Air Excursions LLC v. Janet Yellen ( 2023 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 6, 2023 Decided April 18, 2023
No. 22-5125
AIR EXCURSIONS LLC,
APPELLANT
v.
JANET L. YELLEN, IN HER OFFICIAL CAPACITY AS SECRETARY
OF THE UNITED STATES DEPARTMENT OF THE TREASURY AND
UNITED STATES DEPARTMENT OF THE TREASURY,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 1:21-cv-01769)
Kenneth S. Nankin argued the cause and filed the briefs for
appellant.
Adam C. Jed, Attorney, U.S. Department of Justice,
argued the cause for appellees. With him on the brief were
Brian M. Boynton, Principal Deputy Assistant Attorney
General, and Michael S. Raab, Attorney.
Before: HENDERSON and RAO, Circuit Judges, and
RANDOLPH, Senior Circuit Judge.
2
Opinion for the Court filed by Circuit Judge HENDERSON.
KAREN LECRAFT HENDERSON, Circuit Judge: Air
Excursions, LLC provides air transportation services in Alaska
and the Pacific Northwest. It claims that the United States
Department of Treasury (Treasury) erroneously disbursed
pandemic relief funds to a competitor airline and challenges
that disbursement as unlawful under the Administrative
Procedure Act (APA). See 5 U.S.C. § 706(2)(A). We conclude,
however, that Air Excursions lacks Article III standing to bring
this suit. Accordingly, we vacate the district court’s order
dismissing the complaint on the merits and remand with
instructions to dismiss for lack of jurisdiction.
I.
The Coronavirus Aid, Relief and Economic Security
(CARES) Act was designed to help businesses weather the
pandemic. See Pub. L. No. 116-136, 134 Stat. 281 (2020). The
Act authorized the Treasury to disburse up to $25 billion to
“passenger air carriers” through the Payroll Support Program
(PSP). See 15 U.S.C. § 9072(a)(1). The Act granted the
Treasury significant discretion to distribute PSP funds “in such
form” and “on such terms and conditions . . . as the Secretary
determines appropriate.” Id. § 9073(b)(1)(A). The only
requirement was that a recipient use the funds exclusively for
“the continuation of payment of employee wages, salaries, and
benefits.” Id. § 9072(a). If an air carrier accepted PSP funds but
nonetheless furloughed workers, the Act gave the Treasury
discretionary authority to “clawback . . . any financial
assistance” provided the air carrier. Id. § 9073(b)(1)(A).
The Congress later authorized two additional relief
packages that allowed the Treasury to disburse more money to
passenger air carriers during the pandemic. First, the
Consolidated Appropriations Act (CAA) authorized the
3
Treasury to disburse an additional $15 billion to passenger air
carriers for worker support. See Pub. L. No. 116-260, tit. IV,
§ 402, 134 Stat. 1182, 2053 (2020). Second, the American
Rescue Plan Act (ARP) authorized another $14 billion under
the same terms and for the same purpose. See Pub. L. No. 117-
2, § 7301, 135 Stat. 4, 106 (2021). Both statutes incorporated
the CARES Act’s grant of broad discretion to the Treasury in
disbursing the funds. See 15 U.S.C. §§ 9092(a), 9093(b),
9141(b).
One air carrier that applied for PSP relief was Corvus
Airlines, Inc., a small airline servicing certain commuter routes
between Anchorage and Southwest Alaska. But just two days
after it applied for PSP disbursements, Corvus petitioned for
relief under Chapter 11 of the United States Bankruptcy Code
and ceased operations. See 11 U.S.C. § 301 (describing filing
of petition); id. ch. 11. While the bankruptcy proceedings were
pending, the Treasury approved Corvus’s application for PSP
funds and the bankruptcy court gave Corvus leave to enter a
PSP Agreement authorizing the disbursement. The PSP
Agreement allowed disbursement only to the “Recipient,”
which it defined as the “Signatory Entity”—Corvus—and its
“successors” and “assigns.” First Am. Compl. ¶¶ 21–22 (J.A.
161). The Agreement further provided that the Recipient could
not “pledge, mortgage, encumber, or otherwise assign” any
interest in the PSP funds to any “other Person without the
express written approval of [the] Treasury.” Id. ¶ 23 (J.A. 161).
Pursuant to the PSP Agreement and subsequent agreements
incorporating it, Corvus received three disbursements totaling
$30 million, as authorized by the CARES Act, the CAA and
the ARP.
By the time the Treasury disbursed any funds, Corvus’s
bankruptcy sale was already complete. Through an Asset
Purchase Agreement, Corvus opted to sell its business to
4
multiple entities. One of the buyers—FLOAT Shuttle, Inc.
(FLOAT)—purchased for $8 million several of Corvus’s
airplanes, all of its capital stock and “all right, title, and
interest . . . 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].” Id.
¶ 32 (J.A. 163). In approving the Asset Purchase Agreement,
the bankruptcy court clarified that FLOAT “is not a successor
to [Corvus] or [its] estate[] by reason of any theory of law or
equity, and the Transaction does not amount to a consolidation,
merger, or de facto merger” between Corvus and FLOAT. Id.
¶ 33 (J.A. 163–65). After the bankruptcy sale, FLOAT began
offering air passenger transportation on certain routes between
Anchorage and Southwest Alaska that Corvus had once served.
Air Excursions planned to operate in that same market and
began accepting charter reservations for the same routes that
FLOAT serves.1 Air Excursions claims that the Treasury
should not have disbursed any PSP funds to the post-
bankruptcy Corvus entity. According to Air Excursions,
FLOAT was the actual recipient of the funds because it
purchased the right to Corvus’s PSP disbursements in
bankruptcy and the Treasury’s three disbursements thus
violated the PSP Agreement, which specified Corvus as the
“Recipient” of the funds and prohibited Corvus from assigning
any interest in those funds without the Treasury’s written
approval. They also ran counter to the bankruptcy court’s
order, which declared that FLOAT is not Corvus’s successor in
interest. Air Excursions further alleged that FLOAT’s receipt
of the funds allowed it to engage in anticompetitive behavior—
first, by charging below-market fares for its services and,
1
Air Excursions is an Alaska LLC doing business as “Alaska
Seaplanes.” Air Excursions also applied for and received PSP
disbursements.
5
second, by negotiating a sublease for airport gate space with
Air Excursions in bad faith, costing Air Excursions a lucrative
business opportunity. This conduct, according to the
complaint, harmed Air Excursions because it enabled FLOAT
to “capture market share, prevent entry of competitors and
impede competitors in the market.” Id. ¶ 47 (J.A. 168).
Relying on a theory of competitor standing, Air
Excursions brought this action under the APA to challenge the
Treasury’s disbursement of PSP funds to FLOAT. See 5 U.S.C.
§ 706(2)(A). To remedy its alleged competitive injuries, Air
Excursions sought a declaration that the Treasury’s
disbursements were unlawful and an injunction requiring the
Treasury to “take remedial measures,” see First Am. Compl.
¶ b (J.A. 171), including its “clawback” authority pursuant to
15 U.S.C. §§ 9073 and 9093, and to refrain from disbursing
any additional funds to FLOAT. The Treasury moved to
dismiss, both for lack of standing and on the merits.
The district court held that Air Excursions had competitor
standing but dismissed the complaint on the merits. See Air
Excursions, LLC v. Yellen, 598 F. Supp. 3d 4, 13–18 (D.D.C.
2022). It concluded that the CARES Act and its progeny
commit the terms of PSP disbursements to agency discretion
and thus Air Excursions’ challenge is not reviewable under the
APA. Id. at 13–15; see also 5 U.S.C. § 701(a)(2) (excepting
from APA reviewability challenges to “agency action” that are
“committed to agency discretion by law”); Oryszak v. Sullivan,
576 F.3d 522, 525 (D.C. Cir. 2009) (“the court has jurisdiction”
under 28 U.S.C. § 1331 to consider challenges to “agency
action committed to agency discretion by law” but “will
properly grant a motion to dismiss the complaint for failure to
state a claim”). The court further concluded that, even if the
statutes or the PSP Agreement provide a meaningful standard
against which to review the allegations, Air Excursions
6
“misconstrue[d]” the bankruptcy order’s “no-successor”
provision and its complaint failed to raise a plausible inference
that FLOAT’s receipt of funds violated the PSP Agreement’s
“no-assignment” provision. See Air Excursions, 598 F. Supp.
3d at 15–18. Air Excursions timely appealed.
II.
We review de novo the district court’s determination that
Air Excursions has Article III standing to sue. See Kareem v.
Haspel, 986 F.3d 859, 865 (D.C. Cir. 2021). As detailed infra,
the complaint fails to support the claim that the Treasury’s
disbursement of PSP funds to FLOAT caused Air Excursions a
competitive injury redressable by a favorable judicial decision.
Article III standing is an “essential and unchanging part”
of the Constitution’s case-or-controversy requirement. Lujan v.
Defs. of Wildlife, 504 U.S. 555, 560 (1992); see also U.S.
CONST. art. III, § 2, cl. 1. To establish Article III standing, a
plaintiff must show that it “suffered or [is] imminently
threatened with a concrete and particularized ‘injury in fact’
that is fairly traceable to the challenged action of the defendant
and likely to be redressed by a favorable judicial decision.”
Lexmark Int’l, Inc. v. Static Control Components, Inc.,
572 U.S. 118, 125 (2014); see also Lujan, 504 U.S. at 560. A
plaintiff must support allegations of standing “in the same way
as any other matter on which the plaintiff bears the burden of
proof, i.e., with the manner and degree of evidence required at
the successive stages of the litigation.” Kareem, 986 F.3d at
865 (quoting Lujan, 504 U.S. at 561).
“[A]t the motion to dismiss stage, we ‘accept the well-
pleaded factual allegations as true and draw all reasonable
inferences from those allegations in the plaintiff’s favor.’” Id.(quoting Arpaio v. Obama, 797 F.3d 11, 19 (D.C. Cir. 2015)).
But we do not assume the truth of legal conclusions, see
7
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), or “accept
inferences that are unsupported by the facts set out in the
complaint,” Islamic Am. Relief Agency v. Gonzales, 477 F.3d
728, 732 (D.C. Cir. 2007); see also Kareem, 986 F.3d at 865–
66 (“[T]hreadbare recitals of the elements of [standing],
supported by mere conclusory statements, do not suffice.”
(quoting Arpaio, 797 F.3d at 19) (second alteration in Arpaio)).
Setting “mere conclusory statements” aside, the complaint
must contain “sufficient factual matter, accepted as true,” to
support an inference of standing “‘that is plausible on its face.’”
Iqbal, 556 U.S. at 678 (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007)). The plausibility standard requires
“more than a sheer possibility” that the plaintiff has standing to
sue. Id. Thus, if “a complaint pleads facts that are ‘merely
consistent with’” the plaintiff’s theory of standing, “it ‘stops
short of the line between possibility and plausibility of
‘entitlement to relief.’” Id. (quoting Twombly, 550 U.S. at 557).
A.
We begin “by identifying pleadings that, because they are
no more than conclusions, are not entitled to the assumption of
truth.” Iqbal, 556 U.S. at 679; see also Twombly, 550 U.S. at
555. Air Excursions asserts that, by distributing PSP funds to
FLOAT, the Treasury “improperly subsidized FLOAT with a
windfall that it did not earn and was not entitled to receive.”
First Am. Compl. ¶ 50 (J.A. 169). These funds, according to
the complaint, allowed FLOAT to approach its sublease
negotiations with Air Excursions in bad faith and charge
below-market fares for its services, both of which caused Air
Excursions a competitive injury by impeding its entry into the
Alaskan air passenger transport market and impairing its ability
to compete in that market once entered. But the causal link
between the Treasury’s disbursement of PSP funds and
FLOAT’s alleged anticompetitive behavior rests entirely on
8
“general averments” and “conclusory allegations,” Friends of
the Earth, Inc. v. Laidlaw Env’t Servs. (TOC), Inc., 528 U.S.
167, 184 (2000) (quoting Lujan v. Nat’l Wildlife Fed’n,
497 U.S. 871, 888 (1990)), the truth of which we do not assume
in evaluating whether the complaint satisfies the traceability
element of Article III standing, see Iqbal, 556 U.S. at 678(“[T]he tenet that a court must accept as true all of the
allegations contained in a complaint is inapplicable to legal
conclusions.”).
First, Air Excursions makes only conclusory allegations
connecting FLOAT’s receipt of PSP funds with the outcome of
the sublease negotiations. The complaint avers that FLOAT’s
receipt of PSP funds “allow[ed]” it to “impede and delay” Air
Excursion’s market entry by failing to negotiate a sublease for
airport gate space in good faith. First Am. Compl. ¶ 50 (J.A.
169). Granted, Air Excursions’ causal theory is possible—the
infusion of PSP capital may have given FLOAT the financial
means to deny itself a potentially lucrative source of rental
income. But “[t]he plausibility standard . . . asks for more than
a sheer possibility that” the challenged action caused the injury
alleged. Iqbal, 556 U.S. at 678. And FLOAT’s refusal to
sublease gate space is “not only compatible with, but indeed
[is] more likely explained by” FLOAT’s obvious incentive not
to sublease to a competitor, independent of its receipt of PSP
disbursements. Kareem, 986 F.3d at 869 (quoting Iqbal,
556 U.S. at 680); accord Twombly, 550 U.S. at 550–51, 566.
Second, Air Excursions similarly fails to connect
FLOAT’s receipt of PSP disbursements with its pricing
decisions. The complaint avers only that “Treasury’s improper
subsidies . . . are allowing FLOAT to continue to charge
below-market fares.” First Am. Compl. ¶ 52 (J.A. 169); see
also id. ¶¶ 46–47 (J.A. 168) (FLOAT’s below-market fares are
“[a]ided by Treasury’s unlawful disbursements”). Such
9
“general allegation[s]” are disregarded, Kareem, 986 F.3d at
867, and the complaint contains no factual matter regarding the
timing of FLOAT’s pricing decisions or otherwise suggesting
that FLOAT’s receipt of PSP disbursements had anything to do
with its fare pricing, see Iqbal, 556 U.S. at 679 (“[W]here the
well-pleaded facts do not permit the court to infer more than
the mere possibility of misconduct, the complaint has
alleged—but it has not ‘show[n]’—‘that the pleader is entitled
to relief.’” (quoting FED. R. CIV. P. 8(a)(2)) (second alteration
in Iqbal)). Indeed, the complaint supplies no factual support for
its allegation that FLOAT charges below-market fares in the
first place. The complaint alleges only that “FLOAT has been
charging below-market fares” ever “[s]ince it began providing
service in the Anchorage-Southwest Alaska passenger air
transportation market.” First Am. Compl. ¶ 47 (J.A. 168). We
disregard such “‘naked assertion[s]’ devoid of ‘further factual
enhancement’” in evaluating whether the complaint establishes
a causal link between the challenged action and the alleged
injury. Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at
557) (alteration in Iqbal). Noticeably absent from the
complaint is any allegation about the fares FLOAT in fact
charges or how those fares compare to prevailing market rates.
In addition, some well-pleaded allegations in the
complaint undermine the inference that FLOAT used the
disbursements to further its alleged anticompetitive behavior.
The complaint asserts that FLOAT’s owners used funds from
the PSP disbursements to reduce their equity stake in the
company, which is inconsistent with an inference that FLOAT
used the PSP funds to subsidize its pricing decisions or support
its refusal to sublease gate space to Air Excursions. See
Gonzales, 477 F.3d at 732 (“This Court need not . . . accept
inferences that are unsupported by the facts set out in the
complaint[.]”). To nudge its theory of causation “across the line
from conceivable to plausible,” Twombly, 550 U.S. at 570, Air
10
Excursions would need to allege more specifically how
FLOAT used its PSP disbursements.
In sum, the complaint fails to show that FLOAT charged
below-market fares and that FLOAT’s receipt of PSP
disbursements influenced its pricing decisions or negotiating
conduct. See Kareem, 986 F.3d at 868. The complaint’s
“[t]hreadbare recitals of the elements of [standing], supported
by mere conclusory statements, do not suffice.” Arpaio,
797 F.3d at 19 (quoting Iqbal, 556 U.S. at 678) (alterations in
Arpaio).
B.
Remaining are the allegations relating to Air Excursions’
role in the Alaskan air transportation market as well as the
allegations that the Treasury improperly disbursed $30 million
to FLOAT. See Est. of Boyland v. U.S. Dep’t of Agric., 913
F.3d 117, 123 (D.C. Cir. 2019) (“[W]hen considering whether
a plaintiff has Article III standing, a federal court must assume,
arguendo, the merits of his or her legal claim.”). These
allegations are insufficient to sustain a theory of competitor
standing.
Competitor standing addresses the injury in fact
requirement of Article III standing. Because “increased
competition almost surely injures a seller in one form or
another,” Sherley v. Sebelius, 610 F.3d 69, 72 (D.C. Cir. 2010),
we have recognized that “parties suffer constitutional injury in
fact when agencies lift regulatory restrictions on their
competitors or otherwise allow increased competition,” La.
Energy & Power Auth. v. FERC, 141 F.3d 364, 367 (D.C. Cir.
1998). To invoke competitor standing, a plaintiff must show
that the challenged government action results in “an actual or
imminent increase in competition, which increase we recognize
will almost certainly cause an injury in fact” to any competitor
11
in the relevant market. Sherley, 610 F.3d at 73. The plaintiff
must also show that it is in fact “a direct and current
competitor” in that market, in which case the plaintiff’s
“bottom line may be adversely affected by the challenged
government action.” KERM, Inc. v. FCC, 353 F.3d 57, 60
(D.C. Cir. 2004) (quoting New World Radio, Inc. v. FCC,
294 F.3d 164, 170 (D.C. Cir. 2002)); see also Mendoza v.
Perez, 754 F.3d 1002, 1013 (D.C. Cir. 2014) (“Having
concluded individuals competing in the herder labor market
have standing to challenge the TEGLs, we need only determine
whether any of the plaintiffs in this action is a member of that
market.”); Mobile Relay Assocs. v. FCC, 457 F.3d 1, 13–14
(D.C. Cir. 2006) (“the requirement that Nextel be a ‘direct’ and
‘current’ competitor of [plaintiffs] is likely met” but plaintiffs
“lack competitor standing . . . because they have failed to make
a concrete showing that they are likely to suffer financial
injury”).
The initial inquiry requires that the challenged agency
action directly increase competition in the affected market,
thereby injuring competitors “as a matter of economic logic.”
PSSI Global Servs., LLC v. FCC, 983 F.3d 1, 12 (D.C. Cir.
2020); see also New World Radio, 294 F.3d at 172 (“basic
law[s] of economics” hold that increased competition leads to
actual injury (quotation omitted)). Agency action may increase
competition, for example, if it allows new entrants into a fixed
regulated market, see FCC v. Sanders Bros. Radio Station,
309 U.S. 470, 476–77 (1940); Mendoza, 754 F.3d at 1011, if it
lifts price controls on a firm’s competitor and therefore permits
“price competition” that would not otherwise occur, see La.
Energy & Power Auth., 141 F.3d at 367, or if it reimburses a
firm’s competitor for selling its product or service at
discounted rates, see U.S. Telecom Ass’n v. FCC, 295 F.3d
1326, 1331 (D.C. Cir. 2002).
12
Our cases are clear, however, that an agency action does
not confer competitor standing if it merely “create[s] a ‘skewed
playing field,’” PSSI Global Servs., 983 F.3d at 11 (quoting
Mobile Relay, 457 F.3d at 13), by, for example, providing a
“windfall” to a competitor, see Mobile Relay, 457 F.3d at 13.
For instance, in PSSI Global Services, we denied competitor
standing to satellite operators that challenged an FCC order
making alleged competitors eligible for “relocation payments.”
983 F.3d at 5–6. Although the operators complained that the
payments were “arbitrarily high” and would “make the already
strongest competitors even stronger,” they failed to connect
their competitors’ receipt of payments with a more specific
competitive injury. See id. at 11–12. Similarly, in Mobile
Relay, we denied competitor standing to radio licensees that
complained the FCC “improperly undervalued” a portion of the
electromagnetic spectrum it granted to a competitor because
the licensees failed to demonstrate they were “likely to suffer
financial injury” as a result of the agency action. 457 F.3d at12–13; see also id. at 13–14 (“bare assertion” that competitor’s
receipt of a windfall creates a “skewed playing field” “is not
enough”). Consequently, a competitor’s receipt of a windfall,
whether monetary or otherwise, falls short of establishing that
“any specific harm” will result “as a matter of economic logic.”
PSSI Global Servs., 983 F.3d at 11–12; see also Mobile Relay,
457 F.3d at 13–14; Am. Soc’y of Travel Agents, Inc. v.
Blumenthal, 566 F.2d 145, 149 (D.C. Cir. 1977).
Here, the complaint establishes no more than that FLOAT
received a windfall of the precise sort PSSI Global Services and
Mobile Relay held was insufficient to support a theory of
competitor standing. FLOAT’s receipt of a cash “windfall,” see
First Am. Compl. ¶ 50 (J.A. 169), is economically
indistinguishable from the cash relocation payments in PSSI
Global Services, 983 F.3d at 11–12, and the “improperly
undervalued” regulatory grant in Mobile Relay, 457 F.3d at 12–
13
13. Although the cash PSP payments may create a “skewed
playing field” in the Alaskan air transportation market, a
competitor’s receipt of a windfall, by itself, “is not enough,” id.at 13–14, to demonstrate the “actual or imminent increase in
competition” required before a plaintiff may invoke competitor
standing, Sherley, 610 F.3d at 73; see also PSSI Global Servs.,
983 F.3d at 11–12; La. Energy & Power Auth., 141 F.3d at 367.
The complaint’s deficiencies doom Air Excursion’s
asserted competitor standing based on FLOAT’s alleged
below-market fares and therefore make our decision in U.S.
Telecom Association inapplicable. See 295 F.3d at 1331.
There, we recognized that price competition is injurious
competition; thus, a trade association’s members had standing
to challenge an FCC order making their competitor “eligible
for a subsidy that permits it to offer lower prices for the
same . . . services.” Id. That subsidy reimbursed the competitor
for “an amount equal to the aggregate discount” off the
standard price of the competitor’s services, thereby directly
connecting the challenged agency action and the competitor’s
pricing decisions. Id. at 1328; see also La. Energy & Power
Auth., 141 F.3d at 366–67 (agency action leading to “increased
price competition” causes competitive injury). By contrast, a
competitor’s receipt of a bare regulatory windfall—like
FLOAT’s receipt of PSP disbursements—does not necessarily
influence the competitor’s pricing decisions or otherwise result
in increased competition in the industry. See PSSI Global
Servs., 983 F.3d at 11–12; Mobile Relay, 457 F.3d at 13.
In sum, the competitor standing doctrine supplies the link
between increased competition and tangible injury but does
not, by itself, supply the link between the challenged conduct
and increased competition. The latter must be apparent from
the nature of the challenged action itself—as in U.S. Telecom
Association—or from the well-pleaded allegations of the
14
plaintiff’s complaint—which Air Excursions fails to supply
here. To hold otherwise would vitiate Article III’s case or
controversy requirement and permit a business to superintend
its industry’s regulatory scheme, even if the agency action at
issue threatens the business with only highly attenuated or
wholly speculative consequences. See Simon v. E. Ky. Welfare
Rts. Org., 426 U.S. 26, 37 (1976) (“No principle is more
fundamental to the judiciary’s proper role in our system of
government than the constitutional limitation of federal-court
jurisdiction to actual cases or controversies.”).
The complaint fails to establish that Air Excursions has
suffered a competitive injury satisfying Article III’s injury in
fact requirement. See PSSI Global Servs., 983 F.3d at 11–12;
Mobile Relay, 457 F.3d at 13; cf. U.S. Telecom Ass’n, 295 F.3d
at 1331.2 We therefore vacate the district court’s order granting
Treasury’s motion to dismiss under Rule 12(b)(6) and remand
with instructions to dismiss the complaint because Air
Excursions lacks Article III standing.
So ordered.
2
Because Air Excursions has not demonstrated that the
challenged agency action increases competition in the affected
market, we need not determine whether the complaint sufficiently
alleges that Air Excursions is in fact FLOAT’s “direct and current
competitor.” See KERM, Inc., 353 F.3d at 60 (quoting New World
Radio, 294 F.3d at 170).