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OST-2007-27331 - TBIT Complainants' Pleadings
Inital Complaints and Scheduling Notice
Complainants' Pleadings - Terminal 1 and 3 Airlines (Alaska Airlines et al. v. LA World Airports et al.)
Intervenors' Pleadings
Respondents' Pleadings
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Prehearing Conference and Hearing Transcripts
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March 5, 2007 Joint Reply of Complainants - Bookmarked The lack of meaningful consultation is particularly problematic, as it has led to the imposition of terminal rates that are not "fair and reasonable" because they substantially overcompensate LAWA for the airlines' use of the TBIT. The TBIT Airlines have shown that what they are paying now for the terminal space they use is fully compensatory because, at least until the tariff rates are imposed on April 1,2007, their space rent is at fair market value, which by dint of the formula LAWA has adopted exceeds LAWA's capital costs for the airlines' space. The positive margin between full market value and capital costs has covered at least some of the additional cost categories LAWA now states must be added to the M&O charges calculation. With the increases reflected in the December 27,2006 letters to the TBIT airlines now taking into account what LAWA states is all of the M&O costs, the fair market value profit margin is no longer covering any costs. It is pure profit margin to LAWA-a surplus that is not allowed under a compensatory rate structure. Expanding that profit margin to rentable space will, of course, simply increase the amount of the surplus. As they have before, Respondents attempt to use the Department's rules and procedures as both a shield and a sword in their attempt to transfer capital risk and costs improperly to the TBIT Airlines without adequately explaining the basis for doing so and without following the requirements of the Department's Policy Statement Regarding Airport Rates and Charges, 61 Fed. Reg. 3 1994, June 21, 1996. The Policy Statement requires that airport owners not seek to create revenue surpluses, and that they may spend funds only on facilities in use? With the announced increase in M&O rates, LAWA is unlawfully recovering far more than its costs for maintaining the TBIT. Counsel: Kirkpatrick & Lockhart Preston Gates, James Weiss, 202-628-1700, jim.weiss@klgates.com
March 6, 2007 Joint Complainants' Memo Regarding Corrections and Motion for Leave to File Unauthorized Documents - Bookmarked
The Joint Complainants respectfully request leave to file modified Exhibit E to the Joint Complaint in Opposition to New Terminal Charges at Los Angeles International Airport, filed on February 23, 2007. A copied of this modified Exhibit E (the Expert Report of Daniel P. Wikel and Dr. Timothy J. Tardiff) is attached hereto. Complainants also respectfully request that the Department grant leave to file the inadvertently omitted document attached to this motion. Pursuant to agreement of the parties, Complainants seek to replace the Exhibit E filed with their Joint Complaint with the attached modified Exhibit E. The modifications Complainants seek to file are nonmaterial redactions of information regarding a confidential report referenced in the version of Exhibit E filed on February 23, 2007. Complainants seek to make these modifications, in good faith, at the request of the authors of the report. The modifications do not alter the substance of the testimony, Counsel has checked with all parties to this proceeding, including counsel for Respondents, counsel for Terminals 1 and 3 Airlines, and counsel to the Department, and none object to the filing of the modified exhibit. Accordingly, Complainants' request leave to file the attached modified Exhibit E to their Joint Complaint. In addition, Complainants respectfully request that the Department grant leave to file the inadvertently omitted document attached to this motion. The document is Attachment C.12 to Exhibit C to Complainants' Joint Complaint. Because of clerical error, this document was inadvertently omitted from Complainants' filing. A copy of this document was provided to Respondents via hand-delivery on February 28, 2007, and is attached hereto. Counsel: Kirkpatrick & Lockhart, James Weiss, 202-661-6225, jim.weiss@klgates.com
March 8, 2007
Complainants respectfully request leave to file the attached December 27, 2006 notice letters from Los Angeles World Airports to Air Pacific and Philippine Airlines, Inc. which, due to clerical error, were inadvertently excluded from the February 23, 2007 Complaint. The information contained in these letters is largely duplicative of the December 27, 2006 notice letters received by every other airline that is a tenant in TBIT. With the exception of the specific fees listed, the omitted letters are the same in all material respects as the notice letters already in the record. However, for sake of completeness and to clarify the record, the TBIT Airlines move the Department to include Air Pacific's and Philippine Airlines' letters in the above-referenced docket. The TBIT Airlines also submit the attached declarations for Air Pacific and Philippine Airlines, who are the subject of a pending motion to dismiss filed by Respondent on March 2, 2007 based on the absence in the record of a declaration or notice letter for these parties. These declarations merely authenticate the attached letters and briefly explain the inadvertent omission. They do not alter the substance of any declarant's testimony already entered in the record of this case, nor do they otherwise attempt to introduce new testimony. The TBIT Airlines' opposition brief is being filed simultaneously with this motion.
Respondents contend that the Add-on Complaint must be dismissed because foreign air carriers cannot file complaints under 47129. Respondents further argue that the Department of Transportation would "exceed its discretion" if it allowed the TBIT Airlines to participate in these proceedings, even though their complaint involves the same terminal rent increases and maintenance and operations charges that are being challenged by domestic air carriers whose right to proceed under Section 47129 has not been questioned. Respondents' motion must be denied; indeed, the TBIT Airlines respectfully submit that it does not even present a close question. Respondents ignore DOT'S broad discretion to structure its own proceedings to address the rates and charges issues that have been raised by the TBIT Airlines and its authority and obligation to protect all carriers, domestic or foreign, from unreasonable or discriminatory rates and charges. That authority and discretion easily extend to allowing the TBIT Airlines to participate in the resolution of issues directly affecting them that are already the subject of other Complaints before the agency. Nor are the agency's authority and discretion to allow the TBIT Airlines to participate in this case eliminated by the Newark ruling, which itself invited the agency to use its other authorities to resolve the "illogical" and treaty-violative results of not allowing foreign carriers the same rights as domestic carriers to challenge unreasonable or discriminatory fees. Moreover, although it is not necessary for the Department to state its disagreement with the Newark decision to resolve the Motion, the TBIT Airlines would also point out that the decision does not bind DOT in this case in any event. Whether the Newark decision is right or wrong (and the TBIT Airlines strongly believe it to be erroneous), the Department has ample authority to allow them to continue in this proceeding,
Counsel: K&L|Gates, James Weiss, 202-661-6225, jim.weiss@klgates.com
March 13, 2007 TBIT Airlines' Answer to Respondent's Two Motions for Leave to File an Unauthorized Document The Department should take special care to make sure that these expedited proceedings are not cluttered, and scarce time and resources taken, with unnecessary and improper filings. Indeed, LAWA promises more of the same, droping dark threats that if things do not go its way it might seek a "mandamus" from the DC Circuit - apparently, an order directing the Department to take an action that court has already found would be illogical and likely to violate US treaties, notwithstanding that the court also expressly invited the Department to use its other authorities to prevent such an untoward result. Counsel: K&L | Gates, James Weiss, 202-628-1700
March 19, 2007 Re: Order on Discovery - Complainants Exhibit 1 The attached discovery requests relate directly to the Complaintants TBIT Airlines assertion (conceded by LAWA) that additional revenues derived from the significant increase in M&O charges is necessary to fund future projects at LAX. Joint Complaint at 34-39; Pan Decl. at 24; Tubert Decl. at 27. The Complaintants TBIT Airlines have claimed that LAWA has failed to disclose or document how these additional funds will be spent, and in any case, will create a surplus that exceeds the airport's actual costs. The attached information is necessary to determine the validity of LAWA's claim that the additional revenues are necessary to fund certain projects and, if so, which projects specifically, when, and at what cost. Also enclosed is Cornplaintants' TBIT Airlines Motion for Limited Additional Discovery. Counsel: Kirkpatrick & Lockhart Preston Gates, James Weiss, 202-628-1700, jim.weiss@klgates.com
March 20, 2007 Respondents request an Order from the Administrative Law Judge directing all parties to refile direct testimony redacting all testimony that "refers or relates to issues excluded by the Instituting order."' Complainants TBIT Airlines agree that redaction of appropriate material will simplify the consideration of issues in the case but oppose an order so broad as to require removal of all testimony that refers or relates to an excluded issue. It is self-evident that reference to an issue may be relevant even though the substance of the issue may have been excluded from the case. For example, in their Complaint and Reply the TBIT Airlines did not object to the adoption of a market rate methodology for the calculation of space rent. Instead, they describe the methodology for calculating rent in order to demonstrate that the rate calculation covers more than the actual costs of the terminal space the TBIT Airlines are using, and that therefore LAWA's claim that the additional M&O charges are merely covering costs that were not previously covered is untrue. Further, the issue of adopting a "rentable space" methodology for allocating space was not ripe for the TBIT Airlines at the time of filing the Complaint because they had not yet been presented with the new lease proposal by LAWA. The fact that LAWA has advised the TBIT Airlines that it will again be increasing their rent by adopting a rentable space methodology, thereby adding to the surplus created by the initial rent increase, goes to the issue of how large the surplus will be. LAWA's suggestion that all testimony be redacted that "refers or relates" to excluded issues is thus overbroad and would introduce tremendous uncertainty into the process of redaction. This problem can be avoided if Your Honor orders the redaction of testimony that is "directed to" an issue excluded by the Instituting Order. Such an order will accomplish the desired purpose while minimizing the likelihood of further motions practice on the issue. Counsel: Kilpatrick & Lockhart, James Weiss, 202-628-1700
March 20, 2007 Motion of TBIT Airlines for Limited Discovery and Proposed Order The TBIT Airlines respectfully request that Your Honor direct Respondents to produce all documents responsive to discovery requests pertaining to a single issue contained herein by 5:00 p.m. EDT on March 22, 2007 (the same day the Order on Discovery required Respondents to provide the information requested by the T1/T3 Airlines and the TBIT Airlines). Should Respondents be unable to produce the limited information requested herein, the TBIT Airlines request that Your Honor order Respondents to explain in detail why such information is unavailable or otherwise cannot be produced. Counsel: Kilpatrick & Lockhart, James Weiss, 202-628-1700
March 20, 2007 The Thomas Bradley International Terminal Complainants together with the Terminal 1 and Terminal 3 Complainants respectfully request that this Court grant leave to file the attached Joint Motion to Clarify the March 16, 2007 Prehearing Order by the TBIT and T1/T3 Airlines. The TBIT and T1/T3 Airlines have good cause to submit this motion. Clarification of the Court's Prehearing Order with respect to the designation of lead counsel for the separate Complainant groups will contribute to the orderly conduct of the hearing in this case and full and sufficient representation of the interests of both Complainant groups. For these reasons, the TBIT and T1/T3 Airlines respectfully request that this Court accept the attached unauthorized Joint Motion to Clarify March 16, 2007 Prehearing Order for filing. Counsel: Sheppard Mullin, Roy Goldberg, rgoldberg@sheppardmullin.com for T1/T3 Carriers / Kirkpatrick & Lockhart, James Weiss, 202-628-1700, jim.weiss@klgates.com for TBIT Airlines
March 21, 2007 Stipulated Motion of Voluntary Dismissal Without Prejudice of China Southern Airlines Complainant, China Southern Airlines Company Limited, with the consent of all other parties and interveners to this proceeding, hereby moves the Department to accept the voluntary dismissal of China Southern without prejudice from the above referenced proceeding. Although China Southern maintains that it has been and will be impacted by Respondents' proposed fee increases, it is not a direct tenant of the Thomas Bradley International Terminal. Therefore, with the consent of all undersigned parties and interveners, China Southern voluntarily dismisses its case against Respondents without prejudice. Counsel: Kaye Scholer, Steven Rosenthal, 202-682-3500, srosenthal@kayescholer.com / Kirkpatrick & Lockhart, James Weiss, 202-628-1700, jim.weiss@klgates.com for TBIT Airlines
March 22, 2007 Designation of Witnesses of the TBIT Airlines and Testimony and Evidence/Exhibits - 163 Pages Complainants TBIT Airlines designate the following individuals as witnesses, along with their pre-filed declarations/expert reports. Where and to the extent appropriate, these pre-filed declarations/expert reports were redacted consistent with the Department of Transportation's ruling in the Instituting Order that the scope of this case should not include the alleged failure of Respondents to engage in meaningful consultations prior to the imposition of the new terminal charges. The redacted versions of these declarations/expert reports -- copies of which are attached hereto - are, in all other respects, identical to those submitted with the TBIT Airlines Joint Complaint and Joint Reply. Counsel: Kirkpatrick & Lockhart, James Weiss, 202-628-1700
March 23, 2007 Response of the TBIT Airlines to Order to Produce Documents TBIT Airlines hereby respond that, based on their investigation conducted to date, no such documents exist. To the extent TBIT Airlines’ ongoing investigation produces any such documents, they will be provided as soon as they are located. Counsel: Kirkpatrick & Lockhart, James Weiss, 202-628-1700
March 24, 2007 Reply of the TBIT Airlines to the Respondents' Objections to Relevant Evidence In their opposition to Complainants TBlT Airlines' Designation of Witnesses, Testimony and Evidence/Exhibits, Respondents improperly seek -- through vague, nonspecific and admittedly incomplete objections -- to exclude information that is plainly relevant to the matters at issue in this proceeding. Respondents object to "portions" of four paragraphs of the declarations filed in support of the TBIT Airlines' Complaint, yet offer only "fairly representative" quotes from two of the four paragraphs with which they take issue. The sole basis for Respondents' objections is that language within these four paragraphs somehow falls outside the scope of the Departments' Instituting Order. Respondents' objections are misplaced and without merit. Specifically. Respondents take issue with paragraphs 41 and 42 of the Declaration of Wikel and Tardiff paragraph 6 of the Reply Declaration of Clark, and paragraph 24 of the Reply Declaration of Olson Counsel: Kirkpatrick & Lockhart, James Weiss, 202-628-1700
April 6, 2007 TBIT Airlines respectfully request leave to file unauthorized documents due to errors in the Respondents' calculations of the terminal charges at Los Angeles International Airport. During last week's proceedings, Respondents admitted to a "data entry error into the terminal capital charge model" that affected the debt service and other calculations for Terminals T1/T3 and TBIT. In addition, LAWA has provided information in response to the TBIT Airlines' discovery request and their follow-up requests for amplification of the responses that LAWA provided. All of this information was made available well after the opportunity to take it into account in the TBIT Airlines' supporting declarations and reply declarations. The parties and Your Honor agreed that amended declarations could be filed in order to respond to the changes in the terminal charge calculations. The same rationale applies to changes that are necessitated by the discovery materials. Accordingly, Complainants TBIT Airlines hereby request leave to file the attached Supplemental Joint Expert Report of Daniel P. Wikel and Dr. Timothy J. Turdiff and to have said report entered into the record of this proceeding. Counsel: Kirkpatrick & Lockhart, James Weiss, 202-628-1700
April 27, 2007 The TBIT Airlines respectfully request that Your Honor find, pursuant to the Department's Instituting Order in this proceeding, that (1) LAWA's new M&O methodology for the TBIT Airlines is unreasonable, unjustified, and unjustly discriminatory; and (2) the TBIT Airlines' new and increased M&O fees were not "imposed pursuant to a written agreement," as set forth in 47129. Accordingly, the TBIT Airlines respectfully ask that Your Honor disallow LAWA's unlawful M&O fee increase and order LAWA to refund (or credit) immediately the total amount of M&O fee increases that have been paid by the TBIT Airlines under protest, with interest. In the alternative, if the new M&O fees are considered to be reasonable, justified and non-discriminatory - which they are not -- LAWA should refund (or credit) the TBIT Airlines the amount by which their total payments have exceeded LAWA's actual costs at the terminal, with interest. Counsel: Kirkpatrick & Lockhart, James Weiss, 202-628-1700
April 30, 2007 Exhibits:
Counsel: Kirkpatrick & Lockhart, James Weiss, 202-628-1700, jim.weiss@klgates.com
April 30, 2007 Airline Declarations in Support of TBIT Airlines' Joint Complaint - 526 Pages
April 30, 2007 Declarations of:
April 30, 2007
May 4, 2007 Exhibit of TBIT Airlines - 2855 Pages
May 4, 2007 Reply Brief of the TBIT Airlines - Bookmarked LAWA asserts in its opening brief that the TBIT Airlines' arguments are only plausible in a world where certain decisions, statutes and policies were never enacted. It is LAWA, however, that assumes away all obligations of reasonableness, constraint, and non-discrimination in claiming that its M&O fee increase is lawful. LAWA's Brief relies on half-truths and misstatements in an attempt to confuse the issues and side-step LAWA's legal obligations. As the TBIT Airlines have demonstrated, however, LAWA's M&O fee increase is unreasonable (LAWA's costs are covered and it is operating at a surplus), unjustified (LAWA has failed to provide any credible data to substantiate the need for the increase), unnecessary (LAWA is profitable and able to obtain funding for future improvements at LAX), and discriminatory (the TBIT Airlines are similarly situated to the T2/4-8 Airlines, yet will be charged disproportionately higher fees if the T2/4-8 Airlines succeed in their court challenge). Accordingly, LAWA's M&O fee increase should be disallowed and the amounts paid by the TBIT Airlines under protest ($9.25 million) should be refunded (or credited) with interest. At the very least, the TBIT Airlines should be refunded (or credited) the amounts in excess of LAWA's actual costs that they have paid through their FMV space rent -- amounts that range from $4.75 million to $8.75 million. Counsel: Kirkpatrick & Lockhart, James Weiss, 202-628-1700
May 7, 2007 The Joint Complainants hereby submit the following errata and Table of Contents correcting certain errors and omissions in the Joint Complaint filed April 30, 2007. Counsel: Kirkpatrick & Lockhart, James Weiss, 202-628-1700, jim.weiss@klgates.com
May 11, 2007 Reply of TBIT Airlines to Respondents' Answer - Bookmarked The TBIT Airlines have filed this action for two reasons: (1) to preserve their position that they should be entitled to proceed under the procedures that the Department of Transportation has established under 49 U.S.C. § 47129, and (2) to invoke the Department’s authority and obligation under the Anti-Head Tax Act, 49 U.S.C. § 40113, and the Airport and Airways Improvement Act, 49 U.S.C. § 47107(a), to protect them from unreasonable and discriminatory fees. A number of the issues raised in this Complaint are, of course, related to the dispute the Department already has before it regarding airport fees and charges in Alaska Airlines, et al. v. Los Angeles World Airports, Docket OST-2007-27331, and on which a final Departmental decision will be reached on or before June 15, 2007. LAWA charges in characteristic fashion that the Joint Complaint is intended to create “unnecessarily… duplicative effort.” That is, of course, not the TBIT Airlines’ intent. The TBIT Airlines have no desire to relitigate matters or issues that will be decided in LAX III, and in fact propose that the Department structure the proceedings on this Complaint so as to be able to take advantage of any rulings and matters decided in LAX III. The TBIT Airlines in fact believe that the issues remaining for resolution in this case will be greatly narrowed by the LAX III decision and that the Department will be able to resolve any remaining issues in the light of LAX III within any applicable time frames. Finally, a preliminary word about the timing of the Joint Complaint, which is the subject of a good deal of exercised discussion in LAWA’s Answer. As set out more fully below, this Complaint was not, contrary to LAWA’s contentions, ripe in February for consideration on the same schedule as the pending LAX III proceeding. The new “rentable” space methodology it challenges had not been imposed on the TBIT Airlines when the prior complaint was filed on February 16, 2007, or when the TBIT Airlines submitted their follow-on complaint on February 23, 2007. Indeed, the new rate methodology and corresponding fee increases were not “final” until March 5, 2007, when LAWA took the final step necessary to effectuate the change, and the TBIT Airlines were not formally notified of this action until March 9, 2007. As noted below, the Department’s controlling regulations, which LAWA improperly discounts, refute any suggestion that this Complaint was filed too late to invoke the procedures of Section 47129. The TBIT Airlines are also desirous that, in resolving this Complaint, the Department have the benefit of the decision in LAX III to the extent the possible. The TBIT Carriers thus respectfully submit that the timing of procedures to resolve this Complaint should be established to allow that to occur. Counsel: Kirkpatrick & Lockhart, James Weiss, 202-628-1700, jim.weiss@klgates.com
May 11, 2007 Reply Declaration of Frank Clark in Support of TBIT Airlines
May 21, 2007 The TBIT Airlines' Initial Brief to The Department of Transportation Judge Goodwin's thorough review and careful analysis of a voluminous, complicated record, and his well-reasoned Recommended Decision should be affirmed. The Recommended Decision is sound, firmly grounded in the credible record evidence, and in the end is the only result that can reasonably be reached. After reviewing the entire testimonial record and almost 500 exhibits (consisting of over 11,000 pages), paying "due regard for logic and probability, the demeanor of the witnesses, the consistency and probability of the testimony, and the teaching of NLRB v. Walton Mfs. Co., 369 U.S. 404 (1962)," Judge Goodwin rejected every aspect of LAWA's case. Judge Goodwin found unsubstantiated LAWA's purported "need" for the increased revenues. He found implausible LAWA's claim that the financial data and accounting system upon which it relied are accurate and reliable. He rejected LAWA's assertion that its new terminal rents were based on costs. He found incredible LAWA's assertion that its new M&O fee methodology was commonplace among airport. He dismissed the notion that the airlines have Los Angeles area service options to LAX. He found, contrary to LAWA's allegations, that LAX is a monopoly with respect to air service in the Los Angeles area. He concluded that LAWA's claim that it had attempted to negotiate with the airlines over the M&O fee increases was baseless. He found unsubstantiated LAWA's claim that the significant differences between the fees paid by the TBIT Airlines and the T2/4-8 Airlines were based on reasonable distinctions. He rejected LAWA's notion that LAWA's "opportunity costs" represent the true cost to the airlines for their use of terminal space." He found incredible LAWA's claim that the elimination of the 15% proxy for calculating administrative costs (in favor of a direct allocation of LAWA's purported security, general administrative, and access costs) was not a change in methodology. And he rejected the notion that the new M&O fees imposed unilaterally on the TBIT Airlines were "pursuant to a written agreement." In short, Judge Goodwin rejected LAWA's case in its entirety. He found the testimony from LAWA's witnesses on many (if not all) of the critical issues in this case to be incredible and unworthy of belief. In a proceeding where the ALJ is "called upon to make recommendations which rely in large part on numbers and calculations in the possession and control of LAWA," Judge Goodwin found LAWA's financial data to be error-ridden, highly suspect, and ultimately unreliable. Counsel: Kirkpatrick & Lockhart, James Weiss, 202-628-1700
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