18-62 cres.cloudinary.com/lbresearch/image/upload/v... · grant thornton ultimately proposed an air...

IN THE UNITED STATES COURT OF FEDERAL CLAIMS

AIR CANADA, AIR CHINA, AIR EUROPA, AIR FRANCE, AIR NEW ZEALAND, AIR TRANSAT, ALASKA AIRLINES, AMERICAN AIRLINES, ASIANA AIRLINES, AUSTRIAN AIRLINES, BRUSSELS AIRLINES, CATHAY PACIFIC AIRWAYS, CHINA EASTERN AIRLINES, CONDOR FLUGDIENST & THOMAS COOK AIRLINES LIMITED, COPA AIRLINES, DELTA AIR LINES, INC., EDELWEISS AIR, EGYPTAIR, EL-AL ISRAEL AIRLINES, ETIHAD AIRWAYS, EUROWINGS, EVA AIRWAYS CORPORATION, FINNAIR, HAWAIIAN AIRLINES, ICELANDAIR, INSEL AIR, JETBLUE AIRWAYS, JET AIRWAYS, KLM ROYAL DUTCH AIRLINES, LATAM AIRLINES, LUFTHANSA GERMAN AIRLINES, LUFTHANSA CARGO AG, PORTER AIRLINES INC., ROYAL JORDANIAN AIRLINES, SCANDINAVIAN AIRLINES (SAS), SINGAPORE AIRLINES LIMITED, SOUTHWEST AIRLINES, SWISS INTERNATIONAL AIR LINES, TAP PORTUGAL, TURKISH AIRLINES, UNITED AIRLINES, VIRGIN ATLANTIC AIRWAYS LIMITED, VIRGIN AUSTRALIA AIRLINES, WESTJET AIRLINES, LTD., XL AIRWAYS FRANCE AND DREAMJET (DBA LA COMPAGNIE),

Plaintiffs,

v.

No. _______________

THE UNITED STATES OF AMERICA,

Defendant.

COMPLAINT FOR DAMAGES

Plaintiffs bring this action under the Tucker Act, 28 U.S.C. § 1491(a), to redress

JAN 12 2018

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Receipt number 9998-4415772Case 1:18-cv-00062-TCW Document 1 Filed 01/12/18 of 57

stokes

Filed

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Defendant’s collection of fees from Plaintiffs pursuant to two unlawful regulations, both

promulgated by the Animal Plant Health Inspection Service (“APHIS”): User Fees for

Agricultural Quarantine and Inspection Services, 71 Fed. Reg. 49,984 (Aug. 24, 2006) (to be

codified at 7 C.F.R. pt. 354) (“2006 Rule”), and User Fees for Agricultural Quarantine and

Inspection Services, 80 Fed. Reg. 66,748, 66,775 (Oct. 29, 2015) (to be codified at 7 C.F.R. pt.

354) (“2015 Rule”). Both regulations violate the Food, Agriculture, Conservation and Trade Act

of 1990 (the “FACT Act”), 21 U.S.C. § 136a, and the Administrative Procedure Act (“APA”), 5

U.S.C. § 500 et seq. Both have resulted in millions of dollars in excess fees and double charges

flowing to Defendant. Plaintiffs bring this suit to recover these illegal exactions.

INTRODUCTION

1. For more than 25 years, commercial airlines and their passengers have been

required to pay Agricultural Quarantine and Inspection (“AQI”) fees to cover the cost of

inspecting aircraft, persons, cargo, and baggage on arriving international flights for agricultural

risks. APHIS administers the AQI program, and it sets AQI user fees through notice-and-

comment rulemaking. The FACT Act grants APHIS this authority: i.e., to “prescribe and collect

fees” for certain activities related to the AQI program. 21 U.S.C. § 136a(a)(1).

2. But the FACT Act imposes specific constraints on APHIS’s discretion in setting

these fees. First, while the FACT Act provides that APHIS may impose fees on vehicles (such

as aircraft, trucks, and trains) and their passengers, the statute prohibits charging both a per-

passenger fee and a per-aircraft fee for the same arrival. Second, the FACT Act requires APHIS

to set AQI user fees by class, and the agency must set each class’s fee at a level “commensurate”

with the cost of inspecting that class—it may not “cross-subsidize” across classes, by charging

one class a higher fee and using those collections to fund inspections of another. Third, though

the FACT Act granted APHIS the authority to charge a heightened fee in order to keep a

Case 1:18-cv-00062-TCW Document 1 Filed 01/12/18 of 57

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“reasonable balance” in a reserve account, the statute unambiguously provides that APHIS only

had this authority “through fiscal year 2002.”

3. The 2006 Rule and the 2015 Rule (together, “the Challenged Rules”) violate each

one of these statutory constraints. Both charge a user fee on commercial passenger aircraft and a

separate fee for every passenger arriving on those aircraft, contrary to the statute’s prohibition on

such double charging. Both charge some user classes elevated fees to cover the costs of

inspecting others, in direct contravention of the FACT Act’s “commensurate” requirement. And

both charge an explicit surcharge to fund APHIS’s reserve account, while never acknowledging

that APHIS no longer has the authority to do so. APHIS’s power to charge fees to supplement

the agency’s “reserve” fund was revoked in 2002, yet both the 2006 Rule and the 2015 Rule

explicitly cite this prohibited purpose to justify charging inflated fees.

4. These clear statutory violations are just the latest in APHIS’s longstanding

practice of violating well-established norms of administrative procedure. For decades, APHIS

has periodically increased user inspection fees either without providing any justifying cost data,

or by relying on summary data so flawed and incomplete that, according to multiple reports from

the Government Accountability Office (“GAO”), they cannot be relied on to set accurate fees.

APHIS also has repeatedly relied on summary “emergency” rulemakings to pass fee increases it

promised to explain later, but never did. Instead, APHIS left these fees in place for years, with

no meaningful explanation—even after GAO chastised the agency for circumventing normal

notice-and-comment procedures.

5. Though these administrative irregularities may seem haphazard, they all have one

thing in common: they inured to Defendant’s benefit, to the tune of millions of dollars in excess

collections from certain users—creating surpluses for which APHIS has never accounted.


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APHIS’s decades-long practice of shoddy administrative and accounting practices deprives

APHIS of any legitimate claim to the “presumption of regularity” to which agencies are normally

entitled.

6. For multiple reasons, the commercial passenger aircraft fees collected under the

Challenged Rules are illegal exactions, and must be returned to Plaintiffs:

7. First, the imposition of any distinct AQI user fee on commercial aircraft carrying

passengers is unlawful, because, under the FACT Act, when a class of passengers is charged a

fee—as air passengers are—the statute directs that “[t]he costs of the services with respect to

passengers as a class includes the costs of related inspections of the aircraft or other vehicle.” 21

U.S.C. § 136a(a)(2). By including the costs of related aircraft inspections together with

passengers as a user class, this provision precludes APHIS from charging a duplicative per-

aircraft fee. This is not merely Plaintiffs’ reading—Grant Thornton LLP (“Grant Thornton”), the

accounting firm APHIS hired to assess the AQI fee structure and calculate the 2015 Rule’s fee

levels, reached the same conclusion. After a comprehensive analysis of APHIS’s fee program,

Grant Thornton ultimately proposed an air passenger fee of $4 and a commercial aircraft fee of

either $200 or $225 (depending on the fee scenario) but specifically directed that “[a]s required

by the AQI fee authority legislation, the revised air passenger fee includes the cost of inspecting

passenger aircraft,” and that the commercial aircraft fee should be “applie[d] only to cargo

aircraft because the cost of inspecting passenger aircraft is included in the air passenger fee.”

Grant Thornton, Agricultural Quarantine and Inspection, Program AQI Fee Schedule

Assessment and Alternatives 10 (May 21, 2012) (“May 2012 Grant Thornton Report”).

available at https://www.regulations.gov/document?D=APHIS-2013-0021-0004 (emphasis

added). Incredibly, the 2015 Rule adopted these proposed fee levels but imposed both fees on


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commercial aircraft carrying passengers, directly contrary to Grant Thornton’s conclusions and

the FACT Act’s text. The 2006 Rule, for its part, offered no explanation or justification for

APHIS’s decision to impose a duplicative fee on commercial aircraft and the passengers arriving

on them. These unexplained and unlawful double charges are in direct violation of the FACT

Act, and must be returned to Plaintiffs.

8. Second, APHIS has long added a surcharge to its user fees to sustain what it calls

its “reserve” fund, citing the FACT Act for the authority to collect fees to “maintain a reasonable

balance” in the AQI user fee account. 21 U.S.C. § 136a(a)(1)(C). But that very provision gave

APHIS such authority only “through fiscal year 2002,” a limitation the agency never mentions in

the Challenged Rules. Id. Indeed, though the statute was amended in 2002, Congress did not

extend this deadline. Yet Defendant has collected millions of dollars in reserve surcharges. The

2006 Rule imposed a reserve surcharge of 25 percent above the cost of inspecting each user.

2006 Rule, 71 Fed. Reg. at 49,985. And the 2015 Rule funds the reserve by “rounding up” some

fees and by charging a flat 3.5% surcharge on others. 80 Fed. Reg. at 66,763. Thus, every single

collection APHIS has made since 2006 has overcharged users in violation of the FACT Act.

9. Third, the Challenged Rules continue APHIS’s longstanding practice of cross-

subsidizing the cost of inspecting some user classes with fees collected from other classes.

APHIS admits the FACT Act prohibits cross-subsidization, but its own statements—both in the

Challenged Rules themselves and elsewhere in the administrative record—make clear that the

agency does just that. In the 2015 Rule, APHIS explicitly exempts several user classes it

inspects from paying any fees and caps others at less than cost, exemptions that were in effect

under 2006 Rule (albeit sub silentio). And, though it sometimes claims that inspections for these

users are paid for by appropriations, in neither rulemaking did APHIS provide evidence showing


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this to be the case. Moreover, according to GAO and Grant Thornton, APHIS overcharged air

passengers by over $285 million in fiscal years 2010 and 2011 alone. When asked why it did

not at the very least reduce the air passenger fee in light of these extreme overcharges, APHIS’s

Administrator admitted that the entire AQI program would cease to function if the agency

immediately lowered the air passenger fee to the level required by the statute—a tacit admission

that these excess collections are used to fund inspections of other user classes. Indeed, APHIS

concedes that once such excess collections flow into its “reserve” account, the agency uses this

money to fund the AQI program generally. Thus, either through inadvertence or deliberate

indifference, the agency regularly cross-subsidizes users in contravention of the FACT Act’s

plain text.

10. Finally, in neither rulemaking did APHIS provide adequate evidence to support

the commercial aircraft fees it imposed—$70.75 per flight in the 2006 Rule, and $225 per flight

in the 2015 Rule. APHIS withheld key documents and information during the rulemakings that

make the above violations patently obvious. In the 2006 Rule, the only data APHIS offered were

industry-level figures—i.e., estimates for aggregate annual costs of inspecting all commercial

aircraft. User Fees for Agricultural Quarantine and Inspection Services, 69 Fed. Reg. 71,660,

71,665 (Dec. 9, 2004) (“2004 Interim Rule”); see also 2006 Rule, 71 Fed. Reg. at 49,985 (noting

data offered to support 2006 fee increase was provided “in tabular form”). When later

commenting on the data used in this rulemaking, Grant Thornton concluded they did not

“demonstrate what kind of work is being done, the output it contributes to, or the fee category

where it should be recovered.” Grant Thornton, Agricultural Quarantine and Inspection

Program: Fee Setting Process Documentation and Recommendations 6 (Oct. 25, 2011) (“2011

Grant Thornton Report”) available at https://www.regulations.gov/document?D=APHIS-2013-


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0021-0005.

11. APHIS fared no better in the 2015 Rule. The agency (through Grant Thornton)

used an Activity-Based Costing (“ABC”) methodology, under which costs are meant to be

calculated by identifying “cost drivers” and tying these drivers to units of output. But the agency

did not provide during the rulemaking either the document explaining its fee model (i.e.,

APHIS’s AQI program cost model documentation), nor the cost data it employed in its analysis,

depriving stakeholders of a meaningful opportunity to comment on them. More importantly,

once these data were finally released (in litigation), they proved what many of Plaintiffs had told

APHIS they suspected: Grant Thornton designed its ABC model to set the air passenger fee at a

level that would cover the cost of inspecting all passenger aircraft, as required by the FACT Act.

This directly contradicts APHIS’s unsupported claim in the Final Rule that it needed to charge a

separate commercial aircraft fee to cover inspection costs for passenger aircraft. The data

confirmed what Grant Thornton reported in its final conclusions: “This [$225 commercial

aircraft fee] fee now applies only to cargo aircraft because the cost of inspecting passenger

aircraft is included in the air passenger fee.” 2011 Grant Thornton Report at 10. Yet,

incredibly, APHIS adopted Grant Thornton’s proposed $225 fee and applied it (without any

additional explanation) to commercial passenger aircraft, reaping millions of dollars in fees that,

by its own consultant’s model, exceeded the amount the agency could lawfully collect.

12. In short, both Challenged Rules ignore the FACT Act’s express limitations, and

they are the antithesis of the “reasoned decisionmaking” the APA requires. The illegal exactions

Defendant has misappropriated from Plaintiffs since January 12, 2012 must be reimbursed.

PARTIES

13. Plaintiff Air Canada is a commercial air carrier that has paid an AQI user fee for

an international flight arriving in U.S. customs territory at least once since January 12, 2012.


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14. Plaintiff Air China is a commercial air carrier that has paid an AQI user fee for an

international flight arriving in U.S. customs territory at least once since January 12, 2012.

15. Plaintiff Air Europa is a commercial air carrier that has paid an AQI user fee for


16. Plaintiff Air France is a commercial air carrier that has paid an AQI user fee for


17. Plaintiff Air New Zealand is a commercial air carrier that has paid an AQI user

fee for an international flight arriving in U.S. customs territory at least once since January 12,

2012.

18. Plaintiff Air Transat is a commercial air carrier that has paid an AQI user fee for


19. Plaintiff Alaska Airlines is a commercial air carrier that has paid an AQI user fee

for an international flight arriving in U.S. customs territory at least once since January 12, 2012.

20. Plaintiff American Airlines is a commercial air carrier that has paid an AQI user


2012.

21. Plaintiff Asiana Airlines is a commercial air carrier that has paid an AQI user fee


22. Plaintiff Austrian Airlines is a commercial air carrier that has paid an AQI user


2012.

23. Plaintiff Brussels Airlines is a commercial air carrier that has paid an AQI user



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2012.

24. Plaintiff Cathay Pacific Airways is a commercial air carrier that has paid an AQI

user fee for an international flight arriving in U.S. customs territory at least once since January

12, 2012.

25. Plaintiff China Eastern Airlines is a commercial air carrier that has paid an AQI


12, 2012.

26. Plaintiff Condor Flugdienst and Thomas Cook Airlines Limited are commercial

air carriers that have paid an AQI user fee for an international flight arriving in U.S. customs

territory at least once since January 12, 2012.

27. Plaintiff COPA Airlines is a commercial air carrier that has paid an AQI user fee


28. Plaintiff Delta Air Lines, Inc. is a commercial air carrier that has paid an AQI user


2012.

29. Plaintiff Edelweiss Air is a commercial air carrier that has paid an AQI user fee


30. Plaintiff EgyptAir is a commercial air carrier that has paid an AQI user fee for an


31. Plaintiff El-Al Israel Airlines is a commercial air carrier that has paid an AQI user


2012.

32. Plaintiff Etihad Airways is a commercial air carrier that has paid an AQI user fee


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33. Plaintiff Eurowings is a commercial air carrier that has paid an AQI user fee for


34. Plaintiff Eva Airways Corporation is a commercial air carrier that has paid an

AQI user fee for an international flight arriving in U.S. customs territory at least once since

January 12, 2012.

35. Plaintiff Finnair is a commercial air carrier that has paid an AQI user fee for an


36. Plaintiff Hawaiian Airlines is a commercial air carrier that has paid an AQI user


2012.

37. Plaintiff Icelandair is a commercial air carrier that has paid an AQI user fee for an


38. Plaintiff Insel Air is a commercial air carrier that has paid an AQI user fee for an


39. Plaintiff JetBlue Airways is a commercial air carrier that has paid an AQI user fee


40. Plaintiff Jet Airways is a commercial air carrier that has paid an AQI user fee for


41. Plaintiff KLM Royal Dutch Airlines is a commercial air carrier that has paid an


January 12, 2012.

42. Plaintiff LATAM Airlines is a commercial air carrier that has paid an AQI user


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2012.

43. Plaintiff Lufthansa German Airlines is a commercial air carrier that has paid an


January 12, 2012.

44. Plaintiff Lufthansa Cargo AG is a commercial air carrier that has paid an AQI


12, 2012.

45. Plaintiff Porter Airlines Inc. is a commercial air carrier that has paid an AQI user


2012.

46. Plaintiff Royal Jordanian Airlines is a commercial air carrier that has paid an AQI


12, 2012.

47. Plaintiff Scandinavian Airlines (“SAS”) is a commercial air carrier that has paid

an AQI user fee for an international flight arriving in U.S. customs territory at least once since

January 12, 2012.

48. Plaintiff Singapore Airlines Ltd. is a commercial air carrier that has paid an AQI


12, 2012.

49. Plaintiff Southwest Airlines is a commercial air carrier that has paid an AQI user


2012.


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50. Plaintiff Swiss International Air Lines is a commercial air carrier that has paid an


January 12, 2012.

51. Plaintiff TAP Portugal is a commercial air carrier that has paid an AQI user fee


52. Plaintiff Turkish Airlines is a commercial air carrier that has paid an AQI user fee


53. Plaintiff United Airlines and certain of its Express Partners are commercial air

carriers that have paid an AQI user fee for an international flight arriving in U.S. customs


54. Plaintiff Virgin Atlantic Airways Ltd. is a commercial air carrier that has paid an


January 12, 2012.

55. Plaintiff Virgin Australia Airlines is a commercial air carrier that has paid an AQI


12, 2012.

56. Plaintiff WestJet Airlines, Ltd. is a commercial air carrier that has paid an AQI


12, 2012.

57. Plaintiff XL Airways France and DreamJet (dba La Compagnie) are commercial

air carriers that have paid an AQI user fee for an international flight arriving in U.S. customs


58. Defendant United States of America includes the U.S. Department of Agriculture


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(“USDA”), APHIS, the Department of Homeland Security (“DHS”), U.S. Customs and Border

Protection (“CBP”), and any other agencies or officials involved in the promulgation and

enforcement of the Challenged Rules. See generally 21 U.S.C. § 136a (establishing AQI

program).

JURISDICTION

59. This Court has jurisdiction over Plaintiffs’ illegal exaction claims under 28 U.S.C.

§ 1491(a) (The Tucker Act), or, in the alternative, 28 U.S.C. § 1346(a)(2) (The Little Tucker

Act).

60. Pursuant to Local Rule 9(p), Plaintiffs advise the Court that an action was filed in

the U.S. District Court for the District of Columbia on May 13, 2016 in which two plaintiffs (not

parties to this litigation) seek an injunction setting aside the 2015 Rule as invalid under the APA.

See Complaint, Air Transp. Assoc. of Am. v. U.S. Dep’t of Agric., 1:16-cv-00919 (D.D.C. May

13, 2016). That district court action does not deprive this Court of jurisdiction, because Plaintiffs

are not parties to that action, and the plaintiffs in that action (associations of domestic and

international airlines) are not Plaintiffs’ “assignee[s].” See 28 U.S.C. § 1500 (“The United States

Court of Federal Claims shall not have jurisdiction of any claim for or in respect to which the

plaintiff or his assignee has pending in any other court any suit . . . .”) (emphasis added); see

also Klamath Irrigation Dist. v. United States, 113 Fed. Cl. 688, 696-98 (2013) (finding

association not to be assignee of constituent members for purposes of 28 U.S.C. § 1500).

Nonetheless, because many of the issues raised in this Complaint could be resolved by the

ongoing district court litigation, Plaintiffs will be filing a motion to stay this Tucker Act action

pending the resolution of the district court litigation.

61. The Tucker Act provides this Court with jurisdiction over Plaintiffs’ illegal

exactions claims and confers on Plaintiffs a right for money damages. See Piszel v. United


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States, 121 Fed. Cl. 793, 799 (2015).

62. The Tucker Act’s statute of limitations is six years. 28 U.S.C. § 2501. Thus,

Plaintiffs seek the return of money obtained through illegal exactions (i.e., monies paid pursuant

to the unlawful AQI fees) that have occurred since January 12, 2012.

FACTUAL BACKGROUND

I. The FACT Act

63. APHIS is the federal agency tasked with “ensuring the free flow of agricultural

trade by keeping U.S. agricultural industries free from pests and diseases.” Import Export, U.S.

Dep’t of Agric. – Animal and Plant Health Inspection Service (Mar. 30, 2017), available at

https://www.aphis.usda.gov/aphis/ourfocus/importexport. This responsibility includes inspecting

international air, rail, truck, and maritime shipments (and their passengers) for foreign animal

and plant materials, pests, and diseases. Id. After the attacks of September 11, 2001, certain

AQI functions, including many passenger and aircraft inspection functions, were transferred

from APHIS to CBP, located within DHS. See 2004 Interim Rule, 69 Fed. Reg. at 71,661.

APHIS maintains its rulemaking function, however, and remains solely responsible for the

regulations setting AQI fees. Id.

64. In 1990, Congress enacted the FACT Act, which authorizes APHIS to collect user

fees that cover the costs of inspecting passengers, cargo, and vessels that arrive in the United

States. 21 U.S.C. § 136a. The FACT Act permits fees to cover inspections of “an international

passenger, commercial vessel, commercial aircraft, commercial truck, or railroad car.” Id.

§ 136a(a)(1)(A).

65. The FACT Act requires that fees charged for inspection services be

“commensurate with the costs . . . with respect to the class of persons or entities paying the fees.”

21 U.S.C. § 136a(a)(2). As the 2015 Rule observes, the purpose of this provision is to “avoid


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cross-subsidization of AQI services.” 80 Fed. Reg. at 66,748; see also May 2012 Grant

Thornton Report at 10. Put simply, AQI fees charged to one type of user cannot be used to cover

any amount of the costs incurred for inspections of another type of user or for any services or

purposes other than AQI costs.

66. The FACT Act also prohibits double charging passengers and passenger aircraft,

by requiring that “[t]he cost of the services with respect to passengers as a class includes the cost

of related inspections of the aircraft or other vehicles.” 21 U.S.C. § 136a(a)(2). As the 2015

Rule itself concludes, “[t]he cost of AQI services with respect to passengers as a class should

include the cost of related inspections of the aircraft or other conveyance.” 80 Fed. Reg. at

66,748.

67. Finally, the FACT Act granted APHIS the ability to impose a surcharge on top of

AQI user fees in order to maintain a reserve fund—i.e., “a reasonable balance in the [AQI] User

Fee Account.” 21 U.S.C. § 136a(a)(1)(C). However, that very same provision noted that APHIS

would only have this authority “through fiscal year 2002.” Id. Thus, since 2003, APHIS has not

had authority to impose a reserve surcharge.

II. APHIS’s Prior AQI Fee Rulemakings

68. The Challenged Rules are only the most recent instances of APHIS’s decades-

long practice—repeatedly decried by the GAO and industry stakeholders alike—of setting AQI

fees with little or no empirical justification and in violation of the FACT Act. See, e.g., U.S.

Gov’t Accountability Office, GAO-06-644, Homeland Security: Management and Coordination

Problems Increase the Vulnerability of U.S. Agriculture to Foreign Pests and Disease 33 (May

19, 2006) (“2006 GAO Report”) available at http://www.gao.gov/assets/260/250156.pdf

(“APHIS does not know whether inspections of international airline passengers and commercial

aircraft, vessels, trucks, and railroad cars are being funded by revenue from the appropriate user


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fee.”); Air Transport Association, Comment Letter on Proposed Rule on Agricultural Inspection

and AQI User Fees Along the U.S./Canada Border, Dkt. No. APHIS-2006-0096 (Nov. 21, 2006)

at 2, available at https://www.regulations.gov/document?D=APHIS-2006-0096-0067 (“The

interim rule contains no detail as to how the direct costs of performing the inspections are

determined. In fact, there is evidence APHIS may not even know what those costs are.”).

69. Since the FACT Act’s passage, APHIS has periodically promulgated rules

changing the fees charged to AQI user classes. But APHIS has never provided what the FACT

Act requires: data substantiating that “the amount of the fees is commensurate with the costs of

[AQI] services with respect to the class of persons or entities paying the fees.” 21 U.S.C.

§ 136a(a)(2). Nor has the agency satisfied the APA, because the data it has provided in every

rule—including the Challenged Rules at issue here—have been woefully insufficient to justify

the fees and so lacking in detail as to deprive stakeholders of a meaningful opportunity to offer

analysis or comment. In the case of the 2006 Rsule, only the most cursory data was provided,

and for the 2015 Rule, APHIS withheld the key documents undergirding Grant Thornton’s ABC

model, despite APHIS’s repeated insistence that the ABC model was the method by which it

ensured no user was double charged and no fees were cross-subsidized. See 2015 Rule, 80 Fed.

Reg. at 66,748 (“The use of activity based costing (ABC) methodology in establishing fees

ensures that no cost is double counted.”).

70. In 1992, APHIS reduced the fees charged for each arriving international air

passengers, but provided no data in that rulemaking justifying the fee change or amounts. See

User Fees—Agricultural Quarantine and Inspection Services, 57 Fed. Reg. 62,468, 62,469-71

(Dec. 31, 1992) (to be codified at 7 C.F.R. pt. 354). And a 1999 regulation set fees on an

increasing schedule for future years without explaining how the escalating fees were connected


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to inspection costs. The agency merely cited its desire to increase its “reserve.” See User Fees;

Agricultural Quarantine and Inspection Services, 64 Fed. Reg. 62,089, 62,090 (Nov. 16, 1999)

(to be codified at 7 C.F.R. pt. 354).

III. The 2004 “Interim Rule” and GAO’s Criticism

71. APHIS continued its pattern of imposing unexplained AQI fees in December

2004, when it increased commercial aircraft fees from $65.25 to $70.00 for fiscal year 2005,

with fees set to increase incrementally from there up to $70.75 by 2009. See 2004 Interim Rule,

69 Fed. Reg. at 71,674. Though the “interim rule” noted that APHIS’s and CBP’s costs had

increased since September 11, 2001, the document provided only the highest level figures to

justify this fee increase—i.e., estimates for aggregate annual costs of inspecting all commercial

aircraft. See, e.g., id. at 71,665. The “interim rule” also did not explain why it imposed both a

commercial aircraft fee and a passenger fee on arriving passenger flights, in violation of the

FACT Act’s prohibition on such “double charging.” The 2004 rulemaking also noted that it

elevated fees in order to maintain a reserve of “25 percent of AQI program costs.” Id. at 71,662;

see also id. at 71,664 (“We need to maintain a reasonable reserve balance in the AQI account of

25 percent of the AQI program costs. We are including a reserve-building component in the user

fees for each activity for FYs 2005 through 2010.”). Nowhere in the 2004 “interim rule” did

APHIS explain how it justified increasing fees to include this “reserve-building component,”

when its authority to maintain a reserve lapsed after 2002.

72. These significant omissions of reasoning and data were compounded by the fact

that the “interim rule” was passed on an “emergency” basis, after providing stakeholders only

three weeks for comment. Id. at 71,674. After this truncated rulemaking, APHIS received many

comments from air carriers and other industry parties regarding its improper procedure. As one

commenter put it, “There is no compelling reason why the Department of Agriculture could not


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have engaged in a public, deliberative process before imposing an increase in the AQI fees on

airlines and passengers . . . .” Airports Council Int’l, Comment Letter on Proposed Rule

Regarding User Fees for Agricultural Quarantine and Inspection Services (Feb. 7, 2005).

73. While this “interim rule” was in effect, GAO issued a blistering report detailing

APHIS’s and CBP’s years-long pattern of lackadaisical or even non-existent accounting. See

2006 GAO Report. Because the agencies failed to keep even minimally adequate data tying fee

levels to inspection costs for each user class, the GAO concluded the AQI fee schedules likely

ran afoul of the FACT Act, particularly its prohibition on cross-subsidization. Id. at 33 (“[A]

senior APHIS budget official told us that [AQI] cost information [provided by CBP] was not

helpful to APHIS for reviewing the user-fee type rates because they needed the breakdown of

actual costs by user-fee type and because APHIS could not determine if the costs were

accurate.”); see also id. (“Until CBP’s financial management system can provide actual costs by

activity and AQI user-fee type, APHIS will not be able to accurately determine the extent to

which the user fees need to be revised.”). According to the GAO, “APHIS does not know

whether inspections of international airline passengers and commercial aircraft, vessels, trucks,

and railroad cars are being funded by revenue from the appropriate user fee.” Id. In other

words, it was impossible to tell from the data APHIS and CBP maintained whether the AQI

program and the fees set in the “interim rule” complied with the FACT Act’s prohibition on

cross-subsidization.

IV. The 2006 Rule Makes Permanent The Unexplained And Unsupported Fee Increases Of The Emergency “Interim Rule”

74. APHIS did not improve its practices in response to GAO’s criticism or the

industry’s repeated complaints—instead, it doubled down by issuing the 2006 Rule, which it

styled as an “[a]ffirmation of interim rule as final rule.” User Fees for Agricultural Quarantine


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and Inspection Services, 2006 Rule, 71 Fed. Reg. at 49,984 (Aug. 24, 2006). This three-page

rule offered no user-level data, totally ignored the GAO’s criticisms, and only responded in

cursory fashion to the many comments APHIS had received from industry since the “interim

rule” had been passed. For instance, one commenter observed, along the same lines as the GAO

Report, that “it was difficult to evaluate the justifications for the increases in fees presented in

the supplementary information section of the . . . interim rule because there was an insufficient

level of detail regarding direct and distributable costs and their allocation.” Id. at 49,985.

APHIS responded by noting that the “interim rule” had provided “in tabular form . . . our

projected costs for fiscal years 2005 through 2010.” Id. But, as the GAO Report indicated, such

high-level data is inadequate, because it does not “provide actual costs by activity and AQI user-

fee type,” without which “APHIS does not know whether inspections . . . are being funded by

revenue from the appropriate user fee.” 2006 GAO Report at 33. Grant Thornton came to the

same conclusion in a 2011 Report. See 2011 Grant Thornton Report at 11 (noting data used to

support 2006 Rule “does not demonstrate what kind of work is being done, the output it

contributes to, or the fee category where it should be covered”).

75. The 2006 Rule also expressly affirmed APHIS’s practice of increasing user fees

in order to “maintain[] a 25-percent reserve in the AQI account for each service category.” 2006

Rule, 71 Fed. Reg. at 49,985.

V. APHIS Is Repeatedly Criticized For Its Use Of Truncated Rulemakings And Its Inadequate Explanations Of User Fees

76. The day after it issued the 2006 Rule, APHIS issued another “interim rule”

designed to increase its revenue by eliminating a then-existing AQI exemption for flights and air

passengers arriving from Canada. See Agricultural Inspection and AQI User Fees Along the

U.S./Canada Border, Interim Rule, 71 Fed. Reg. 50,34 (Aug. 25, 2006) (“2006 Interim Rule”)


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(to be codified at 7 C.F.R. pts. 319 & 354). APHIS did not respond substantively to numerous

industry comments and objections, but instead proceeded to remove the U.S./Canada flight

exemption beginning in 2007. Agricultural Inspection and AQI User Fees Along the

U.S./Canada Border, 71 Fed. Reg. 67,436 (Nov. 22, 2006). More troubling, the cost data APHIS

cited in this interim rulemaking—which suggested that the annual cost of an airport-based AQI

inspector was $708,000, or approximately 5 times that of a land-based inspector, see Agricultural

Inspection and AQI User Fees Along the U.S./Canada Border, Preliminary Economic Analysis

for Significant Rulemaking and Initial Regulatory Flexibility Analysis, Dkt. No. APHIS-2006-

096 (Aug. 10, 2006)—appears to have drastically exaggerated the actual cost of these inspectors

based both on public salary data and information made public in the final regulatory analysis to

the 2015 Rule. See U.S. Dep’t of Agric., Regulatory Impact Analysis and Final Regulatory

Flexibility Analysis (“2015 RIA”) (Aug. 2015) at 15-17.

77. These oversights and omissions did not go unnoticed by the AQI program’s

overseers. In 2007, the Department of Homeland Security Office of the Inspector General found

significant inaccuracies in the data used to track agricultural inspection activities. Dep’t of

Homeland Security, Office of Inspector General, OIG-07-32, Review of Customs and Border

Protection’s Agricultural Inspection Activities 1 (Feb. 21, 2007) (“OIG-07-32”) available at

https://www.oig.dhs.gov/assets/Mgmt/OIG_07-32_Feb07.pdf. That same year, the GAO

recommended in a report on air passenger inspection fees that APHIS “make information on the

estimated cost of inspections as well as the basis for these cost estimates readily available to

affected parties to improve transparency and credibility.” U.S. Gov’t Accountability Office,

GAO-07-1131, Federal User Fees: Key Aspects of International Air Passenger Inspection Fees

Should Be Addressed Regardless of Whether Fees are Consolidated 36 (Sept. 24, 2007) (GAO-


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07-1131), available at https://www.gao.gov/assets/270/267175.pdf. And in 2008, the GAO

reiterated its complaints in a report tellingly entitled “Substantive Reviews Needed to Align Port-

Related Fees with the Programs They Support,” U.S. Gov’t Accountability Office GAO-08-321,

Homeland Security: Management and Coordination Problems Increase the Vulnerability of U.S.

Agriculture to Foreign Pests and Disease (Feb. 22, 2008) available at

http://www.gao.gov/assets/280/272556.pdf. The report’s recommendation to the Secretary of

Agriculture could not have been clearer: “Improve the transparency of the regulatory process of

setting AQI fee rates by providing clearer information about how the rates for each of the fee

types (vessel, air passenger aircraft, etc.) are determined.” Id. at 39.

78. Yet even this pointed recommendation went unheeded. The following year,

APHIS issued another interim rule—again, on an “emergency” basis—that proposed to increase

AQI user fees for passengers and aircraft ten percent across the board, without providing data to

support this proposed fee increase. See generally User Fees for Agricultural Quarantine and

Inspection Services, Interim Rule, 74 Fed. Reg. 49,311 (Sept. 28, 2009) (to be codified at 7

C.F.R. pt. 354). The agency chose an interim rule procedure—which effectively bypassed a

meaningful opportunity for notice and comment—despite the fact that the GAO had criticized it

for this very practice. See GAO-07-1131 at 23-24 (“APHIS’s use of the ‘good cause’

exemptions to issue interim final rules limits stakeholder input. . . . When agencies do not

effectively communicate their analysis and results, they miss the opportunity to obtain

meaningful comments that could affect the outcome of their regulatory changes.”). In the wake

of comments and complaints from the industry about the lack of transparency and hard data,

APHIS eventually “withdrew that interim rule before it became effective in order to explore

other regulatory alternatives.” User Fees for Agricultural Quarantine and Inspection Services,


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Proposed Rule, 79 Fed. Reg. 22,895, 22,896 (Apr. 25, 2014) (to be codified at 7 C.F.R. pt. 354)

(“2014 Proposed Rule”).

79. In 2012, the GAO undertook a more thorough critique of APHIS’s and CBP’s

AQI accounting. The 2012 GAO report reiterated that “data quality is an ongoing issue within

the AQI data systems, including the Work Accomplishment Data System (WADS)—the primary

repository for arrival, inspection, and interception data.” U.S. Gov’t Accountability Office,

GAO-12-885, Homeland Security: Agriculture Inspection Program Has Made Some

Improvements, But Management Challenges Persist 20 (Sept. 27, 2012) (“GAO-12-885”)

available at http://www.gao.gov/assets/650/648921.pdf. According to the GAO, data collection

was afflicted by “transcription errors” affecting data reliability at nearly half of the ports

reviewed, which led to “data that were overreported or had not been recorded.” Id. The process

did not accurately measure the costs of inspection; at best, it detected “only unusually large

changes at a port.” Id. The data accordingly “is not a representation of the total number of

agricultural inspections carried out at ports and cannot be used to analyze the number of

agricultural inspections conducted.” Id. at 21 (emphasis added). “Without reliable data on work

activities,” the GAO continued, “AQI program officials cannot be assured that they have the

information they need to manage the program.” Id. at 22. The GAO’s ultimate conclusions were

harsh: It found that “potential weaknesses exist at several places in the data collection process,”

id. at 40, and that these flaws “have the potential to affect . . . the effort to analyze the

structure and amounts of the AQI user fees,” id. at 22 (emphasis added). The Department of

Agriculture’s own Inspector General found the total WADS data error rate to be approximately

63 percent, with one port reviewed reaching an error rate of 96 percent. OIG-07-32 at 45 (App.

F). Yet the subsequent 2015 Rule explicitly relied on WADS data, with no discussion of these


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longstanding and pervasive problems. See 2015 Rule, 80 Fed. Reg. at 66,762.

80. In 2013, the GAO issued its third report focused solely on problems with

APHIS’s fee-setting. The GAO again emphasized that “data quality is an ongoing issue with the

AQI data systems, including the Work Accomplishment Data System (WADS).” U.S. Gov’t

Accountability Office, GAO-13-268, Agricultural Quarantine Inspection Fees: Major Changes

Needed to Align Fee Revenues with Program Costs 8 (Mar. 1, 2013) (“GAO-13-268”), available

at http://www.gao.gov/assets/660/652555.pdf. The GAO noted that APHIS’s own consultant

(Grant Thornton, who APHIS has engaged to assist with the fee calculations and

recommendations since 2010) had “inquired about potential data quality issues,” but that its

analysis ultimately “assumed the accuracy of the data provided from both APHIS and CBP.” Id.

at 8 & n.14.

VI. APHIS Proposes Its Most Dramatic Aircraft Fee Increase Ever In 2014

81. In April 2014, APHIS issued a Proposed Rule that greatly increased the fees

charged to commercial airlines and some other users, while reducing fees for some users. 2014

Proposed Rule, 79 Fed. Reg. at 22,895. In total, APHIS estimated that its proposed rule would

increase annual fee collections by $94.5 million. Id. at 22,904.

82. Major increases included: a 218 percent increase for commercial aircraft, a 71

percent increase for maritime cargo vessels, a 74 percent increase for commercial rail cargo, and

a brand new fee for cruise passengers. Id. at 22,901-02. The proposed rule also added a $375

fee for cargo “treatment.” Id. at 22,900-03. At the same time, APHIS issued a concurrent

proposed rule announcing an increase in the fees for AQI overtime services. See Fee Increases

for Overtime Services, 79 Fed. Reg. 22,887 (Apr. 25, 2014) (to be codified at 7 C.F.R. pt. 354, 9

C.F.R. pts. 97 & 130).

83. The Proposed Rule set forth APHIS’s desire to more than triple the fee for


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inspecting “commercial aircraft” from $70.75 to $225. 2014 Proposed Rule, 79 Fed. Reg. at

22,901. APHIS’s consultant, Grant Thornton—whose ABC cost accounting methodology

APHIS relied upon in issuing the Proposed Rule, see id. at 22,898—was the source of this $225

number. But the Grant Thornton report expressly concluded that the $225 fee on commercial

aircraft should be applied solely to “cargo only” aircraft, because the “cost of inspecting

passenger aircraft is included in the air passenger fee.” May 2012 Grant Thornton Report at 10.

Notwithstanding the consultant’s conclusion—and without explaining why the agency relied on

Grant Thornton’s ABC analysis to arrive at the $225 fee but then ignored its conclusions

regarding to whom the fee should apply—the Proposed Rule imposed the $225 aircraft

inspection fee on all commercial aircraft, both cargo-only aircraft and commercial (non-private)

passenger aircraft, regardless of aircraft type (i.e., size) and regardless of whether the aircraft is

carrying cargo to inspect. 2014 Proposed Rule, 79 Fed. Reg. at 22,901.

84. While APHIS proposed to increase the fees for commercial aircraft, it recognized

that airline passengers had been overcharged for years—APHIS had collected hundreds of

millions of dollars in fees above the cost of services provided to air passengers in 2010 and 2011

alone. See GAO-13-268, at 10 tbl. 1 (noting passenger-fee surplus of over $145 million for

Fiscal Year 2011); Grant Thornton, Agricultural Quarantine and Inspection Program: AQI Cost

Briefing 10 (May 1, 2013) (“2013 Grant Thornton Report”) (more than $134 million in Fiscal

Year 2010). Accordingly, APHIS proposed lowering the passenger fee from $5.00 to $4.00

because the “current fee was going to generate revenues in excess of what will be required to

support anticipated costs.” 2014 Proposed Rule, 79 Fed. Reg. at 22,901.

85. But APHIS did not disclose how it spent or otherwise disposed of the excess

passenger fee revenue collected in the past, or whether they were stored in a reserve fund


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dedicated to air passengers (or aircraft). Nor did APHIS credit the excess fees to air passengers

or commercial passenger aircraft operators. Indeed, if APHIS had credited excess funds

collected from air passengers to commercial aircraft inspections, there would be hundreds of

millions of dollars in the reserve account to pay for aircraft inspections. Cf. GAO-13-268, at 10

tbl. 1; 2013 Grant Thornton Report 10.

86. Even if this money did go into APHIS’s “reserve” account, it is impossible to

determine whether these hundreds of millions of dollars were spent consistent with the FACT

Act’s prohibition on cross-subsidization. In fact, APHIS has made contradictory statements over

time with respect to whether it treats the reserve as an all-purpose fund, or whether it separates

reserve funds by user class as the FACT Act requires. For instance, in one of its 2006

rulemakings, APHIS claimed, “Internal recordkeeping ensures that revenues received from air

passengers and each mode of transportation are properly recorded and utilized. While AQI

revenues all go into one AQI account, they are applied to specific activities. . . . Any excess

collections will be used to rebuild the AQI reserve balances for the various service categories.”

2006 Interim Rule, 71 Fed. Reg. at 50,324 (emphasis added). Yet in the lead-up to the 2015

Rule, APHIS Administrator Kevin Shea stated at a stakeholder meeting, “The fees are set by

mode, but the overall [reserve] account is not. So there is not a specific reserve account for

passengers versus cargo versus railcars. . . . All revenue is aggregated.” Final Transcript, AQI

Stakeholder Webinar, at 27 (Jan. 13, 2015), available at

https://www.aphis.usda.gov/import_export/plants/plant_imports/aqi/downloads/transcript.pdf.

And the 2015 Rule itself states that, prior to Grant Thornton’s application of the ABC

methodology, APHIS could not segregate reserve funds by user class—it did not have the data

necessary to do so. 2015 Rule, 80 Fed. Reg. at 66,762.


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87. The most proper use of this enormous sum of excess collections from air

passengers would have been to put it towards what the FACT Act requires passenger fees (in

part) should cover: “the costs of related inspections of the aircraft.” 21 U.S.C. § 136a(a)(2). But

APHIS decided instead in the Proposed Rule to increase its already unlawful double charge on

commercial aircraft. The Proposed Rule more than tripled the separate fee charged to

commercial aircraft (both passenger and all-cargo) on top of the passenger fee, despite its lack of

statutory authority and despite the fact that no other mode of transportation had ever been

charged a separate passenger and vessel fee. Indeed, for another mode of transportation—cruise

ships—APHIS acknowledged that “[c]onsistent with our AQI fee authority, the costs of

inspecting the cruise ships themselves would be covered by the proposed sea passenger fee rather

than a separate fee.” 2014 Proposed Rule, 79 Fed. Reg. at 22,902. Yet APHIS failed to adhere

to its statutory mandate for commercial passenger aircraft, with no explanation for this disparate

treatment.

88. Notably, a new fee for cruise passengers was instituted to cover both “inspection

of passenger baggage” and “inspection of the vessel itself,” including “inspecting the ship’s

stores to ensure prohibited items are not present or are properly safeguarded.” Id. APHIS

decided not to charge cruise ship operators a separate vessel fee, in a telling passage:

Consistent with our AQI fee authority, the costs of inspecting the cruise ships themselves would be covered by the proposed sea passenger fee rather than a separate fee similar to the commercial maritime cargo vessel fee, just as the international air passenger user fee covers the costs associated with inspecting the aircraft on which they arrived.”

Id. (emphasis added). Incredibly, this quote acknowledges that the FACT Act prohibits charging

a separate aircraft fee for passenger aircraft, and disclaims that the agency would do such a

thing—but this very same document does exactly that. Id. at 22,901. In other words, even

though it expressly recognized the statute’s command that passenger fees cover the cost of


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related inspections of the aircraft, see id. at 22,896, APHIS nevertheless imposed an aircraft fee

on commercial aircraft carrying passengers. And the agency made absolutely no effort to justify

treating cruise ships more favorably than commercial aircraft. This is the very antithesis of

reasoned decisionmaking. See Westar Energy, Inc. v. FERC, 473 F.3d 1239, 1241 (D.C. Cir.

2007) (“A fundamental norm of administrative procedure requires an agency to treat like cases

alike.”).

89. Moreover, APHIS decided to forgo fees entirely for a variety of users receiving

inspection services, including bus passengers and private aircraft, denying itself $244 million in

revenue. 2014 Proposed Rule, 79 Fed. Reg. at 22,903. APHIS covered that shortfall in part by

fees collected from other user types, in direct violation of the FACT Act. See 2015 RIA at 27

(“AQI services received by classes that do not pay user fees are covered through appropriated

funding or a portion of user fees otherwise collected.” (emphasis added)). That is, the Proposed

Rule’s own Regulatory Impact Analysis expressly admits APHIS engaged in prohibited cross-

subsidization, and the Proposed Rule (as well as the 2015 Rule that enacted it) demonstrate the

agency’s intent to continue this unlawful practice.

90. Moreover, APHIS proposed additional fees beyond its asserted costs of services

to “generate revenue to replenish the AQI account reserve.” 2014 Proposed Rule, 79 Fed. Reg.

at 22,900. As APHIS had over-collected from commercial air by at least hundreds of millions of

dollars, the need for reserves for those inspections is highly suspect. The agency also claimed it

was rounding each fee to the nearest $1 or $25 increment depending on the applicable fee,

justifying the rounding based on the “flexibility” allowed for by the reserve. Id. But, as noted

above, APHIS’s statutory authority to impose such a reserve surcharge lapsed in 2002. See 21

U.S.C. § 136a(a)(1)(C).


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VII. The Industry Comments On APHIS’s Proposed Tripling Of The Commercial Aircraft AQI Fee

91. APHIS received over 200 comments from surprised and confused stakeholders

questioning the fee hikes outlined in the Proposed Rule. Many affected industries raised

questions, from airlines to cruise lines to flower importers. Many comments noted that the sharp

fee increases would be difficult for many industries to handle and requested additional data so

the fees could be understood.

92. Plaintiffs and their trade associations submitted comments. For instance, the Air

Transport Association (also known as “Airlines for America,” or “A4A”), an association of

commercial airlines of which several Plaintiffs are members, submitted comments on the

Proposed Rule on June 24, 2014. The association informed APHIS that the duplicative fees were

unauthorized, that the proposed commercial aircraft fee was excessive and unsupported by

APHIS’s purported analysis, that the proposed fee structure cross-subsidizes certain industries

and AQI-service users, that it double-charges passengers and carriers for the same services, that

APHIS failed to provide the data it used in its fee calculations to interested parties and that its

analysis and explanation was inadequate. See Comments of Airlines for America, User Fees

Agricultural Quarantine and Inspection Services, Dkt. No. APHIS-2013-0021 (June 24, 2014)

available at https://www.regulations.gov/document?D=APHIS-2013-0021-0119.

93. A4A and other commentators requested data to understand APHIS’s Proposed

Rule, but no additional data were provided until the rule was made final, and even those data,

like the little information provided in the Proposed Rule, were so aggregated and inconsistent as

to be almost useless. Specifically, A4A requested several types of data in its June 24, 2014

comment letter, including: the data showing what actually drove the inspection costs that

underpin the ABC methodology; data on the costs of inspecting each area of an aircraft,


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including passenger baggage and the cargo hold; and APHIS’s data on the number of AQI

inspections and arriving flights. As discussed below, the key data—Grant Thornton’s fee

modeling documentation for its ABC analysis—were not revealed until A4A filed suit; once

revealed that information confirmed that APHIS had ignored Grant Thornton’s model, which

specificallt attributed the cost of inspecting passenger aircraft to the air passenger fee, not the

commercial aircraft fee.

94. Other stakeholders submitted similar comments, including:

a. Comments co-signed by two dozen industry groups. including the

American Trucking Association and Cruise Lines International Association, noting that “the

agency has not yet conducted a sufficiently rigorous and transparent process to determine

whether ABC is the most appropriate costing methodology and has not provided detailed cost

information to give stakeholders a meaningful opportunity to comment.” Comment Letter from

Various Industry Stakeholders, User Fees for Agricultural Quarantine Inspection Services, Dkt.

No. APHIS-2013-0021, at 2 (July 24, 2014) available at

https://www.regulations.gov/document?D=APHIS-2013-0021-0236. The industry groups also

wrote that even though they had “requested additional information to allow us to better analyze

the AQI rulemaking . . . APHIS has not yet made this additional data available.” Id. at 3.

b. China Airlines Ltd. commented that “the proposed rule does not provide

any reasoned justification for this huge three-fold increase in the ‘commercial aircraft’ inspection

fees” and echoed Plaintiff’s sentiment that “conclusory assertions such as [APHIS’s statement

that the increase is needed to ‘more accurately align the fee with the actual cost’ of inspection]

are not enough to justify such a massive fee increase.” China Airlines, Comments Letter on

Proposed Rule, User Fees for Agricultural Quarantine Inspection Services, Dkt. No. APHIS-


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2013-0021, at 2 (June 24, 2014) available at https://www.regulations.gov/document?D=APHIS-

2013-0021-0127.

c. Three Plaintiffs that are major U.S. airlines commented that the “public’s

ability to fully engage in notice and comment in this matter is constrained by the dated, highly

aggregated and incomplete information APHIS has thus far provided in the docket.” United

Airlines, American Airlines, and Delta Air Lines, Comment on Proposed Rule, User Fees for

Agricultural Quarantine Inspection Services, Dkt. No. APHIS-2013-0021, at 8 (July 24, 2014)

available at https://www.regulations.gov/document?D=APHIS-2013-0021-0231.

d. A4A also submitted a letter to the Secretary of Agriculture observing that

“air passenger flights are the only type of AQI user for which APHIS proposes a fee both on the

passenger and on the mode,” resulting in “double taxation” that is “unjustified.” Letter from

Airlines for America to Sec. Thomas J. Vilsack, at 2 (Oct. 15, 2015).

VIII. APHIS Promulgates The 2015 Rule, Ignoring Key Deficiencies Raised In Comment Letters

95. APHIS’s 2015 Rule and its regulatory analysis provided only a sliver of the

information stakeholders requested and made negligible changes to the proposed fees. APHIS

described its inspection activities at length, but provided few numbers to substantiate and

quantify costs or demonstrate how they were assigned. APHIS’s fees are charged in dollars and

cents—stakeholders need numbers to understand how APHIS and CBP costs translate into AQI

fees. The Final Regulatory Impact Analysis, for example, asserts for commercial aircraft CBP

total costs of $103,225,589 for FY 2012, breaking down only “imputed” and “support” costs, but

with no further detail. 2015 RIA at 17 tbl. 6.

96. Most importantly, APHIS justified its imposition of a charge on both air

passengers and the commercial aircraft on which they arrived by simply asserting that “[b]ased


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on our ABC analysis, we determined that the air passenger fee is not adequate to recover all the

costs we incur in inspecting both passengers and aircraft.” 2015 Rule, 80 Fed. Reg. at 66,769.

But this is simply false: Grant Thornton’s analysis was APHIS’s ABC analysis—after all, the

agency adopted the consultant’s recommendation for a $225 commercial aircraft fee and a $4 air

passenger fee1—and Grant Thornton attributed costs of inspecting passenger aircraft to the air

passenger fee. In the user fee cost model Grant Thornton used to calculate the air passenger fee

(withheld from the public until the related district court litigation), passenger aircraft inspection

costs are clearly included as a cost—meaning that the final fee amount for air passengers was set

at a level that would cover passenger aircraft inspections. See cost model documentation:

AR656-52992 (data file of “fee cost model” for “Air Passengers”); AR3083 (listing “Prog

Passenger Aircraft” and “CBP08 (“Passenger Acft Inspection”) as cost inputs). By contrast, the

user fee cost model for the commercial aircraft fee does not contain the “Prog Passenger

Aircraft” costs, nor any other reference to passenger aircraft inspection—the only aircraft

inspections it mentions are “Air Cargo.” See generally AR5300-6866. This is consistent with

Grant Thornton’s final report, which noted, when explaining the proposed fee schedule changes,

that the new, tripled commercial aircraft fee “now applies only to cargo aircraft because the cost

of inspecting passenger aircraft is included in the air passenger fee.” May 2012 Grant Thornton

Report at 10.

97. Thus, APHIS’s claim that under its model the $225 commercial aircraft fee had to

1 The final air passenger fee was eventually set at $3.96, which was reduced “due to the change in [APHIS’s] methodology for calculating the reserve,” not due to any alteration to Grant Thornton’s ABC analysis. 2015 Rule, 80 Fed. Reg. at 66,769. 2 Citations to the “AR” are to the Administrative Record agreed upon and filed by the parties in Air Transp. Ass’n of Am. v. United States Dep’t of Agric., No. 1:16-cv-00919-RMC (D.D.C.) on September 16, 2016 at dkt. 19.2.


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be imposed on passenger aircraft is directly contrary to the assumptions and data that led to the

$225 fee Grant Thornton recommended. This utter failure to adhere to the assumptions of its

own ABC model and impose a fee on hundreds of thousands more flights than the model

directed was not only contrary to the FACT Act’s plain language—it was utterly irrational. See

Columbia Falls Aluminum Co. v. EPA, 139 F.3d 914, 923 (D.C. Cir. 1998) (“An agency’s use of

a model is arbitrary if that model ‘bears no rational relationship to the reality it purports to

represent.’” (quoting Am. Iron & Steel Inst. v. EPA, 115 F.3d 979, 1005 (D.C. Cir. 1997))

98. APHIS did not address the many concerns raised by commenters about its lack of

data, and it added nothing to the docket after the comments period closed other than the

Regulatory Flexibility Analysis required by the APA, see 5 U.S.C. § 603—filed only when the

rule was made final, despite the fact that its data dated from 2010 to 2012. Nor did it release the

cost model documentation on which Grant Thornton relied—the very documentation that belied

APHIS’s assertion that the $225 fee should apply to passenger aircraft—until it was required to

by litigation, more than a year after the Final Rule was promulgated. This failure to engage in a

transparent process prejudiced Plaintiffs and other stakeholders who, if armed with the requisite

information, could have pointed out these basic flaws in APHIS’s methodology.

99. Instead of releasing this key information, APHIS merely responded with vague

and unsupported assurances that “[u]ser fees charged to one class of users will not be used to

subsidize inspections of another class of users,” and that “cost accounting principles ensure[] that

costs are aligned with activities that generate those costs and that costs can only be counted

once.” 2015 Rule, 80 Fed. Reg. at 66,752. Repeatedly, the 2015 Rule pointed to the ABC model

as unimpeachable, confidently asserting that “[t]he use of activity based costing (ABC)

methodology in establishing fees ensures that no cost is double counted.” Id. at 66,748. But that


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model produced a $225 commercial aircraft fee based on the assumption that it would apply only

to “cargo only” aircraft, because “the air passenger fee reflects the inclusion of costs related to

inspecting passenger aircraft.” May 2012 Grant Thornton Report 10 (emphasis added).

100. The 2015 Rule took effect on December 28, 2015, and is codified at 7 C.F.R.

§ 354. Plaintiffs have been paying these increased fees since they took effect.

VIOLATIONS OF LAW

I. The Fees Imposed By The 2006 And 2015 Rules Violate The FACT Act and the APA

A. The Challenged Rules Impose an Unlawful Duplicative Commercial Aircraft Fee

101. The Challenged Rules violate federal law by charging both a fee to air passengers

and a duplicative fee to commercial air carriers for inspections of the same aircraft. As APHIS

itself has acknowledged, the FACT Act requires that “[t]he costs of the services with respect to

passengers as a class includes the costs of related inspections of the aircraft or other vehicle.” 21

U.S.C. § 136a(a)(2); see also 2014 Proposed Rule, 79 Fed. Reg. at 22,902 (“Consistent with our

AQI fee authority, the costs of inspecting the cruise ships themselves would be covered by the

proposed sea passenger fee rather than a separate fee similar to the commercial maritime cargo

vessel fee, just as the international air passenger user fee covers the costs associated with

inspecting the aircraft on which they arrived.” (emphasis added)). The 2015 Rule, however,

charges a $225 commercial aircraft fee in addition to the $4.00 per passenger fee for every

passenger flight, regardless of whether the flight actually carries cargo. See 2015 Rule, 80 Fed.

Reg. at 66,753 n.2; id. at 66,755-57. And the 2006 Rule charged each arriving commercial

passenger flight between $70 and $71 per flight, while simultaneously charging each passenger

$5.00. See 2004 Interim Rule, 69 Fed. Reg. at 71,667-73.

102. The FACT Act’s command is clear: “[T]he Secretary shall ensure that the


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amount of [AQI] fees is commensurate with the costs of agriculture quarantine and inspection

services with respect to the class of persons or entities paying the fees. The costs of the services

with respect to passengers as a class includes the costs of related inspections of the aircraft or

other vehicle.” § 136a(a)(2). That language limits APHIS’s fee authority in several important

respects. First, any imposed fees for AQI inspections must be no higher than (“commensurate

with”) the costs of those services. Second, in the particular case of a vehicle carrying passengers

charged a passenger fee, the costs of the services include both the costs of inspecting passengers

and the costs of “related inspections of the aircraft or other vehicle.” Id. Thus, when APHIS

decides to charge a fee to a class of passengers, that fee must be “commensurate” with the

amount it costs to inspect those passengers and the vehicle on which they arrived.

103. Moreover, the Challenged Rules’ imposition of the double charge was contrary to

the evidence before APHIS. With respect to the 2006 Rule, APHIS provided no data supporting

its claim that charging a fee on air passengers and the commercial aircraft on which they arrived

was necessary. And for the 2015 Rule, there was concrete evidence the other way: The $225

commercial aircraft fee APHIS ultimately adopted came from Grant Thornton’s ABC analysis,

and Grant Thornton arrived at that number by assuming that passenger aircraft would not pay

the fee. APHIS adopted Grant Thornton’s bottom line conclusion, but utterly ignored the

consultant’s analysis about to whom the fee applies—with the ultimate effect being millions of

dollars in excess fees flowing to the agency. Whether APHIS deliberately ignored Grant

Thornton’s analysis or simply failed to read and understand its own fee model, this arbitrary and

capricious action must be set aside.

104. In its final report explaining the fee levels APHIS ultimately adopted, Grant

Thornton stated with no ambiguity that aircraft carrying passengers should not be charged the


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commercial aircraft fee: “As required by the AQI fee authority legislation, the revised air

passenger fee includes the cost of inspecting passenger aircraft.” May 2012 Grant Thornton

Report at 10. Indeed, when describing the “significant changes” to the fees, Grant Thornton

specifically noted that, unlike under APHIS’s old regime, the new commercial aircraft fee “now

applies only to cargo aircraft because the cost of inspecting passenger aircraft is included in the

air passenger fee.” Id.; see also id. (describing commercial aircraft fee as “Commercial Air

(Cargo only)”).

105. This unambiguous conclusion is confirmed by Grant Thornton’s fee model

documentation, and by the cost outputs from the ABC analysis the consultant performed, neither

of which were made publicly available until the related district court litigation.3 In a March 2012

report, Grant Thornton described in greater detail the ABC model it used to calculate AQI user

fees. Animal and Plant Health Inspection Service: Agricultural Quarantine and Inspection

Program Cost Model Documentation (Mar. 30, 2012) (“March 2012 Grant Thornton Report”),

AR000432. A key part of the ABC process, according to this report, is tying APHIS’s and

CBP’s cost data to particular “programmatic outputs”—that is, activities the agencies

undertook—to “aggregate all AQI-identified costs into program level outputs for which a fee

might be charged.” Id. at 58. These outputs were then assigned to a particular fee schedule. For

example, Grant Thornton grouped all the costs associated with inspecting cruise vessels under

the “Prog Cruise Vessel” programmatic output, and assigned this output to the “Cruise Vessel

Pax” fee, consistent with APHIS’s eventual decision to set the cruise passenger fee at a level that

covered the costs of inspecting the cruise ships themselves. Id. at 63; see also 2015 Rule, 80

3 APHIS’s decision to withhold these key documents—which conclusively disprove the 2015 Rule’s claim that the air passenger fee did not cover the costs of inspecting passenger aircraft—constitutes an independent APA violation, which is discussed in Section IV.A, infra.


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Fed. Reg. at 66,749 (noting the cost of inspecting cruise ships would be paid for by the cruise

passenger fee).

106. The programmatic output for passenger aircraft was denominated “Prog

Passenger Aircraft.” March 2012 Grant Thornton Report 58. After noting that passenger aircraft

inspections were “currently charged” to the commercial aircraft fee, id.; see also id. at 137, Grant

Thornton developed a number of alternative “scenarios”—redesigned fee structures. In every

scenario the fee model document described, the costs of inspecting passenger aircraft were

assigned to the air passenger fee:

Id. at 61; see also id. at 62 (showing same breakdown for “Scenario 8,” the only other scenario

described). Grant Thornton likely made this change because it was “required by the AQI fee

authority legislation.” May 2012 Grant Thornton Report at 10. Whatever the reason, Grant

Thornton’s fee model shows that it assigned the costs of inspecting passenger aircraft to the air

passenger fee calculation. This is why, in its final report describing its ultimate fee

recommendations, Grant Thornton said “the revised air passenger fee includes the cost of

inspecting passenger aircraft.” Id.

107. The actual ABC analysis Grant Thornton performed—which also was not

released until more than a year after the rulemaking—confirms this conclusion. In the user fee

cost model Grant Thornton used to calculate the air passenger fee, passenger aircraft inspection


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costs are clearly included as a cost—meaning that the final fee amount for air passengers was set

at a level that would cover passenger aircraft inspections. See cost model documentation:

AR656-5299 (data file of “fee cost model” for “Air Passengers”); AR3083 (listing “Prog

Passenger Aircraft” and “CBP08 (“Passenger Acft Inspection”) as cost inputs). By contrast, the

user fee cost model for the commercial aircraft fee does not contain the “Prog Passenger

Aircraft” costs, nor any other reference to passenger aircraft inspection—the only aircraft

inspections it mentions are “Air Cargo.” See generally AR5300-6866. This is consistent with

Grant Thornton’s final report, which noted, when explaining the proposed fee schedule changes,

that the new, tripled commercial aircraft fee “now applies only to cargo aircraft because the cost

of inspecting passenger aircraft is included in the air passenger fee.” May 2012 Grant Thornton

Report at 10.

108. This analysis cannot be reconciled with the 2015 Rule’s statement that, “[b]ased

on our ABC analysis, we determined that the air passenger fee is not adequate to recover all the

costs we incur in inspecting both passengers and aircraft.” 80 Fed. Reg. at 66,769. Grant

Thornton’s ABC analysis was APHIS’s ABC analysis—the agency never suggests otherwise—

and the Final Rule adopted the commercial aircraft and air passenger fees in the Grant Thornton

report. Thus, APHIS’s ABC model did generate an air passenger fee high enough to pay for

passenger aircraft inspections, and a commercial aircraft fee set to cover the costs of inspecting

cargo only aircraft. “Because its justifications for the final rule contradict earlier findings,

[APHIS] must provide some reasoning to explain why its final decision runs counter to the

evidence before the agency.” U.S. Sugar Corp. v. EPA, 830 F.3d 579, 650 (D.C. Cir. 2016)

(internal quotation marks omitted). The agency’s failure to do so confirms the unlawfulness of

its action.


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109. APHIS’s decision to double charge commercial passenger aircraft thus violates

not only the FACT Act but also the APA’s fundamental requirement that an agency employ a

rulemaking “process” that is “logical and rational.” Allentown Mack Sales & Serv., Inc. v.

NLRB, 522 U.S. 359, 374 (1998). By adopting the exact commercial aircraft fee Grant Thornton

proposed and ignoring (indeed, never mentioning) that the fee was designed not to be applied to

passenger aircraft, APHIS acted arbitrarily, irrationally, and in violation of applicable law.

B. The Challenged Rules Violate the FACT Act’s Plain Text by Imposing a Reserve Surcharge

110. As described above, every collection of a commercial aircraft fee from aircraft

carrying passengers who pay the air passenger fee is precluded by the FACT Act and all of the

evidence before APHIS. But separate and apart from that, Defendant has overcharged Plaintiffs

every day for years via another unlawful fee: the “reserve” surcharge it imposes on every

arriving flight. Under the 2006 Rule, Plaintiffs were charged 25% above the cost of inspecting

each flight to fund APHIS’s reserve account—that is, approximately $14 per flight. See 2006

Rule, 71 Fed. Reg. at 49,985. Under the 2015 Rule, instead of doing a percentage-based

surcharge, APHIS simply used a “rounding approach,” under which it rounded the commercial

aircraft fee up to $225 from some undisclosed lower amount that was as low as $200. See 2015

Rule, 80 Fed. Reg. at 66,753. Because the FACT Act makes explicit that APHIS was only

empowered to impose such heightened fees to fund its reserve “through fiscal year 2002,” each

collection made under the Challenged Rules has included an unlawful surcharge. Because these

collections were clearly precluded by statute, Defendant must remit them to Plaintiffs.

111. APHIS derives its authority to set AQI fees from § 136a(a)(1). As enacted in

1990, the FACT Act did provide, in general terms, that the agency could adjust fees to

“maintain[] a reasonable balance in the [AQI] Account.” Food, Agriculture, Conservation, and


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Trade Act of 1990, Pub. L. 101-624, § 2509, 104 Stat. 3359, 4070 (1990). But in a 1996

amendment, Congress modified § 136a(a)(1) to cabin APHIS’s fee-setting authority.

Specifically, Congress delineated three—and only three—purposes for which the agency can

“prescribe and collect fees”:

(A) to cover the costs of “providing [AQI] services in connection” with international arrivals

(B) “to cover the cost of administering this subsection;” and

(C) “through fiscal year 2002, to maintain a reasonable balance in the Agricultural Quarantine Inspection User Fee Account”

Federal Agriculture Improvement and Reform Act of 1996, Pub. L. 104-127, § 917, 110 Stat.

888, 1187 (1996) (emphasis added). This language remains in effect today. See 21 U.S.C.

§ 136a(a)(1).

112. The powers the statute grants APHIS are clear. Subsection (A) is the primary

grant of authority. It gives APHIS the power to collect fees to cover AQI inspection costs,

subject to the FACT Act’s substantive “limitations”—i.e., the prohibition on double charging

aircraft and passengers, and the requirement that fees charged to a class of users be

“commensurate” with the cost of inspecting that class. See id. § 136a(a)(2). Subsection (B) then

allows APHIS to account for not just on-the-ground inspection costs, but also the indirect costs

of administering the program. Finally, subsection (C) gives APHIS the authority to set user fees

at a level above costs, to allow the agency to keep a “reasonable balance” in its reserve—but

only through 2002.

113. Notably, Congress amended the FACT Act in 2002, but left the time limit in

subsection (C) untouched. See Farm Security and Rural Investment Act of 2002, Pub. L. 107-

171, § 10418(b)(5), 116 Stat. 134, 509. APHIS—and this Court—must respect Congress’s

decision to maintain this limit on APHIS’s reserve authority.


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114. Both of the Challenged Rules make clear that APHIS reads the statute as if the

words “through fiscal year 2002” were simply not there. The 2006 Rule brushes over the issue

entirely, never attempting to reconcile the 25% reserve surcharge with the FACT Act’s text. See,

e.g., 2006 Rule, 71 Fed. Reg. at 49,985. And while the 2015 Rule at least made an attempt to

justify its surcharge under the statute, APHIS cited the wrong statute—the 1990 prior version of

the FACT Act that did not have the 2002 limitation. See 80 Fed. Reg. at 66,748 (citing as

authority for charging a fee to maintain a “reasonable balance” in the reserve account Pub. L.

101-624, Section 2509 (1990)). As noted above, Congress amended the FACT Act in 1996, and

in doing so added the “through fiscal year 2002” limitation on APHIS’s reserve surcharge

authority. See Pub. L. 104-127, § 917, 110 Stat. 888, 1187 (1996). This is the version of the

statute that remains in effect today. See 21 U.S.C. § 136a(a)(1)(C). While APHIS may find it

inconvenient that it no longer can charge inflated fees, neither the FACT Act nor the APA

permits “interpretive gerrymanders under which an agency keeps parts of statutory context it

likes while throwing away parts it does not.” Michigan v. EPA, 135 S. Ct. 2699, 2708 (2015).

115. Not only does APHIS’s reading of § 136a(a)(1)(C) ignore key words—it also

renders the entire provision superfluous. Subsection (C) on its face grants APHIS a power that

lasted only through 2002. Reading another part of the statute as granting APHIS that same

power indefinitely would make subsection (C) meaningless. See TRW Inc. v. Andrews, 534 U.S.

19, 31 (2001) (“It is ‘a cardinal principle of statutory construction’ that ‘a statute ought, upon the

whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be

superfluous, void, or insignificant.’” (quoting Duncan v. Walker, 533 U.S. 163, 174 (2001)).

116. In any event, nowhere in either of the Challenged Rules nor anywhere else in the

rulemaking records does APHIS even attempt to point to another provision of law that grants the


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agency the power to charge a reserve surcharge. In fact, the only statute APHIS cites to justify

its reserve surcharge is the outdated version of the statute enacted in 1990, which did not contain

the 2002 limitation. See 2015 Final Rule, 80 Fed. Reg. at 66,748 (citing Pub. L. 101-624, §

2509, 104 Stat. 3359, 4069-73 (1990)). It thus appears APHIS was either simply unaware or

unwilling to acknowledge that the statute was amended in 1996 to revoke this reserve authority.

Whatever the reason, given that the Court must judge the agency’s action based on the

explanation the agency actually gave in the rulemaking, this absence of any reasoning—other

than a citation to an outdated statute—cannot justify the reserve surcharge. See Byers v. C.I.R.,

740 F.3d 668, 680 (D.C. Cir. 2014) (“Under the Chenery doctrine, a reviewing court must

confine itself to the grounds upon which the record discloses that the agency’s action was

based.” (citing SEC v. Chenery Corp., 332 U.S. 194, 196 (1947)).

117. Indeed, APHIS’s apparent ignorance of the FACT Act’s text is all the more

unreasonable given that commenters—including multiple Plaintiffs—alerted the agency to the

oversight during the rulemaking process. See, e.g., Comment of United Airlines, Delta Airlines,

and American Airlines (July 2014) (“It appears that APHIS’s explicit authority to collect

reserves expired a dozen years ago in 2002.”). But APHIS ignored this observation, and pointed

again to the wrong statute in the Final Rule. APHIS’s failure to address this material comment

was itself arbitrary and capricious. See La. Fed. Land Bank Ass’n, FLCA v. Farm Credit Admin.,

336 F.3d 1075, 1080 (D.C. Cir. 2003) (agency “must respond to those comments which, if true,

would require a change in the proposed rule” ( internal quotation marks, and alterations

omitted)).

118. Regardless of whether APHIS believes a reserve is necessary or helpful in

administering the AQI program, its continued imposition of a reserve surcharge violates


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§ 136a(a)(1)(C)’s express time limitation—and that statutory text trumps whatever policy goal

the agency may wish to pursue. See Util. Air Regulatory Grp. v. EPA, 134 S. Ct. 2427, 2446

(2014) (“The power of executing the laws necessarily includes both authority and responsibility

to resolve some questions left open by Congress that arise during the law’s administration. But it

does not include a power to revise clear statutory terms that turn out not to work in practice.”).

Because it turns a blind eye to unambiguous statutory text, construes the FACT Act to render an

important limitation superfluous, and ignores a material comment that clearly identified the

oversight, the Final Rule’s imposition of explicit surcharges to fund its reserve violates the

FACT Act and the APA

C. The Challenged Rules Impermissibly Cross-Subsidize Across AQI User Classes

119. In both Challenged Rules, APHIS violates the FACT Act’s command that the

AQI fee for each user class must be “commensurate” with the cost of inspecting that user class.

See 21 U.S.C. § 136a(a)(2). APHIS’s own data and statements show that AQI air passenger fees

cover APHIS’s and CBP’s costs of inspecting other user types. The FACT Act forbids this

cross-subsidization among user types and similarly prohibits charging for expenses outside of

those outlined in the Act.

120. As an initial matter, APHIS longstanding practices make clear that cross-

subsidization is a systemic problem in the agency’s operation of the AQI program. APHIS has

never provided public cash flow information or reserve levels showing how revenue generated

from carrier and passenger fees is spent. For example, according to the GAO, in Fiscal Year

2011, APHIS collected $433,679,205 in fees to cover $277,838,102 in costs for commercial

aircraft passengers—a surplus of over $145 million. GAO-13-268 at 10 tbl.1. In Fiscal Year

2010, APHIS overcharged air passengers by almost as much—$134,871,098. 2013 Grant

Thornton Report 10. APHIS has not accounted for the excess fees collected in either year or any


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of the years before or after those dates.

121. Further, APHIS admitted to these FACT Act violations in a presentation to

stakeholders on January 13, 2015. In that presentation, Defendant Kevin Shea acknowledged

that APHIS “could not operate this program” if passenger fees were lowered from five dollars to

four dollars immediately, even though the costs of inspecting the passengers and their aircraft

could be covered by the lower fee. Final Transcript, AQI Stakeholder Webinar, at 27 (Jan. 13,

2015). Shea thus confirmed that the additional revenue being obtained from passenger fee

overcharges was being used to cover program costs for other users.

122. Additionally, in that same meeting APHIS made clear that it believes it can

circumvent the statute’s prohibition on cross-subsidization by using its “reserve” fund. As

discussed, APHIS no longer has the authority to collect excess fees to fund its “reserve.” But

even if it did, the FACT Act would still require APHIS to segregate fees within the reserve based

on the user class they had been collected from, to ensure no cross-subsidization occurred.

Otherwise, this limitation would be meaningless: APHIS could pour excess collections into the

reserve and spend them on any user class it saw fit, without taking into account which class of

user had actually paid for the expenditures.

123. APHIS was not unaware of this fact, for when it gave an accounting of the fees

expected to be collected in the 2015 Rule’s RIA, the agency purported to break reserve

collections out by user class. See 2015 RIA at 13-25; see also id. at 13 (“While the reserve

account is a single fund, the projected reserve amounts that each fee class would contribute to the

AQI program reserve are included separately in tables 5-11 below, to show the total revenue

generated by each fee class.”). This was in line with how APHIS described the reserve in a prior

rulemaking: “While AQI revenues all go into one AQI account, they are applied to specific


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activities. . . . Any excess collections will be used to rebuild the AQI reserve balances for the

various service categories.” 2006 Interim Rule, 71 Fed. Reg. at 50,324(emphasis added).

124. But when pressed on the topic in the stakeholder meeting, APHIS’s Administrator

made clear that this was not how things actually worked. When asked how much of the

hundreds of millions of dollars in excess air passenger fee collections remained in the reserve,

the Administrator claimed he had no idea—once money is in the reserve, the agency actually has

no way of knowing from which user class it came:

The fees are set by mode, but the overall [reserve] account is not. So there is not a specific reserve account for passengers versus cargo versus railcars. That’s an aggregated amount. It just doesn’t work that way. It’s simply aggregated. All revenue is aggregated.

Final Transcript, AQI Stakeholder Webinar at 55. Not only was this revelation directly contrary

to the agency’s prior explanations—it also affirmed the conclusion GAO came to years ago:

“APHIS does not know whether inspections of international airline passengers and commercial

aircraft, vessels, trucks, and railroad cars are being funded by revenue from the appropriate user

fee.” 2006 GAO Report at 33. In short, APHIS does not have the ability—even if it wanted to—

to verify that its collection of funds and use of the aggregate reserve complies with the FACT

Act’s prohibition on cross-subsidization.

125. Thus, under both the 2006 Rule and the 2015 Rule, APHIS has engaged in

prohibited cross-subsidization, both directly and by using its reserve account to circumvent the

FACT Act’s “commensurate” requirement.

II. The 2015 Rules Violate The APA

A. For the 2015 Rule, APHIS Refused to Disclose Key Documentation, Despite Repeated Requests

126. APHIS’s decision to withhold crucial information until the related district court

litigation commenced—namely Grant Thornton’s fee model documentation, and the cost output


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from the ABC analysis—prevented stakeholders and the public from evaluating the agency’s fee-

setting process and pointing out the clear inconsistencies between the fees APHIS’s ABC

methodology derived and those set by the 2015 Rule. The APA requires an agency to make

“public in the proceeding and expose[] to refutation” “the most critical factual material that is

used to support the agency’s position.” Ass’n of Data Processing Serv. Orgs., Inc. v. Bd. of

Govs. of Fed. Reserve Sys., 745 F.2d 677, 684 (D.C. Cir. 1984); see also 5 U.S.C. § 553(c).

127. This case proves the importance of this principle. The information APHIS

withheld makes clear that its decision to impose its newly tripled commercial aircraft fee to

passenger aircraft was directly contrary to Grant Thornton’s fee model and data analysis. By

ignoring the basic assumptions of its own ABC model, and then withholding the information

necessary for the public to alert the agency to its manifest error, APHIS violated the APA. See,

e.g., Conn. Light & Power Co. v. NRC, 673 F.2d 525, 530 (D.C. Cir. 1982) (“In order to allow

for useful criticism, it is especially important for the agency to identify and make available

technical studies and data that it has employed in reaching the decisions to propose particular

rules.”). Thus, the fees collected pursuant to this unlawful rule were illegal exactions which

Defendant must remit to Plaintiffs.

128. Grant Thornton’s fee model documentation and the cost output from its ABC

analysis show that the air passenger fee was set at a level that was designed to pay for inspecting

both air passengers and passenger aircraft. March 2012 Grant Thornton Report. The fee model

description attributes “Passenger Aircraft” inspection costs to the air passenger fee, as does the

actual calculation itself. Id. APHIS’s decision to double charge commercial passenger aircraft

was not only contrary to the FACT Act—it was inconsistent with the analysis APHIS claims

produced its fee levels.


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129. Yet APHIS withheld these documents until the related district court litigation,

despite the fact that stakeholders requested it. This obfuscation made it impossible, during the

rulemaking process, to dispel the agency’s bald assertion that “[b]ased on our ABC analysis, we

determined that the air passenger fee is not adequate to recover all the costs we incur in

inspecting both passengers and aircraft.” 2015 Rules, 80 Fed. Reg. at 66,769. Grant Thornton’s

final report, which was released during the rulemaking, belies this claim. See May 2012 Grant

Thornton Report at 10 (“As required by the AQI fee authority legislation, the revised air

passenger fee includes the cost of inspecting passenger aircraft.”); id. (noting new commercial

aircraft fee “applies only to cargo aircraft because the cost of inspecting passenger aircraft is

included in the air passenger fee”). But without the fee model documentation and cost outputs

from its ABC model, APHIS could hide behind the black box of its ABC methodology. Only

after these key documents were released was it fully clear that APHIS’s cost rationale conflicts

with its own analysis: passenger aircraft inspections were encompassed within the air passenger

fee calculation, see, e.g., March 2012 Grant Thornton Report 61-62, making APHIS’s double

charging not only unlawful but also unnecessary.

130. The APA requires agencies to release key factual information before a rule is

finalized precisely because public scrutiny can test the agencies’ rationale and underlying data.

See Am. Radio Relay League v. FCC, 524 F.3d 227, 236 (D.C. Cir. 2008) (“[T]o allow for useful

criticism, it is especially important for the agency to identify and make available technical

studies and data that it has employed in reaching the decisions to propose particular rules.”

(quotation omitted) (emphasis in original)). Without “sufficient detail” about an agency’s

methodology, the public cannot provide the informed comment necessary to check the agency’s

work. Abington Mem’l Hosp. v. Burwell, 2016 WL 6267950, at *12 (D.D.C. 2016); see also


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HBO, Inc. v. FCC, 567 F.2d 9, 35 (D.C. Cir. 1977) (agency “must disclose in detail the thinking

that has animated . . . a proposed rule and the data upon which that rule is based” (emphasis

added)).

131. Either because it knew its double charging was not supported by its own analysis,

or because it did not believe public evaluation of its ABC model was necessary, APHIS

improperly denied stakeholders access to key documents necessary to test its conclusions, thus

depriving the public of a meaningful opportunity to comment. Whatever its reason for

withholding this vital information, APHIS’s decision to do so violated the APA, thus rendering

the rule unlawful. Doe v. Rumsfeld, 341 F. Supp. 2d 1, 13 (D.D.C. 2004). Illegal exactions

collected pursuant to this unlawful agency action are recoverable under the Tucker Act. See,

e.g., Piszel v. United States, 121 Fed. Cl. 793, 800-01 (2015).

B. Neither of the Challenged Rules was Supported by Adequate Data

132. In order for agency action to be lawful, it must be supported by adequate

evidence. Neither of the rulemakings leading to the promulgation of the 2006 Rule nor the 2015

Rule contained information that demonstrated that the commercial aircraft fees they set—$70.75

for the 2006 Rule, and $225 for the 2015 Rule—were “commensurate” with the costs of

inspecting commercial aircraft (and commercial passenger aircraft in particular). Indeed, prior to

the 2015 Rule, APHIS never even purported to provide activity-level data to justify its fees; the

2006 Rule is supported only by highly aggregated data that the GAO itself noted was inadequate

to prohibit cost-subsidization. See supra p. 18. Because the evidence before the agency during

the rulemaking proceeding did not support either Challenged Rules’ commercial aircraft fee, the

fees were arbitrary and capricious and, therefore, the fees collected pursuant to them must be

remitted.

133. The 2006 Rule was simply an affirmation of the 2004 interim rule, and neither


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document or docket contained data breaking down the costs attributable to the inspection of each

user class. Without this information, it is impossible to determine whether APHIS set fees

appropriately. And even the tabular data it did provide—which gave only industry-wide cost

figures—were too unreliable to justify setting the fees at the level APHIS did. See supra p. 18-

19 (discussing GAO and Grant Thornton criticism of data and methodology used to set 2006

Rule’s fee levels).

134. In 2015, APHIS purported to remedy this shortfall by employing Grant

Thornton’s ABC methodology. But APHIS has failed to establish that the ABC model employed

by its consultant yields accurate, reliable fees. While activity based costing is an accepted

method for assigning costs and deriving fees, it yields the correct fees only when the data used is

reliable, when the costs are assigned properly to activities, and when “cost drivers”—the factors

that “causally affect costs over a given time span”—are correctly identified. Horngren, Datar, &

Rajan, Cost Accounting: A Managerial Emphasis, 34 (15th ed. 2014). APHIS has not

demonstrated that any of these requirements are met. Nor has it proven that its cost models

account for expenses paid by appropriations and/or overtime charges. If appropriations cover

APHIS’s and CBP’s expenses for commercial aircraft inspections, the FACT Act’s command

that AQI fees be “commensurate” with the “costs of inspection” would require that the fees be

set at a level reduced to account for the costs defrayed by appropriations.

135. APHIS has not demonstrated that the data it uses in its ABC model are reliable.

Like the data in its 2006 Rule, the data APHIS relied on for the 2015 Rule were highly

aggregated—the only additional detail provided was the number of FTE employees dedicated to

a particular user class, and the total costs. CBP initially provided only its total costs (lump sums

by fiscal year in the hundreds of millions of dollar); even its aggregate FTE data was never


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provided until a high-level estimate was included in the 2015 Rule. See 2015 Rule, 80 Fed. Reg.

at 66,763. But even taking all of this information together, it is drastically insufficient to show

that the ABC method has worked properly. This is particularly true given APHIS’s parsing of

the aircraft into pieces to justify its double charging. If, as APHIS asserts, inspecting one section

of the aircraft is supposedly paid for by the passenger fee, while inspecting an adjacent part of

the plane is covered by the commercial aircraft fee, the costs of these inspections must be broken

down in the same manner. But none of the data either APHIS or CBP provided during this

rulemaking process supports—or even could support, at so high a level—this fine-toothed

division.

136. Nor do either of the Challenged Rules or any of their accompanying documents

even mention the long-recognized flaws in APHIS’s and CBP’s data collection. In 2007, the

DHS Office of the Inspector General found significant inaccuracies in the data used to track

agricultural inspection activities. Dep’t of Homeland Security, Office of the Inspector General,

Review of Customs and Border Protection’s Agricultural Inspection Activities 1 (Feb. 21, 2007).

The GAO’s 2012 report concluded that the AQI program’s data flaws “have the potential to

affect . . . the effort to analyze the structure and amounts of the AQI user fees.” GAO-12-885

at 22 (emphasis added). The report reiterated that “data quality is an ongoing issue within the

AQI data systems, including the Work Accomplishment Data System (WADS)—the primary

repository for arrival, inspection, and interception data.” Id. at 20. Data collection was afflicted

by “transcription errors,” among other issues, which led to “data that were overreported or had

not been recorded.” Id. Thus, not only was the data provided by APHIS in this rulemaking too

high-level and aggregated to allow for meaningful review and comment—it was also

fundamentally flawed, with no explanation given for how (or whether) the agency addressed


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these shortcomings.

137. For the 2015 Rule, APHIS’s costs are purportedly allocated to activities based on

an “activity labor survey” used to estimate the level of “effort” devoted to AQI activities.

APHIS, however, has not released those “survey” and “effort” data in order for users to assess its

reliability. The only data released (and that only at the time the rule was made final) provide

highly-aggregated claims of the number of FTE APHIS and CBP employees committed to

different types of (again, highly-aggregated) users. Those data contain many unexplained

anomalies, for example, that APHIS AQI costs on a per-FTE basis ranged by more than 500%

among user classes in 2010. 2015 RIA, tables 5-11 pages 16-25, comparing rail inspectors and

passenger inspectors.

138. The 2015 Rule’s fee-setting model relies on forecasted data, but neither APHIS

nor Grant Thornton acknowledged the potential problems with this approach. Using forecasted

data to set fees in an environment where demand for services fluctuates risks setting fees too

high or too low. There may be adjustments to account for this, but neither APHIS nor Grant

Thornton has explained their approach to this problem. In addition, Grant Thornton’s forecasts

assume that projected costs are fully variable—that, for instance, the costs of two inspections is

exactly twice the cost of one. It is more likely, however, that many of the costs are fixed in the

short term and thus would increase only marginally with an increase in users or inspections. See

2015 RIA at iii (acknowledging “there are fixed costs related to providing AQI services”).

Indeed, APHIS itself has in the past justified fee increases on the ground that its costs do not

decline with reduced demand. See, e.g., 2004 Interim Rule, 69 Fed. Reg. at 71,664.

139. APHIS also failed to prove that its model correctly pools and assigns costs.

Plaintiffs do not know—and given the data APHIS provided, cannot know—if this step was


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completed correctly. A4A requested from APHIS data describing “how USDA/APHIS verifies

AQI costs incurred by CBP” and data to quantify the “USDA/APHIS and CBP cost

drivers/activities forming the basis of activity-based costing.” Airlines for America, NPRM

Comment Letter, Attachment A (June 24, 2015). APHIS never provided the data.

140. As an example, the reported cost of commercial aircraft AQI inspections in Fiscal

Year 2011 varied by $19,000,000 in separate publications. The GAO Report issued in March

2013 identified commercial aircraft costs of $175 million dollars. GAO-13-268, at 10. In April

of the next year, the Proposed Rule listed those costs at $156 million. 2014 Proposed Rule, 79

Fed. Reg. at 22,899. The 2015 Rule listed commercial aircraft costs as $161 million. 2015 Rule,

80 Fed. Reg at 66,756. The 2015 Rule justified this drastic variance as follows: “The difference

in FY 2011 costs between the proposed rule and the GAO report resulted from the fact that the

GAO report used preliminary results from the AQI user fee model, i.e., the model developed by

Grant Thornton to calculate costs used to run the AQI program.” Id. at 66,751. That explanation

misses the point: If the user fee model is so bad at predicting what final costs will be, it cannot be

a reliable basis for setting commensurate fees.

141. After determining the appropriate pool of costs to allocate, the next step in ABC

is to assign direct costs to the user groups and indirect costs to the activities required to provide

AQI service. APHIS and CBP have not provided information describing the various activities

required to provide AQI services to each person or user, nor sufficient information to determine

whether costs are appropriately allocated to these activities.

142. APHIS claims in the 2015 Rule that it bases its cost estimates on “cost drivers,”

which are “data used to establish a cause and effect relationship between an organization’s

activities and what it produces.” 80 Fed. Reg. at 66,762. Grant Thornton agrees: “this cost


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assignment is done using activity drivers . . . based on a cause-and-effect relationship.” Grant

Thornton, Fee Setting Process Documentation and Recommendations 8 (Oct 25, 2011) available

at

https://www.aphis.usda.gov/import_export/plants/plant_imports/aqi/downloads/AQI_Fee_Settin

g_Methodology_Documentation_and_Recommendations.pdf. But APHIS does not reveal what

it believes to be the cost drivers, or even the number of inspections, interceptions or other work

data, so it is impossible to tell whether its assessment and conclusions are accurate or reliable.

143. APHIS uses the number of aircraft arrivals to determine the fee by merely

dividing the costs assigned to commercial aircraft by an estimate of the number of arrivals. 2015

Rule, 80 Fed. Reg. at 66,756; 2004 Interim Rule, 69 Fed. Reg. at 71,665. But APHIS has not

provided any evidence that inspection costs are tied entirely to the number of aircraft arrivals. In

fact, APHIS’s own data suggest that its costs per aircraft change with each additional arrival.

See 2015 RIA at 17 tbl. 6 (showing a non-linear relationship between number of aircraft

inspected and costs based on “[d]ata used for the commercial aircraft fee calculation”); see also

id. at iii (acknowledging “there are fixed costs related to providing AQI services.”).

144. Moreover, APHIS’ own explanations in the Challenged Rules on this subject

contradict its assumption that all aircraft cost exactly the same amount to inspect. The agency

recognizes that smaller aircraft are cheaper to inspect, estimating that private aircraft inspections

cost $90 while commercial aircraft inspections cost $225. 2014 Proposed Rule, 79 Fed. Reg.

22,899-22,900 (figures from tables 2 and 6). But without explanation, APHIS does not apply

this same logic to account for the huge variance in the sizes of commercial aircraft. In the same

vein, it does not charge commercial seagoing vessels of under 100 tons at all. Such arbitrary

categorizations cannot be a product of reasoned decision-making.


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145. The 2015 Rule’s ABC model also fails to consider how the presence or absence of

commercial (that is, non-passenger property) volume, weight or type of commercial cargo drives

costs. APHIS noted in its 2015 Rule that “increases in cargo volumes necessitate increases in the

conveyance fees to recover these expanded cargo inspection costs.” 80 Fed. Reg. at 66,760. But

it then applied the same increased fee across the board—even for the high percentage of

commercial passenger aircraft charged AQI fees that carry zero commercial cargo.

146. In addition, APHIS stated in the 2015 Rule that “risk targeting” is a factor that

“drive[s] inspection costs.” 80 Fed. Reg. at 66,750. But there is no indication that the ABC

model accounts for the relationship between the risk of the cargo (or even the presence or

absence of commercial cargo) and the inspection cost. Id. at 66,756. Nor does the 2015 Rule

elaborate at all on what exactly it means by “risk targeting,” rendering this vague statement

effectively meaningless. In any event, the majority of cargo transported into the United States

aboard commercial passenger aircraft is low risk, i.e., consumer electronics and other non-

perishables—but APHIS apparently does not account for this fact in its AQI fee structure, even

though CBP (the entity performing these inspections) boasts that it is able to “target potentially

high-risk shipments[] and reduce redundant inspection activities.” Testimony of CBP Field

Operations Executive Director Kevin Harriger, Defending American Agriculture Against Foreign

Pests and Diseases, House Subcommittee on Livestock and Foreign Agriculture (Mar. 15, 2016)

available at http://docs.house.gov/meetings/AG/AG14/20160315/104656/HHRG-114-AG14-

Wstate-HarrigerK-20160315.pdf.

147. Finally, APHIS refused to subject its ABC model to neutral, third-party review or

to open it up for examination by stakeholders. Commenters questioned “the level of scrutiny the

model received,” but APHIS refused to release additional details that would support the model.


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2015 Rule, 80 Fed. Reg. at 66,750. As for the 2006 Rule, the agency provided only a truncated

comment period, and an annual aggregate cost estimate that allowed for no meaningful analysis

or comment.

COUNT I: TUCKER ACT ILLEGAL EXACTION CLAIMS (28 U.S.C. § 1491(a) (Tucker Act); 28 U.S.C. § 1346(a)(2) (Little Tucker Act))

148. Plaintiffs incorporate and reallege each allegation contained in the previous

paragraphs of the Complaint as though fully set forth herein.

149. As explained above, the Challenged Rules are unlawful, as they violate both the

FACT Act’s substantive limitations and the APA’s requirement of reasoned decisionmaking.

The Challenged Rules (1) unlawfully double charge Plaintiffs, by requiring them to pay a

commercial aircraft fee for passenger flights, when passengers are also charged a fee that is set,

by statute, at a level that includes the costs of inspecting the aircraft; (2) charge unlawfully

heightened fees to users in order to allow APHIS to maintain a “reserve” balance, even though

that authority lapsed years before the Challenged Rules were implemented; and, (3) unlawfully

overcharge Plaintiffs, by failing to set fees “commensurate” with the costs of inspecting

commercial aircraft and by “cross-subsidizing” the costs of inspecting one class of users with

fees charged to another.

150. These infirmities of the Challenged Rules are clear from the plain language of the

FACT Act and the Challenged Rules themselves; the lack of any meaningful supporting data to

justify the increases in commercial aircraft fees; the repeated (and unanswered) criticisms of the

GAO and the DHS Inspector General relating to APHIS’s and CBP’s lax data collection and

retention practices; and, the clear (and unexplained) inconsistency between APHIS’s approach to

the fee calculation and that of its own economic consultant, Grant Thornton.

151. Moreover, the procedures used to promulgate the Challenged Rules did not


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embody the reasoned decisionmaking that valid administrative rulemaking requires, by using an

unnecessary “emergency” procedure to promulgate the 2006 Rule without allowing a meaningful

opportunity to comment, and, in both Rules, by treating similar classes of users dissimilarly.

152. Moreover, both Challenged Rules are unlawful insofar as they fail to explain the

basic premises and data underlying their respective fee increase; this flawed analysis and failure

to explain the justification for the fee increases (and, most especially, how the increased fees

comply with the FACT Act’s substantive requirements) led to arbitrary and capricious Rules.

153. For these reasons, the Challenged Rules violate both the FACT Act and the APA.

Thus, the millions of dollars in commercial aircraft AQI fees that Plaintiffs have been forced to

pay under the Challenged Rules since January 12, 2012 were collected by the Government in

contravention of a statute. These collections therefore constitute illegal exactions, and must be

returned to Plaintiffs. See Aerolineas Argentinas v. United States, 77 F.3d 1564, 1572-73 (Fed.

Cir. 1996); see also Piszel, 121 Fed. Cl. at 799 (“The Federal Circuit has recognized that the

Tucker Act provides jurisdiction to recover an illegal exaction by government officials when the

exaction is based on an asserted statutory power.” (quotation omitted)).

154. Plaintiffs have suffered injury as a direct and proximate cause of these illegal

exactions, including but not limited to monetary damage. As a result of the conduct alleged

herein, Defendant is liable to Plaintiffs and Plaintiffs are entitled to relief.

155. Each Plaintiff has suffered monetary damages since January 12, 2012, and

together the Government has illegally exacted millions of dollars from Plaintiffs via its unlawful

commercial aircraft AQI fees. The precise amount of damages each Plaintiff has suffered

roughly approximates the number of international arriving flights that Plaintiff has operated since

January 12, 2012, multiplied by the amount of the commercial aircraft AQI fee in effect at the


-56-

time of each flight.

156. Moreover, even if the commercial aircraft fee could lawfully be charged to

commercial passenger aircraft, APHIS’s imposition of a reserve surcharge—of 25% of the

commercial aircraft fee for the 2006 Rule, and an undisclosed amount of up to $25 per flight for

the 2015 Rule—was unlawful, for the FACT Act clearly prohibits such overcharging after fiscal

year 2002. Thus, even if the commercial aircraft fee were lawfully applied to commercial

passenger aircraft, Plaintiffs nonetheless suffered damages equally roughly to $14 per flight from

January 12, 2012 to December 28, 2015 (when the 2006 Rule was superseded by the 2015 Rule),

and an undisclosed amount of up to $25 from December 28, 2015 to the present.

157. For both sources of damages, the precise amount of Defendant’s illegal exactions

can be readily calculated for each Plaintiff (and for all Plaintiffs collectively) at trial.

PRAYER FOR RELIEF

WHEREFORE, PLAINTIFFS respectfully request that this Court:

A. Enter judgment for Plaintiffs and against Defendant;

B. Find that commercial aircraft AQI fees collected from commercial passenger

aircraft pursuant to the 2006 Rule and the 2015 Rule constitute illegal exactions;

C. Find that, separate and apart from the lawfulness of collecting the commercial

aircraft fee from commercial passenger aircraft, the collection of a reserve

surcharge pursuant to the 2006 Rule and the 2015 Rule constitute illegal

exactions.

D. Award damages to Plaintiffs in the amount that Plaintiffs have paid to Defendant

as commercial aircraft AQI fees under the Challenged Rules since January 12,

2012—believed to be at least $50,000,000;

E. Award Plaintiffs pre-judgment and post-judgment interest, together with any and


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all further costs, disbursements and reasonable attorney’s and experts fees;

F. Grant such other relief, including any available equitable and injunctive relief, as

this Court may deem just and proper.

Dated: January 12, 2018 Respectfully submitted, /s/ Benjamin G. Bradshaw Benjamin G. Bradshaw Matthew C. Gill Kimya Saied O’MELVENY & MYERS LLP 1625 Eye St. N.W. Washington, D.C. 20006 Tel: 202-383-5163 [email protected] Attorney for Plaintiffs


In The United States Court of Federal Claims

Plaintiff(s) or Petitioner(s)

Cover Sheet

Names:

Location of Plaintiff(s)/Petitioner(s) (city/state):

(If this is a multi-plaintiff case, pursuant to RCFC 20(a), please use a separate sheet to list additional plaintiffs.)

Name of the attorney of record (See RCFC 83.1(c)):

Firm Name:

Contact information for pro se plaintiff/petitioner or attorney of record:

Post Office Box:

Street Address:

City-State-ZIP:

Telephone & Facsimile Numbers:

E-mail Address:

Is the attorney of record admitted to the Court of Federal Claims Bar? □ Yes □ No

Nature of Suit Code:Select only one (three digit) nature-of-suit code from theattached sheet. See attached sheet for three-digit codes. If number

Agency Identification Code:

213 is used, please identify partnership or partnership group: Number of Claims Involved:

Amount Claimed: $ Use estimate if specific amount is not pleaded.

Bid Protest: Indicate approximate dollar amount of procurement at issue: $

Is plaintiff a small business? □ Yes □ No

□ Yes □ NoWas this action preceded by the filing ofa protest before the GAO?

If yes, was a decision on the merits rendered? □ Yes □ No

Takings Case: Specify Location of Property (city/state):

Vaccine Case:Date of Vaccination:

Related Case:Is this case directly related to any pending or previous cases?If yes, you are required to file a separate notice of directly related case(s). See RCFC 40.2.

□ Yes □ No

Air Canada et al.See attachment for full list of Plaintiffs and locations

Benjamin G. BradshawO'Melveny & Myers LLP

1625 Eye Street, NWWashington, D.C. [email protected]

516 AGR

at least 45

at least 50,000,000.00

■

■

18-62 C

JAN 12 2018

Case 1:18-cv-00062-TCW Document 1-1 Filed 01/12/18 Page 1 of 5

stokes

Received

Nature-of-Suit Codes for General Jurisdiction Cases

100 Contract - Construction - (CDA)

102 Contract - Fail to Award - (CDA)

104 Contract - Lease - (CDA)

106 Contract - Maintenance - (CDA)

108 Contract - Renovation - (CDA)

110 Contract - Repair - (CDA)

112 Contract - Sale - (CDA)

114 Contract - Service - (CDA)

116 Contract - Supply - (CDA)

118 Contract - Other - (CDA)

120 Contract - Bailment

122 Contract - Bid Preparation Costs

124 Contract - Medicare Act

125 Contract - Affordable Care Act

126 Contract - Realty Sale

128 Contract - Subsidy

130 Contract - Surety

132 Contract - Timber Sale

134 Contract - Other

136 Contract - Other - Wunderlich

138 Contract - Protest (Pre Award)

140 Contract - Protest (Post Award)

200 Tax - Allowance of Interest

202 Tax - Declaratory Judgment - 28:1507

204 Tax - Estate

206 Tax - Excise

208 Tax - Gift

210 Tax - Income, Corporate

212 Tax - Income, Individual

213 Tax - Income, Individual (Partnership)

214 Tax - Informer’s Fees

216 Tax - Preparer’s Penalty

218 Tax - Railroad

Retirement/Unemployment Tax Act

220 Tax - TEFRA Partnership - 28:1508

222 Tax - Windfall Profit

Overpayment - Interest

224 Tax - 100% Penalty - 26:6672 -

Withholding

226 Tax - Other

300 Civilian Pay - Back Pay

302 Civilian Pay - COLA

303 Civilian Pay - Disability Annuity

304 Civilian Pay - FLSA

306 Civilian Pay - Overtime Compensation

308 Civilian Pay - Relocation Expenses

310 Civilian Pay - Suggestion Award

312 Civilian Pay - Other

340 Military Pay - Back Pay

342 Military Pay - CHAMPUS

344 Military Pay - Correct records

346 Military Pay - Correct/Reinstate

348 Military Pay - Reinstatement

350 Military Pay - Relocation Expenses

352 Military Pay - Retirement

354 Military Pay - SBP

356 Military Pay - Other

500 Carrier - transportation

502 Copyright

504 Native American

506 Oil Spill Clean Up

508 Patent

509 Taking - Hurricane Harvey

510 Taking - Personalty

512 Taking - Realty

513 Taking - Rails to Trails

514 Taking - Other

515 Unjust Conviction and Imprisonment

516 Miscellaneous - Damages

518 Miscellaneous - Lease

520 Miscellaneous - Mineral Leasing Act

522 Miscellaneous - Oyster Growers

Damages

524 Miscellaneous - Safety Off. Ben. Act

526 Miscellaneous - Royalty/Penalty Gas

Production

528 Miscellaneous - Other

535 Informer’s Reward

536 Spent Nuclear Fuel

Nature-of-Suit Codes for Vaccine Cases

449 Injury - Hepatitis A

453 Injury - Pneumococcal Conjugate

456 Injury - DPT & Polio

457 Injury - D/T

458 Injury - DTP/DPT

459 Injury - Measles

460 Injury - M/M/R

461 Injury - Measles/Rubella

462 Injury - Mumps

463 Injury - Pertussis

464 Injury - Polio - inactive

465 Injury - Polio - other

466 Injury - Rubella

467 Injury - Tetanus & Diphtheria

468 Injury - Tetanus & Tox.

469 Injury - Other

484 Injury - Hepatitis B

485 Injury - Hemophilus Influenzae

486 Injury - Varicella

490 Injury - Rotavirus

492 Injury - Thimerosal

494 Injury - Trivalent Influenzae

496 Injury - Meningococcal

498 Injury - Human Papillomavirus

452 Death - Hepatitis A

454 Death - Pneumococcal Conjugate

470 Death - DPT & Polio

471 Death - D/T

472 Death - DTP/DPT

473 Death - Measles

474 Death - M/M/R

475 Death - Measles/Rubella

476 Death - Mumps

477 Death - Pertussis

478 Death - Polio - inactive

479 Death - Polio - other

480 Death - Rubella

481 Death - Tetanus & Diphtheria

482 Death - Tetanus & Tox.

483 Death - Other

487 Death - Hepatitus B

488 Death - Hemophilus Influenzae

489 Death - Varicella

491 Death - Rotavirus

493 Death - Thimerosal

495 Death - Trivalent Influenzae

497 Death - Meningococcal

499 Death - Human Papillomavirus


AGENCY CODES

AGR Agriculture

AF Air Force

ARM Army

AEC Atomic Energy Commission

COM Department of Commerce

DOD Department of Defense

DOE Department of Energy

ED Department of Education

EPA Environmental Protection Agency

GPO Government Printing Office

GSA General Services Administration

HHS Health and Human Services

HLS Homeland Security

HUD Housing and Urban Development

DOI Department of the Interior

ICC Interstate Commerce Commission

DOJ Department of Justice

LAB Department of Labor

MC Marine Corps

NAS National Aeronautical Space Agency

NAV Navy

NRC Nuclear Regulatory Commission

PS Postal Service

STA State Department

SBA Small Business Administration

TRN Department of Transportation

TRE Department of Treasury

VA Department of Veterans Affairs

VAR Various Agencies

O Other

1


ADDITIONAL PLAINTIFFS

Plaintiff Location of Plaintiff Air Canada Montreal, Quebec, Canada Air China Shunyi District, Beijing, China Air Europa Llucmajor, Mallorca, Spain

Air France Tremblay-en-France, Seine-Saint-Denis, France

Air New Zealand Auckland City, New Zealand Air Transat Montreal, Quebec, Canada

Alaska Airlines SeaTac, Washington, United States of America

American Airlines Fort Worth, Texas, United States of America Asiana Airlines Gangseo-gu, Seoul, South Korea Austrian Airlines Schwechat, Vienna, Austria Brussels Airlines Diegem, Machelen, Belgium Cathay Pacific Airways Cathay City, Hong Kong China Eastern Airlines Shanghai, China Condor Flugdienst & Thomas Cook Airlines Limited

Frankfurt, Germany / Manchester, England

COPA Airlines Panama City, Panama Delta Air Lines, Inc. Atlanta, Georgia, United States of America Edelweiss Air Kloten, Zurich, Switzerland EgyptAir Cairo, Egypt El-Al Israel Airlines Central District, Israel

Etihad Airways Khalifa City, Abu Dhabi, United Arab Emirates

Eurowings Dusseldorf, Germany Eva Airways Corporation Luzhu, Taoyuan City, Taiwan Finnair Vantaa, Finland Hawaiian Airlines Honolulu, Hawaii, United States of America Icelandair Reykjavik, Iceland Insel Air Willemstad, Curacao

JetBlue Airways Long Island City, New York, United States of America

Jet Airways Mumbai, India KLM Royal Dutch Airlines Amstelveen, Netherlands LATAM Airlines Santiago, Chile / Sao Paulo, Brazil Lufthansa German Airlines Cologne, Germany Lufthansa Cargo AG Frankfurt, Germany Porter Airlines Inc. Toronto, Ontario, Canada Royal Jordanian Airlines Amman, Jordan Scandinavian Airlines (SAS) Solna, Sweden Singapore Airlines Limited Singapore, Singapore Southwest Airlines Dallas, Texas, United States of America


Swiss International Air Lines Basel, Basel-Stadt, Switzerland TAP Portugal Lisbon, Portugal Turkish Airlines Istanbul, Turkey United Airlines Chicago, Illinois, United States of America Virgin Atlantic Airways Limited Crawley, West Sussex, England Virgin Australia Airlines Bowen Hills, Brisbane, Australia WestJet Airlines, Ltd. Calgary, Alberta, Canada

XL Airways France and DreamJet (dba La Compagnie)

Tremblay-en-France, Seine-Saint-Denis, France / Le Bourget, Seine-Saint-Denis, France


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