Air Excursions, LLC. v. Yellen

598 F.Supp.3d 4

AIR EXCURSIONS, LLC., Plaintiff,

v.Janet YELLEN, in her official capacity as Secretary of the Treasury, et al., Defendants.

Case No. 1:21-cv-01769 (TNM)

United States District Court, District of Columbia.

Signed April 12, 2022

Kenneth Scott Nankin, Nankin Law LLC, Rockville, MD, for Plaintiff.

Jeremy S. Simon, U.S. Attorney's Office for the District of Columbia, Washington, DC, for Defendants.

MEMORANDUM OPINION

TREVOR N. McFADDEN, United States District Judge

COVID-19 created challenges for many businesses. In response, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The Act provided billions of dollars for various industries, including air carriers. Two further Congressional acts provided even more. Corvus Airlines was one of the beneficiaries. But before the Department of the Treasury could disburse the money to Corvus, the airline filed for bankruptcy. A new company, FLOAT Shuttle, bought some of Corvus's assets, including the right to its federal relief payments. FLOAT then began flying routes in Alaska formerly serviced by Corvus.

Plaintiff Air Excursions had planned to serve those routes, too, but it claims FLOAT impeded its entry into the market by charging below-market fares enabled by the federal subsidies. It sues to force the Treasury to claw back those payments as contrary to the Administrative Procedure Act (APA). The Treasury argues Air Excursions lacks standing and fails to state a claim. The Court finds Air Excursions has standing but agrees it fails to state a claim. The governing statutes contain no judicially manageable standard of review, and even if they did, Air Excursions relies heavily on a bankruptcy court order that it misconstrues. The Court will grant the Treasury's motion to dismiss.

I.

Congress passed the CARES Act at the beginning of the pandemic. See First Am. Compl. (Compl.) ¶ 8, ECF No. 13. The Act provided $25 billion for air carriers to "exclusively be used for the continuation of payment of employee wages, salaries, and benefits." Id. (quoting 15 U.S.C. § 9072(a) ). The Act granted the Treasury discretion to decide how to distribute the funds:

Financial assistance provided to an air carrier or contractor ... shall be in such form, on such terms and conditions (including requirements for audits and the clawback of any financial assistance provided upon failure by a passenger air carrier, cargo air carrier, or contractor to honor [the required assurances]), as the Secretary determines appropriate.

15 U.S.C. § 9073(b)(1)(A).

At the end of 2020, Congress passed another relief package. The Consolidated Appropriations Act of 2021 (CAA) authorized $15 billion in payroll support for passenger air carriers. See id. § 9092(a). In early 2021, Congress passed the third relief package at issue. The American Rescue Plan Act of 2021 (ARP) provided $14 billion in payroll support for passenger air carriers. See id. § 9141(b). Both the CAA and the ARP incorporated the CARES Act's grant of discretion to the Treasury. See id. § 9093(b)(1)(A) (CAA); id. § 9141(b)(3)(A) (ARP). The Treasury disbursed the funds from all three of these statutes through the Payroll Support Program (PSP).

Corvus was one of many air carriers to apply for PSP payments.¹ See Compl. ¶¶ 12–14. Only two days after it applied for these payments, it filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. Id. ¶ 15. While the bankruptcy proceedings were pending, the Treasury sent Corvus a PSP Agreement to execute. Id. ¶ 19. Corvus filed an emergency motion seeking permission to enter into the PSP Agreement. Id. ¶ 20. The bankruptcy court granted the motion. Id. ¶ 25.

The court then approved a Chapter 11 liquidation plan. Id. ¶ 27. Rather than reorganize to continue operations, Corvus opted to sell its assets and cease flying. Id. ¶ 28. FLOAT bought some of Corvus's assets. Id. ¶ 29. Along with buying several aircraft and all of Corvus's capital stock, FLOAT bought "all right, title, and interest of the Seller in and to any and all federal loans, grants, subsidies, or other forms of funding ... including, without limitation, to monies or rights to monies pursuant to the [CARES Act]."² Id. ¶ 32. In approving the Asset Purchase Agreement governing the sale, the bankruptcy court wrote that the "[b]uyer shall not be deemed or considered a successor to the Debtors or the Debtors’ estates by reason of any theory of law or equity." Sale Order ¶ 32, ECF No. 13-1.

In the summer of 2020, the Treasury disbursed $10,297,313 to New Corvus, although the actual beneficiary was FLOAT.³ Compl. ¶¶ 37–38. Air Excursions maintains the Treasury made this disbursement in error because it did not understand Old Corvus's sale. It notes that the PSP Agreement governing this disbursement specified Old Corvus as the "Recipient." Id. ¶ 21. The Agreement defined "Recipient" as the "signatory entity" and its "successors" and "assigns." Id. ¶ 22. The Recipient could not assign the PSP funds to another entity without the Treasury's express written permission. Id. ¶ 23. No written permission appears in the record. Id. ¶ 36. Thus, says Air Excursions, the funds had to go to Old Corvus or its successor. Because the bankruptcy court found that the buyer was not a "successor" to Old Corvus, FLOAT was not entitled to the funds as a successor. Id. ¶¶ 38–39. The only conclusion, Air Excursions maintains, is that FLOAT received the funds by mistake.

FLOAT purportedly compounded this error when it applied for PSP funds under the CAA and claimed it was the same entity that applied for PSP funds under the CARES Act. Id. ¶ 42. The Treasury gave FLOAT $10,478,223 under the CAA. Id. When Congress passed the ARP, FLOAT sought PSP funds under that program, too. Id. ¶ 43. The Treasury based FLOAT's eligibility for those funds on its eligibility for the CAA funds. Id. It gave FLOAT $9,773,038 under the ARP. Id.

FLOAT began operating in the Anchorage-Southwest Alaska passenger air transport market in the fall of 2020 and charged below-market fares. Id. ¶¶ 46–47. Air Excursions planned to operate in this same market and has been accepting reservations for several routes. Id. ¶ 52. It claims that FLOAT's below-market fares, made possible by the PSP payments, are anticompetitive and impede its ability to enter the market. Id.

It also claims that it approached FLOAT about subleasing terminals at Ted Stevens Anchorage International Airport (ANC). Id. ¶ 48. FLOAT had leased all the commuter aircraft gates at ANC, although Air Excursions alleges FLOAT was using only half of them. Id. Because FLOAT "refused to negotiate in good faith," the parties did not reach a sublease agreement and Air Excursions lost a business opportunity. Id. ¶¶ 48–49.

Seeking to halt FLOAT's allegedly anticompetitive conduct, Air Excursions sued. It seeks a declaratory judgment that the Treasury violated the APA by acting arbitrarily and capriciously when it disbursed funds to an ineligible recipient, FLOAT, in violation of the PSP statutes and the three PSP Agreements—one for each disbursement. Compl. at 16.⁴ It also seeks injunctive relief directing the Treasury to claw back the payments and refrain from any more disbursements to FLOAT. Id. The Treasury moves to dismiss, arguing that Air Excursions lacks standing and fails to state a claim. See Mot. to Dismiss, ECF No. 17. The motion is now ripe.⁵

II.

To survive a motion to dismiss under Rule 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Hurd v. Dist. of Colum. , 864 F.3d 671, 678 (D.C. Cir. 2017) (cleaned up). A plaintiff must plead "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). The Court accepts the complaint's factual allegations as true and grants the plaintiff "all inferences that can be derived from the facts alleged." L. Xia v. Tillerson , 865 F.3d 643, 649 (D.C. Cir. 2017) (cleaned up).

The Court need not, however, credit "a legal conclusion couched as a factual allegation." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 (cleaned up). The Court considers "only the facts alleged in the complaint, any documents either attached to or incorporated in the complaint[,] and matters of which [it] may take judicial notice." Hurd , 864 F.3d at 678 (cleaned up). Evaluating a motion to dismiss requires a "reviewing court to draw on its judicial experience and common sense." Freedom Watch, Inc. v. Google, Inc., 368 F. Supp. 3d 30, 36 (D.D.C. 2019), aff'd, 816 F. Appx 497 (D.C. Cir. 2020).

Under the APA, a court must "hold unlawful and set aside agency action" that is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). "[D]istrict courts reviewing agency action under the APA's arbitrary and capricious standard do not resolve factual issues, but instead operate as appellate courts resolving legal questions." James Madison Ltd. v. Ludwig , 82 F.3d 1085, 1096 (D.C. Cir. 1996). The APA also provides that a reviewing court must set aside agency action if the agency has acted "without observance of procedure required by law" or "in excess of statutory jurisdiction, authority, or limitations, or short of statutory right." 5 U.S.C. §§ 706(2)(D), (C).

III.

A.

To establish standing, Air Excursions must allege: (1) that it has suffered an injury in fact that is both concrete and particularized and actual or imminent; (2) that the injury is fairly traceable to the challenged action of the Treasury; and (3) that a favorable decision is likely to redress the identified harm. See Sabre, Inc. v. DOT , 429 F.3d 1113, 1117 (D.C. Cir. 2005). Because Air Excursions alleges so-called competitor standing, it must show "that it is a direct and current competitor whose bottom line may be adversely affected by the challenged...