[00:00:00] Speaker 01:
Case number 22, 5125, air excursions LLC at balance versus Janet Allen yelling in our official capacity as secretary of the United States Department of the Treasury and United States Department of the Treasury.

[00:00:15] Speaker 01:
Mr. Nanking for the balance, Mr. Jed for the avalanche.

[00:00:19] Speaker 03:
Mr. Nanking, good morning.

[00:00:30] Speaker 06:
May it please the court.

[00:00:31] Speaker 06:
My name is Kenneth Anken.

[00:00:32] Speaker 06:
I'm the attorney for the appellant Air Excursions LLC.

[00:00:36] Speaker 06:
The court should rule in favor of Air Excursions for three reasons.

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First, Air Excursion has standing under the Administrative Procedure Act.

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The company is an actual competitor in the relevant marketplace and Treasury's actions armed it.

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The District Court got this right.

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Second, Air Excursion's APA claims are reviewable by this court, as well as the court below.

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There are meaningful standards for judicial review provided by the payroll support program agreements.

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And third, air excursions claims on the merits are plainly plausible.

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Who will otherwise, the district court incorrectly drew inferences in favor of treasury, not air excursions.

[00:01:15] Speaker 06:
Because air excursions has much more standing than a group of prospective sheep and goat herders, I'd like to focus my first argument on reviewability.

[00:01:24] Speaker 02:
Well, before you turn to that, can we talk a little bit about standing?

[00:01:27] Speaker 02:
So I'm having a little trouble understanding what the injury is here that's been suffered by air excursions.

[00:01:36] Speaker 06:
Your Honor, the injury is that there were subsidies.

[00:01:39] Speaker 06:
The CARES Act payments flowed in, and now the competitor flowed to charge below market rates, making it more difficult for air excursions to enter into the competitive marketplace, which it eventually did.

[00:01:53] Speaker 06:
but that is competing against a company that's charging below market fairs.

[00:01:57] Speaker 02:
So air excursions also received funds from the government.

[00:02:01] Speaker 02:
That's correct.

[00:02:02] Speaker 02:
Right.

[00:02:03] Speaker 02:
And air excursions has not made any allegations that Float improperly, that Float was ineligible to receive funds as an air carrier.

[00:02:13] Speaker 06:
Your Honor, Float was ineligible because it didn't meet the PSP agreement requirements.

[00:02:19] Speaker 06:
It wasn't the signature entity.

[00:02:20] Speaker 02:
No, but under the statute, it was an air carrier that could have been eligible for funds if it had applied.

[00:02:27] Speaker 06:
Under the statute, yes, Your Honor.

[00:02:29] Speaker 06:
It was just air carrier that was the only requirement.

[00:02:31] Speaker 02:
And so in the complaint, there are no specific allegations about the below market rates, like what the rates were.

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you know, to what extent they were below market or what type of competitive harm was actually suffered here.

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I mean, there's nothing even really specific alleged in that regard.

[00:02:52] Speaker 06:
Yes, Your Honor, that's right.

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In terms of just raw numbers, we haven't put a number on it.

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But that analysis has been done.

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As a matter of pleading, I don't believe that air excursions were actually required to kind of go to that extent and to kind of put actual numbers to it.

[00:03:08] Speaker 06:
But these analysis have been performed and it actually did harm the below market rates, did harm air excursions, made it more difficult to enter the competitive markets, which it did, and is still now having to compete at a disadvantage because the market rates are low.

[00:03:22] Speaker 02:
I just don't see any facts in the complaint that support that conclusion.

[00:03:29] Speaker 02:
Other than just the conclusory remarks that they were below market rates.

[00:03:35] Speaker 06:
Well, your honor, there are, like I stated before, you're correct, there are no numbers, but those analysis have been performed.

[00:03:44] Speaker 06:
And it made it more difficult because they were, my client was dealing with a situation where their rates were below market because Float did receive these subsidies.

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which allowed them to charge the below market rates.

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There were also difficulties in leasing space, wholly beyond kind of the numbers, difficulties in leasing space at the airport.

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That was alleged as well on the complaint that they couldn't get the space that they wanted at the Anchorage airport.

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There were other business opportunities that they lost out on, those wholly beyond the numbers in terms of standing.

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There were other problems as well that my client did face from Flo's competitive position in the marketplace.

[00:04:23] Speaker 02:
Well, what about, I mean, under our case law, there are a number of cases that suggest simply getting a windfall from the government doesn't confer competitor standing.

[00:04:33] Speaker 06:
Simply receiving a windfall?

[00:04:38] Speaker 02:
Well, I mean, which is in effect what you think happened here to Float, right?

[00:04:42] Speaker 02:
Float got a windfall, was not entitled to this money, it received, you know, payments from the government.

[00:04:48] Speaker 06:
It did put on my claim at a disadvantage under the Jerry Jenner's standing definitions and precedent under Mendoza versus Perez.

[00:05:00] Speaker 06:
I think that plainly and the district court got this right, the Treasury's actions did actually harm it.

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So I do think that there is standing.

[00:05:11] Speaker 03:
Well, let me ask you about prudential standing and I don't want you to feel you're being beat up about standing,

[00:05:18] Speaker 03:
This is such a discreet statute and almost idiosyncratic.

[00:05:27] Speaker 03:
I don't see where you're within the zone of interest.

[00:05:30] Speaker 03:
I know the district court said a layoff is a layoff, but that's not what the statute says.

[00:05:38] Speaker 03:
It's directed at pandemic relief.

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The title of section 9772 is Pandemic Relief for Aviation Workers.

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In the name of the act is Coronavirus Aid Relief and Economic Security Act.

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I don't see how

[00:06:01] Speaker 03:
within the zone of interest.

[00:06:03] Speaker 06:
Your honor, I do believe in the matter of prudential standing that we're within the zone of interest.

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Air Excursion's whole objective is to make the Anchorage Southwest Alaska passenger market more competitive to contain the anti-competitive conduct of float.

[00:06:20] Speaker 03:
But that wasn't the reason for the relief act.

[00:06:24] Speaker 06:
Your Honor, I disagree.

[00:06:26] Speaker 06:
And it's quoted in our brief states that one of the objectives as to this particular title of the CARES Act was to ensure the health of the aviation industry.

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And curtailing the anti-competitive conduct of float plainly supports that objective, Your Honor.

[00:06:45] Speaker 03:
But it doesn't say that.

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I mean, it's just talking about this virus.

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And that's all it's talking about.

[00:06:52] Speaker 06:
Well, this was a quote from the Secretary of the Treasury at the time describing what was the objective of these airline worker support provisions of the CARES Act.

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And that's exactly what Air Excursions is trying to do, curtail anti-competitive conduct so it can be a healthier aviation industry.

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If I could just turn to reviewability.

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We believe that Air Excursions claims

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judicial reviewable under the APA.

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First, there's no provision of the CARES Act or any other statute that bars APA review.

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And secondly, there are judicial manageable standards review under the APA.

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These standards are the actual terms of the payroll support program agreements, which Treasury actually drafted.

[00:07:43] Speaker 06:
They're every bit as usable and manageable as a standard, as a statute or regulation or an agency's informal policy statement.

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Why do these PSP agreements provide judicially manageable stands to review?

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There are two reasons.

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First, contracts matter.

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Contracts are the linchpin of all commercial activity in society.

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But don't take my word for it, it's even in the Constitution.

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Article 1, Section 10 of the Constitution prohibits a state from passing any law comparing the obligation of contracts.

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Second, the District Court knows how to interpret contracts.

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It does that all the time.

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It did so in a decision in the National Association of Realtors versus United States case issued just on January 25th, less than two weeks ago.

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To quote that court,

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The parties dispute the terms of their settlement agreement.

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Thus, before the court can enforce the agreement, it must first determine its terms.

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This task is essentially one of contract interpretation.

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And then in that case, the district court went on to interpret the contract.

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Here the district court is equally able to do just the same in this case using the PSP agreements that Treasury itself draft.

[00:08:50] Speaker 02:
Mr. Nanking, maybe a contract can provide a standard, but why would air excursions

[00:08:58] Speaker 02:
get the benefit of the standards in a contract between Treasury and Corvus, right?

[00:09:05] Speaker 02:
So, I mean, Air Excursions is not even a third party beneficiary to that contract.

[00:09:10] Speaker 06:
That is true.

[00:09:11] Speaker 06:
That's true.

[00:09:12] Speaker 06:
Air excursion is not a third party beneficiary, but it was harmed by these actions.

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And that's what the Administrative Procedure Act does, allow us to a party who's been harmed.

[00:09:23] Speaker 06:
That's the issue of standing to challenge these kinds of actions.

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You don't have to be a third party beneficiary.

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The standards can be used by anyone who is harmed by Treasury's actions.

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And so I believe that it goes back to the issue of standing.

[00:09:39] Speaker 06:
The character was clearly not a party to these PSP agreements, was not a third party beneficiary, but it was harmed by Treasury's actions under those agreements, Your Honor.

[00:09:49] Speaker 02:
Can you point to a case in which a party where a contract has provided a standard of review?

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to use by a party that was not a party to the contract?

[00:10:04] Speaker 06:
I believe that was the DeVos case, Your Honor, that was cited.

[00:10:10] Speaker 06:
I don't see, and this report wasn't able to kind of point to it, nor was Treasury able to kind of point to any precedent that would be barring the application or the use of a contract as additional manageable standards for review by a non-party to the contract.

[00:10:27] Speaker 06:
In my mind, it's just as clear and well written as a statute or regulation or an agency policy statement.

[00:10:34] Speaker 06:
It's clearly reviewable.

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And in fact, the district court did actually get into it and review its terms.

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As to the reviewability argument, the district court's other concern was how could it review an agreement that gave Treasury so much discretion?

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Yes, I agree that under these PSP agreements, Treasury had a loss of discretion.

[00:11:01] Speaker 06:
It could increase funding amounts.

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It could waive requirements imposed on a recipient.

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But Treasury's discretion had limits.

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The agreement did not give Treasury discretion to disburse funds to a non-party stranger to the agreement.

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And that's a district court case.

[00:11:17] Speaker 06:
That's the Confederated Tribes case, Your Honors.

[00:11:21] Speaker 06:
stating in part, while the secretary's decisions as to how much could disperse might not be reviewable, his decisions concerning to whom to disperse those funds most certainly is.

[00:11:32] Speaker 06:
That is to disperse funds to a non-party stranger to the agreement who's not their signatory, who's not the successor, who's not the assignee.

[00:11:42] Speaker 06:
That's arbitrary and capricious and an abuse of discretion.

[00:11:47] Speaker 06:
Leading review bill, they'd like to discuss the merits.

[00:11:49] Speaker 06:
Eric Surgeon's plainly stated a plausible APA claim.

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Treasury disbursed over $30 million to a company that had absolutely no legal right to the funds.

[00:11:58] Speaker 06:
In my view, that's the dictionary definition of arbitrary and capricious.

[00:12:03] Speaker 06:
Treasury disbursed the funds to flow, not to Corvus Airlines Inc.

[00:12:06] Speaker 06:
That's amended complaint paragraph 38, not a motion dismissed, and that's the procedural posture of the case before this report.

[00:12:14] Speaker 06:
That allegation must be presented to Mr. Council

[00:12:17] Speaker 00:
The record shows that the checks were made out to Corvus and that Corvus deposited the checks in its own account.

[00:12:29] Speaker 00:
So where do you get the argument or where does it, you get the assertion from what evidence or what is in the record to indicate that the money was dispersed afloat?

[00:12:45] Speaker 06:
Uh, your honor, we firmly believe the funds went right to Float.

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I mean, that was the whole point of the asset purchase agreement, making sure that Float owned the account into which the funds went into.

[00:12:57] Speaker 06:
The funds went right to Float.

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Float paid its own employees, didn't pay the former employees of Corvus Airline.

[00:13:05] Speaker 00:
That's an argument that Float, that Corvus shouldn't have transferred the payments to Float.

[00:13:15] Speaker 00:
But that's got nothing to do with whether Treasury made any kind of an error in dispersing the funds to Corvus to begin with.

[00:13:26] Speaker 00:
I don't get it.

[00:13:28] Speaker 06:
Your honor, the funds went directly to Float, your honor.

[00:13:36] Speaker 00:
That is not accurate.

[00:13:37] Speaker 00:
The record shows that the funds went directly to Corvus and were deposited in Corvus' account, bank account.

[00:13:45] Speaker 06:
Well, that part of us at that place.

[00:13:48] Speaker 00:
Do you think it's otherwise?

[00:13:50] Speaker 00:
Give me the page in the appendix that indicates support for what you're saying.

[00:13:56] Speaker 06:
Your Honor, I don't have the page in the appendix.

[00:14:00] Speaker 00:
I do.

[00:14:01] Speaker 00:
I do.

[00:14:01] Speaker 00:
Take a look at appendix 286 at the top.

[00:14:21] Speaker 06:
Your Honor, yes, I'm at the appendix 286, Your Honor.

[00:14:27] Speaker 06:
Yes, yes.

[00:14:31] Speaker 06:
I don't see where there's like a copy of the check or at least a page I want.

[00:14:39] Speaker 00:
The instructions indicate that the money was to be deposited in the same account as the first payment and that was Corvus's account.

[00:14:48] Speaker 00:
Does it not say that?

[00:14:50] Speaker 06:
It says, yes, your honor, it says same account used for CPSP one homes, your honor.

[00:14:57] Speaker 06:
But it's almost kind of like somebody giving like a newborn as a gift, a $10,000 check.

[00:15:07] Speaker 06:
Well, yes, it may be cable in the name of the newborn.

[00:15:10] Speaker 06:
But that money is going right to the parent.

[00:15:16] Speaker 06:
So that is the situation here.

[00:15:18] Speaker 06:
Technically, yes, it may have been a check table to Corvus Airlines, Inc., but that money went right to Float.

[00:15:24] Speaker 06:
And that's how it was used.

[00:15:27] Speaker 06:
So at that point, that is the whole point of the asset purchase agreement, was to give Float the unfettered right to have that account to own the account and own the fund.

[00:15:39] Speaker 06:
So that's exactly where the funds went, Your Honor.

[00:15:43] Speaker 06:
I don't have transfer information.

[00:15:47] Speaker 06:
I don't have a copy of any wire transfer or a check that shows that the funds were paid directly to Flow.

[00:15:55] Speaker 06:
I don't have the information showing that it went from, specifically went from Corvus Airlines to Flow.

[00:16:01] Speaker 06:
But that was the whole point of the asset purchase, Your Honor.

[00:16:04] Speaker 06:
and we're convinced and we now certainly on information believe that the funds ended up in flow.

[00:16:10] Speaker 06:
Otherwise, why do the asset purchase agreement, the biggest asset was Corvus Airlines, the entitlement to receive these CARES Act funds, Ron.

[00:16:19] Speaker 03:
All right.

[00:16:20] Speaker 03:
Mr. Nancar, we'll give you a couple of minutes in reply.

[00:16:23] Speaker 03:
And if you would, on reply, let me know your best case on zone of interest.

[00:16:31] Speaker 03:
Yes, I will, Ron.

[00:16:32] Speaker 03:
Thank you.

[00:16:33] Speaker 03:
All right, Mr. Jed.

[00:16:39] Speaker 05:
Good morning, Your Honors.

[00:16:40] Speaker 05:
Adam Jed on behalf of the United States.

[00:16:42] Speaker 05:
May it please the court?

[00:16:43] Speaker 05:
As I think the various colloquies with my friend this morning have illustrated, this is an incredibly anomalous lawsuit where you have an airline based on essentially nothing but conclusory terms like allow,

[00:16:57] Speaker 05:
claiming that it's somehow being harmed by the distribution of funds to an other airline that may or may not operate in the same market, invoking a statute that has nothing to do with competition exists for a very specific purpose that is clearly not being pursued in this case, and where any claim to reviewability is based on a contract, they have no right to enforce.

[00:17:19] Speaker 05:
For that reason, I mean, I think that this case is just essentially overdetermined.

[00:17:22] Speaker 05:
There's a number of independent reasons that this is just not a properly justiciable suit.

[00:17:26] Speaker 05:
And unless the court has any other questions, we're happy to rest on our brief.

[00:17:33] Speaker 03:
Thank you.

[00:17:35] Speaker 03:
I'm sorry.

[00:17:38] Speaker 03:
Do you have any questions?

[00:17:43] Speaker 04:
Thank you.

[00:17:59] Speaker 04:
Thank you.

[00:18:30] Speaker 06:
Your Honor, the zone of interest test is not specifically demanding respect to matters rising under the APA.

[00:18:37] Speaker 06:
The benefit of any doubt goes to the plaintiff.

[00:18:39] Speaker 06:
That's the Indian River County Florida case, DC Circuit case 945, Fed 3rd, 515, Your Honor.

[00:18:48] Speaker 06:
And also, more recently, the CSL Plasma Inc.

[00:18:52] Speaker 06:
versus U.S.

[00:18:52] Speaker 06:
Custom Border Protection case, 33, bed 4, 584, this court last year, 2022.

[00:19:03] Speaker 06:
Your Honor, the Air Service's interests certainly do coincide with that of the CARES Act on the next page in our reply brief.

[00:19:14] Speaker 06:
Page 11 actually quotes the quote from the Secretary of the Treasury that the financial assistance the Treasury is providing under Title IV of the CARES Act is essential to help American workers and to preserve our aviation industry.

[00:19:28] Speaker 06:
And that completely dovetails with Eric's interest in the case, which is to protect the health of the aviation industry by trying to curtail float and its anti-competitive conduct in that anchored southwest Alaska air passenger market, Your Honor.

[00:19:46] Speaker 02:
That's a very interesting argument.

[00:19:49] Speaker 02:
Are you aware of any cases in which a person has been within the zone of interest for a general spending statute?

[00:19:56] Speaker 02:
Because the CARES Act is essentially just a large spending statute, a welfare transfer to particular entities.

[00:20:05] Speaker 02:
So basically, if you are one of those entities, you're within the zone of interest to ensure that your competitors don't get the funds, that would dramatically expand APA suits under spending statutes.

[00:20:21] Speaker 06:
I do believe that it's more than a simple lump sum appropriation.

[00:20:25] Speaker 06:
It was for a specific purpose, and this Title IV was for the health of the aviation industry.

[00:20:30] Speaker 06:
So I do think air excursions has a definite specific interest and this interest dovetails with that of Title IV of the CARES Act just to help ensure the health of the aviation industry in particular as it relates to the workers.

[00:20:49] Speaker 03:
All right, Judge Randolph, any questions?

[00:20:54] Speaker ?:
No.

[00:20:54] Speaker 03:
Okay, thank you.

[00:20:55] Speaker 03:
Thank you, John.

[00:20:55] Speaker 04:
Thank you.

[00:20:56] Speaker 03:
Thank you.

[00:20:56] Speaker 03:
We'll take a brief recess.