conclusion follows from the plain language of 14 C.F.R. 61.113, which established

a general prohibition against compensation and hire and listed . . . exceptions to that

general prohibition, which included expense-sharing with passengers. JA 59

10


(emphasis added). In addition, the FAA determined that pilots participating in the

AirPooler website were holding out to the public to transport passengers, thus

satisfying the holding out element of common carriage. JA 60. The FAA explained

that [t]his position is fully consistent with prior legal interpretations related to other

nationwide initiatives.6

In the legal interpretation issued to Flytenow, the FAA further emphasized that

[h]olding out can be accomplished by any means which communicates to the public

that a transportation service is indiscriminately available to the members of that

segment of the public it is designed to attract. JA 62 (quoting In re Transocean Air

Lines, Inc., 11 C.A.B. 350, 353 (1950) (JA 4)). The FAA explained that, [b]ased on

[Flytenows] description, the website is designed to attract a broad segment of the

public interested in transportation by air. JA 62. Because Flytenow and AirPooler

pilots are engaged in common carriage, the FAA concluded that they require Part 119

certificates. JA 61-62.

This petition for review followed.7

6 JA 60 (citing Chero Interpretation (JA 28-29); Legal Interpretation to Hal Klee (FAA 1985) (JA 26-27); Legal Interpretation to D. David Brown (FAA 1976) (JA 24-25)).

7 Flytenows addendum includes documents pertaining to Flytenow and a screenshot of another companys website that are not part of the administrative record in this case and that Flytenow has not relied upon in making its standing argument. See Pet. Addendum 7-9, 12-14. Although nothing turns on the issue in this case because of Flytenows limited reliance on these documents, they are not properly

11


SUMMARY OF ARGUMENT

Flytenow operates a website on which an aircraft pilot can post information

about upcoming flights to attract passengers who are willing to pay a pro rata share of

the pilots operating expenses. In the decision under review, the FAA determined that

Flytenow pilots are common carriers and thus must obtain a Part 119 certificate

that subjects them to heightened safety standards. Flytenow does not dispute that

common carriers are required to obtain Part 119 certificates, nor does Flytenow

contest the agencys definition of common carriera person who holds himself out

to the public as available to provide transportation in return for compensation.

Instead, Flytenow contends that the agencys conclusion that Flytenow pilots are

common carriers under this definition is arbitrary and capricious.

The agency reasonably determined that Flytenow pilots are common carriers.

Flytenow pilots offer flight services to paying strangers. Postings by pilots on the

Flytenow website are accessible to any member of the public who applies to become a

Flytenow member, and thus the holding out requirement of common carriage is

satisfied. Indeed, Flytenow does not seriously argue otherwise. In addition, the

agencys regulations and prior legal interpretations establish that the payment of a pro

rata share of expenses in exchange for transportation qualifies as compensation, a

before this Court. See 49 U.S.C. 46110(b); 28 U.S.C. 2112(b); Fed. R. App. P. 16(a); see also, e.g., American Wildlands v. Kempthorne, 530 F.3d 991, 1001-02 (D.C. Cir. 2008).

12


conclusion consistent with the ordinary meaning of that term. Flytenow contends that

the agency misconstrued various regulations in reaching these conclusions, but the

agencys interpretation of those provisions is both sensible and persuasive. At a

minimum, the agencys interpretation of its own rules is not plainly erroneous or

inconsistent with the regulations.

Flytenow also asserts a variety of statutory and constitutional challenges to the

agencys decision, but this Court is barred by 49 U.S.C. 46110(d) from considering

those challenges because Flytenow failed to raise them during the administrative

proceedings. In any event, all of Flytenows statutory and constitutional challenges fail

on their own terms. First, the Administrative Procedure Act did not require the

agency to engage in notice-and-comment rulemaking prior to adopting the

interpretations of its regulations set forth in the decision on review because those

interpretations are interpretive rules or statements of policy. Second, the FAA plainly

has statutory authority to require that pilots advertising flights to the public on the

Internet obtain Part 119 certificates. Congress specifically granted the FAA authority

to require common carriers to obtain specialized certificates, and a person is a

common carrier if he holds himself out to the public as available to provide

transportation in exchange for compensation, including when he does so on the

Internet.

13


Flytenows constitutional challenges are equally wide of the mark. First, the

FAAs conclusion that Flytenow pilots must obtain Part 119 certificates is consistent

with the equal protection component of the Due Process Clause because it is rational

for the FAA to impose stricter safety standards on expense-sharing pilots who serve

the public than on expense-sharing pilots who operate privately. Second, the holding

out element of the common carriage analysis, as applied by the FAA, is not

unconstitutionally vague. There is no uncertainty as to how that standard applies to

Flytenow pilots, who advertise flights on a website accessible by any member of the

public. In any case, the standard is not vague as applied to others, and entities may

seek clarification by requesting a legal interpretation from the FAA. Flytenow did just

that and received a clear and definitive answer from the agency.

Finally, the First Amendment does not bar the FAA from using a pilots

advertisement to the public as evidence that the pilot has held himself out to the

public, thereby triggering the requirement that the pilot obtain a Part 119 certificate.

Nor is 14 C.F.R. 119.5(k), which precludes persons from advertising operations

subject to Part 119 prior to obtaining authorization from the FAA to conduct those

operations, problematic. That regulation bars persons from offering to engage in

illegal transactions, and such offers receive no protection under the First Amendment.

Even if advertisements by pilots on the Flytenow website are protected by the First

Amendment, those advertisements are commercial speech that may be restricted

14


under the test articulated in Central Hudson Gas & Electric Corp. v. Public Service

Commission, 447 U.S. 557 (1980). The FAAs regulations requiring pilots who post

flights on the Flytenow website to obtain Part 119 certificates easily pass scrutiny

under Central Hudson because they are narrowly tailored to the FAAs substantial

interest in ensuring that those pilots who serve the publici.e., those who hold out

the availability of transportation by air to the publicsatisfy heightened safety

standards.

STANDARD OF REVIEW

The FAAs decision must be upheld unless it is arbitrary, capricious, an abuse

of discretion, . . . otherwise not in accordance with law, or contrary to constitutional

right. 5 U.S.C. 706(2)(A), (B). See City of Santa Monica v. FAA, 631 F.3d 550, 554

(D.C. Cir. 2011). The agencys interpretation of its own regulations is controlling

unless plainly erroneous or inconsistent with the regulation. Auer v. Robbins, 519 U.S.

452, 461 (1997) (internal quotation marks omitted); see also, e.g., Town of Barnstable v.

FAA, 740 F.3d 681, 687 (D.C. Cir. 2014).

ARGUMENT

The FAA reasonably concluded that pilots who use Flytenows website to

solicit paying passengers are common carriers and thus require a Part 119

certificate. Flytenow pilots offer point-to-point transportation by air to interested

strangers in exchange for moneythe traditional hallmark of a common carrier. That

15


the payment they receive is measured by the passengers pro rata share of the flight

expenses does not alter the fact that the pilots are providing flight services in

exchange for compensation. That conclusion follows from the plain language of the

FAAs regulations, which reflect the commonsense determination that defraying a

pilots fuel, oil, and other expenses in exchange for transportation is a form of

compensation. Flytenows arguments to the contrary (Pet. Br. 19-25) are meritless.

In addition, Flytenow argues (Pet. Br. 26-57) for the first time in this Court that

the agencys decision violates the notice-and-comment requirements of the

Administrative Procedure Act, exceeds the agencys authority under the Federal

Aviation Act, and violates the Constitution in various respects. Because Flytenow did

not raise these objections before the FAA, it is barred under 49 U.S.C. 46110(d)

from pressing them in this Court. See, e.g., Cronin v. FAA, 73 F.3d 1126, 1133-34 (D.C.

Cir. 1996). In any event, as explained below, Flytenows statutory and constitutional

challenges fail on their own terms.

I. THE FAA REASONABLY CONSTRUED ITS REGULATIONS.

A. The agency reasonably concluded that Flytenow pilots are common carriers and thus require Part 119 certificates.

In the decision under review, the FAA reasonably determined that pilots who

solicit passengers on the Flytenow website are common carriers within the meaning

of the agencys regulations and thus require a Part 119 certificate. Flytenow does not

16


dispute that common carriers generally must obtain Part 119 certificates under the

governing regulations, whether as air carriers or commercial operators.8 See Pet.

Br. 9, 11, 50; 14 C.F.R. 119.1(a)(1), 119.21(a); see also 49 U.S.C. 44701(a)(5),

44702(a), 44705, 44711(a)(5) (statutory authority); Gorman v. NTSB, 558 F.3d 580,

589-90 (D.C. Cir. 2009). Nor does Flytenow dispute the definition of common

carrier the agency has adoptedany person who (1) . . . hold[s] out [to the public

or a segment of the public] a willingness to (2) transport persons or property (3) from

place to place (4) for compensation, FAA Advisory Circular No. 120-12A (JA 30).

See Pet. Br. 6 n.6, 11 & n.14, 23-25 & n.21. The only dispute in this case centers

around whether Flytenow pilots are common carriers within the meaning of the

agencys definition. The agency reasonably determined that they are.

First, the FAA concluded that Flytenow pilots satisfy the holding out

element of common carriage, and Flytenow offers no argument in this Court to the

contrary. As the agency explained, and as Flytenow does not dispute, [h]olding out

can be accomplished by any means which communicates to the public that a

transportation service is indiscriminately available to the members of that segment of

the public it is designed to attract. JA 62 (quoting In re Transocean Air Lines, Inc., 11

8 As explained above, under the FAAs regulations, common carriers that operate in interstate, foreign, and overseas settings are air carriers, and common carriers that operate in intrastate settings are commercial operators. See supra pp. 4-5 & note 1.

17


C.A.B. 350, 353 (1950) (JA 4)); see also Pet. Br. 11 n.14, 24 n.21 (agreeing with this

formulation). As the administrative record establishes, any member of the public can

view flights that pilots post on the Flytenow website simply by applying for

membership to the website, and there is no indication that Flytenow ever denies

membership to a prospective passenger. JA 47. Indeed, the purpose of Flytenows

website is to allow pilots to attract strangers who are interested in becoming

passengers. The FAA thus reasonably concluded that, because Flytenows website is

designed to attract a broad segment of the public interested in transportation by air,

the holding out element of common carriage is satisfied. JA 62.

The FAA also reasonably determined that the for compensation element of

common carriage is satisfied by pilots who post flights on the Flytenow website. See

JA 61 (citing Legal Interpretation to Rebecca B. MacPherson (FAA 2014) (JA 57-60)).

Pilots posting flights on the Flytenow website offer transportation to passengers in

exchange for payment of a pro rata share of the flight expenses enumerated in 14

C.F.R. 61.113(c)fuel, oil, airport expenditures, and rental fees. JA 48. Receipt of

this money in exchange for transportation satisfies the ordinary meaning of the term

compensation, which the agency explained includes the act of making up for

whatever has been suffered or lost through another, and the act of remuneration. JA

59 (internal quotation marks omitted). The pilot transports the passenger, and the

passenger compensates the pilot by paying a portion of the flight expenses.

18


The agency explained that the plain language of 14 C.F.R. 61.113 supports

this interpretation. JA 59. Section 61.113(a) states that, [e]xcept as provided in, inter

alia, 61.113(c), no person who holds a private pilot certificate may act as pilot in

command of an aircraft that is carrying passengers or property for compensation or

hire; nor may that person, for compensation or hire, act as pilot in command of an

aircraft. 14 C.F.R. 61.113(a) (emphasis added). Section 61.113(c), in turn, provides

an exception to that ban on compensation for expense-sharing arrangements,

provided that a private pilot may not pay less than the pro rata share of the operating

expenses of a flight with passengers. Id. 61.113(c). As the agency explained, because

61.113 authorizes the sharing of operating expenses as an exception to the bar on

compensation or hire, that regulation reflects the FAAs commonsense judgment

that reimbursement of a pilots flight expenses is a form of compensation to the

pilot. JA 59. That interpretation of 61.113, the agency observed, is further supported

by the 1963 Notice of Proposed Rulemaking that preceded the initial codification of

the expense-sharing rule, 28 Fed. Reg. 8157 (Aug. 8, 1963). JA 59. That Notice

observed that [s]haring of expenses would appear to be prohibited when for hire or

compensation is prohibited, so that an exception to the rule is necessary to preserve

the traditional right to share expenses. 28 Fed. Reg. at 8158.

Because there is no dispute that the remaining elements of common carriage

transport[ing] persons or property . . . from place to place, FAA Advisory Circular

19


No. 120-12A (JA 30)are satisfied, the agency reasonably concluded that Flytenow

pilots are common carriers who require a Part 119 certificate. As the agency explained,

moreover, that conclusion is supported by prior FAA legal interpretations addressing

similar nationwide initiatives involving expense-sharing flights. JA 60. In 1985, for

example, the FAA concluded that pilots participating in a service to match them with

passengers willing to share expenses under the predecessor to 61.113(c)9 were

probably engaged in common carriage and thus subject to the certification rules

that preceded Part 119.10 Legal Interpretation to Hal Klee (FAA 1985) (JA 26); Legal

Interpretation to Thomas H. Chero (FAA 1985) (JA 29). The agency based its

conclusion on its determinations that the passengers are solicited . . . from a broad

segment of the general public and that payment[s] . . . made under the expense

sharing provisions of the predecessor to 61.113(c) were compensation in the

relevant sense. JA 26; see also JA 29. Accord Legal Interpretation to D. David Brown

9 Prior to August 1997, a materially identical version of the expense-sharing rule was codified at 14 C.F.R. 61.118(b). See, e.g., 62 Fed. Reg. 16,220, 16,266 (Apr. 4, 1997); 14 C.F.R. 61.118(b)(1985).

10 Part 119 was added to the Code of Federal Regulations in January 1996 and consolidate[d] into one part the certification and operations specifications requirements for persons who operate under parts 121 and 135. 60 Fed. Reg. 65,832, 65,832, 65,879 (Dec. 20, 1995). Prior to the promulgation of Part 119, the certification requirements for common carriers appeared in Special Federal Aviation Regulation 38-2 and Parts 121 and 135 of the FAAs regulations. See id. at 65,879; see also, e.g., 14 C.F.R. Pt. 121, SFAR 38-2, 4 (1995); 50 Fed. Reg. 23,941, 23,945, 4 (June 7, 1985); Alaska Profl Hunters Assn v. FAA, 177 F.3d 1030, 1031 n.2 (D.C. Cir. 1999), abrogated on other grounds, Perez v. Mortg. Bankers Assn, 2015 WL 998535 (S. Ct. 2015).

20


(FAA 1976) (JA 24-25) (similar conclusion regarding nationwide referral service

designed to allow pilots and passengers to share expenses).11

The FAA thus reasonably construed its regulations in concluding that pilots

using Flytenows website to offer point-to-point flight services to interested strangers

in exchange for money are common carriers who require a Part 119 certificate. At a

minimum, the agencys interpretation of its regulations is not plainly erroneous or

inconsistent with the regulation[s], Auer v. Robbins, 519 U.S. 452, 461 (1997) (internal

quotation marks omitted), and it is entitled to deference.

B. Flytenows attacks on the FAAs interpretation of its own regulations are meritless.

1. Flytenows principal contention (Pet. Br. 19-23) is that the FAA erred in

concluding that Flytenow pilots receive compensation (as required to be common

carriers) when passengers pay them a pro rata share of their operating expenses in

11 FAA legal interpretations have also addressed the permissibility of posting expense-sharing flights on bulletin boards. In two legal interpretations, the FAA has emphasized that such postings may be construed as holding out, depending on the surrounding circumstances (which were apparently not presented to the agency in those cases). Legal Interpretation to Mark Haberkorn (FAA 2011) (JA 43); see also Legal Interpretation to John Yodice, 1978 WL 390805, at *1 (FAA 1978). In another legal interpretation, the FAA applied this principle to a posting on a community college bulletin board, concluding that such a posting was permissible. See Legal Interpretation to Paul D. Ware (FAA 1976) (JA 23). The number of prospective passengers reached by a community college bulletin board is plainly significantly smaller than in the examples above or in the case of the Flytenow website, which is accessible by any member of the public who applies for membership and is geared towards prospective passengers. JA 47.

21


return for transportation. But Flytenow fails to explain why a passengers payment of

money to a pilot in exchange for flight services is not compensation in every

relevant sense.

a. According to Flytenow (Pet. Br. 19-22), the agency misconstrued 14 C.F.R.

61.113(c). Relying on the agencys legal interpretations concluding that expense

sharing is permissible under 61.113(c) only if a pilot and his passengers share a

common purpose,12 Flytenow argues (Pet. Br. 19-21) that where the common

purpose requirement is satisfied, expense sharing does not constitute compensation.

This contention conflates two distinct concepts. Under the agencys longstanding

common purpose gloss on 61.113(c), the pilot must have independently set the

destination, and both the pilot and the passenger must have personal business at the

destination. Legal Interpretation to Mark Haberkorn (FAA 2011) (JA 43). That rule is

another way that the FAA seeks to ensure that the expense sharing that is permitted

under 61.113(c) is appropriately limited in scope. See, e.g., Chero Interpretation (JA

28) (noting that the expense-sharing rule permits casual expense sharing by a pilot

wishing to take some friends or acquaintances with him on a trip). The common

purpose requirement is distinct from the threshold question whether the

12 See, e.g., MacPherson Interpretation (JA 59 & n.5); Haberkorn Interpretation (JA 43); Legal Interpretation to Don Bobertz (FAA 2009) (JA 39); Legal Interpretation to Guy Mangiamele (FAA 2009) (JA 36-37); Chero Interpretation (JA 28); supra pp. 7-8.

22


reimbursement of a pilots operating expenses constitutes compensation. As already

explained, the conclusion that expense sharing is a form of compensation is the very

premise of 61.113(c), which is an exception to the prohibition in 61.113(a) against

transporting passengers for compensation or hire.

Flytenow notes (Pet. Br. 19) that some prior legal interpretations have stated

that, [a]bsent a bona fide common purpose . . . , reimbursement for the pro rata

share of operating expenses constitutes compensation . . . for which a part 119

certificate is required.13 Although these general statements are imprecise, none of

them was made in the context of a decision addressing whether the presence of a

common purpose insulates a pilot who accepts payment of expenses from passengers

from being deemed a common carrier who requires a Part 119 certificate. And none

suggests that, when a common purpose is present, the payment of the pilots expenses

is somehow no longer compensation. As already discussed, the FAA has repeatedly

concluded that expense sharing is compensation for purposes of the common carriage

analysis. Moreover, each of those decisions arrived at that conclusion without

addressing the distinct common purpose requirement, see Brown Interpretation (JA

24-25); Klee Interpretation (JA 26), or assumed that the common purpose

requirement had been satisfied, see Chero Interpretation (JA 28-29). These decisions

are also supported by numerous FAA legal interpretations observing that the agency

13 Bobertz Interpretation (JA 39); see Haberkorn Interpretation (JA 41). 23


construes compensation broadly to mean the receipt of anything of value, including

not only expense reimbursements but also meals, lodging, and other amenities.14

Flytenows reliance (Pet. Br. 19-20, 25) on a legal interpretation issued by one

of the FAAs regional counsel, Legal Interpretation to Ron Levy (FAA Office of

Regional Counsel, Eastern Region 2005) (Pet. Addendum 10-11), fares no better.

Although the regional counsel concluded that pilots who post flights on a website

similar to Flytenows may not require a Part 119 certificate as long as there is a

genuine sharing of expenses, Pet. Addendum 11, that interpretation does not

represent the views of the FAAs Office of the Chief Counsel or the FAA

Administrator. It was issued by one of the FAAs regional counsel without any

coordination with or approval by the FAAs Office of the Chief Counsel, and the

interpretation is plainly inconsistent with the FAA decisions discussed above.15 See

Alaska Profl Hunters Assn v. FAA, 177 F.3d 1030, 1035 (D.C. Cir. 1999) ([W]hen a

14 Legal Interpretation to Andy Dobis (FAA 2014) (JA 45) (emphasis added); Legal Interpretation to Mike Sommer, 2010 WL 4038518, at *1 (FAA 2010) (free dinner in return for flight is compensation); Legal Interpretation to John W. Harrington, 1997 WL 34613525, at *2 (FAA 1997) (accumulating flight time without bearing expenses is compensation; lodging and other amenities in exchange for flight is compensation); see also, e.g., Legal Interpretation to Joseph A. Kirwan, 2005 WL 4994728, at *1 (FAA 2005).

15 By contrast, the two legal interpretations in the administrative record that were written by other regional counsel were coordinated with the Office of the Chief Counsel, which expressly concurred in those interpretations. See Ware Interpretation (JA 23) (noting that AGC-20a reference to the Regulations and Enforcement Division of the Office of the Chief Counselconcur[red] (capitalization omitted)); Brown Interpretation (JA 24-25) (same).

24


local office gives an interpretation of a regulation or provides advice to a regulated

party, this will not necessarily constitute an authoritative administrative position,

particularly if the interpretation or advice contradicts the view of the agency as a

whole.), abrogated on other grounds, Perez v. Mortg. Bankers Assn, 2015 WL 998535 (S. Ct.

2015). Accordingly, the Levy Interpretation does not control. See also Legal

Interpretation to Taylor S. Perry, 2010 WL 3070407, at *1 (FAA 2010) (concluding

that regional offices interpretation does not control when it is inconsistent with an

interpretation issued by the Office of the Chief Counsel).

Flytenow further argues (Pet. Br. 21) that the agencys interpretation of

61.113(c) leads to the nonsensical conclusion that pilots must obtain Part 119

certificates whenever they share expenses with passengers, and it contends (Pet. Br. 32)

that the FAA flipped its long-held position that private pilots may engage in

expense sharing under 61.113(c). But that is plainly not the case. Under the agencys

interpretation of the governing regulations, private pilots may continue to share

enumerated operating expenses with their passengers on a pro rata basis consistent

with 61.113(c) as long as they do not hold out to the public (or a segment of the

public) that they are willing to provide such transportation.16 What a private pilot

16 Just as 61.113(a) provides that private pilots generally may not transport passengers for compensation or hire, FAA regulations governing noncommon carriage generally provide that a Part 119 certificate is required to transport passengers for compensation or hire even when there is no holding out to the public. See 14

25


cannot do is publicly offer to provide point-to-point transportation to any stranger

willing to underwrite a portion of the flight expenses. When pilots hold out the

availability of transportation to the public in exchange for compensation of any kind,

the agency reasonably demands that they comply with the stricter requirements in Part

119 (and related parts of the FAAs regulations), such as the requirements pertaining

to flight experience and pilot testing discussed earlier, see supra pp. 5-6 & note 2.

b. Flytenow also attacks (Pet. Br. 21-22, 33-34) the agencys conclusion that

expense sharing is compensation under 14 C.F.R. 61.113(c) by relying on the

preambles to three Federal Register notices concerning the promulgation or

amendment of 61.113(c) (or its predecessors). These notices each include a

statement that 61.113(c) and its predecessors reflect the view that expense sharing

is not considered the carriage of persons for compensation or hire. 29 Fed. Reg.

4717, 4718 (Apr. 2, 1964); see also 28 Fed. Reg. at 8158; 62 Fed. Reg. 16,220, 16,263

C.F.R. 119.23; id. 110.2 (definition of noncommon carriage). The FAA has consistently treated the limited expense-sharing exception for private pilots under 61.113(c) as an exception not only to the ban on compensation in 61.113(a), but also to the requirement that noncommon carriers obtain Part 119 certificates. The FAA reasonably insists, however, that a pilot who holds out transportation to the public for compensation must obtain a Part 119 certificate, even if the only compensation the pilot demands is a pro rata share of the flight expenses. On its face, 61.113(c) does not address, much less sanction, expense sharing where a pilot holds himself out to the public, and the agency has a significant interest in ensuring that persons who provide transportation to the general public satisfy the higher safety standards applicable to common carriers. See infra pp. 39-40.

26


(Apr. 4, 1997).17 But those statements reflect nothing more than the agencys

judgment that expense sharing should not be barred under 61.113(a). That is why

the agency concluded it was necessary to promulgate the expense-sharing rule as an

[e]xcept[ion] to 61.113(a)s bar on flying for compensation or hire. 14 C.F.R.

61.113(a) (emphasis added). If Flytenow were correct that giving money to a pilot

for flight expenses is somehow not compensation at all, that exceptionand the

Federal Register notices on which Flytenow relieswould have been unnecessary.

c. Flytenow also notes (Pet. Br. 22-23) that the agencys regulation defining

commercial operator states that [w]here it is doubtful that an operation is for

compensation or hire[,] the test applied is whether the carriage by air is merely

incidental to the persons other business or is, in itself, a major enterprise for profit.

14 C.F.R. 1.1. But, as the agency explained in the MacPherson Interpretation (upon

which the agency relied in the decision on review, JA 61), the major enterprise for

profit test . . . is wholly inapplicable here. JA 60. By its terms, that test applies only

when it is unclear whether an operation is undertaken for compensation, and 61.113

17 To the extent that Flytenow suggests (Pet. Br. 33) that the 1997 amendments to the expense-sharing rule materially expanded its scope, Flytenow is wrong. Instead, the 1997 amendments merely (1) explicitly enumerated the four types of operating expenses that may be shared (fuel, oil, airport expenditures, or rental fees); and (2) used the phrase pro rata share to clarify the minimum amount of expenses a pilot must pay. Compare 14 C.F.R. 61.118(b) (1997), with id. 61.113(c) (1998); see also 62 Fed. Reg. at 16,262-63, 16,266.

27


establishes that expense-sharing [i]s compensation. MacPherson Interpretation (JA

59).

As prior FAA legal interpretations make clear, the major enterprise for profit

test is meant for circumstances in which a flight operator provides transportation for

goods or passengers in a manner that is not directly compensated but nonetheless

indirectly results in the payment of money. See, e.g., Legal Interpretation to Wayne M.

Del Rossi, 2010 WL 3070407, at *2-3 (FAA 1987) (pilot receives compensation for

a flight when he takes aerial photographs for aerial photography business); Legal

Interpretation to Mr. Atwood, 1993 WL 13581152, at *1 (FAA 1993) (company

receives compensation for flight when it transports seafood from one location to

another for sale and distribution); see also Legal Interpretation to Bob Shaw, 2008 WL

2204585, at *1 (FAA 2008). Here, however, compensation to the pilot could not be

more direct or clearmoney is paid in exchange for transportation. That conclusion

is supported not only by prior FAA decisions concluding that public expense-sharing

schemes involve compensation, but also by agency decisions concluding more

generally that compensation[,] under the FAAs view, is the receipt of anything of

value. Legal Interpretation to Joseph A. Kirwan, 2005 WL 4994728, at *1 (FAA

2005); see supra pp. 20-21, 23-24 & note 14.

2. Flytenow does not dispute that holding out is an element of the common

carriage analysis, Pet. Br. 6 n.6, 11 & n.14, 23-25 & n.21, and it offers no argument in

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this Court that Flytenow pilots do not satisfy the holding out element. Flytenow

nonetheless contends (Pet. Br. 23-25) that the holding out element is inapplicable in

this case. According to Flytenow (Pet. Br. 24), the holding out element of the

common carrier analysis is codified in 14 C.F.R. 119.5(k), which states that [n]o

person may advertise or otherwise offer to perform an operation subject to [Part 119]

unless that person is authorized by the [FAA] to conduct that operation. Flytenow

asserts (Pet. Br. 25) that its pilots operations are not subject to [Part 119] within the

meaning of 119.5(k) and therefore argues that the holding out inquiry is

inapplicable to them.

But Flytenow simply assumes its own conclusion. As an initial matter, a person

is subject to [Part 119] under 119.5(k) if the person is, inter alia, an air carrier or

a commercial operator, 14 C.F.R. 119.1(a)(1). As explained earlier, and as

Flytenow does not dispute, air carriers and commercial operators are defined by

regulation to include common carriers. See supra pp. 4-5 & note 1. Accordingly,

where, as here, a pilot satisfies the common carrier definition, he is necessarily

subject to [Part 119] and covered by 119.5(k).

In any event, 119.5(k) is not the codification of the holding out element of

common carriage. Rather, that section prohibits offers of unauthorized transportation

by any person covered by Part 119, regardless of whether that person engages in

common carriage. See, e.g., 14 C.F.R. 119.1(a)(2) (noting that Part 119 applies to

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certain larger planes not at issue in this case that are not involved in common

carriage). The holding out element of common carriage is not separately codified,

but it has been consistently articulated by the FAA and endorsed by this Court in

applying the common carrier concept. See CSI Aviation Servs., Inc. v. U.S. Dept of

Transp., 637 F.3d 408, 415 (D.C. Cir. 2011) (explaining that common carrier is a

well-known term that comes to us from the common law and requires some type

of holding out to the public); FAA Advisory Circular No. 120-12A (JA 30).

Flytenow also contends (Pet. Br. 25) that, under the FAAs decision, any pilot

communicating an expense-sharing flight . . . will now be considered [to be] holding

out to provide common carriage. That is incorrect. As the agency explained in the

decision on review, [h]olding out [is] accomplished by any means which

communicates to the public that a transportation service is indiscriminately available to

the members of that segment of the public it is designed to attract. JA 62 (emphases

added) (quoting In re Transocean Air Lines, Inc., 11 C.A.B. at 353 (JA 4)). Thus, a pilot

remains free, for example, to call or email a friend to determine if he would be

interested in sharing expenses on a planned flight. A pilot may even post his expense-

sharing flight plans on a bulletin board if the bulletin boards audience is sufficiently

limited in scope. See, e.g., Legal Interpretation to Paul D. Ware (FAA 1976) (JA 23)

(community college bulletin board); supra p. 21 note 11. Private pilots are not

permitted, however, to solicit passengers interested in transportation by air from a

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broad segment of the public, which is what Flytenow pilots are doing. JA 62. The

agencys conclusion that Flytenow pilots are common carriers who require a Part

119 certificate is entirely reasonable.

II. FLYTENOWS REMAINING CONTENTIONS ARE BARRED AND, IN ANY EVENT, LACK MERIT.

Flytenow additionally contends (Pet. Br. 26-57) that the FAAs decision violates

the notice-and-comment requirements of the Administrative Procedure Act; exceeds

the agencys authority under the Federal Aviation Act; and violates the Constitution in

various respects. Because Flytenow did not raise these contentions before the agency,

they are not subject to review here. See 49 U.S.C. 46110(d). In any event, as

explained below, Flytenows challenges are without merit.

A. Review of Flytenows unexhausted statutory and constitutional claims is barred under 49 U.S.C. 46110(d).

Flytenow brings this petition for review of the FAAs decision under 49 U.S.C.

46110. Under the express terms of 49 U.S.C. 46110(d), however, this Court may

consider an objection to an order of the . . . [FAA] Administrator only if the objection

was made in the proceeding conducted by the . . . Administrator or if there was a

reasonable ground for not making the objection in the proceeding.

Flytenow did not argue before the FAA that construing the agencys

regulations to require Flytenow pilots to obtain Part 119 certificates would require

notice-and-comment rulemaking, nor did it raise any objection to the FAAs statutory

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authority. See JA 47-50. Flytenow has not suggested in this Courtmuch less

establishedthat it had any reasonable ground for failing to raise these arguments

before the agency. Under the plain terms of 46110(d), therefore, Flytenow cannot

seek review of the FAAs decision in this Court on those grounds. See, e.g., City of

Olmsted Falls v. FAA, 292 F.3d 261, 274 (D.C. Cir. 2002).

The same is true of Flytenows constitutional arguments. Flytenow failed to

raise any contention under the First or Fifth Amendments in its correspondence with

the agency. See JA 47-50. This Court has specifically held that 46110(d) bars review

of unexhausted constitutional claims, at least where (as here) the petitioner does not

assert a facial constitutional challenge to the statutory scheme as a whole. Continental

Air Lines, Inc. v. Dept of Transp., 843 F.2d 1444, 1455-56 (D.C. Cir. 1988) (interpreting

predecessor to 46110(d) to bar a First Amendment claim); Cronin v. FAA, 73 F.3d

1126, 1133-34 (D.C. Cir. 1996) (Fourth and Fifth Amendments). Flytenows

constitutional argumentsall raised for the first time in this Courtare therefore

foreclosed under 46110(d).

B. The FAAs decision is consistent with the Administrative Procedure Act and the Federal Aviation Act.

Even assuming they are not barred, Flytenows statutory objections to the

FAAs decision are without merit.

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1. Flytenow first contends (Pet. Br. 26) that the Administrative Procedure Act

required the agency to undertake notice-and-comment rulemaking prior to adopting

the interpretation at issue here. But the FAA did not adopt a new legislative rule or

amend an existing rule; it merely provided its legal interpretation of existing regulatory

requirements in response to Flytenows inquiry. That interpretation is at most a

general statement of policy or an interpretative rule that is exempt from notice

and comment under 5 U.S.C. 553(b)(A) because it merely spell[ed] out a duty fairly

encompassed within the regulation[s]. Appalachian Power Co. v. EPA, 208 F.3d 1015,

1024 (D.C. Cir. 2000) (internal quotation marks omitted). As already discussed, the

FAAs regulations make clear that common carrier[s] must obtain Part 119

certificates, see 14 C.F.R. 1.1, 119.1(a)(1), 119.21(a); supra pp. 4-5 & note 1, and the

agencys decision here merely interpreted the term common carrier and the FAAs

related regulations, such as 14 C.F.R. 61.113.

Flytenow contends (Pet. Br. 26) that the agencys decision upended more than

40 years of agency precedent, apparently invoking this Courts decisions concluding

that notice-and-comment rulemaking is required, even for interpretive rules, [w]hen

an agency has given its regulation a definitive interpretation, and later significantly

revises that interpretation, Alaska Profl Hunters Assn, 177 F.3d at 1034. Since

Flytenow filed its brief, however, the Supreme Court has squarely rejected that line of

cases. See Perez v. Mortg. Bankers Assn, 2015 WL 998535, at *6-9 (S. Ct. 2015).

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Accordingly, notice-and-comment rulemaking was not required here. And in any

event, Flytenow is wrong that the FAAs interpretation of its regul

FAA Response Brief

Documents

Transcript of FAA Response Brief