Lopez, C v. FAA ( 2003 )


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    United States Court of Appeals
    FOR THE DISTRICT OF COLUMBIA CIRCUIT
    Argued December 6, 2002                   Decided February 11, 2003
    No. 01-1427
    CARLOS LOPEZ,
    PETITIONER
    v.
    FEDERAL AVIATION ADMINISTRATION,
    RESPONDENT
    On Petition for Review of an Order of the
    Federal Aviation Administration
    David M. McDonald argued the cause and filed the briefs
    for petitioner.
    Kenneth G. Caplan, Special Attorney to the Attorney Gen-
    eral, Federal Aviation Administration, argued the cause and
    filed the brief for respondent.
    Before: EDWARDS, ROGERS and GARLAND, Circuit Judges.
    Opinion for the Court filed by Circuit Judge ROGERS.
    Bills of costs must be filed within 14 days after entry of judgment.
    The court looks with disfavor upon motions to file bills of costs out
    of time.
    2
    ROGERS, Circuit Judge: Carlos Lopez petitions for review
    of the decision of the Federal Aviation Administration
    (‘‘FAA’’) not to renew his appointment as a Designated
    Engineering Representative (‘‘DER’’). He challenges the
    decision on substantive and procedural grounds as well as
    maintaining that he had a property and liberty interest in the
    continued renewal of his designation, entitling him to due
    process under the Fifth Amendment. Although the court
    does not have jurisdiction to review the substance of the
    FAA’s decision because it is ‘‘committed to agency discretion
    by law,’’ 
    5 U.S.C. § 701
    (a)(2) (1996), the court does have
    jurisdiction to review Lopez’s procedural claim that the FAA
    failed to follow its nonrenewal procedures. Insofar as there
    was any such failure, we hold that Lopez has failed to show
    prejudice and that, in light of circuit precedent, because his
    claim of a liberty or property interest in a DER designation is
    without merit, Lopez cannot show that he was entitled to
    renewal of his status or to constitutional due process. Ac-
    cordingly, we deny the petition for review.
    I.
    Under the Federal Aviation Act (‘‘Act’’), 
    49 U.S.C. § 44702
    (d)(1), the FAA Administrator ‘‘may delegate to a
    qualified private person’’ the authority to undertake the ‘‘ex-
    amination, testing, and inspection necessary’’ to issue certifi-
    cates identifying aircraft as compliant with FAA regulations.
    See 
    49 U.S.C. §§ 44702
    , 44704. The Administrator, through
    local Aircraft Certification Offices (‘‘certification office’’), has
    appointed a group of individuals, called DERs, to perform
    these tasks. 
    14 C.F.R. § 183.11
    (c)(1) (2002). DER appoint-
    ments are for one year subject to renewal for additional one-
    year periods at the Administrator’s discretion. 
    14 C.F.R. § 183.15
    (b). The Administrator may rescind such appoint-
    ments, or choose not to renew them, at ‘‘any time for any
    reason the Administrator considers appropriate.’’ 
    49 U.S.C. § 44702
    (d)(2); 
    14 C.F.R. § 183.15
    (d).
    In accordance with FAA regulations, DERs may perform
    their responsibilities on U.S. registered aircraft located
    3
    abroad under certain limited conditions if they have prior
    approval of the certification office. Designated Engineering
    Representative (DER) Guidance Handbook, FAA Order
    8110.37C ¶ 609 (Sept. 30, 1998). The regulations require, as
    relevant here, that before granting such approval, the certifi-
    cation office provide the foreign civil aviation authority
    (‘‘CAA’’) with written notification requesting its concurrence
    in the proposed work. 
    Id. at ¶ 609
    (b)(3)(a). Only after
    receiving approval from the CAA, will the certification office
    authorize the proposed DER activity. 
    Id. at ¶ 609
    (b)(3)(a).
    The regulations also require DERs to obtain specific authori-
    zation from the certification office prior to authorizing a
    major repair or alteration of an aircraft, regardless of wheth-
    er it is located in the United States or a foreign country. 
    Id. at ¶ 611
    (c).
    The FAA reviews the performance of DERs annually. 
    Id.
    at ¶ ¶ 703–04. The regulations provide that if the FAA
    decides to terminate or not renew a DER’s designation, the
    DER is to be sent written notice of the decision at least thirty
    days before the intended effective date, including specific
    reasons for it, and is to be given an opportunity to respond in
    writing or in person. 
    Id. at ¶ 706
    (b); see also Procedures for
    Termination/Nonrenewal of Aircraft Certification Service
    Designations and Delegations, FAA Order 8130.24 ¶ 6 (Oct.
    21, 1991). The regulations also provide for two levels of
    agency review. Thus, if the DER requests review of the
    decision, a first-level review is conducted by the appointing
    certification office manager.         FAA Order 8110.37C
    ¶ 706(c)(1). If the DER seeks further relief, the DER is
    entitled to a second-level review by the manager of the
    appropriate geographic directorate. 
    Id. at ¶ 706
    (c)(2). If the
    directorate manager concurs with the decision to terminate or
    not renew, the regulations require that a letter be sent to the
    DER reciting the justifications for the decision and advising
    the DER that the decision is final. 
    Id. at ¶ 706
    (c)(3). The
    regulations also require this notice to indicate that the DER’s
    remaining legal remedy is an appeal to a federal appeals
    court, as provided in FAA Order 8130.24 ¶ 7(b)(2). 
    Id.
    4
    Lopez received notice that his DER would not be renewed
    and pursued the two levels of review. By letter of February
    15, 2000, Melvin D. Taylor, the manager of the Atlanta
    certification office, informed Lopez that his DER designation
    would not be renewed when it expired on February 29, 2000.
    Taylor stated that his decision was based upon findings that
    Lopez had neither ‘‘properly exercised and performed the
    duties of [his] designation’’ nor ‘‘demonstrated the care and
    integrity necessary to merit special public responsibility.’’
    These general findings were based, in turn, upon more partic-
    ular concerns that Lopez had (1) approved engineering data
    and found compliance with FAA regulations outside his dele-
    gated authority; (2) failed to notify and obtain authorization
    from the certification office before performing work on air-
    craft outside the United States and failed to notify the
    certification office of his anticipated activities and length of
    stay in Europe; and (3) failed to adhere to ‘‘good practice’’
    principles while acting as an FAA designee. With respect to
    Lopez’s failure to adhere to ‘‘good practice’’ principles, Taylor
    stated that Lopez had exhibited a lack of integrity with
    regard to his contacts with the FAA and the Direction
    Generale de L’Aviation Civile (‘‘DGAC’’) while in France;
    failed to notify the certification office of his foreign activities
    after having been counseled to do so; and created interna-
    tional friction between the FAA and the DGAC by trying to
    obtain a U.S. Supplemental Type Certificate (‘‘STC’’) for a
    French company with regard to a U.S.-registered aircraft in
    violation of the United States and French Bilateral Airworthi-
    ness Agreement. (In regard to the latter, Lopez sent letters
    to his Congressman and the Commerce Department’s Inspec-
    tor General seeking clarification of the FAA’s approval pro-
    cess for STCs.) Taylor’s letter informed Lopez that he could
    request reconsideration of the decision not to renew his DER
    status, and that his request should include information he
    wished the FAA to review. Lopez responded, by letter of
    February 24, 2000, to Taylor’s reasons for not renewing his
    DER status, and requested reconsideration of Taylor’s deci-
    sion.
    5
    The first-level review took place on March 1, 2000. At that
    time Lopez’s counsel submitted exhibits on Lopez’s behalf
    and received documents from the FAA in support of Taylor’s
    position. Following the meeting, Lopez’s counsel wrote Tay-
    lor, on March 10, 2000, more extensively refuting Taylor’s
    rationale for not renewing Lopez’s designation. Taylor re-
    sponded by letter of April 4, 2000, that ‘‘[a]fter reviewing the
    file and considering the information provided by [Lopez] and
    [his] counsel,’’ the Atlanta certification office concluded that
    ‘‘the original findings’’ contained in the February 15 letter
    ‘‘were accurate and justifiable,’’ and that consequently, Lo-
    pez’s DER designation would not be renewed or reinstated.
    Taylor reiterated his reasons for his nonrenewal decision, and
    advised Lopez of his right to request reconsideration. On
    April 17, 2002, Lopez, through counsel, requested reconsider-
    ation of the decision reached by the Atlanta certification office
    from the manager of the Central Region Directorate, Mike
    Gallagher.
    The second-level review took place on June 14, 2000. As a
    result of concern that the certification office had not taken ‘‘a
    more active role in reviewing [Lopez’s] work,’’ Gallagher, on
    August 3, 2000, informed Lopez of his interim decision to
    allow Lopez to function on a Recommend Only Approval
    status for a period of six months. During that time, Lopez
    would be required to submit Recommend Only Approval
    requests for evaluation by the Atlanta certification office;
    failure to submit projects, or submission of projects of mini-
    mal difficulty would result in Lopez’s termination. Gallagher
    denied Lopez’s request for reconsideration of the interim
    decision for failure to raise any new issues. When Lopez
    subsequently complained that he could not find any work to
    perform on a Recommend Only Approval basis, Gallagher, on
    November 21, 2000, extended the time period for Lopez to
    find work. Having received no submissions from Lopez as of
    May 18, 2001, Gallagher wrote Lopez that he had ninety days
    to submit data for review or face termination. On August 20,
    2001, upon receiving no submissions, Gallagher issued a final
    decision terminating Lopez’s DER appointment effective im-
    mediately. Lopez now seeks relief from the court.
    6
    II.
    On appeal, Lopez challenges the FAA’s decision not to
    renew his DER designation on three grounds: first, the
    decision was arbitrary and capricious, and that insofar as it
    was a retaliatory response to Lopez’s complaint to his con-
    gressman and the Inspector General about how the FAA
    handled his work abroad, it was an abuse of process; second,
    the FAA failed to follow its internal procedures for nonrenew-
    al of DERs; and third, the FAA violated his Fifth Amend-
    ment due process rights to property and liberty.
    A.
    As a threshold matter, the FAA maintains that the court
    does not have jurisdiction to review the substance of its
    nonrenewal decision because the decision is committed to
    agency discretion by law. Most recently, in Steenholdt v.
    FAA, 
    2003 WL 69564
     *4–5 (D.C. Cir. 2003), the court held
    that because the decision not to renew a DER delegation is
    committed to the Administrator’s discretion under 
    49 U.S.C. § 44702
    (d), judicial review of the substantive merits of that
    decision is precluded under the Administrative Procedure
    Act, 
    5 U.S.C. § 701
    (a)(2). See also Greenwood v. FAA, 
    28 F.3d 971
    , 974–75 (9th Cir. 1994); Adams v. FAA, 
    1 F.3d 955
    ,
    956 (9th Cir. 1993). There is no need to repeat the court’s
    analysis in Steenholdt. Accordingly, in light of Steenholdt, we
    hold that we lack jurisdiction to review Lopez’s contention
    challenging the FAA’s nonrenewal decision on substantive
    grounds as being arbitrary and capricious and an abuse of
    process.
    B.
    The FAA similarly maintains that the court does not have
    jurisdiction to consider Lopez’s procedural challenge to the
    nonrenewal decision because the FAA’s nonrenewal proce-
    dures are also committed to agency discretion as a matter of
    law. Alternatively, the FAA maintains that, if the court does
    have jurisdiction, Lopez’s procedural challenge fails because
    the FAA substantially followed its internal procedures, and to
    7
    the extent that it did not, Lopez failed to prove he was
    prejudiced.
    Most recently, again in Steenholdt, the court rejected a
    challenge to the FAA’s nonrenewal of a DER on the ground
    that the FAA had failed to follow its procedures. 
    2003 WL 69564
     at *6. In Steenholdt, the petitioner argued that the
    court had jurisdiction to review his procedural challenge
    because, under Accardi v. Shaughnessy, 
    347 U.S. 260
     (1954),
    federal agencies are required to ‘‘follow their own rules, even
    gratuitous procedural rules that limit otherwise discretionary
    actions.’’ 
    2003 WL 69564
     at *6. Without expressly adopting
    the Accardi doctrine, the court implicitly held that it had
    jurisdiction to address the procedural challenge, citing Doe v.
    United States Dep’t of Justice, 
    753 F.2d 1092
    , 1098 (D.C. Cir.
    1985), for the proposition that courts ‘‘have long required
    agencies to abide by internal, procedural regulations TTT even
    when those regulations provide more protection than the
    Constitution or relevant civil service laws.’’ The court other-
    wise left undefined the analysis by which it reached the
    conclusion that it had jurisdiction. Today, we fill that gap.
    In a series of decisions, the Supreme Court has entertained
    challenges to agency actions that failed to conform to agency
    regulations. In SEC v. Chenery Corp., 
    318 U.S. 80
    , 87–88
    (1943), the Court held that an agency is bound to the stan-
    dards by which it professes its action to be judged. In
    Accardi, a case involving a habeas challenge to the denial of
    suspension of deportation, the Court objected to the agency’s
    ‘‘alleged failure to exercise its own discretion contrary to
    existing valid regulations.’’ 
    347 U.S. at 268
    . In the employ-
    ment context, the Court held in Service v. Dulles, 
    354 U.S. 363
    , 373–76 (1957), that where dismissal from employment is
    based on a defined procedure, even though generous beyond
    the requirements binding the agency, that procedure must be
    scrupulously observed, and in Vitarelli v. Seaton, 
    359 U.S. 535
     (1959), that the dismissal of a former government employ-
    ee was illegal and of no effect because the agency’s dismissal
    ‘‘fell substantially short of the requirements of the applicable
    department regulations.’’ 
    Id. at 545
    . See also Morton v.
    Ruiz, 
    415 U.S. 199
    , 234 (1974); Lincoln v. Vigil, 
    508 U.S. 182
    8
    (1993). In other words, ‘‘[a] court’s duty to enforce an agency
    regulation [, while] most evident when compliance with the
    regulation is mandated by the Constitution or federal law,’’
    United States v. Caceras, 
    440 U.S. 741
    , 749, embraces as well
    agency regulations that are not so required.
    The Supreme Court has, however, distinguished between
    the types of internal agency regulations that are reviewable.
    In American Farm Lines v. Black Ball Freight Serv., 
    397 U.S. 532
    , 539 (1970), a case involving regulations designed to
    provide the agency with information it needed to reach an
    informed decision, the Court held that the regulations were
    unreviewable absent a showing of substantial prejudice by the
    complaining party. On the other hand, had the agency’s
    rules been ‘‘intended primarily to confer important procedural
    benefits upon individuals in the face of otherwise unfettered
    discretion as in Vitarelli,’’ 
    id.
     at 538–39, or had the agency
    failed to exercise independent discretion required by the rule,
    as in Accardi, 
    id. at 539
    , the Court indicated the case would
    be ‘‘exempt’’ from the general principle that an administrative
    agency may ‘‘relax or modify its procedural rules adopted for
    the orderly transaction of business TTT when TTT the ends of
    justice require it.’’ 
    Id.
    Given this instruction, this court has been careful to distin-
    guish between procedural rules benefitting the agency (Amer-
    ican Farm Lines) and procedural rules benefitting the party
    otherwise left unprotected by agency rules (Vitarelli), as well
    as cases in which the agency has failed to exercise discretion
    required by its regulations (Accardi). Compare Associated
    Press v. FCC, 
    448 F.2d 1095
    , 1105 (D.C. Cir. 1971), Mun.
    Light Bds. v. FPC, 
    450 F.2d 1341
    , 1347–48 (D.C. Cir. 1971),
    and Neighborhood TV Co. v. FCC, 
    742 F.2d 629
    , 636 (D.C.
    Cir. 1984) with Doe, 
    753 F.2d at 1098
    , and Mazaleski v.
    Treusdell, 
    562 F.2d 701
    , 719 (D.C. Cir. 1977). These distinc-
    tions are particularly visible in the employment context,
    where this court has long recognized that, contrary to the
    type of internal regulations in American Farm Lines, agen-
    cies cannot ‘‘relax or modify’’ regulations that provide the
    only safeguard individuals have against unlimited agency
    discretion in hiring and termination. Thus, in Mazaleski, the
    9
    court held, citing Vitarelli, that where ‘‘a government employ-
    ee has no procedural due process rights apart from those
    which the agency has chosen to create by its own regulations,
    scrupulous compliance with those regulations is required to
    avoid any injuries.’’ 
    562 F.2d at 719
    . The court rejected the
    notion that a ‘‘failure to inform [the employee] of the specific
    grounds of the termination decision, though merely an over-
    sight, can[ ] be excused as a de minimus or harmless violation
    of its own regulations.’’ 
    Id.
     Likewise, in Doe the court
    explained, citing Vitarelli and Service, that when agencies
    establish ‘‘special’’ ‘‘pre-termination procedures,’’ they are
    bound to follow them. 
    753 F.2d at 1098
    . Our sister circuits
    have similarly required agencies to follow procedural rules
    ‘‘designed to benefit aggrieved parties during [employment]
    proceedings.’’ Bates v. Sponberg, 
    547 F.2d 325
    , 330 nn.6–7
    (6th Cir. 1976); see also Gaballah v. Johnson, 
    629 F.2d 1191
    ,
    1202–03 (7th Cir. 1980).
    The FAA’s procedures challenged by Lopez are not primar-
    ily intended to provide information to the agency, but are
    instead aimed at protecting the DER from the Administra-
    tor’s otherwise unlimited discretion. It is uncontested that
    FAA Orders 8110.37C and 8130.24 provide procedural safe-
    guards that are the only available protection for DERs whose
    designation can otherwise be terminated by the FAA for ‘‘any
    reason considered appropriate by the Administrator.’’ 
    49 U.S.C. § 44702
    (d)(2); 
    14 C.F.R. § 183.15
    (d); FAA Order
    8130.24(5)(a)(10). The Administrator issued FAA Order
    8110.37C to ‘‘prescribe[ ] the guidance and procedures to be
    used TTT in administering the Designated Engineering Repre-
    sentative management program,’’ 
    id. at ¶ 1
    , and issued Order
    8130.24 to ‘‘ensure that due process is accorded before a final
    decision is made on termination or nonrenewal of [DER]
    designations.’’ 
    Id. at ¶ 1
    . We hold, as the court implicitly
    held in Steenholdt, 
    2003 WL 69564
     at *6, that the court has
    jurisdiction to review whether the FAA followed its procedur-
    al rules in terminating Lopez’s DER status because ‘‘scrupu-
    lous observance of departmental procedural safeguards is
    clearly of particular importance’’ where no other agency rules
    protect the employee. Vitarelli, 
    359 U.S. at 540
    .
    10
    Lopez’s procedural challenge focuses on two FAA failures
    as requiring reversal of the nonrenewal decision: the FAA
    failed first, to provide him with thirty days advance written
    notice of its decision not to renew his DER designation, as
    required by FAA Order 8110.37C ¶ 706, and second, to coun-
    sel him about his shortcomings prior to making its nonrenew-
    al decision, as required by FAA Order 8110.37C ¶ 700(b). As
    to the first failure, Lopez does not indicate how he was
    prejudiced by receiving less than thirty days notice of the
    FAA’s decision, and nothing in the record indicates that he
    was. He responded to the initial notice from Taylor and
    pursued his rights under the FAA regulations to seek recon-
    sideration from the agency. With the assistance of counsel
    he submitted materials on several occasions in support of his
    defense to the original claim that his performance was unsat-
    isfactory. Lopez does not argue either that he was pressed
    for time in responding to the FAA’s view of his performance
    or that other defenses would have been presented with addi-
    tional time. Thus, his circumstances are readily distinguish-
    able from those in Vitarelli, where the denial of material
    procedural protections left the former government employee
    at a severe disadvantage in defending against his dismissal.
    Vitarelli, 
    359 U.S. at
    540–44. As to the second failure, the
    record shows that any failure of the FAA not to afford
    counseling to Lopez was ameliorated by its subsequent ac-
    tions: in his August 3, 2000 letter to Lopez, the directorate
    manager issued an interim decision, that he later extended,
    providing Lopez with a further opportunity to demonstrate
    that he could perform DER work at an acceptable level. Yet
    over the course of more than a year, Lopez never submitted
    any work for review. Moreover, the record reveals disputes
    over performance that were not remediable by mere counsel-
    ing; the FAA would have had to change practices and policies
    to allow Lopez to perform as he had. Under the circum-
    stances, Lopez fails to show that the FAA’s initial oversight
    was other than harmless. See Mazaleski, 
    562 F.2d at 719
    .
    Consequently, we conclude that Lopez fails to show that the
    proceedings leading to the nonrenewal of his DER status ‘‘fell
    substantially short of the requirements of the applicable
    11
    departmental regulations.’’ Vitarelli, 
    359 U.S. at 544
    , result-
    ing in prejudice to him. Steenholdt, 
    2003 WL 69564
     at *6.
    C.
    Finally, as follows from our decision in Fried v. Hinson, 
    78 F.3d 688
     (D.C. Cir. 1996), Lopez’s challenge on constitutional
    grounds to the FAA’s nonrenewal decision fails. Lopez con-
    tends that his Fifth Amendment due process rights to proper-
    ty and liberty were violated by the FAA’s failure to renew his
    DER designation and by the FAA’s alleged public disclosures
    of the reasons for his discharge.
    In Fried the court held that a Designated Pilot Examiner
    (‘‘DPE’’) does not have a legitimate property or liberty inter-
    est in his DPE delegation. See also Greenwood, 
    28 F.3d 971
    .
    Explaining why a DPE has no cognizable property interest in
    renewal of that designation, the court pointed to 
    49 U.S.C. § 44702
    (d), which allows the Administrator to ‘‘rescind [this]
    delegation TTT at any time for any reason,’’ and 
    14 C.F.R. § 183.15
    , which permits the FAA to determine annually
    whether to renew a designee. 
    Id. at 692
    . These same
    provisions apply to DERs who, like DPEs, serve at the FAA’s
    discretion and therefore have no more ‘‘than a unilateral
    expectation’’ of renewal. Bd. of Regents v. Roth, 
    408 U.S. 564
    , 577 (1972). Any doubt that DERs lack a property
    interest in renewal of their designation is clarified by FAA
    Order 8110.37C ¶ 5(b), which states: ‘‘Designation of a pri-
    vate person as a DER is a privilege granted by the Adminis-
    trator. It is not the right of every qualified applicant to be
    granted a DER designation.’’ Combined with Lopez’s admis-
    sion that ‘‘a DER designation is a privilege and not a right,’’
    Petitioner’s Br. at 25, we hold that he has no property right
    in his DER status.
    Furthermore, as in Fried, Lopez does not have a legitimate
    liberty interest because nonrenewal neither automatically
    bars him from future jobs nor stigmatizes him in a way that
    would ‘‘substantially preclude the professional use of his
    skills.’’ Fried, 
    78 F.3d at 692
     (citation omitted). Lopez’s
    12
    contention that the FAA violated his liberty interest is based
    on a September 13, 1999 letter that the manager of the FAA’s
    International Airworthiness Programs Staff, sent Lopez’s
    client, Aviation Sale and Leasing Corporation, which stated in
    relevant part:
    While we understand your company’s sense of urgency
    because of a pending customer for these aircraft, we
    believe this situation was unnecessarily complicated
    through the actions of your representative in France, Mr.
    Carlos Lopez. The advice and actions taken by Mr.
    Lopez were not correct for modification of N-registered
    aircraft.
    Lopez maintains that the letter was a ‘‘stigmatizing public
    disclosure’’ that adversely affects his business reputation. He
    provides no evidence, however, that the letter impugned his
    good name, reputation, honesty or integrity, Roth, 
    408 U.S. at 573
    , let alone that it ‘‘substantially preclude[s]’’ the use of his
    skills. Fried, 
    78 F.3d at 692
    . Although Lopez cannot serve
    as a DER for the FAA, he has not been deprived of his
    career as an engineer, Roth, 
    408 U.S. at 573
    . Without loss of
    some legitimate protected interest, Lopez’s claim that the
    FAA violated his constitutional right to due process is unsus-
    tainable.
    Accordingly, because the court does not have jurisdiction to
    review the substance of the FAA’s nonrenewal decision, be-
    cause any FAA failure to follow internal nonrenewal proce-
    dures caused no prejudice to Lopez, and because his constitu-
    tional claim is without merit, we deny the petition for review.