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Case number 16-1200, United Airlines Inc.

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Petitioner versus Transportation Security Administration.

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Mr. Feinberg for the petitioner.

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Mr. Clare for the respondent.

[00:00:16] Speaker 01:
Good morning.

[00:00:16] Speaker 01:
May it please the court.

[00:00:17] Speaker 01:
Adam Feinberg on behalf of Petitioner United Airlines Inc.

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with me is Adam Braskich.

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This case involves a September 11th security fee, which is imposed on domestic airline passengers and for which United Airlines and other carriers involuntarily serve as a collection agent for TSA.

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Pursuant to a provision in the fee statute that specifically allows for refunds of any fee paid by mistake or any amount paid in excess of that required, United, on April 8th of last year, submitted a refund request of approximately $1.5 million that it erroneously paid under the statute and regulations.

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TSA refused to consider the merits of that request, issuing a denial in a four-paragraph email just 10 days later.

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And although it wasn't clear in the administrative proceedings, TSA's sole reason now is clear that its theory is that the doctrine of issue preclusion bars United's refund request, with the earlier supposedly preclusive decision coming in the form of a 2012 audit report that TSA had performed.

[00:01:27] Speaker 05:
I thought their main argument was less issue preclusion than time bar.

[00:01:32] Speaker 01:
Well, you can ask the government that question, but that's not what it seems to me their main argument is.

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They expressly state in at least a couple places in their brief that their main argument is the doctrine of issue preclusion.

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If the argument is time bar, it's not even clear how that would work.

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It's not a specific time period.

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Their argument is, essentially, whenever we conduct an audit, that cuts off your rights to seek a refund.

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But there's no time period associated with that.

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And I'm not aware of any time limitations period or claim filing deadline that has an indefinite period of time.

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What about the argument, which should be at first, I guess, that we have no jurisdiction?

[00:02:15] Speaker 01:
Well, Your Honor, I think there are a couple reasons why that argument goes nowhere.

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The main one is a factual argument.

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There simply wasn't a request for reconsideration or an appeal.

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It's unclear what TSA even claims this was.

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And I assume you're referring to the June 7th email that United sent after the denial.

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It's very clear if you read that entire email that all United was doing, this is literally from the words in the email, requesting TSA's quote, guidance concerning TSA's rules and procedures for obtaining administrative review.

[00:02:52] Speaker 02:
Well, you did state we are seeking review, didn't you?

[00:02:57] Speaker 01:
Well, I agree, Judge Silverman, those words are in the email, but if you look at the entire context of the email, I think it's abundantly clear that they were asking for guidance on whether they could pursue further administrative review, and if so, how.

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And in fact, the email contains the following line.

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It says, because we are hoping

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to keep this matter within TSA's administrative review process, we ask for your reply by June 10th, 2016, which is a week before the petition in this court would have been due.

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And Mr. Dabney, did you make a point of what was the reply?

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What was the reply from?

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What was the government's reply to this email?

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Well, that is, we did make a point in our brief because I think this is a very important one.

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This and this their their reply, which can be found with the reply was that we have no procedure.

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Correct.

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There were not only was a reply that we have no procedure, and this is a page 40 to the joint appendix, but it says.

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It describes the June 7th email from United as something that, quote, sought guidance concerning how to obtain administrative review.

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It doesn't say anything of we received your request for further administrative review or for reconsideration or for appeal.

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And by the way, that same theme comes out in TSA's

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certified index to the administrative record, which is at page two of the joint appendix, it describes the April transactions as a, quote, request for refund and then a denial, that being the April 8th and April 18th documents, but then describes the June email as seeking guidance on how to obtain administrative review.

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And then in TSA's response,

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There's no mention of any sort of appeal or request for consideration or any denial of anything, just in the way TSA described it.

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These are items 8 through 11 of the index.

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So I don't think there's any plausible argument factually that there's lack of jurisdiction.

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By the way, I would add one other point.

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There's a legal preclusion to their argument as well, and that is

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The cases that they cite, including the Brotherhood of Locomotive Engineers case from the Supreme Court and this court's decisions in Sendra and Telestar, establish that this notion of jurisdiction applies if there is a timely request for reconsideration.

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And of course, TSA's position here is not only was it not timely, but even the only possible date that they could have applied is a 30-day review period.

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And this supposed request for reconsideration in June comes more than 30 days after the supposed, or not supposed, but the actual denial on April 18th.

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So even under the cases that the government cites, there's no lack of jurisdiction because the doctrine simply doesn't apply here.

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And I'd like if that answers your questions about jurisdiction, Judge Silverman, to return to the main question of issue preclusion.

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Here, I think, at bottom, there's simply no basis for finding issued preclusion here.

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First of all, an audit has no preclusive impact in any other circumstance that we know of.

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I'm talking about federal taxes, state taxes, other user fees that work like this.

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And TSA has not cited one example where an audit can have preclusive effect.

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And I think that's simply because of the basic notion that audits are not adjudicatory in nature.

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It simply doesn't apply.

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Issued preclusion just doesn't apply to this sort of thing.

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And of course, nowhere has TSA informed anybody ever that these audits are going to have preclusive effects, and it would yield bizarre results.

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And Judge Pillard, your question about the timing, this is so bizarre, the way TSA would have it go.

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So in this case, the audit period ended on March 31 of 2016.

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And sometime after that, but before August of 2016, when the audit was actually conducted,

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United was notified that they were going to be audited.

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And under TSA's theory, United... You said 2016.

[00:07:15] Speaker 05:
I thought it was in 2012.

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Oh, I'm sorry.

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You're exactly right.

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In 2012.

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All of those same dates in 2012.

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And then the audit, the final report coming in October of 2012.

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So if United had wanted to seek a refund request associated with March of 2012, it would have had to have done that only a few months later.

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by the end of the audit in October or so of 2012.

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I don't know of any statute of limitations that has that sort of indiscriminate period.

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And by the way, TSA doesn't even audit every carrier.

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It certainly does the large carriers, but there are some small carriers that never get audited.

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They get audited infrequently.

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And then even under TSA's view,

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there would be an unlimited claim filing deadline or whatever you want to call it.

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But we cited a case called Swisher International from the Federal Circuit that dealt with this exact situation and found that if the regulations or statute doesn't have a claim filing deadline, that deadline is unlimited.

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And that's exactly what we have here.

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And of course, TSA can solve this problem itself simply by promulgating a regulation.

[00:08:22] Speaker 05:
So back to the... Wouldn't it be the six years under the APA?

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It could.

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That's the other alternative.

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But here, if that applies, then the claim is timely as well.

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But I think the true answer is it's unlimited, less than until TSA promulgates a claim filing deadline.

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On the issue of preclusion, the B&B hardware case, which we cited in both of our briefs, says this, quoting from the restatement.

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The issue of preclusion applies when an issue of factual law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment.

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And so unlike claim preclusion,

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The Supreme Court described in the Sunan case that we cite, parties are free to litigate points which were not at issue in the first proceeding, even though such points might have been tendered and decided.

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So the issue has to actually have come out and been decided.

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And this court's decision in Nasim versus Brown, I think, is a critical one, and we cited this in our brief.

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because it shows that if one of two things could happen, and it's not clear what the court's judgment is based on, then issue preclusion applies to neither of them.

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And what that means is that even if the government can show some doubt as to whether or not it looked at whether a refund was appropriate,

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The doubt works in our favor in this context, because unless there's an explicit decision by the court, or in this case the agency, claim preclusion cannot apply.

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And I would note, just as a factual matter, that

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The TSA relies on this line from the audit.

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This is a joint appendix, page 32.

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This is the audit determined to unite its compliance as well as the amount and nature of the liability to the TSA Office of the Revenue.

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And I think TSA's argument is that the word liability refers to its overall fee liability.

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And as noted on page 31 of the joint appendix,

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It had remitted $660 million in fees over this period.

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But there's nowhere in the audit report that says that was the correct amount.

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And in fact, TSA wasn't looking at whether or not the amount submitted was correct or overpaid.

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It was only looking for an additional liability.

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And that's revealed in the very next sentence of the joint appendix on page 32 under the results section where it says,

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We found United Airlines had no liability due to TSA for incorrect imposition collection or remittance of the fee.

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It didn't say that the $660 million was correct.

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It said only that it has no liability, which shows that all TSA was looking at was additional liability.

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And by the way, their review provision that they don't cite one, but they cite this 30 days, which I presume comes from 49 CFR 89.21,

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We cited that in our opening brief and TSA doesn't disagree or didn't come up with anything else.

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That review provision that they say applies here

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applies only to debts that are owed to the government.

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It's a debt collection review provision.

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It says nothing about the ability to challenge amounts that you claim are owed by the government to you, which shows that even TSA didn't think that this audit was considering amounts that might have been due to United.

[00:11:45] Speaker 04:
Thank you.

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The statute that you're relying on basically says the secretary may refund

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It doesn't require it to be done.

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Could TSA promulgate a reg that simply says we're not going to entertain refunds?

[00:12:06] Speaker 01:
I don't think so, Your Honor, because this is the issue that happened in this court's Dixon decision in a very different context.

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An agency has an ability to come up with procedures, claim filing procedure, for example.

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So it might deny a valid request for a refund on a time basis if it had promulgated a claim filing deadline.

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But it still is subject to the normal APA review for arbitrary and capricious abuse of discretion or not in accordance with the law, review for any action that takes pursuant to that.

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And so once a refund is presented to the agency, it has to act under that normal APA standard.

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And here, actually, I think the standard is not even arbitrary and capricious or abusive discretion.

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I think it's not in accordance with law, because it was acting solely in the capacity of like a judge would in finding that issue of preclusion applies.

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And I think, therefore, this court should be reviewing that question de novo.

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Thank you.

[00:13:11] Speaker 04:
Thank you.

[00:13:18] Speaker 03:
Good morning, Your Honors.

[00:13:19] Speaker 03:
May it please the Court, I'm Jeffrey Clare, I'm Justice Department Counsel for PSA in this matter.

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Your Honor, decades of this Court's precedent make clear that if a matter is pending on reconsideration or appeal before an administrative agency, a request, a petition... My counsel, this argument strikes me as extraordinarily weak.

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There was a request to determine whether there was a procedure for rehearing.

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wasn't there, and the government's response was there's none.

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He went on to say, is there any procedure?

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Well, what they ask for guidance is how to proceed, Your Honor.

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And I think it's a commonplace among attorneys to file an initial document, like a notice of appeal, a petition for review, that makes sure the appeal was timely and is a placeholder for protecting a jurisdiction of the appropriate form.

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and then after invoking the appeal to ask if there's some question for us for guidance.

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And the response was we have no proceedings.

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The response was that the audit was final and no longer subject to review.

[00:14:31] Speaker 05:
Exactly.

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The audit, which took place in October 2012, so any time for review and for seeking reconsideration or appealing from administrative review on TSA's view, expired

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years before.

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So the notion that you would then take what in TSA's view is a completely null effort, even if it were directly an effort to seek administrative review, you can't say, well, the null filing in 2016 somehow rendered non-final.

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something that TSA believes was finalized in 2012?

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Or is this an alternative argument?

[00:15:12] Speaker 03:
Well, Your Honor, the request, as we consider, is essentially to look again at the audit findings.

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And the agency may, by issuing a refund for amounts in the petitioner's view, were inappropriately

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And there was an agency decision saying, no, you have no such rights at this juncture.

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And then you have this document at page 44 that says in very present tense, non-conditional, non-future terms, we request review of that decision in conjunction with the request for information as to how to proceed.

[00:15:48] Speaker 05:
Well, that was United's position.

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But what I'm saying is that TSA's position was,

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your time to appeal the audit expired in January 2013.

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So I guess I'm just having a little bit of trouble understanding how the agency's position now could be, oh, but by the way, it was on administrative review when this case was filed with us.

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Let me make one more point, if I could, and then leave this issue.

[00:16:19] Speaker 03:
It's petition.

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I can imagine why you want to leave this issue.

[00:16:22] Speaker 03:
I tell you.

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As a matter of fact, counsel, if I may interrupt for a second and ask a very pointed question.

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Was this issue, this administrative review question, approved by senior people in the Civil Division?

[00:16:40] Speaker 03:
Yes, Your Honor.

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Well, I have a reviewer who is senior to me who reviews this group.

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I suppose you can detect from my question that I'm troubled that justice would even make this argument.

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It's so extraordinarily weak.

[00:16:54] Speaker 03:
Yeah, I understand.

[00:16:56] Speaker 02:
It's even weaker than the rest of the case.

[00:16:59] Speaker 03:
Okay, Your Honor.

[00:17:00] Speaker 03:
Well, perhaps let me move on to what Your Honor advises in the last week or points in the case, which are that when the agency made a send out as auditors in 2012 to determine whether the appropriate amount of fees had been collected,

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and remitted to the agency.

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It made a final determination of whether fees were collected and remitted in appropriate amounts.

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It was not limited to ferreting out underpayments.

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It was its purpose's intent was to assess compliance with the totality of the statute if overpayments had been detected.

[00:17:36] Speaker 02:
But you never gave any notice, even if that was your purpose.

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There's never any notice given by form of regulation or guidance or anything.

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they would suggest that was your position.

[00:17:49] Speaker 03:
Well, Your Honor, the statute directs the agency to verify that fees are collected in the appropriate amount.

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The audit is the agency's means of determining whether that is so.

[00:17:58] Speaker 02:
I'm asking about the question of whether your view that it was preclusive with respect to underpayments as well as overpayments.

[00:18:09] Speaker 02:
There's no notice of that to the effect which leads counsel to argue that if this was your position,

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It should have been done by notice and comment and a rulemaking.

[00:18:20] Speaker 03:
Well, let me unpack that question if I might, Your Honor.

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First of all, as Judge Pellard observed, argument is not really a claims preclusion argument.

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It is a time bar argument.

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The cases we rely on, California, the Sanders, and BLA,

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the ICC are cases that say once an administrative decision has been rendered, you can't revive appeal times by asking for reconsideration of that decision and then trying to appeal from the new decision on reconsideration.

[00:18:51] Speaker 03:
None of those cases talk about plain preclusion.

[00:18:54] Speaker 02:
They talk about the... No, I'm still on the notice question.

[00:18:58] Speaker 02:
It's hard for me to imagine why an airline would have realized that that was your position.

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that your position was going to be what your position is in court with respect to the preclusive nature of the audit.

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With respect to refunds.

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that are accepted by TSA and communicated to the audited entity state that this is the agency's final determination of the liability and amount of fees due and compliance.

[00:19:34] Speaker 05:
That's, yeah, sorry to interrupt.

[00:19:36] Speaker 05:
That's right.

[00:19:37] Speaker 05:
I think that the trouble that we're having is that you can imagine a regime in which it's TSA says, we're gonna take care of our potential, any shortfall in what you owe us.

[00:19:50] Speaker 05:
we're gonna go out and make sure you're not gouging us.

[00:19:56] Speaker 05:
And it's up to you to figure out, hire your own auditor or whatever, or submit questions when we set out to do our audit, if you wanna cover your interests.

[00:20:06] Speaker 05:
That's one possible approach to an audit.

[00:20:09] Speaker 05:
Another possible approach is, okay, we're gonna go out when we audit, we don't have to audit, and there's lots of airlines we don't, but when we audit, it's gonna be account clearing for everybody.

[00:20:19] Speaker 05:
it's gonna be bilateral and whatever we find out is speak now or forever hold your peace.

[00:20:25] Speaker 05:
If you had that regime, I think your argument would have some legs in terms of what happened in 2012.

[00:20:33] Speaker 05:
The difficulty and I think what Judge Silverman is probing is there's a basic idea that there has to be notice to the entity, which animal was this?

[00:20:42] Speaker 05:
And I don't see it in the record and it would be helpful if you could point us to your best

[00:20:46] Speaker 05:
place where you think this is rendered clear, because there's a lot of ambiguity where TSA's communications and regulations talk about what I would characterize as my first potential regime.

[00:20:59] Speaker 05:
We're just trying to cover our bases and make sure we TSA are not getting underpaid.

[00:21:05] Speaker 03:
Well, Your Honor, first let me separate the question of how the audit process is described from how the audit

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procedures actually work.

[00:21:13] Speaker 03:
In point of fact, every audit looks at the totality of compliance with the statute.

[00:21:20] Speaker 03:
If overpayments are uncovered, they are taken into account in the audit.

[00:21:24] Speaker 03:
We have other instances where carriers have been, and I did verify this with my agency counsel,

[00:21:30] Speaker 03:
We have other instances in which overpayments were detected in an audit and offset against liability.

[00:21:36] Speaker 03:
So what actually happens is overpayments and underpayments, any matter bearing on compliance with the statute, is in fact taken into account.

[00:21:45] Speaker 05:
Not exactly.

[00:21:46] Speaker 05:
I mean, you talked about

[00:21:49] Speaker 05:
In the record, the audit is to verify that the security service fees were properly collected and remitted.

[00:21:57] Speaker 05:
A little bit ambiguous.

[00:21:59] Speaker 05:
We assessed United's compliance.

[00:22:02] Speaker 05:
found United Airlines had no liability, not that we didn't have any liability to it.

[00:22:08] Speaker 05:
And when they talked about these, the transferred passengers, they were looking at whether any of the,

[00:22:21] Speaker 05:
whether United claimed that more passengers that flew on United were actually transferred over from other airlines than was the case.

[00:22:31] Speaker 05:
They didn't look at the converse.

[00:22:32] Speaker 05:
If they had, they would have found this million and a half shortfall, wouldn't they?

[00:22:36] Speaker 03:
Well, no, no, no.

[00:22:38] Speaker 03:
First of all, this is a sample audit, so it is certainly possible that there are claims outside the sample that were not captured.

[00:22:45] Speaker 03:
Secondly, if I could just describe the audit process briefly, the auditors go out, they take a sample of 600 passenger itineraries, which provide all the information the agency needs to know about

[00:22:57] Speaker 03:
whether fees should be collected, who should have been collecting them, how they were handled by the carrier, where they were admitted.

[00:23:04] Speaker 03:
Everything you would need to know to know whether the fee was properly collected, under collected, or over collected.

[00:23:11] Speaker 03:
So the audit process is in fact designed to capture this information.

[00:23:16] Speaker 05:
And none of those 600 had also this asymmetry in terms of the currency.

[00:23:21] Speaker 03:
Well, there's an assertion in terms of the currency.

[00:23:27] Speaker 03:
While that is, there is, in addition to sampling passenger itineraries, the agency looks at the account ledger.

[00:23:34] Speaker 03:
It looks at this is the total amount collected and remitted.

[00:23:37] Speaker 03:
The agency noticed the discrepancy between

[00:23:39] Speaker 03:
the amounts collected and the amounts remitted.

[00:23:42] Speaker 03:
It also noted that they are not an even multiple of $2.50, which is the amount of feed collected.

[00:23:49] Speaker 03:
So that clearly indicates the agency is picking up instances in which the amount actually remitted to the agency varied according to

[00:23:57] Speaker 03:
the way they encourage the exchange rates fluctuate.

[00:24:02] Speaker 03:
So that is information that, again, is also collected in the audit.

[00:24:06] Speaker 03:
As a matter of settled administrative practice, it is simply not true that the audit doesn't look at potential overpayments.

[00:24:12] Speaker 03:
There are other instances in which the agency has uncovered overpayments and offset them against other payments.

[00:24:19] Speaker 02:
Well, that's sort of fortuitous.

[00:24:20] Speaker 02:
In other words, the focus is not overpayments.

[00:24:27] Speaker 02:
It's underpayments.

[00:24:28] Speaker 02:
If you have to see there's an overpayment, then there's an offset.

[00:24:32] Speaker 02:
But that's not the focus.

[00:24:34] Speaker 03:
Your Honor, respectfully, that's absolutely incorrect.

[00:24:37] Speaker 03:
These audits are conducted in accordance with generally accepted criteria.

[00:24:43] Speaker 03:
state that that's his purpose.

[00:24:51] Speaker 02:
It never states that our purpose is to check overpayments as well as underpayments and once the audit is finished

[00:25:07] Speaker 03:
I recognize this is hardly a persuasive argument for agency action, but that would be a really frankly preposterous kind of way of administering the statute.

[00:25:22] Speaker 03:
to send your auditors out for a week to dedicate all your resources to looking at liability and to not looking at an overpayment issue that can present it years after the audit fact.

[00:25:34] Speaker 03:
That's simply not the way the agency does business.

[00:25:37] Speaker 03:
It's not consistent with the statutory directive.

[00:25:40] Speaker 02:
It's possible, but certainly one couldn't, doesn't necessarily conclude that as an airline.

[00:25:47] Speaker 02:
looking at it beforehand.

[00:25:48] Speaker 02:
That goes to my notice problem.

[00:25:50] Speaker 03:
Your Honor, the auditors, this is not a rigidly formalized process.

[00:25:57] Speaker 03:
The auditors go out, they have discussions with the auditor entity as how the audit is going to proceed.

[00:26:02] Speaker 03:
They have discussions about appropriate sampling methodology.

[00:26:05] Speaker 02:
But you're the one who's arguing formalism because you're the one who's arguing preclusion.

[00:26:10] Speaker 03:
Well, again, Your Honor, we are not arguing preclusion.

[00:26:12] Speaker 05:
We are arguing that... Well, you do have a separate preclusion argument in your brief, and I thought that was... I mean, if it were preclusive, then we would be out of business in terms of APA review.

[00:26:23] Speaker 03:
I mean, that just can't be right.

[00:26:25] Speaker 03:
Your Honor, I think...

[00:26:26] Speaker 03:
any kind of time bar issue is kind of akin to a preclusion issue.

[00:26:32] Speaker 05:
Separate section in the brief on preclusion.

[00:26:34] Speaker 03:
Well, I think those preclusion principles all kind of derive from the statutory limit on review of a final agency order and the implications for how that review scheme would work if parties could simply come back with success.

[00:26:49] Speaker 05:
I take your point, but it is not a preclusion argument.

[00:26:53] Speaker 05:
It's a time bar argument.

[00:26:57] Speaker 04:
Council said that TSA does not audit every airline.

[00:27:05] Speaker 04:
And so the ones who are unaudited are the rules for refunds different for them?

[00:27:12] Speaker 03:
Well, they would be different only in the sense that there's not a final determination of their liability and compliance in the absence of an audit.

[00:27:20] Speaker 03:
So they wouldn't have the same sort of time bar issues for requesting a refund.

[00:27:25] Speaker 05:
So what is your position on the time limit in which they must request a refund if it was united and they had the similar kinds of what they thought were overpayment issues?

[00:27:35] Speaker 05:
Six years, no limit?

[00:27:37] Speaker 03:
Well, there's no time bar arising from a final determination, because there is not.

[00:27:43] Speaker 03:
There is no determination.

[00:27:44] Speaker 03:
If they were to come in with a request for a refund at some late period, the agency would have.

[00:27:50] Speaker 03:
25 years later.

[00:27:51] Speaker 03:
Right.

[00:27:51] Speaker 03:
If the agency would have some discretion, because the statute says the agency may refund overpayments, to consider whether the request is unreasonably, untimely, whether there is sufficient information.

[00:28:03] Speaker 03:
to evaluate the request and so forth.

[00:28:06] Speaker 03:
And in terms of whether there would be a time limit on that action if, I believe the only, there's no administrative time limit, the only limit that I can think of is the statute of limitations period that Your Honor referred to earlier, that APA actions.

[00:28:22] Speaker 02:
Well, you might argue latches at that point.

[00:28:24] Speaker 03:
Well, Your Honor, we would submit that even apart from the finality concerns we've raised here, here's a part of coming in four years after the audit, after the agency's record retention requirements have expired.

[00:28:40] Speaker 03:
making it very difficult for the agency to evaluate the request in circumstances where, bear in mind, Your Honor, the carrier has all the information it needs to make these kinds of arguments.

[00:28:52] Speaker 03:
They are the ones that account for it, that impose the fee in the first instance, that account for it.

[00:28:57] Speaker 03:
They have their own records.

[00:28:58] Speaker 03:
This is information.

[00:29:00] Speaker 03:
On TSA's behalf.

[00:29:01] Speaker 03:
On TSA's behalf.

[00:29:03] Speaker 04:
Yes.

[00:29:03] Speaker 04:
It seems like all of that is true.

[00:29:05] Speaker 04:
And you seem to recognize that there is a statutory directive to refund overpayments.

[00:29:13] Speaker 04:
So if the agency recognizes that that's part of the responsibility, why not a regulation which just says what the rules are?

[00:29:25] Speaker 03:
Well, regulations certainly would have been helpful in this case.

[00:29:31] Speaker 03:
Again, because it is the carriers that are responsible for administering the program in the first instance, we don't see a lot of cases in which errors are made in the government's favor.

[00:29:40] Speaker 03:
We see many more cases in which there are underpayments, and there is a much more sort of routinized regulatory controlled process.

[00:29:48] Speaker 03:
for that, as petitioners' counsel has described.

[00:29:52] Speaker 03:
Part of the reason you don't have a more elaborate set of rules and a somewhat more ad hoc process for this kind of claim is we just don't see that many claims.

[00:30:01] Speaker 03:
Nonetheless, when the auditors go out, the carrier is free to bring any information it thinks is relevant to the auditor's attention.

[00:30:10] Speaker 03:
And to have a system where the agency dedicates all these resources to looking at 600 passenger itineraries and the 1,400 plane segments, and looking at anything that bears on the amount of fees that should be collected and remitted, and to say, well, the agency is just sort of ignoring any instance in which there's been an overpayment.

[00:30:32] Speaker 03:
It's simply not a sensible way of administering the statute.

[00:30:35] Speaker 03:
It is, in point of fact, not the way the agency administers the statute.

[00:30:39] Speaker 03:
What does the carrier think is going on when the auditors show up?

[00:30:43] Speaker 03:
That they're only looking for underpayments?

[00:30:45] Speaker 03:
Nothing conveys that to them.

[00:30:47] Speaker 05:
It is a compliance.

[00:30:48] Speaker 05:
I'm curious, and maybe you don't know this, but in, for example, a typical government contracting situation, it would not surprise me if

[00:30:58] Speaker 05:
government compliance officials looked at whether the government was getting its value for its money.

[00:31:07] Speaker 05:
And if it seemed to be getting windfalls here and there, it might just not worry about that and say that's on the counterparty to bring that up.

[00:31:19] Speaker 05:
I mean, it just seems like in the contracting world,

[00:31:23] Speaker 05:
you know, sometimes you think, well, goodwill, you know, we got lucky, or you just don't even look for it, because it's not your, it's not in the interest of the person who hired you to go out and investigate.

[00:31:37] Speaker 03:
Well, Your Honor, that may be, I don't know about the contracting role, but it's certainly not true of this role.

[00:31:43] Speaker 03:
The statute, and I'm at section 44940,

[00:31:47] Speaker 03:
subsection D4.

[00:31:49] Speaker 03:
The undersecretary may require the provision of such information as the undersecretary decides is necessary to verify that fees have been collected and remitted at the proper times and in the proper amounts.

[00:32:01] Speaker 03:
If that proper amount, it's not a proper amount if it is more than the statute requires.

[00:32:07] Speaker 03:
In other audits where the agency has found overpayments, it has characterized that as a compliance issue, as a noncompliance finding because the

[00:32:17] Speaker 03:
Fees are not being processed and collected in accordance with the way the statute dictates.

[00:32:24] Speaker 05:
Do you have a citation for that when you say that?

[00:32:26] Speaker 03:
Well, these are other audits that are not in the record.

[00:32:28] Speaker 03:
They are judicially noticeable.

[00:32:30] Speaker 03:
Again, if the court would like, I can file them with a motion for judicial notice so the court can see that.

[00:32:38] Speaker 03:
Would the court be interested in that?

[00:32:40] Speaker 05:
I'm not sure that's something that we can take judicial notice of.

[00:32:44] Speaker 05:
Maybe you'll have a further opportunity to put that in the record.

[00:32:47] Speaker 03:
I'm sorry, Your Honor.

[00:32:50] Speaker 03:
Is the court requesting a motion for a judicial review?

[00:32:52] Speaker 03:
No, we're not.

[00:32:57] Speaker 03:
No.

[00:32:57] Speaker 03:
Thank you.

[00:32:58] Speaker 03:
Leave that.

[00:32:59] Speaker 03:
Again, Your Honor, even aside from the fact I'm seeing way over my time, if I could just have a quick moment, even apart from the question where the audit is final, a refund decision, the statute, subsection G, gives the agency discretion as to whether

[00:33:14] Speaker 03:
The very same policy considerations we've articulated in the brief, the interest in finality, the limitation on the agency's resources, the inability to document these things in periods after the three-year record retention requirement has expired, the inability to chase another carrier if it is the carrier's responsibility,

[00:33:36] Speaker 03:
and the attendant impact on whether the appropriate amount of fees have been collected.

[00:33:43] Speaker 03:
All those instances would certainly warrant an exercise of discretion not to honor the refund request.

[00:33:50] Speaker 03:
If the court is persuaded by the petitioner's argument that the agency should have entertained this appeal, it can, of course, man to the agency for a consideration of whether a refund would be appropriate.

[00:34:03] Speaker 03:
But I think the writing is really on the wall here.

[00:34:06] Speaker 03:
the agency has articulated some important policy considerations and certainly reasonable ones as to why a refund request four years after the audit has been completed doesn't warrant further consideration.

[00:34:21] Speaker 04:
Thank you.

[00:34:26] Speaker 04:
Mr. Feinberg, you had no time left.

[00:34:28] Speaker 04:
We'll give you a minute of rebuttal time if you think there's something you need to respond to.

[00:34:33] Speaker 01:
Yes, Your Honor, I have four very brief points.

[00:34:36] Speaker 01:
First of all, just to clarify this issue about the time bar, I think the two issues about time bar versus issue preclusion merge because

[00:34:45] Speaker 01:
The government says, well, it's time barred because you have to seek reconsideration.

[00:34:51] Speaker 01:
And we say, no, no, no, we don't have to seek reconsideration because we're not reopening the past issue.

[00:34:55] Speaker 01:
This is a different issue.

[00:34:57] Speaker 01:
And so it's the same thing.

[00:34:59] Speaker 01:
The time bar only applies if there is issue preclusion.

[00:35:08] Speaker 01:
We say there isn't, and so you don't get to the time bar question.

[00:35:10] Speaker 05:
I don't think it's if it's issue preclusion.

[00:35:12] Speaker 05:
I think if the final action was in 2012, that's what they're saying.

[00:35:17] Speaker 05:
It's not preclusion in the sense that because that's a judicial decision, it's that you've missed the boat on bringing that to us in their view.

[00:35:27] Speaker 01:
Correct.

[00:35:27] Speaker 01:
But that seems to me to be an issue preclusion task.

[00:35:31] Speaker 01:
Because the issue in this case is, what's the scope of what you should have brought to our attention

[00:35:38] Speaker 01:
And that's analyzed under a normal issue of preclusion analysis and so forth.

[00:35:42] Speaker 05:
Or was there a final decision then on your claim?

[00:35:46] Speaker 05:
And if there was, it's time barred.

[00:35:48] Speaker 05:
If there wasn't, it's not.

[00:35:49] Speaker 01:
Exactly.

[00:35:50] Speaker 01:
But we didn't make any such claim.

[00:35:51] Speaker 01:
They happened to look at an underpayment of a couple dollars here and there.

[00:35:56] Speaker 01:
But it wasn't presented to them, nor did they actually decide, which is the test for issue of preclusion, the underpayments that we're talking about here.

[00:36:05] Speaker 05:
Why did it take so long?

[00:36:07] Speaker 01:
Well, these are very complicated matters, and they didn't realize how some of the systems were set up, which is what happened here.

[00:36:16] Speaker 01:
By the way, one of the other minor points I wanted to make is about the 600.

[00:36:20] Speaker 01:
And Mr. Clare said that, oh, well, this issue

[00:36:25] Speaker 01:
wasn't in the 600.

[00:36:27] Speaker 01:
That's not true.

[00:36:28] Speaker 01:
We submitted the evidence that we submitted the filing and the claim for refund that was submitted on April 8th contained not a sampling, literally, data on every single ticket to which we thought there was an overpayment on this involuntary passenger issue.

[00:36:44] Speaker 01:
So there's no issue about the records not being there.

[00:36:46] Speaker 01:
We have preserved the records and have now presented them to the government.

[00:36:50] Speaker 02:
On the other hand, if the government thinks, well, we're... Are you saying that the audit dealt with a sampling?

[00:36:59] Speaker 03:
Correct.

[00:36:59] Speaker 02:
Your refund deals with all transactions in which you're entitled to refund, which go way beyond the sample.

[00:37:08] Speaker 02:
That's correct.

[00:37:10] Speaker 05:
And is there overlap?

[00:37:11] Speaker 05:
If they had looked at those that they sampled for overpayment, would some of those records have enough information to have made the kinds of points that you make in your fuller review?

[00:37:23] Speaker 01:
Yes, they would.

[00:37:25] Speaker 01:
And so these issues were there for everybody to see if somebody had looked very carefully at them.

[00:37:31] Speaker 01:
But nobody understood that that was the purpose of this audit.

[00:37:35] Speaker 01:
Obviously, if anybody had, we would have looked at this.

[00:37:38] Speaker 01:
And the final point I wanted to make was Mr. Clare's comment that this would be preposterous to work it the way we're suggesting.

[00:37:46] Speaker 01:
Well, this is the way the IRS works.

[00:37:48] Speaker 01:
This is the way almost every state works.

[00:37:51] Speaker 01:
And this is the way other agencies work that have similar fees.

[00:37:54] Speaker 01:
And I mentioned this Swisher case that was in the federal circuit.

[00:38:01] Speaker 01:
Customs added a statute of limitations after this case, learning the lesson that can be found at 19 CFR 24.24 E4 little 2i.

[00:38:12] Speaker 01:
But the Swisher case also talks about the fact that

[00:38:18] Speaker 01:
Customs has the right to audit, and in fact does audit, pursuant to a provision that is identical, or nearly identical, to the one in this case.

[00:38:25] Speaker 01:
In the customs side, this was a harbor maintenance tax.

[00:38:29] Speaker 01:
It was at 19 CFR 24.24 G, and it's discussed towards the end of the Swisher case.

[00:38:35] Speaker 01:
And so the notion that you have the right to audit as the government has nothing to do and isn't reclusive whatsoever with respect to the right to seek a refund.

[00:38:44] Speaker 01:
All right.

[00:38:44] Speaker 01:
Thank you.

[00:38:46] Speaker 04:
Thank you, Mr. Finder.

[00:38:47] Speaker 04:
The case will be submitted.