[00:00:00] Speaker 00:
Case number 20-1222, United Airlines Inc.

[00:00:04] Speaker 04:
Petitioner versus Transportation Security Administration.

[00:00:08] Speaker 04:
Mr. Feinberg for the petitioner, Mr. Overvold for the respondent.

[00:00:12] Speaker 00:
Mr. Feinberg, good morning.

[00:00:15] Speaker 03:
Good morning, Judge Henderson.

[00:00:17] Speaker 03:
May it please the court.

[00:00:20] Speaker 03:
I'm sorry.

[00:00:20] Speaker 03:
May it please the court, Adam Feinberg on behalf of Petitioner United Airlines Inc.

[00:00:25] Speaker 03:
This case is about United requests for a refund of overpaid TSA security fees were before the court now for a second time after TSA has once again denied United's request in full.

[00:00:37] Speaker 03:
There are two different types of refunds that United requested in this case, the first one

[00:00:43] Speaker 03:
relates to involuntary transfer or what we sometimes call IT tickets.

[00:00:49] Speaker 03:
This involves a million dollars of refund or requested refund and more than 304,000 tickets.

[00:00:56] Speaker 03:
The basic premise of this refund is quite straightforward.

[00:00:59] Speaker 03:
A different airline sold the ticket and the passenger was involuntarily transferred by that other selling carrier to United for the actual transportation.

[00:01:09] Speaker 03:
And the second issue relates to exchange rate difference, or what we call ERD tickets, which involve a situation where United sold a ticket in a foreign currency.

[00:01:18] Speaker 03:
And between the time of the sale of the ticket and when it converted the funds and then remitted them to TSA, the funds were worth slightly more or less than the $2.50 fee at the time.

[00:01:28] Speaker 03:
And United made a mistake and paid at least

[00:01:33] Speaker 03:
$2.50 fee.

[00:01:35] Speaker 03:
In other words, when the fee went down before Remittance United typically, although not in every case, trued it up with its own funds, paid the whole $2.50, but when the $2.50 had appreciated before Remittance United remitted more than $2.50, and with that excess contributing are causing the overpayment.

[00:01:56] Speaker 03:
Let me start with involuntary transfer tickets.

[00:01:59] Speaker 03:
This issue is obviously the bigger of the two issues and involves one purely legal issue.

[00:02:07] Speaker 03:
And that is, can United Airlines ever be liable if it was not the selling carrier?

[00:02:12] Speaker 03:
There are no factual disputes about this.

[00:02:14] Speaker 03:
The government does not dispute it.

[00:02:16] Speaker 02:
What was the next word?

[00:02:19] Speaker 03:
Can United ever be liable or ever be responsible for collecting or remitting the fee if it was not the carrier that sold the ticket?

[00:02:30] Speaker 03:
There's no dispute about the facts.

[00:02:32] Speaker 03:
TSA reviews.

[00:02:34] Speaker 00:
Let me ask you about that because the statute, I agree with you, the statute says that the selling carrier is solely liable.

[00:02:43] Speaker 00:
Why don't you, let's say it's American Airlines, why don't you sue American Airlines for the IT fees that you had to pay as the transferee that was actually owed by American?

[00:03:02] Speaker 03:
Well, I think there are two answers to that.

[00:03:03] Speaker 03:
First of all, the statute specifically says that the carrier that collects the fee is responsible for remitting the fee.

[00:03:12] Speaker 03:
So there's no way that United would ever be, or that American would ever be liable to United in that situation.

[00:03:19] Speaker 03:
Under the statute and the regulations, each independently, American has to provide those fees solely to TSA.

[00:03:27] Speaker 03:
That is explicitly clear in the statute.

[00:03:31] Speaker 02:
No, they don't have to.

[00:03:32] Speaker 02:
They can give them to the transferee airline.

[00:03:37] Speaker 03:
No, they cannot, Your Honor.

[00:03:40] Speaker 02:
I thought in your case, Council, maybe I have this completely wrong.

[00:03:45] Speaker 02:
In fact, you are requesting refunds because you claim funds came from the transferring airline, right?

[00:03:57] Speaker 03:
No, your honor.

[00:03:59] Speaker 03:
So, not not to not to unite it.

[00:04:02] Speaker 03:
So, let me back up a second and explain the factual situation.

[00:04:06] Speaker 03:
So passenger travel but buys a ticket let's say on American Airlines, they are required at that time, American Airlines that is

[00:04:14] Speaker 03:
to collect the fee.

[00:04:15] Speaker 03:
And then in the following month, at the end of the following month, American Airlines under the statute and regulations is required by law to remit the fee.

[00:04:25] Speaker 03:
And the statute and the regulations say that the carrier that collected the fee.

[00:04:29] Speaker 02:
I understand that.

[00:04:30] Speaker 02:
But what happens if the transferring airline sends that fee money to the transferee?

[00:04:38] Speaker 03:
Well, so there are cases about.

[00:04:41] Speaker 03:
Well, but the fee money is never sent by American to United because the statute specifically says that American as the ticketing carrier, the carrier that sold the ticket is solely liable to TSA.

[00:04:56] Speaker 02:
So American has to be... You are suing under a provision seeking a refund.

[00:05:03] Speaker 02:
Correct, because United... The provision you're talking about is not really in play.

[00:05:08] Speaker 03:
Well, it is, Your Honor, because of the...

[00:05:11] Speaker 02:
you are claiming, as I understand it, that some of these monies were sent to you.

[00:05:17] Speaker 02:
And indeed, as the government points out in the joint appendix indicates, the government points out you acknowledge that you failed to remit some of the fees, the assumption being that you did have the fee money sent to you by the transferring airline.

[00:05:36] Speaker 03:
No, Your Honor, that's not right at all.

[00:05:39] Speaker 02:
Well, you didn't contest it.

[00:05:41] Speaker 02:
It's in the Joint Appendix.

[00:05:44] Speaker 02:
And that's one of the principal points that the government's making.

[00:05:46] Speaker 02:
You're essentially acknowledging that, yeah, you do sometimes get fee money because they send all of it over.

[00:05:54] Speaker 02:
And the person responsible.

[00:05:56] Speaker 02:
See, you're under refund provision now.

[00:05:59] Speaker 02:
It's only an interesting issue that you raise about who's

[00:06:04] Speaker 02:
responsible under the law for transmitting that that fee money.

[00:06:08] Speaker 02:
There's no doubt that the initial airline is responsible under the law.

[00:06:12] Speaker 02:
But you are suing under a refund provision on the assumption that you sent some of that fee money to the government and you did it mistakenly and you want it back.

[00:06:25] Speaker 02:
The assumption being that the original airline must have done it.

[00:06:28] Speaker 02:
No.

[00:06:29] Speaker 03:
No, Your Honor, let me clarify the factual situation because it's quite different and there's no, by the way, what I'm about to say is not disputed by TSA.

[00:06:38] Speaker 03:
So there were two fees probably, we say definitely, paid to TSA.

[00:06:45] Speaker 03:
American Airlines collects the original fee and it remits the fee directly to TSA.

[00:06:51] Speaker 03:
That's what the statute says it has to do.

[00:06:54] Speaker 03:
United Airlines, when it transported the passenger, paid a second fee.

[00:06:59] Speaker 03:
to TSA.

[00:07:00] Speaker 03:
And in fact, this court in the first United Airlines case four years ago, said that same exact thing.

[00:07:07] Speaker 03:
So the refund we're seeking is the second fee that United paid out of its own money when it's not United.

[00:07:15] Speaker 02:
You're not meaning to say different fee, you're just saying second.

[00:07:19] Speaker 03:
A second fee.

[00:07:20] Speaker 02:
Second mean repaid.

[00:07:22] Speaker 03:
No, not repaid.

[00:07:24] Speaker 01:
Mr. Feinberg, is it your position that TSA should have been paid, based on these transfers, a total of $1 million from all the airlines, but they actually were paid a total of $2 million.

[00:07:37] Speaker 01:
And so Unite at once the $1 million back.

[00:07:42] Speaker 03:
Exactly.

[00:07:43] Speaker 03:
And the transferring carriers paid the first million and United paid the second million.

[00:07:49] Speaker 01:
TSA got an extra one million more than TSA was entitled to.

[00:07:54] Speaker 01:
Exactly.

[00:07:55] Speaker 02:
And why is it, and I'll ask the other side about this, why is it that in the Joint Appendix, you're acknowledging, the government says you acknowledged that you failed to pay this fee in some instances.

[00:08:10] Speaker 02:
And that's what caused some of the problems.

[00:08:12] Speaker 02:
Now, you want me to look it up?

[00:08:14] Speaker 02:
I will.

[00:08:14] Speaker 02:
But it's there.

[00:08:16] Speaker 02:
I'm sure the government will fill in the blank.

[00:08:18] Speaker 03:
I believe I know, Your Honor, the reference that you're making.

[00:08:23] Speaker 03:
But there were a few outlier tickets, literally 109 tickets out of 304,000 tickets where there were some anomalies.

[00:08:33] Speaker 03:
And it did look like, for unrelated reasons,

[00:08:37] Speaker 03:
the fee was not properly paid by United.

[00:08:40] Speaker 03:
And United concedes that, and it subtracts that amount from the amount of the refund that it's seeking.

[00:08:46] Speaker 02:
But that was not properly paid by United.

[00:08:48] Speaker 02:
I thought your theory was you never have to pay the fee.

[00:08:51] Speaker 03:
Correct.

[00:08:53] Speaker 02:
See, that's the problem here.

[00:08:55] Speaker 02:
On the one hand, you're saying you never have to pay it, as if it's routine that the transferring airline always does.

[00:09:02] Speaker 02:
And yet there's evidence here indicating you're acknowledging we failed to pay it in some instances.

[00:09:08] Speaker 02:
And so you should subtract that from whatever it is that's an issue.

[00:09:13] Speaker 02:
Obviously there were occasions, there have been occasions where the transferring airline is sending the ticket amount and the fee, and you will then remit.

[00:09:26] Speaker 02:
As a matter of law, you would be required to remit that money if the transferring airline

[00:09:32] Speaker 02:
In fact, I'm not gonna say this is accurate.

[00:09:34] Speaker 02:
If the transferring airline, in fact, say there's $100 for the ticket and $20 for the fee, and they sent you $120, and you have reason to know that 20 of that is the fee, and that money belongs to the government.

[00:09:49] Speaker 02:
Obviously you have an obligation to send that to the government, even though you are right, originally that legal obligation is on the transferring airline, right?

[00:09:58] Speaker 02:
If they sent you $120, you can keep the $20, right?

[00:10:02] Speaker 03:
Well, I respectfully disagree.

[00:10:04] Speaker 03:
I think, well, if we owe that $20 back, it would be to American Airlines because American Airlines remains liable and would still be liable to this day to TSA for that fee.

[00:10:18] Speaker 03:
But I think we're getting a little off on a tangent a little bit because there's no evidence here whatsoever that even on one single ticket,

[00:10:30] Speaker 03:
American Airlines or whoever the other transferring carrier was, sent the fee to United Airlines.

[00:10:36] Speaker 03:
And not only that, but that's just not how the airline industry works.

[00:10:40] Speaker 03:
And we cited in our reply brief, an audit guy from the IRS that makes a habit of auditing every carrier repeatedly.

[00:10:49] Speaker 03:
And it specifically says that it's always the carrier that sells the ticket that has to remit the fees and that the fees are not transferred from carrier to carrier.

[00:10:59] Speaker 03:
So the situation we have here is that some other carrier, as this court held four years ago, some other carrier paid TSA a fee, and then United has now paid a second fee.

[00:11:11] Speaker 03:
And the statutory question that doesn't seem like there's any dispute about it is which of those two carriers was required to pay, and it's never United.

[00:11:20] Speaker 03:
It's always the other carrier.

[00:11:21] Speaker 02:
I don't think it's which of it's whether you did and if there's a possibility that they did transfer money to you sometimes the government can assume that you properly remitted that because that's the honest thing to do because it wasn't your money to hold and so the question is how many times and how much of that are we talking about because you can't claim that in a refund if they did

[00:11:45] Speaker 02:
incorrectly send you some fee money and you remitted it, you should have remitted it and you're not entitled to seek a refund for it because it's government money, right?

[00:11:54] Speaker 03:
I agree with that entirely.

[00:11:58] Speaker 03:
Did that ever happen?

[00:12:00] Speaker 01:
No, not once, never.

[00:12:02] Speaker 01:
I'm going to ask Mr. Overbaugh the same thing when it's his turn.

[00:12:07] Speaker 00:
But I'm with Judge Edwards.

[00:12:08] Speaker 00:
I thought you said you conceded that in 100 and some of the cases, you ditto.

[00:12:14] Speaker 03:
Right.

[00:12:15] Speaker 03:
I did say that, but not because of this issue.

[00:12:19] Speaker 03:
It was because of some unrelated reason.

[00:12:25] Speaker 01:
Can you give an example of one of those 100 tickets and what went wrong?

[00:12:32] Speaker 03:
I don't know the particulars, but there are times when a passenger might be traveling with two issuing carriers or one carrier issues part of the ticket and another carrier issues another part of the ticket.

[00:12:45] Speaker 03:
And so there's a problem.

[00:12:48] Speaker 03:
One of these involuntary transfer tickets in that the part that was not issued by United was that segment was transferred to United, but the other part that was issued by United has some unrelated independent error on it.

[00:13:05] Speaker 03:
So that could happen.

[00:13:07] Speaker 03:
And this is, by the way, described in Mr. Lem's declaration.

[00:13:11] Speaker 03:
I don't think the particulars are really relevant here, because as a legal matter, United is simply never required to remit these fees.

[00:13:21] Speaker 03:
And as a- They may not be required.

[00:13:24] Speaker 02:
That's not the point.

[00:13:25] Speaker 02:
The point is they might.

[00:13:27] Speaker 02:
And you're talking about a million dollars.

[00:13:29] Speaker 02:
They might.

[00:13:29] Speaker 02:
There's no doubt that they might have.

[00:13:31] Speaker 02:
And indeed, that is conceded.

[00:13:32] Speaker 02:
I'm still looking for it, and I will find it.

[00:13:35] Speaker 02:
they might have, that's why you're asking for a refund.

[00:13:39] Speaker 02:
You're asking for a refund on the assumption that you incorrectly sent a whole bunch of fee money to the government that you had no obligation to send.

[00:13:50] Speaker 02:
The government says, that's perfectly plausible starting point, but now prove it.

[00:13:56] Speaker 02:
Because it isn't your responsibility to do that, you argue

[00:14:00] Speaker 02:
vigorously that you have no such responsibility.

[00:14:02] Speaker 02:
That's your starting point.

[00:14:03] Speaker 02:
We have no obligation.

[00:14:05] Speaker 02:
And yet you're under the refund provision saying, but we did.

[00:14:08] Speaker 02:
Now I won't even get into how could you have business practices that could even allow that possibility, but that's a whole nother issue that makes no sense.

[00:14:16] Speaker 02:
And when I'm preparing this case, I'm saying United did that.

[00:14:20] Speaker 02:
That's bizarre.

[00:14:21] Speaker 02:
They're arguing with great vigor.

[00:14:23] Speaker 02:
They have no legal responsibility to send any fee money.

[00:14:27] Speaker 02:
because it's on the transfering airline, and yet they're saying they sent over a million dollars to the government and they want it all back.

[00:14:33] Speaker 02:
Well, you have an obligation to prove that you did.

[00:14:35] Speaker 03:
Well, Your Honor, this happens usually in a rush where some passengers, original flight got canceled and United is accommodating the passengers.

[00:14:44] Speaker 03:
Somebody is running to the plane from some other carrier and they're doing the paperwork.

[00:14:48] Speaker 03:
And so mistakes do get made.

[00:14:51] Speaker 03:
And obviously in this case, the mistakes were all in the government's favor.

[00:14:55] Speaker 03:
But at the end of the day, there really isn't a dispute that for over 300,000 tickets,

[00:15:03] Speaker 03:
The United paid a fee out of its own money when somebody else sold the ticket and there's every reason to believe that that other carrier itself paid the money because how do we know that?

[00:15:17] Speaker 03:
Well, this court said it four years ago.

[00:15:19] Speaker 03:
Number one, number two, that we know that the transferring airline paid that money.

[00:15:25] Speaker 02:
Correct.

[00:15:26] Speaker 00:
No, it was a footnote that said it is reasonable leave or something like that.

[00:15:31] Speaker 00:
It was not a holding.

[00:15:32] Speaker 03:
Well, but I think that the court, whether you say it's a holding or dicta, that the logic flows from the fact that the legal responsibility from a few things.

[00:15:42] Speaker 03:
Number one, that the legal responsibility for submitting the fee always lies with that other carrier.

[00:15:48] Speaker 03:
And number two, that the other carriers were audited by TSA repeatedly.

[00:15:54] Speaker 03:
All carriers are.

[00:15:55] Speaker 03:
under their regulatory provisions to ensure that they have complied with the law.

[00:16:00] Speaker 03:
And third, because the process in the airline industry as the IRS itself acknowledged is that the fees do not get transferred between carriers, only the airfare does.

[00:16:13] Speaker 03:
And when you put all those together, that's more than enough proof that the transferring carrier did in fact pay as it was required to all of these other fees.

[00:16:24] Speaker 00:
All right, Mr. Overvolt, we'll hear from you.

[00:16:32] Speaker 04:
Thank you, Judge Henderson.

[00:16:33] Speaker 04:
May it please the court, Life Overvolt on behalf of the Transportation Security Administration.

[00:16:39] Speaker 04:
Just to start, Judge Edward, just for the record site, the portion of the TSA decision which references that concession from United is JA7.

[00:16:49] Speaker 04:
And I believe the reference portion of United's submission is that JA19.

[00:16:54] Speaker 04:
And we, TSA does read that the same way that it's sort of an unexplained concession given United's now categorical position that essentially they never have to show anything to establish a refund in these cases, that in the submission itself, they were acknowledging not just that they owe, I mean, there were underpayments associated with a category that they,

[00:17:20] Speaker 04:
at the same time are trying to argue as a categorical matter, they have nothing to show beyond that it was a transfer ticket.

[00:17:27] Speaker 01:
Mr. Overvold, let's hypothesize that American was always the transferring airline and United was always the transferee that did the actual flight with the passenger.

[00:17:42] Speaker 01:
And let's say there were 300,000 of those instances

[00:17:47] Speaker 01:
Let's put aside the 100 anomalies.

[00:17:50] Speaker 01:
That's going to be my next question.

[00:17:51] Speaker 01:
But for the purposes of this question, putting aside the 100 anomalies, is there any reason to believe that American sent the fee to United?

[00:18:11] Speaker 04:
The record does not show that.

[00:18:13] Speaker 04:
And if anyone would know in that situation, it is the carriers who are accounting for that transaction.

[00:18:18] Speaker 01:
So you don't know and United says,

[00:18:22] Speaker 01:
that's not what happened.

[00:18:23] Speaker 01:
What about the hundred anomalies?

[00:18:25] Speaker 04:
To be clear, I don't think, I'm sorry, Dr. Dwaga, I don't think they say that's not what happened.

[00:18:29] Speaker 04:
They say it's not our burden to show whether or not it happened or not.

[00:18:32] Speaker 04:
I mean, in the reply brief, they note maybe American did send us a fee and then the appropriate situation is for American to sue us to get that feedback and for TSA to proceed against American, which is, I think the agency can reasonably conclude that's not, you know, that doesn't make a whole lot of sense under this refund scheme.

[00:18:50] Speaker 01:
I thought that Mr. Feinberg had just said that there's no reason to believe that, but that's neither here.

[00:18:58] Speaker 01:
We can check transcript and see.

[00:19:00] Speaker 01:
What about the 100 anomalies?

[00:19:03] Speaker 01:
For those 100 anomalies, is there any reason to believe that American sent the fee to United

[00:19:14] Speaker 04:
TSA really just does not have information for those anomalies.

[00:19:18] Speaker 04:
What the, you know, on what basis there isn't underpayment, whether that resulted from some sort of way the carriers had decided they would handle the fee in connection with this transfer.

[00:19:27] Speaker 01:
And then let me ask a question about this, the statute and the regs.

[00:19:33] Speaker 01:
Does the transferring airline have a responsibility to pay the fee to TSA?

[00:19:41] Speaker 04:
TSA would naturally understand the transferring carrier.

[00:19:46] Speaker 01:
In my analogy, does American, before they transferred to United, does American have a responsibility to pay the fee to TSA?

[00:19:55] Speaker 04:
So of the two, TSA would look to the transferee who actually provided the transportation.

[00:20:00] Speaker 01:
You would look to United.

[00:20:01] Speaker 01:
You would look to United.

[00:20:02] Speaker 04:
As a practical matter, and especially in this sort of refund context, TSA wants one fee for one flight.

[00:20:08] Speaker 04:
And if that is remitted by either of the two carriers, they're not looking for a double payment from the other carrier.

[00:20:16] Speaker 01:
It does seem odd, though, to say TSA wants the money and we don't care who we get it from.

[00:20:25] Speaker 01:
One of the two airlines must have a legal responsibility to do it.

[00:20:30] Speaker 04:
Yes.

[00:20:31] Speaker 01:
In my hypothetical, does American have legal responsibility to do it?

[00:20:38] Speaker 02:
I clearly do under the regulations.

[00:20:41] Speaker 02:
Yes.

[00:20:42] Speaker 02:
I think so too, but I don't want to fool you with this because this seems like a very straightforward.

[00:20:50] Speaker 02:
You're treading on very light ground here.

[00:20:53] Speaker 02:
The one thing that's clear in this case that is a legal matter under your regs, it's the transferring airline that is responsible for that fee.

[00:21:01] Speaker 04:
You agree, Mr. Overholt?

[00:21:02] Speaker 04:
They would have collected a fee and they're holding it in trust.

[00:21:05] Speaker 02:
It's a legal matter the way it's written out when someone decided to draft

[00:21:09] Speaker 02:
their assumption was the transferring airline is responsible for that fee.

[00:21:15] Speaker 02:
That's what the law says.

[00:21:17] Speaker 04:
I just, the one point I don't want to, that there are situations in which let's say- No, no, no, no.

[00:21:24] Speaker 02:
In the regs, you have no claim that you can possibly rest on in the regs that would support a claim that the transfer E has that legal obligation.

[00:21:36] Speaker 02:
Under your regs, the assumption is that transferring airline has that responsibility, right?

[00:21:44] Speaker 02:
Yes.

[00:21:45] Speaker 04:
In a situation in which- Show me something that calls- Just offer one hypothetical, which I think, in a situation in which American, the involuntary transfer arises because American has canceled the flight and provides all the remuneration associated with those flights to United, United issues a United ticket for those passengers.

[00:22:06] Speaker 04:
I'm not sure why United is not the selling carrier in that situation.

[00:22:09] Speaker 04:
But I do think the fact that we are in a refund context here is also crucial.

[00:22:14] Speaker 02:
But you don't want to answer a very crucial question, and my colleague has asked it, I'm sure all three of us have, you can't possibly, I can understand your argument that now if it turns out in a case, for whatever reason, the fee money went from American to United, certainly we'd expect United to send it.

[00:22:34] Speaker 02:
We're asking you, as a matter of regulation, the assumption is

[00:22:39] Speaker 02:
The airline that is legally responsible for that fee is the transferring airline.

[00:22:43] Speaker 02:
That's what the regs say.

[00:22:46] Speaker 04:
The selling carrier, it looks to who's providing operational functions over the flight.

[00:22:51] Speaker 04:
And I mean, that's, that's the regulatory language.

[00:22:56] Speaker 04:
But I do think we are not in a position here of providing guidance at the outset.

[00:23:03] Speaker 04:
This is a situation in which United paid a fee, it asserted in connection with its submission that we just, she just assume the transferring carrier also paid the fee because of the timing that they're supposed to remit it a month after collection.

[00:23:17] Speaker 04:
But as TSA noted, it also.

[00:23:20] Speaker 01:
Let me change gears just a little bit.

[00:23:26] Speaker 01:
Who's in the.

[00:23:27] Speaker 01:
Well, is, is the government in a position to know which airline paid the fee.

[00:23:40] Speaker 04:
It is in position to, well, the fees are reported, are collected and remitted by the carriers and then reported at a relatively high level.

[00:23:49] Speaker 04:
So I'm not sure there's a government record that could point to some flight four years ago and say, oh yes, we've marked that as American or United.

[00:23:59] Speaker 04:
I mean, I do think that is also an important aspect of the regulatory scheme we have here that it is the carriers

[00:24:06] Speaker 04:
responsible for collecting and remitting, subject to oversight from TSA and, you know, audits from time to time.

[00:24:13] Speaker 04:
But the records are generally in the carrier's hands.

[00:24:17] Speaker 01:
And so is what's driving TSA's decision here that it's worried if it refunds United for these transfer fees, for these TSA fees that resulted from transfers.

[00:24:33] Speaker 01:
TSA is worried that if it makes those refunds, it will not get paid at all because it will have refunded United and then a transferring airline like American never paid that fee in the first place.

[00:24:49] Speaker 01:
Is that the main reason that TSA has denied the refund here?

[00:24:53] Speaker 04:
That is the principal concern.

[00:24:55] Speaker 04:
Yes.

[00:24:56] Speaker 04:
I mean, that they need in the showing.

[00:24:58] Speaker 01:
And it's yours.

[00:24:59] Speaker 01:
And then what you just said a second ago is that the government's not in a position to know if that's what happened or not.

[00:25:09] Speaker 01:
Yes.

[00:25:11] Speaker 01:
OK.

[00:25:11] Speaker 01:
All right.

[00:25:11] Speaker 01:
I understand it.

[00:25:13] Speaker 00:
Can I ask you a question from the passenger's point of view?

[00:25:16] Speaker 00:
I pay one hundred and fifty dollars to fly

[00:25:21] Speaker 00:
from Columbia to DC.

[00:25:23] Speaker 00:
25 of that is the security fee.

[00:25:32] Speaker 00:
I've already paid it.

[00:25:33] Speaker 00:
I get to the airport and American says, we've canceled, but we're going to put you on United.

[00:25:42] Speaker 00:
I don't pay anything extra.

[00:25:45] Speaker 00:
That $25 has already been paid to American.

[00:25:52] Speaker 00:
Do we know, is it in the record that when United issues me a ticket, that it then bills American the total $150 or whatever I said at the beginning, the entire fare?

[00:26:14] Speaker 04:
Judge, I mean, I believe JA-23 is the portion of United's submission that might

[00:26:22] Speaker 00:
What does that say?

[00:26:25] Speaker 04:
I'm paraphrasing, but I believe it's essentially

[00:26:28] Speaker 04:
United will issue a ticket in exchange for ticket stock from the transferring carrier.

[00:26:34] Speaker 04:
So as I understand the transaction, they sort of handle the accounting between the carriers and the passenger will not pay anything additional.

[00:26:46] Speaker 04:
Whether every transaction involves payment of the entire remuneration from one carrier to the other,

[00:26:54] Speaker 04:
That is, we don't have those accounting records to reflect that.

[00:26:59] Speaker 00:
Well, I thought that's what the IRS, according to the lawyer for the other side, if it didn't make clear, that's what United is relying on, that the IRS says those fees don't get transferred between airlines.

[00:27:22] Speaker 04:
They, I mean, the fact that I guess in the reply brief, they're now pointing to this IRS document that says as a general practice, these sort of fees are not transferred, taxes in general, which may include these sort of fees are not transferred.

[00:27:37] Speaker 04:
I mean, I think that underscores the failure of proof before the agency.

[00:27:42] Speaker 04:
And I mean, this isn't even something, the agency identified this as a defect and they waited until the reply brief to put that forward, so.

[00:27:53] Speaker 02:
In the agency's decisions, JA7, you assert the ticket information that Ryan submitted does not show that United received anything less than all the funds that the passenger had originally paid to the transferring airline for his or her ticket, including the fee.

[00:28:16] Speaker 02:
And what the other side is very plausibly arguing is

[00:28:20] Speaker 02:
Why should they?

[00:28:21] Speaker 02:
Because the assumption should be the opposite.

[00:28:23] Speaker 02:
The assumption should be that the transferring airline has the legal responsibility to submit the fee.

[00:28:29] Speaker 02:
You're not doubting that.

[00:28:31] Speaker 02:
And they apparently often do.

[00:28:32] Speaker 02:
That is the way it's set up.

[00:28:35] Speaker 02:
And all United is doing here is saying, for some reason that I still don't understand, they sent in a million dollars in fees that they had no obligation to send in.

[00:28:46] Speaker 02:
Now, are you doubting that they sent in those million dollars?

[00:28:49] Speaker 02:
million dollars in fees?

[00:28:52] Speaker 02:
Are you doubting that?

[00:28:53] Speaker 04:
We're not doubting that they sent in the fees.

[00:28:57] Speaker 02:
The question is, did the transferring airline already pay for it?

[00:29:02] Speaker 02:
And United's assumption is they must have already paid for it.

[00:29:05] Speaker 02:
There is one place where, again, I don't understand the argument very well.

[00:29:10] Speaker 02:
United is saying there was some confusion on some tickets where we made a mistake, whatever.

[00:29:15] Speaker 02:
Let's assume it was a mistake and it doesn't really answer a question.

[00:29:18] Speaker 02:
United is saying you have to plausibly assume that the transferring airline sent in the fee because that's what the regulations said they're required to do.

[00:29:27] Speaker 02:
And we mistakenly gave you a second payment, which you're not entitled to.

[00:29:34] Speaker 04:
Well, I believe United's initial submission was that you must assume the transferring airline would have sent the fee because they're required to do it a month after remittance.

[00:29:46] Speaker 04:
Sorry.

[00:29:48] Speaker 04:
And so, TSA recently noted that in fact, many transfers may occur before that the fee would otherwise be remitted.

[00:29:57] Speaker 04:
We don't know if in those transfers, the fee collected is transferred along with all the other payment associated with a particular transportation.

[00:30:07] Speaker 04:
And so we just have an assumption based on when the fees are remitted, which is actually a month, the end of the month following collection and no other sort of basis to make a judgment.

[00:30:18] Speaker 04:
And United is seeking, you know, a refund where it's entirely appropriate for it to bear the burden of establishing, you know, even that they didn't actually they didn't simply take the fee from the transferring airline and then pass it along to TSA.

[00:30:33] Speaker 02:
How are they going to establish that?

[00:30:35] Speaker 02:
there's a legal assumption the transferring airline is responsible for the submission of the fee.

[00:30:40] Speaker 04:
Well, they certainly can establish whether or not they got anything less than the full amount of the payment associated with a particular ticket in the first place, including a fee.

[00:30:52] Speaker 04:
I think TSA can entirely reasonably

[00:30:56] Speaker 04:
If what happened was United got the fee from a transferring carrier and just passed that along to TSA, TSA can reasonably say we're not refunding a fee in that situation where you just passed it along, it was initially collected by one carrier, we're just passing the law.

[00:31:12] Speaker 04:
And especially this refund coming several years after the years in question, the audits, that's an entirely

[00:31:20] Speaker 04:
reasonable to rehearse some additional showing from United, which they did not make here.

[00:31:24] Speaker 02:
What they're saying and why is it implausible for them to say, look, the legal responsibility is the transferring airline to submit that fee.

[00:31:32] Speaker 02:
And so the fact that we then went ahead and submitted a fee that we have reason to believe with now was already submitted when we finally do our audits.

[00:31:43] Speaker 02:
We're entitled that money back you're not doubting that they submitted money for the fee and you're not doubting the regulations say the transferring airline has a responsibility to submit the fee.

[00:31:52] Speaker 02:
And it doesn't say before after 30 days it says the transferring airline has a responsibility.

[00:31:59] Speaker 04:
Certainly, at the very least, the regulations don't say anything about you're forbidden in structuring a transfer of a ticket from one carrier to another.

[00:32:08] Speaker 04:
You can't arrange it so that the transferee carrier remits the steps into all the responsibilities of the selling carrier, including remitting a fee.

[00:32:17] Speaker 04:
That's not prohibited.

[00:32:19] Speaker 04:
There's no reason in the record to think that's not what happens.

[00:32:22] Speaker 02:
I understand all these assumptions are correct, actually, on both sides.

[00:32:26] Speaker 02:
The thing I don't understand is who carries what burden to show what.

[00:32:31] Speaker 02:
There's no doubt that if they collected the fee, they had a responsibility in my mind.

[00:32:35] Speaker 02:
They can't hold that money.

[00:32:36] Speaker 02:
They should have sent it.

[00:32:37] Speaker 02:
And there's no doubt you say that they sent a whole lot of fee money to TSA.

[00:32:42] Speaker 02:
You're not contesting that.

[00:32:45] Speaker 02:
So that's not what's the issue.

[00:32:46] Speaker 02:
The only issue is with respect to that chunk of money.

[00:32:50] Speaker 02:
whether American or hypothetical American had already paid for some or all of those fees.

[00:32:58] Speaker 04:
And under a statutory provision that says TSA may refund if there's an overpayment, United as the party seeking for TSA to exercise that statutory authority.

[00:33:10] Speaker 02:
What information would they be looking for in your view?

[00:33:13] Speaker 02:
If you were the lawyer on the other side, what would you tell your client, this is what we have to get to be able to show that American paid that money and we double paid it?

[00:33:23] Speaker 04:
I mean, certainly something in the accounting for the transaction that reflected

[00:33:28] Speaker 04:
that United got anything less than the full amount included, that the security fee wasn't remitted to United in the first place.

[00:33:35] Speaker 04:
And if they had that, but they could nonetheless show that our agreements provided for America to remit the fee in connection with this particular ticket, I mean, that's something that's beyond what they showed here, but they provided no basis

[00:33:52] Speaker 04:
to have any inference about how these transactions actually provided for the fee to be remitted at all.

[00:33:57] Speaker 04:
And they should have that information as the carrier involved.

[00:34:05] Speaker 00:
All right.

[00:34:07] Speaker 00:
Thank you.

[00:34:07] Speaker 00:
We'll hear from Mr. Feinberg.

[00:34:10] Speaker 00:
Why don't you take two minutes?

[00:34:14] Speaker 03:
Thank you, Your Honor.

[00:34:15] Speaker 03:
First of all, I just want to address briefly the very, very few instances where there were issues.

[00:34:23] Speaker 03:
These are all described in paragraph nine of Mr. Lem's declaration.

[00:34:27] Speaker 03:
This may get into the outstanding motion about extra record evidence.

[00:34:32] Speaker 03:
But I do want to point out that a couple of things.

[00:34:34] Speaker 03:
First of all, he does come up with an example of when this happened, and it involves a ticket

[00:34:41] Speaker 03:
That involves a complex ticket exchange so where somebody has a ticket and themselves, exchange it, in addition to the involuntary transfer scenario so that's the classic example he cites for that.

[00:34:56] Speaker 03:
This is extra record evidence, paragraph nine of Mr. Lem's declaration, but the same evidence is in the record in the form of the actual tickets.

[00:35:05] Speaker 03:
So each of these 109 tickets was in the body of all the tickets that were given to TSA.

[00:35:12] Speaker 03:
So they can actually look at this and see what the problem was.

[00:35:16] Speaker 03:
But our view is that these unrelated issues, 109 tickets shouldn't destroy the refund on the 304,000 tickets.

[00:35:25] Speaker 03:
And I now want to return to the, to the main point, the issue of well did American actually pay the fee to United, and the answer to this is no.

[00:35:35] Speaker 03:
First of all, as a practical matter, carriers don't even pay the amount that was collected.

[00:35:41] Speaker 03:
So Judge Henderson, in your example where you paid $150, not only was the $150 not paid, but the airlines don't even transfer the whole amount of the airfare.

[00:35:52] Speaker 03:
They have discounted negotiated amounts that get transferred.

[00:35:57] Speaker 03:
And why would American ever transfer the fee if it under the statute and regulations is going to be liable?

[00:36:05] Speaker 03:
It just makes no sense, as this court noted, even if indicated in the first case.

[00:36:10] Speaker 02:
Is there anything that you have from American confirming that, indeed, that's their business practice?

[00:36:16] Speaker 03:
Not that I'm aware of.

[00:36:18] Speaker 02:
Why not?

[00:36:20] Speaker 02:
Very seriously, I'm just curious as to how lawyers think these things through.

[00:36:24] Speaker 02:
Why not?

[00:36:25] Speaker 02:
Because that's pretty straightforward evidence.

[00:36:27] Speaker 02:
You're saying that American would say, if asked, it is inconceivable that we would have sent that money over to United.

[00:36:35] Speaker 02:
It is not conceivable.

[00:36:36] Speaker 02:
If that's what you want to know, that's not our business practice.

[00:36:38] Speaker 02:
We send the fee in all of it.

[00:36:41] Speaker 00:
And how about United's business practice?

[00:36:43] Speaker 00:
If you're the transferring airline, where's your evidence that you don't ever pass that along to the transferee?

[00:36:54] Speaker 03:
Well, if Judge Henderson and Judge Edwards, if the question is, where is that in the record?

[00:37:00] Speaker 03:
It's obviously not in the record, but that is in fact what happened.

[00:37:05] Speaker 01:
And I do want to just sort of put a- Mr. Feinberg, to Judge Henderson's question, is that what United does?

[00:37:12] Speaker 01:
United- You can represent as an agent of United.

[00:37:17] Speaker 01:
Maybe we will not consider this because it's extra record, but you will represent today as an agent of United.

[00:37:22] Speaker 01:
when United transfers a passenger to American, United does not send along the TSA fee.

[00:37:29] Speaker 03:
Correct.

[00:37:30] Speaker 03:
Because United understands that it owes the fee.

[00:37:33] Speaker 03:
And if you look at the Joint Appendix, page 32 of the first United case, this is a page from TSA's audit of

[00:37:44] Speaker 03:
United.

[00:37:45] Speaker 03:
And it goes through how it conducts these audits and what it does.

[00:37:49] Speaker 03:
And it specifically says that other airline tickets, amongst others, are exempt from the fee.

[00:37:56] Speaker 03:
And it goes through and verifies that those tickets are, in fact, other airline tickets.

[00:38:01] Speaker 03:
And so everybody understands the IRS, TSA, the carriers, that the fees remain the liability of the transferring carrier.

[00:38:12] Speaker 02:
No, it isn't that.

[00:38:14] Speaker 02:
It's that the practice is that the transferring airline always pays the fee.

[00:38:19] Speaker 02:
The legal liability starts out with the transferee, but money could be transferred, and then the recipient would be responsible to send it.

[00:38:29] Speaker 02:
So I mean, you're going too far.

[00:38:30] Speaker 02:
You're reaching too far.

[00:38:32] Speaker 02:
What we need to be convinced is that it's just routine practice.

[00:38:38] Speaker 02:
That's common sense, they're not going to send the field because it's their responsibility and that's where they clear it.

[00:38:43] Speaker 02:
That's the that's the evidence we need.

[00:38:46] Speaker 02:
And it's not in the record.

[00:38:47] Speaker 03:
Well, let me say two things about that judge Edwards.

[00:38:52] Speaker 03:
There's a fundamental fairness issue here.

[00:38:56] Speaker 03:
Keep in mind, there are no regulations, there's no procedure, nobody knows how you're supposed to go about getting a refund from TSA.

[00:39:03] Speaker 03:
And United and its consultant Ryan submitted mountains of information.

[00:39:07] Speaker 03:
And the issue that we're talking about, that we spent this entire argument talking about,

[00:39:12] Speaker 03:
was never raised by TSA in the context of this audit.

[00:39:16] Speaker 03:
Ryan, four times at least that I could count in the record said, if there's anything else you need, let us know.

[00:39:22] Speaker 03:
And not once did TSA or the CBP review team that was looking at this say, oh, wait a minute, how do we know that she didn't get transferred to you by American?

[00:39:33] Speaker 03:
And had TSA even hinted that that was a concern, United obviously would have been a disaster.

[00:39:39] Speaker 02:
They said to you, how do we know that?

[00:39:43] Speaker 02:
Well, the answer would have been what I'm saying I would have liked to have seen.

[00:39:47] Speaker 02:
Your response should have been, you got a clue as to what they were concerned about.

[00:39:50] Speaker 02:
Your response would have been, it is standard practice for United, American to do it this way.

[00:39:56] Speaker 02:
And if I'm counsel, and I'm saying this respectfully, but honestly, they did ask the question,

[00:40:01] Speaker 02:
And your answer should have been, we never do it that way.

[00:40:05] Speaker 02:
It would have to be in an odd situation.

[00:40:07] Speaker 02:
We can show you a few, but that is not our practice and it's not American's practice.

[00:40:11] Speaker 02:
And here are the affidavits.

[00:40:12] Speaker 02:
That was never submitted.

[00:40:13] Speaker 03:
Well, Judge Edwards, there's an important point here.

[00:40:16] Speaker 03:
And that is they never told us this during the time.

[00:40:20] Speaker 03:
We had no opportunity to do this.

[00:40:22] Speaker 03:
The documents you're reading were not shown until, to United, until April 20th of 2020.

[00:40:29] Speaker 03:
And 20, that's the first time we heard of any of this.

[00:40:33] Speaker 03:
After years of exchange of information, what else do you need?

[00:40:37] Speaker 03:
What can we give you?

[00:40:39] Speaker 03:
Never does TSA or the CBP review team say, well, wait a minute, how do we know that American didn't give you the fee?

[00:40:46] Speaker 03:
If they had only said that, we obviously would have provided it, including the very things that you're talking about.

[00:40:52] Speaker 03:
But it seems to me to be fundamentally unfair to have this long exchange of information, this back and forth, and not to even tell the other side what the major deficiency you see in their presentation.

[00:41:07] Speaker 00:
Well, but the burden of proof remains on you.

[00:41:09] Speaker 00:
If there are no more questions.

[00:41:12] Speaker 00:
All right.

[00:41:13] Speaker 00:
Thank you, counsel.

[00:41:14] Speaker 00:
And Madam Clerk, would you call a recess, please?