RUDOLPH CONTRERAS, United States District Judge.
The Export-Import Bank ("Ex-Im Bank" or "Bank") is an independent agency established in 1934 as the official export credit agency ("ECA") of the United States to promote and facilitate U.S. exports by providing loans and loan guarantees to foreign purchasers of U.S.-manufactured goods and services. The U.S. aircraft manufacturing industry is one of many domestic industries that rely on Ex-Im Bank support to compete with foreign manufacturers that receive similar support from foreign ECAs. But while U.S. aircraft manufacturers enjoy the benefits of the Ex-Im Bank's assistance in selling their planes to foreign airline purchasers, U.S. commercial airlines, which are not eligible for financing from the Bank, object to the boost that the Bank's support provides to overseas competitors.
Delta Air Lines, Inc. ("Delta"), Hawaiian Airlines, Inc. ("Hawaiian"), and the Air Line Pilots Association, International ("ALPA") (collectively, "Plaintiffs") are among those that protest the Ex-Im Bank's support of foreign aircraft purchasers. Together, Plaintiffs have embarked on a multipronged litigation attack against the Ex-Im Bank and its Board of Directors (collectively, "Defendants"), in which they maintain, among other things, that the Bank has violated the Export-Import Bank Act of 1945 ("Bank Act" or "Charter") and the Administrative Procedure Act ("APA") through the adoption and application of certain internal economic impact procedures ("EIPs"), which the Bank uses to assess the economic effects of potential transactions within its broader process of determining whether to approve an application for Bank financing.
This series of litigation began in 2011, when Delta, ALPA, and the Air Transport Association of America challenged the Bank's issuance of loan guarantees to Air India for the purchase of certain Boeing aircraft. The Bank approved the challenged Air India commitments by applying the then-operative 2007 EIPs, which included an "exportable goods screen" that categorically excluded from detailed economic
Specifically at issue in this action—one of three separate lawsuits brought by Plaintiffs currently pending before this Court—are the Bank's actions on remand from Delta I, which Plaintiffs challenge here on both procedural and substantive grounds. Defendants and Plaintiffs each have filed a motion for summary judgment. Upon consideration of the parties' motions and the memoranda in support thereof and opposition thereto, the Court will grant Defendants' motion for summary judgment and deny Plaintiffs' motion.
The Ex-Im Bank is an independent federal agency and corporation that has its origins in a 1934 Executive Order issued by then-President Franklin Roosevelt. See Exec. Order No. 6581 (Feb. 2, 1934). The Bank assumed its current form with the passage of the Bank Act, ch. 341, 59 Stat. 526, which, as amended and codified at 12 U.S.C. § 635 et seq., remains the Bank's governing Charter. The Bank Act declares that "[t]he Bank's objective in authorizing loans, guarantees, insurance, and credits shall be to contribute to maintaining or increasing employment of United States workers." 12 U.S.C. § 635(a)(1). "In connection with and in furtherance of its objects and purposes, the Bank is authorized and empowered to do a general banking business," including "to guarantee, insure, coinsure, and reinsure against political and credit risks of loss." Id. Loans and loan guarantees issued by the Ex-Im Bank carry the full faith and credit of the United States government, id. § 635k, and Congress has reauthorized the Bank on more than twenty occasions since 1947.
The Bank Act identifies many policy concerns for the Bank to take into consideration when deciding whether to approve an application for financing support.
In requiring the Ex-Im Bank to be competitive, Congress has emphasized that the Bank must process financing applications efficiently and with flexibility, so as not to cause a U.S. exporter to lose an export opportunity. See id. § 635(b)(1)(B) (the Bank's loans should "neutralize the effect of . . . foreign credit on international sales competition"); see also S.Rep. No. 99-274, at 8 (1986) (recognizing "the need for [the Bank] to respond to exporters' requests for support in a timely . . . fashion"); id. (noting that the adverse economic impact provision of the Bank Act "should be implemented in a way that does not reduce the Bank's competitiveness and flexibility in assisting U.S. exporters nor ignore the positive aspects of the export sale").
The Bank Act also contains several provisions requiring the Bank and its Board of Directors ("Board") to take into account potential serious adverse effects on U.S. industry and employment when considering a proposed transaction. Thus, beginning in 1968, Congress has declared that it is the "policy of the United States" that
12 U.S.C. § 635(b)(1)(B)(ii); see Pub.L. No. 90-267, § 1(b), 82 Stat. 47, 47 (1968). In 1978, Congress amended the Bank Act to include the provision now codified at 12 U.S.C. § 635a-2, which calls on the Bank to
Id.; see Pub.L. No. 95-630, § 1911, 92 Stat. 3641, 3726 (1978). This provision later was amended to require the Bank to "address in writing the views of [those] who may be substantially adversely affected by the loan or guarantee," Pub.L. No. 99-472, § 12, 100 Stat. 1200 (1986), but Congress also specifically provided that "[t]his requirement does not subject the Bank to the provisions of subchapter II of chapter 5 of title 5," id. which is the administrative
In 1986, Congress incorporated § 608 of the Foreign Operations Appropriations Act of 1978, Pub.L. No. 95-481, § 608, 92 Stat. 1591 (1978), into the Bank Act under substantially similar terms. See Pub.L. No. 99-472, § 11, 100 Stat. 1200, 1203-04 (1986). The Bank Act thus provides, among other things, that the Bank may not extend a financial guarantee for the "production of any commodity for export by any country other than the United States" if the Board determines that "(i) the commodity is likely to be in surplus on world markets at the time the resulting commodity will first be sold; or (ii) the resulting production capacity is expected to compete with United States production of the same, similar, or competing commodity." 12 U.S.C. § 635(e)(1). Such a limitation does not apply, however, when the Board determines that the "short- and long-term benefits to industry and employment in the United States are likely to outweigh the short- and long-term injury to United States producers and employment of the same, similar, or competing commodity." Id. § 635(e)(3). Congress has specified that "substantial injury" occurs when "the amount of the capacity for production established, or the amount of the increase in such capacity expanded, by" a transaction "equals or exceeds 1 percent of United States production." Id. § 635(e)(4).
Section 635(e), moreover, provides that "[i]f . . . the Bank conducts a detailed economic impact analysis or similar study," it must provide notice and obtain comments on the potential economic effects of the financing support. Id. § 635(e)(7)(B)(i). Under this provision, the Bank also must consider certain factors when conducting a detailed economic analysis. See id. § 635(e)(7)(A). In addition, Congress requires the Bank to implement such regulations and procedures as may be appropriate, see id. § 635(e)(7)(G), and as it did in § 635a-2, Congress has provided that "[t]his paragraph shall not be construed to make [the administrative procedure portion of the APA, 5 U.S.C. §§ 551-59,] applicable to the Bank." Id. § 635(e)(7)(F).
In an attempt to comply with its statutory mandate to "take into account" the adverse impact of its loans and loan guarantees on U.S. industry and employment, the Bank has adopted EIPs that, among other things, use screens to exempt certain transactions from in-depth economic impact analysis. See Administrative Record ("AR") at 368-73. Of relevance here, in 2001 the Bank changed its EIPs to include a new screen that excluded from in-depth review any "transaction[] that would result in the provision of exportable services from foreign countries" (the "exportable goods screen"). See id. at 371. By extension, this screen excluded from economic impact analysis the Bank's financing of foreign aircraft transactions, which the Bank deems to result in the production of exportable services (i.e., airline seats), not exportable goods. See ATA, 878 F.Supp.2d at 77. The Bank revised its EIPs in 2007 but retained the exportable goods screen. See AR at 356-64 (2007 EIPs). Thus, from 2001 to 2013, when the Bank again revised its EIPs and adopted the 2013 EIPs and Guidelines, see id. at 441-55 (2013 EIPs and Guidelines), the Bank did not conduct in-depth economic analysis regarding the impact of its aircraft financing transactions.
Taking a step back, in 2006 the Bank received an application from Air India for two final commitments and two preliminary commitments for loan guarantees totaling almost $6.3 billion that would support Air India's purchase of certain Boeing aircraft. See id. at 33-34. The Bank's Board approved these transactions on September 28, 2006. See id. at 239-41. Over the next five years, the 2006 preliminary guarantees were converted into final commitments by a series of unanimous Board votes, and on September 30, 2011, the Board unanimously voted to approve the fourth and fifth conversions of the 2006 preliminary guarantees and to approve a new preliminary commitment. See id. at 278, 352-53. Specifically, the two final commitments were for "loan guarantees to be issued to a commercial lender (to be chosen by Air India) for loans of up to $1.273 billion for the purchase of new Boeing 787 aircraft by Air India," id. at 403-04, and the preliminary commitment was for loans of up to $2.1 billion.
As noted in the introduction, in 2011 the Air Transport Association of America, ALPA, and Delta challenged the Bank's loan guarantee commitments to Air India. See generally ATA, 878 F.Supp.2d 42 (D.D.C.2012). After the parties filed dispositive motions in that case, Judge Boasberg granted summary judgment in favor of Defendants, concluding that the "Bank acted neither arbitrarily and capriciously nor contrary to its governing statute when it approved the" Air India transactions using the exportable goods screen. Id. at 54. Delta and ALPA (but not the Air Transport Association of America) appealed, and the D.C. Circuit reversed.
In particular, the D.C. Circuit did not determine that the exportable goods screen was inconsistent with the Bank Act. See Delta I, 718 F.3d at 975. Instead, the court simply held that the Bank had "not reasonably explained its justification for the categorical conclusion at issue." Id. Accordingly, the D.C. Circuit directed the
Id.
The Bank responded to the Delta I remand order by preparing and publishing two documents, entitled Response One and Response Two (collectively, the "Remand Responses").
On January 10, 2014, Plaintiffs filed the present lawsuit, Delta IV, challenging the sufficiency of the Remand Responses on both procedural and substantive grounds, including that, among other things, the Remand Responses are impermissible post-hoc rationalizations not properly before the Court, Response One fails because the exportable goods screen violates the Bank Act, and Response Two fails because the Bank's analysis is arbitrary and capricious. As a remedy, Plaintiffs request that the Court vacate the loan guarantees issued by the Bank in conjunction with the Air India transactions. Plaintiffs and Defendants now each have filed a motion for summary judgment.
Summary judgment may be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202
Though styled as motions for summary judgment, the dispositive pleadings in this case actually seek the Court's review of administrative action. The standard set forth in Rule 56(c) therefore does not apply because of the limited role of a court in reviewing the administrative record. See Sierra Club v. Mainella, 459 F.Supp.2d 76, 89-90 (D.D.C.2006) (citing Nat'l Wilderness Inst. v. U.S. Army Corps of Eng'rs, No. CIV 01-0273, 2005 WL 691775, at *7 (D.D.C. Mar. 23, 2005)); Fund for Animals v. Babbitt, 903 F.Supp. 96, 105 (D.D.C.1995), amended on other grounds, 967 F.Supp. 6 (D.D.C.1997). "[T]he function of the district court is to determine whether or not as a matter of law the evidence in the administrative record permitted the agency to make the decision it did." Sierra Club, 459 F.Supp.2d at 90 (citation and quotation omitted). Summary judgment thus serves as the mechanism for deciding, as a matter of law, whether the agency action is supported by the administrative record and otherwise consistent with the APA standard of review. See Richards v. INS, 554 F.2d 1173, 1177 (D.C.Cir.1977); Bloch v. Powell, 227 F.Supp.2d 25, 31 (D.D.C.2002).
The APA "sets forth the full extent of judicial authority to review executive agency action for procedural correctness." FCC v. Fox Television Stations, Inc., 556 U.S. 502, 513, 129 S.Ct. 1800, 173 L.Ed.2d 738 (2009). It requires courts to "hold unlawful and set aside agency action, findings, and conclusions" that are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). This is a "narrow" standard of review as courts defer to the agency's expertise. Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983). An agency is required to "examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made." Id. (internal citation and quotation omitted). The reviewing court "is not to substitute its judgment for that of the agency," id. and thus "may not supply a reasoned basis for the agency's action that the agency itself has not given." Bowman Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 285-86, 95 S.Ct. 438, 42 L.Ed.2d 447 (1974). Nevertheless, a decision that is not fully explained may be upheld "if the agency's path may reasonably be discerned." Id. at 286, 95 S.Ct. 438; see also Dillmon v. Nat'l Transp. Safety Bd., 588 F.3d 1085, 1089 (D.C.Cir. 2009) (a court must "defer to the wisdom of the agency, provided its decision is reasoned and rational").
Finally, a court's review is particularly deferential when a plaintiff challenges agency decisions that balance competing statutory mandates and involve technical, predictive judgments within the agency's special area of expertise. See Marsh v. Or. Natural Res. Council, 490 U.S. 360, 377, 109 S.Ct. 1851, 104 L.Ed.2d 377 (1989) (when the agency's analysis "requires a high level of technical expertise," courts "must defer to the informed discretion of the responsible federal agencies" (citation and quotation marks omitted));
Through this lawsuit, Plaintiffs allege that the Bank's Remand Responses should be excluded from the administrative record as post-hoc rationalizations, but even if considered part of the record, the responses should be rejected as arbitrary and capricious and contrary to the Bank Act and the Reauthorization Act. In addition to opposing each of Plaintiffs' arguments for summary judgment, Defendants move for summary judgment on their own behalf by arguing that, among other things, Response One demonstrates why the exportable goods screen is consistent with the Bank Act, and Response Two demonstrates why the Bank's approval of the Air India transactions was not arbitrary and capricious. Thus, Defendants ask the Court to find that they fully satisfied their obligations under the Delta I remand order.
Resolving the parties' motions for summary judgment requires the Court to address numerous textbook questions of administrative law and to grapple with complex economic and financial concepts as they relate to the airline industry. To do so, the Court will proceed as follows. First, the Court addresses whether it may consider the Bank's Delta I Remand Responses as part of the administrative record, or whether either of these remand papers must be excluded as a post-hoc rationalization. Second, after concluding that both Response One and Response Two are properly part of the administrative record, the Court considers the sufficiency of the Bank's justification for the exportable goods screen, as explained through Response One. And third, the Court addresses Plaintiffs' challenge to the Bank's economic impact analysis of the Air India transactions in Response Two. Ultimately, the Court concludes that Defendants acted reasonably and in accordance with the relevant statutes at all times, thereby satisfying the Delta I remand order through both responses. As such, the Court will deny Plaintiffs' motion and enter summary judgment in favor of Defendants.
A threshold issue that will dictate the rest of the Court's analysis herein is whether Response One and Response Two are reviewable as part of the administrative record. Specifically, in Delta I, the D.C. Circuit held that the Bank's decision to approve the Air India transactions could not be sustained because, "at a minimum," the Bank had not "reasonably explained its justification" for the exportable goods screen. Delta I, 718 F.3d at 978. The circuit court therefore directed the Bank on remand either to explain how its exportable goods screen "square[s] with the [Bank Act's] requirements," or to "adequately consider and explain any adverse effects that the[] . . . Air India loan guarantees have on U.S. industries and U.S. jobs." Id. Consequently, the Bank prepared Response One, which attempted to justify the adoption of the exportable goods screen, and Response Two, which attempted to explain why the Air India transactions did not result in substantial adverse effects on the U.S. economy.
Without doubt, a "fundamental rule of administrative law" is that a court reviewing an agency's decision "must judge the propriety of [the agency] action solely by the grounds invoked by the agency." SEC v. Chenery Corp., 332 U.S. 194, 196, 67 S.Ct. 1760, 91 L.Ed. 1995 (1947). Typically, the grounds reviewed will appear in the administrative record, see Cmty. for Creative Non-Violence v. Lujan, 908 F.2d 992, 997 (D.C.Cir.1990), and judicial review therefore "is to be based on the full administrative record that was before the [agency] at the time [it] made [its] decision." Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 420, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971). Accordingly, "it is the agency's responsibility, not this Court's, to explain its decision," State Farm, 463 U.S. at 57, 103 S.Ct. 2856, and if the agency's "grounds are inadequate or improper, the [C]ourt is powerless to affirm the administrative action by substituting what it considers to be a more adequate or proper basis." Chenery, 332 U.S. at 196, 67 S.Ct. 1760. It is unsurprising, then, that post-hoc rationalizations "have traditionally been found to be an inadequate basis for review" of agency decisions. Overton Park, 401 U.S. at 419, 91 S.Ct. 814; see also Edison Elec. Inst. v. OSHA, 849 F.2d 611, 617-18 (D.C.Cir. 1988) ("Ordinarily, . . . neither party is entitled to supplement the record with litigation affidavits or other evidentiary material that was not before the agency." (citations omitted)).
At the same time, however, the D.C. Circuit explained in Alpharma, Inc. v. Leavitt, 460 F.3d 1 (D.C.Cir.2006), that Overton Park also "approved the procedure of remanding so that an agency can provide an explanation for an inadequately articulated decision." Id. at 6. The prohibition against post-hoc rationalizations therefore "is not a time barrier which freezes an agency's exercise of its judgment after an initial decision has been made and bars it from further articulation of its reasoning." Id. (citation and quotation omitted); see also Amoco Oil Co. v. EPA, 501 F.2d 722, 729 n. 10 (D.C.Cir.1974) ("Rule-making is necessarily forward-looking, and by the time judicial review is secured events may have progressed sufficiently to indicate the truth or falsity of agency predictions. We do not think a court need blind itself to such events[.]"). Further, the Supreme Court has explained that if the administrative "record before the agency does not support the agency action . . . or if the reviewing court simply cannot evaluate the challenged agency action on the basis of the record before it, the proper course, except in rare circumstances, is to remand to the agency for additional investigation or explanation." Fla. Power & Light Co. v. Lorion, 470 U.S. 729, 744, 105 S.Ct. 1598, 84 L.Ed.2d 643 (1985) (emphasis added). The Court finds that, through Response One, the Bank offers the exact type of "amplified articulation" and "additional explanation" regarding the basis for the exportable goods screen that the D.C. Circuit demanded in Delta I.
Plaintiffs' primary complaint about Response One is that it was not ratified through a vote by the Bank's Board. See, e.g., Pls.' Mem. Supp. Mot. Summ. J., ECF No. 12-1, at 23. For this proposition,
To establish that a Board vote was required to make Response One legitimate, Plaintiffs rely on § 635(b)(1)(B)(ii) of the Bank Act, which directs the "Board of Directors," when "authorizing any . . . guarantee," to "take into account any serious adverse effect of such . . . guarantee on the competitive position of United States industry . . . and employment." 12 U.S.C. § 635(b)(1)(B)(ii). But the Delta I remand explicitly did not require the Bank to issue new authorizing decisions for the Air India commitments as if the D.C. Circuit had vacated the original authorizations; rather, the Bank only was ordered to provide further explanation on remand in an effort to justify the authorizations that it already had made, not to revisit and reissue those decisions anew. See Delta I, 718 F.3d at 978 (refusing to vacate transactions and ordering that the Bank must "attempt to provide a reasonable explanation" justifying the exportable goods screen, or "explain" the adverse effects of the Air India loan guarantees (emphasis added)). As such, the Court finds that § 635(b)(1)(B)(ii) is inapplicable.
The Court, moreover, finds no authority—whether in the APA, the Bank Act, or elsewhere—that requires a formal Board vote adopting Response One when it did not amount to the authorization of a financing decision but rather merely was an explanation of prior decisions. Cf. Menkes v. U.S. Dep't of Homeland Sec., 637 F.3d 319, 337 (D.C.Cir.2011) (when no action by the Commandant or the Secretary of the Department of Homeland Security was required, Coast Guard "official" was found to be a proper decisionmaker); Serono Labs., Inc. v. Shalala, 158 F.3d 1313, 1317, 1325 (D.C.Cir.1998) (when no action by the Commissioner was required, FDA director was found to be a proper decisionmaker); Cardinal Health, Inc. v. Holder, 846 F.Supp.2d 203, 218-19 (D.D.C.2012) (when no action by the Attorney General was required, DEA Administrator was found to be a proper decisionmaker).
Here, Response One was submitted to the Bank's senior staff and members of the Bank's Board for their review and comments, see Defs.' Mem. Opp'n Mot. Summ. J., ECF No. 14-1, Ex. A (E-mails from the Bank's General Counsel), and it was published
That being said, Plaintiffs' complaint about the lack of a Board vote was addressed by Defendants during the course of this litigation. Specifically, the Bank announced on April 10, 2014, that the Board would vote at its April 17 meeting about "whether to ratify and formally adopt the [Remand Responses]." AR at 1143 (agenda for April 17, 2014, Board meeting). Prior to the vote, the Bank's staff recommended that the Board adopt the Remand Responses "in recognition that [they] have represented and continue to represent the official position of the Bank," and that they "serve as the Bank's official responses to the litigation remands." Id. at 1144; see also id. at 1144-46 (April 9, 2014, Board Memorandum).
On April 14, 2014, Plaintiffs submitted a letter and supporting materials to members of the Board "urg[ing] the Board to reject the [remand papers]." Id. at 1147, 1154. The Bank's staff reviewed Plaintiffs' materials and informed the Board that this submission "repeat[ed] arguments that [Plaintiffs have] made multiple times," both in "the several lawsuits brought by" Plaintiffs and in "comments" that Plaintiffs "submitted . . . in connection with various aircraft transactions." Id. at 1147. Accordingly, the staff advised the Board that the materials did not "raise[] anything new that warrant[ed] changing either" the staff's recommendation that the Board ratify and adopt the remand papers or the substance of the remand papers themselves. Id. Thus, at its April 17, 2014, meeting, the Board unanimously voted to ratify and adopt the Remand Responses. Id. at 1311. Following the vote, Defendants supplemented the administrative record in this case with the materials relevant to the Board's actions. See generally Defs.' Notice Am. Admin. R., ECF No. 18.
In determining the propriety of the Board's vote, the Court finds it significant that in Delta I, the D.C. Circuit gave Defendants broad discretion to determine how to act on remand, including the open-ended option to "take whatever other action the Bank deems appropriate to comply with the Bank Act and the APA."
Food Marketing Institute v. ICC, 587 F.2d 1285 (D.C.Cir.1978), another case on which Plaintiffs rely, also does not compel the Court to ignore Response One. That decision's warning against "[p]ost-hoc rationalizations by the agency on remand," id. at 1290, occurred after the court already had concluded that the agency's position was "defective"—not just insufficiently explained, as in Delta I—and the court therefore had "vacated" the decision—in contrast to remand without vacatur in Delta I. See id. at 1288. The agency then issued a new decision reaching the same conclusion as in the decision previously vacated, leading the D.C. Circuit to caution that
Id. at 1290 (citation omitted). This statement therefore addresses the potential problem of closed-mindedness when an agency is required to make a new decision on remand, which is different than the circumstances here, where the Delta I remand occurred in order for the agency to provide a fuller articulation of its reasoning in support of prior decisions that themselves were left undisturbed.
In sum, the Court concludes that Response One provides the type of "amplified articulation" that an agency is permitted to—and, here, required to by the D.C. Circuit—provide on remand; accordingly, examination of Response One's contents is perfectly appropriate.
Although the Board unanimously voted to ratify and adopt both Remand Responses at the same time, a different analysis is required for Response Two. This is because unlike Response One, which attempted to justify the exportable goods screen that the Bank used to approve the Air India commitments, Response Two provided an alternative justification for approving those commitments separate from the 2007 EIPs. As a result, the Court cannot say that Response Two provided an "amplified articulation" of the agency's reasons for adopting the exportable goods screen and, in turn, for originally authorizing the Air India commitments. Alpharma, 460 F.3d at 6. Rather, Response Two offers a new reason for why the agency could have approved the commitments irrespective of the exportable goods screen. Thus, under most circumstances, Response Two would run afoul of the prohibition on post-hoc rationalizations because it offers a justification for authorizing the Air India commitments that was not considered by the agency at the time the decision was made. See, e.g., State Farm, 463 U.S. at 50, 103 S.Ct. 2856 ("It is well-established that an agency's action must be upheld, if at all, on the basis articulated by the agency itself."); Nat'l Oilseed Processors Ass'n v. Browner, 924 F.Supp. 1193, 1204 (D.D.C.1996), aff'd in part and remanded sub nom., Troy Corp. v. Browner, 120 F.3d 277 (D.C.Cir.1997) (a prohibited post-hoc rationalization occurs when an agency "present[s] a new basis for its action," rather than merely offering a "clearer or more detailed explanation" for its action, only the latter of which courts usually may consider on remand).
The Court, however, is not convinced that such a conclusion is appropriate here. In Delta I, the D.C. Circuit did not vacate the Air India commitments or require the Bank to reconsider or re-open its decisionmaking concerning these loan guarantees. In this context, if the D.C. Circuit did not want the Bank to provide an explanation on remand that the agency did not consider at the time of the original authorizations, the court could have given the Bank a simple remand option: attempt to justify the exportable goods screen, and if you cannot do so, re-decide the Air India commitments using a new analysis that is consistent with the Bank Act and that does not rely on the exportable goods screen. Such a remand order would avoid a post-hoc rationalization by requiring the agency to either further explain its original justification (i.e., the exportable goods screen) or make a new authorizing decision on remand using a different justification; the agency could not, however, provide a new justification for its initial decision to authorize the Air India commitments. But Delta I did not take that approach.
Instead, the D.C. Circuit gave the Bank the options on remand to "adequately consider and explain any adverse effects that these particular Air India loan guarantees have on U.S. industries and U.S. jobs," which is what Response Two attempted to do, "or [to] take whatever other action the Bank deems appropriate to comply with the Bank Act and the APA." Delta I, 718 F.3d at 978. By granting options beyond just further explaining the exportable goods screen, the circuit court permitted the agency to provide an alternative, post-hoc justification on remand for the Air India commitments without reconsidering
Having settled that Response One is properly before the Court, the Court next turns to evaluating whether the Bank's adoption of the exportable goods screen as part of the 2007 EIPs was contrary to the APA or the Bank Act. In particular, Defendants ask the Court to find that the screen was the product of the Bank's well-reasoned determination that transactions in which the export was to be used by the foreign purchaser to provide a service—and not to produce an exportable good—were unlikely to cause a substantial or serious adverse economic impact on U.S. industry and employment. See Defs.' Mem. Supp. Mot. Summ. J., ECF No. 14-1, at 30. Plaintiffs, however, disagree that the exportable goods screen represents the culmination of rational agency decisionmaking and instead contend that the screen cannot be reconciled with the Bank Act. See Pls.' Mem. Supp. Mot. Summ. J., ECF No. 12-1, at 37.
Turning to Plaintiffs' substantive challenge, the Court begins, as it must, with the relevant statutes. In particular, Plaintiffs maintain that the exportable goods screen does not reasonably serve the Bank Act's objectives, as proclaimed through three related provisions. First, § 635 specifies that, among other considerations, the agency "shall take into account any serious adverse effect of [a proposed] loan or guarantee on the competitive position of United States industry . . . and employment in the United States, and shall give particular emphasis to the objective of strengthening the competitive position of United States exporters and thereby of expanding total United States exports." 12 U.S.C. § 635(b)(1)(B)(ii). Second, the Bank Act provides that the agency "may not extend [financing support] for establishing or expanding production of any commodity for export by any country other than the United States[] if . . . the Bank determines that the extension of such [support] will cause substantial injury to United States producers of the same, similar, or competing commodity," id. § 635(e)(1), unless "in the judgment of the Board of Directors of the Bank, the short- and long-term benefits to industry and employment in the United States are likely to outweigh the short- and long-term injury to United States producers and employment of the same, similar, or competing commodity." Id. § 635(e)(3). And third, the Bank Act requires that the "Bank shall implement such regulations and procedures as may be appropriate to insure that full consideration is given to the extent to which any loan or financial guarantee is likely to have an adverse effect on industries. . . and employment in the United States." Id. § 635a-2.
Though these provisions utilize somewhat different language, it is undisputed that, taken together, they require the Bank to consider (or, more accurately,
To determine whether the exportable goods screen is a permissible construction under the Bank Act, the Court first must determine how much deference is owed to the agency.
It is well established that "not all statutory interpretations by agencies qualify for [Chevron] deference." Pub. Citizen, Inc. v. U.S. Dep't of Health & Human Servs., 332 F.3d 654, 659 (D.C.Cir. 2003) (citations omitted). Thus, the Supreme Court has explained that "[d]eference in accordance with Chevron . . . is warranted only `when it appears that Congress delegated authority to the agency generally to make rules carrying the force of law, and that the agency interpretation claiming deference was promulgated in the exercise of that authority.'" Gonzales v.
This is because, on the one hand, Congress clearly delegated to the Bank and the Board broad authority to make loan guarantees such as those at issue here, see 12 U.S.C. § 635(a)(1), (b)(1), and Congress also required the agency to "take into account" certain factors—such as potential "serious adverse effect[s]" of a transaction, id. § 635(b)(1)(B)(ii), and whether a transaction would "cause substantial injury" to U.S. industries, id. § 635(e)(1)(B)—when determining whether to approve or deny an application for financing. Congress, moreover, explicitly directed the Bank to "implement such regulations and procedures as may be appropriate to insure that full consideration is given to the extent to which any loan or financial guarantee is likely to have an adverse effect on industries." Id. § 635a-2. Congress therefore left it to the agency to determine how "adverse effects" should be analyzed, and the exportable goods screen represents the agency's judgment as to matters within its area of expertise. Cf. Barnhart v. Walton, 535 U.S. 212, 222, 122 S.Ct. 1265, 152 L.Ed.2d 330 (2002) (applying Chevron because of, inter alia, the "interstitial nature of the legal question" and the "related expertise of the Agency").
On the other hand, the 2007 EIPs plainly are not the product of "either a notice-and-comment rulemaking or a formal adjudication, the usual suspects for Chevron deference." Cal. Valley Miwok Tribe v. United States, 515 F.3d 1262, 1266 (D.C.Cir.2008); see also Mount Royal Joint Venture v. Kempthorne, 477 F.3d 745, 754 (D.C.Cir.2007) ("If the agency enunciates its interpretation through notice-and-comment rule-making or formal adjudication, we give the agency's interpretation Chevron deference."). Though "`the want of' notice and comment `does not decide the case'" against Chevron deference, see Barnhart, 535 U.S. at 222, 122 S.Ct. 1265 (quoting Mead, 533 U.S. at 230-31, 121 S.Ct. 2164), it also is not certain that the 2007 EIPs carry the force of law. Instead, the EIPs might more accurately be described as non-binding internal guidelines—akin to "`interpretations contained in policy statements, agency manuals, and enforcement guidelines,'" which historically are "beyond the Chevron pale," Mead, 533 U.S. at 234, 121 S.Ct. 2164 (quoting Christensen v. Harris Cnty., 529 U.S. 576, 587, 120 S.Ct. 1655, 146 L.Ed.2d 621 (2000))—rather than the formal and binding legislative rules that usually benefit from Chevron deference. See Motion Picture Ass'n of Am., Inc. v. FCC, 309 F.3d 796, 801 (D.C.Cir.2002) ("[E]ven if an agency has acted within its delegated authority, no Chevron deference is due unless the agency's action has the `force of law.'" (quoting Mead, 533 U.S. at 227, 121 S.Ct. 2164)).
Ultimately, then, this Court finds itself at the same impasse as Judge Boasberg in ATA regarding what level of deference is owed to the Bank's interpretation of the Bank Act through the EIPs. See ATA, 878 F.Supp.2d at 72-73 (examining, but ultimately not deciding, whether Chevron applies to the exportable goods screen). And like in ATA, this Court finds that it is unnecessary to resolve the enigmatic Chevron question because "to hold that an agency decision `do[es] not fall
After consideration of the Skidmore factors, this Court, like that in ATA, finds that the exportable goods screen deserves considerable deference. See ATA, 878 F.Supp.2d at 73 (Skidmore "considerations counsel in favor of lending significant weight to the interpretation of §§ 635(b)(1)(B) and 635a-2 set forth in the [2007] EIPs"). Though amendments have occurred from time-to-time to reflect new considerations imposed by Congress, the Bank has used comprehensive EIPs in some form since 1979 as a framework for evaluating potential transactions.
Before reaching the merits of the exportable goods screen itself, the Court first
Specifically, as Judge Boasberg recognized in ATA, "multiple provisions of the Bank Act contemplate [the possibility of] categorical decisionmaking." ATA, 878 F.Supp.2d at 74. For example, § 635a-2 requires that the agency "implement such regulations and procedures as may be appropriate to insure . . . full consideration" of adverse effects, 12 U.S.C. § 635a-2 (emphasis added), which indicates that the Bank was not just permitted to develop a policy for making "adverse effects" determinations, but rather that it was expected to do so. In addition, § 635(e)(7)(A) provides that certain procedural requirements apply only ""[i]f . . . the Bank conducts a detailed economic impact analysis." Id. § 635(e)(7)(A) (emphasis added). Congress's use of the conditional language "if" strongly suggests that detailed economic impact analysis is not expected to be performed for every financing decision, which, in turn, implies that the Bank may create procedures for distinguishing between those transactions that require detailed analysis and those that do not.
Further, the D.C. Circuit in Delta I, in reliance on the plaintiffs' litigation position there, appeared to treat this question as a foregone conclusion accepted by all parties:
Delta I, 718 F.3d at 978 (citation omitted; third emphasis added). In addition, given the volume of applications the Bank receives each year—approximately 3,800 in Fiscal Year 2012, for example, see AR at 374-75—it would be nearly impossible for the Bank to accomplish its statutory mission of promoting U.S. exports if it were required to perform in-depth economic
The Court, moreover, simply is not persuaded by Plaintiffs' argument that the Bank, by applying a categorical screen rather than performing individual analyses, fails to consider a factor required by the Bank Act. Instead, this Court agrees with ATA, where Judge Boasberg rejected a similar argument, explaining that
ATA, 878 F.Supp.2d at 75 (citations omitted). Similarly, the Court in ATA found that
Id. (citations omitted; third emphasis added). Likewise here, the Court finds that both the initial decision that resulted in the institution of the EIPs and their subsequent application to individual transactions qualify as consideration of "adverse effects." Accordingly, this Court, like those in ATA and Delta I, concludes that the Bank is authorized to adopt categorical screens in an attempt to limit further analysis to only those transactions that are "likely to have an adverse effect on industries. . . and employment in the United States."
Finally, Plaintiffs criticize the exportable goods screen because it removed nearly
The critical question thus becomes whether the line drawn by the Bank in adopting the exportable goods screen was "a reasonable policy choice for the agency to make," or whether the agency's decision was arbitrary and capricious or contrary to the Bank Act, as Plaintiffs claim. See Nat'l Cable & Telecomms. Ass'n v. Brand X Internet Servs., 545 U.S. 967, 986, 125 S.Ct. 2688, 162 L.Ed.2d 820 (2005) (citation and quotation omitted). To answer this question, the Court feels compelled to start by noting that the Bank Act creates far more questions than it answers regarding how the Bank should implement the statutory scheme. Indeed, the obligations imposed on the agency by the Bank Act are, at best, modest and, at worst, riddled with gaps that must be filled by the Bank. For instance, how is the Bank to determine whether serious adverse effects on U.S. airlines are likely to result from the Bank's provision of financing support to a foreign airline intending to purchase a U.S.-manufactured aircraft? And, for that matter, what meaning should the Bank give to statutory terms such as "serious" in § 635(b)(1)(B)(ii) or "likely" in § 635a-2?
Competing statutory considerations also are at play. For example, without question,
Thus, the Bank has construed Congress's intent, as relayed through the Bank Act, to be that the Bank must evaluate "transactions efficiently so as not to impede the transactions, which often need to proceed expeditiously to capture the export opportunity," and must "focus its adverse impact analysis only on those instances where the potential adverse effect is substantial." AR at 366. The Bank Act, though, does not answer how the Bank should balance these competing obligations, and the exportable goods screen is the Bank's attempt to perform that balancing. See id. at 371; see also Fresno Mobile Radio, Inc. v. FCC, 165 F.3d 965, 971 (D.C.Cir.1999) ("When an agency must balance a number of potentially conflicting [statutory] objectives, . . . judicial review is limited to determining whether the agency's decision reasonably advances at least one of those objectives and its decisionmaking process was regular." (citation omitted)). Though the Court finds this to be an eminently reasonable interpretation of what the Bank Act demands from the Bank when processing financing applications, such an understanding does not resolve whether the categorical goods screen itself represents rational agency decisionmaking.
The Court now turns, at last, to considering the Bank's justifications for the exportable goods screen. As a preliminary matter, Plaintiffs immediately question the level of the Bank's expertise, arguing that Response One offers only general statements about the Bank's experience rather than meaningful evidence to establish the agency's expertise and experience in understanding the aircraft financing market. See Pls.' Reply Supp. Mot. Summ. J., ECF No. 21, at 18. The Court recognizes that, given the exportable goods screen's categorical exclusion, the Bank has not, until recently, subjected aircraft financing transactions to in-depth economic impact analysis. The Bank does, however, have much experience with global financial markets generally and the aircraft financing market in particular.
Of note, the Bank has evaluated financing transactions across numerous industries under various economic impact provisions for more than forty-five years, with the Bank reviewing upwards of several thousand applications for financing in any given year. See AR at 374. In addition, both before and after the adoption of the exportable goods screen in 2001, the Bank has been directly involved in negotiations
Turning to the Bank's explanation for the exportable goods screen, the Bank understood from the hundreds of aircraft transactions it has financed that, for many years, U.S. airlines generally had access to financing at costs that were more favorable than the costs of aircraft financing provided by ECAs, such as the Ex-Im Bank. See id. at 374. For example, the Bank understood that U.S. airlines often had access to favorable financing tools—such as leveraged leases
Plaintiffs nonetheless criticize Response One as relying on "unstated inferences" or "unsupported assertions." See Pls.' Reply Supp. Mot. Summ. J., ECF No. 21, at 18. Not so. As the Court just discussed, the Bank developed substantial experience regarding the international and domestic aircraft financing market over the years and leading up to the adoption of the exportable goods screen, and the specific facts learned by the Bank during this time led it to reach the well-supported and reasonable conclusion that aircraft financing applications did not require further in-depth analysis because such financing transactions were unlikely to harm U.S. airlines, which themselves had superior financing alternatives available. The Bank's predictive judgment—which the Bank Act implicitly requires by focusing on the likely adverse effects of a transaction, see 12 U.S.C. § 635a-2, and not asking the Bank to determine that a transaction never will have any harmful effect—is entitled to substantial deference.
Response One also explains that the Bank regularly sought input from industry stakeholders, representatives, and government agencies to help the Bank determine whether its actions were consistent with its fundamental mission of supporting U.S. jobs and exports without causing likely, serious adverse effects on the U.S. economy. See AR at 367, 375. The Bank believed that such individuals and entities could be relied on to notify the Bank if they became concerned that certain policies or actions threatened to harm a specific domestic industry or sector. See id. at 375. Thus, industry representatives' and stakeholders' concerns—or, more aptly, the lack thereof—were one tool that the Bank used to evaluate (and reevaluate if necessary) the soundness of its categorical judgments. See id. ("In the Bank's experience," trade groups, industry stakeholders, and other government agencies "could be relied upon to notify the Bank if they were concerned that the Bank's policies. . . threatened to cause any harm . . . to a specific industry or sector."). The Court finds no error in the Bank's decision to rely on such sophisticated and highly interested actors, such as Plaintiffs, for feedback regarding the agency's decisionmaking and predictive judgments over the course of time.
On this point, the Bank reports that when the exportable goods screen first was adopted in 2001, the Bank had not heard any concerns from U.S. airlines regarding adverse economic impact from a Bank financing decision in the last seventeen
Plaintiffs, however, assert that Response One does not sufficiently explain why the Bank continued to use the exportable goods screen into 2007, or why the Bank kept using the screen at the time of the Air India commitments. See Pls.' Reply Supp. Mot. Summ. J., ECF No. 21, at 19-20. Without doubt, an agency's "latitude to make policy based upon predictive judgments deriving from its general expertise. . . implies a correlative duty to evaluate its policies over time[.]" Bechtel v. FCC, 957 F.2d 873, 881 (D.C.Cir.1992) (citations omitted). But here, the Court disagrees with Plaintiffs' contention, as Response One clearly explains that the Bank retained the exportable goods screen in the 2007 EIPs and through the adoption of the 2013 EIPs and Guidelines because, despite changes in the dynamics of the aircraft financing market (and still without any industry complaints for much of this time), the Bank's continued expertise and experience indicated that the screen remained an accurate, effective, and efficient tool for evaluating proposed aircraft financing transactions.
For instance, Response One explains that the terrorist attacks of September 11, 2001, resulted in a sudden and protracted reduction in demand for airline passenger services. See AR at 378. As a result of that decrease in demand, as well as other financial pressures at the time, U.S. airlines began a decade-long process of consolidation through mergers and bankruptcies. See id. Thus, with limited exceptions, U.S. airlines generally did not purchase new passenger aircraft during this period, such that any financing advantage that the Ex-Im Bank purportedly was providing to foreign airlines during this period remained purely theoretical. See id. And, at the same time, the Bank's keen awareness of the aircraft financing market continued to indicate that U.S. airlines still typically had access to financing that was "no less favorable than financing provided by ECAs[.]" See id. Under such circumstances, the Court finds that the Bank had no reason to adjust its procedures.
Starting in 2005, moreover, the various countries and constituencies that were involved with ECA aircraft financing, including multiple U.S. airlines, began negotiating a new ASU. See id. When the new ASU was agreed to in June 2007, the European airlines, many of which had previously alleged that ECA financing was, in fact, more favorable than the financing they could obtain in the private market, agreed that the new ASU no longer posed any ECA financing advantage. See id. At the same time, none of the U.S. airlines expressed any economic impact concerns about the new ASU. See id. Thus, with this new ASU in place and with no other significant changes to the aircraft financing market, the Bank again had no reason to believe that a different approach was
Response One further explains that the worldwide financial crisis that first emerged in 2008, as well as the European sovereign debt and banking crises that emerged soon after, also had a major impact on global financial markets, including those for aircraft purchases. See id. at 378-79. During this period, there continued to be little demand for acquiring new passenger aircraft by U.S. airlines, while there was significant growth in the demand for wide-body aircraft in the emerging markets and resource-rich OECD countries. See id. at 379. Plaintiffs fail to explain how any of these changing conditions suddenly required the Bank to reconsider the exportable goods screen, or why that screen was no longer an effective tool for complying with and achieving the goals of the Bank Act.
For these reasons, the Court is not persuaded by Plaintiffs' argument that Response One relied on outdated information to explain why the Bank continued to use the exportable goods screen through 2007 and beyond, as the Bank has thoroughly explained the factors that it took into consideration and why it did not make any change to its procedures sooner. Given this period of market volatility, the minimal demand for new passenger aircraft by U.S. airlines, the continued lack of industry complaints, and the Bank's understanding that U.S. airlines still generally had access to more favorable financing, the Court finds that the Bank was reasonable to conclude that a different approach was not required.
Next, Plaintiffs argue that by 2010, one U.S. airline—Delta—had complained about the financing the Bank was providing to foreign airlines, which, according to Plaintiffs, should have led the Bank to eliminate the exportable goods screen—particularly given the Bank's reliance in Response One on the fact that it had heard no complaints from industry stakeholders prior to 2010. See Pls.' Reply Supp. Mot. Summ. J., ECF No. 21, at 19. The Court, however, finds that the Bank has justified its decision to maintain the exportable goods screen in the face of this industry complaint for at least two reasons: first, the Bank found little merit in the U.S. airline's complaint that financing provided by the Bank to a European airline, Ryanair, was more favorable than the financing available to the U.S. airline; and second, the Bank understood that, in 2010, negotiations among the ECAs for a new ASU would address any perceived cost advantage because the clear aim of the revised ASU was to ensure the equivalency of ECA and commercial bank financing.
Turning to the first point, in early 2010 the Bank received a complaint from one U.S. airline asserting that financing provided by the Bank to Ryanair, a discount European carrier, was more favorable than the financing available to the U.S. airline. See AR at 379. Plaintiffs argue that this complaint should have led the Bank to eliminate, or at least reconsider, the exportable goods screen. See Pls.' Reply Supp. Mot. Summ. J., ECF No. 21, at 19. The Bank, however, has provided a well-reasoned explanation for why this complaint was unfounded: after receiving the complaint, the Bank determined that Ryanair had a better credit rating and was using a superior quality of collateral, namely new aircraft, as compared to the credit rating of the complaining U.S. airline and the relatively older aircraft that the U.S. airline was using as collateral. See AR at 379. These two factors created
Second, at around the same time, the complaining U.S. airline also had expressed concerns in the context of the new ASU negotiations. See id. The Bank, however, anticipated that the negotiations among the ECAs for a new ASU would address any cost advantage because the plain purpose of the new agreement was to ensure the equivalency of ECA and commercial bank financing. See id. at 379-80. The ECAs ultimately reached a new agreement at the end of 2010, and the new ASU went into effect on February 1, 2011. See id.; see also id. at 1073-119 (2011 ASU). The 2011 ASU contained mechanisms for adjusting to changes in the private financial markets as they occur, thus ensuring that ECA financing and private bank financing remained functionally equivalent. See id. at 379-80; see also id. at 1076 (one purpose of the 2011 ASU is "to establish a balanced equilibrium" that "[a]voids distortion of competition among the Participants to this [ASU] and any other sources of financing"). Accordingly, at the time the Air India transactions at issue in this case were approved (September 2011), the new ASU, which became effective in February 2011, see id. at 379-80, had been in place for a short period of time, and there was no reason to doubt that it was functioning as intended.
Overall, then, when the Bank received a complaint in 2010, it considered the U.S. airline's claims and concluded that the complaint was unfounded and did not require revisiting the exportable goods screen. Further, the mere fact that a U.S. airline, for the first time in nearly two decades, disagreed with the Bank's longstanding judgment about the economic impact of financing aircraft transactions did not, by itself, give the Bank reason to discontinue using the exportable goods screen.
Finally, Plaintiffs argue that the Bank should measure the potential advantage Ex-Im Bank financing may provide to foreign airlines by comparing the difference between the Bank financing available to the foreign airline and the private market rate that the foreign airline would have received absent Bank support; the Bank, on the other hand, compares the cost of ECA financing available to the foreign airlines with the cost of financing that might be available to U.S. airlines.
Initially, Plaintiffs' argument appears to assume that the existence of Ex-Im Bank financing, by itself, induces foreign airlines to purchase new aircraft and thus increase competition with U.S. airlines. Such a conclusion, however, is inconsistent with the fact that the pricing advantage offered by Bank financing, if any, most likely is immaterial in the larger context of the costs for purchasing, operating, and maintaining wide-body passenger aircraft. See AR at 420-21. As the Bank explains, a single Boeing 787 aircraft costs approximately $116 million to purchase and approximately $40-$70 million to operate annually, see id. at 419 n.26, 420, which translates to more than $1 billion over the course of its expected 25-year lifetime. See id. at 421. When compared to the hypothetical interest savings per year from Bank support—approximately $482,000 in the case of the Air India transactions, for instance—the Bank's experience has revealed that "[n]o prudent airline would make an investment of that magnitude, and take on such massive operating costs, based solely on the theoretical savings in financing costs." Id. at 420; see also Boeing's Amicus Curiae Br., ECF No. 19, at 19 ("In Boeing's experience, the Bank was correct in concluding that `[i]t is highly unlikely that' the availability of [ECA] financing `would induce an airline to make a purchasing decision of this magnitude.'" (citation omitted)). The record therefore contradicts Plaintiffs' presumption that the availability of Ex-Im Bank financing sways foreign airlines to purchase new aircraft they otherwise would not acquire, thereby causing an increase in competition with U.S. airlines that otherwise would not exist. Rather, the availability of Bank financing—or the lack thereof—is more likely to affect only the secondary decision of whether to purchase aircraft from Boeing or Airbus when a specific need for new planes arises. See AR at 421. Thus, Plaintiffs' underlying assumption, that U.S. airlines necessarily face less competition if the Bank does not provide financing to foreign airlines, falls apart.
This ties into another problem with Plaintiffs' alternative comparison: it overlooks the fact that in the market for large commercial aircraft, there are only two manufacturers in the world—Boeing and Airbus—and purchases of Airbus aircraft are supported by three European ECAs (France, Germany, and the United Kingdom). See id. at 390, 420-21. As a result, once a foreign airline decides to purchase a new plane to meet a specific need, the airline has a binary choice: purchase a U.S.-manufactured Boeing airplane (potentially financed by the Ex-Im Bank), or purchase a foreign-manufactured Airbus airplane (potentially financed by a European ECA). See id. at 420 ("Given the competition from Airbus on every sale, supported by the three European ECAs, Ex-Im Bank financing affects only the sourcing of an aircraft, not the decision or ability of a foreign airline to purchase an aircraft." (emphasis in original)). And if Ex-Im Bank financing is removed from the equation, the Bank's experience has revealed that foreign airlines simply will purchase from Airbus instead of Boeing due to the presence of foreign ECA financing. Id. at 402. As the Bank explains,
Id. Thus, Plaintiffs' approach is misguided because, by focusing on the benefit a foreign airline might receive from commercial market financing, it ignores the fact that, in the absence of Bank financing, the foreign airline still will compete with U.S. airlines to the same degree by purchasing Airbus aircraft with foreign ECA financing.
The Bank instead focuses on the cost of ECA financing available to the foreign airline in order to make certain that the Bank's financing is competitive with that from foreign ECAs such that export opportunities are funneled (through Boeing) to the U.S. economy and not lost to Airbus. Cf. Boeing's Amicus Curiae Br., ECF No. 19, at 21-22 (in 2012, European ECAs "supported an estimated 147 Airbus airplanes valued at over $10 billion. These agencies are not burdened by the onerous requirements that Plaintiffs demand here." (citation omitted)). Plaintiffs' comparison, on the other hand, ignores the reality that, except when Bank financing is likely to cause serious harm domestically (which the Bank has shown is not the case here), the Bank Act's goal is to ensure that competition between Boeing and Airbus occurs based on the price and quality of the aircraft, not the availability of ECA financing. See, e.g., 12 U.S.C. § 635(a)(2) (specifying procedures that the Bank must follow in order for it "to be competitive in all of its financing programs with countries whose exports compete with United States exports" (emphasis added)); AR at 402 ("[a] key determinant is whether foreign ECA support would be available for financing
A final assumption by Plaintiffs is that if a foreign airline uses Ex-Im Bank financing, it must mean that the Bank's financing was cheaper than that which the foreign airline could have obtained in the private market. The accuracy of this assumption, however, largely is negated by the 2011 ASU, which included mechanisms intended to align ECA financing costs with those available in the private market in order that a foreign airline using ECA financing does not obtain a financing cost advantage.
First, the Court already has addressed the Ryanair transaction, and in short, nothing about Plaintiffs' analysis discredits the Bank's understanding of the aircraft financing industry or the effectiveness of the 2011 ASU, as the Bank has demonstrated why Plaintiffs' analysis of the Ryanair transaction is flawed and not compelling.
Second, Plaintiffs' argument ties into a larger theme that is prevalent throughout this litigation: many of Plaintiffs' complaints about the Bank are, at base, an attempt to provoke a battle of the experts. But such a battle is frowned upon within the context of an APA challenge to agency decisionmaking. See Marsh, 490 U.S. at 378, 109 S.Ct. 1851 ("When specialists express conflicting views, an agency must have discretion to rely on the reasonable opinions of its own qualified experts even if, as an original matter, a court might find contrary views more persuasive."); Mississippi v. EPA, 744 F.3d 1334, 1348 (D.C.Cir.2013) ("We repeat: it is not our job to referee battles among experts; ours is only to evaluate the rationality of EPA's decision[.]"); Envtl. Def. v. U.S. Army Corps of Eng'rs, 515 F.Supp.2d 69, 82 (D.D.C.2007) (agency's "reasoning is disputed, but the dispute presents a battle of experts—a battle conducted in an arena that is off limits to APA judicial review"). This is not to say that the Court has dismissed, or ought to dismiss, outright Plaintiffs' own expertise and counterfactual arguments; the Court, however, must give the appropriate deference to the Bank's experience and judgment, especially when each side's experts might reach different conclusions. Doing otherwise would entangle the Court in the forbidden expert battle and not give the agency the deference that Congress has afforded to it by law.
In sum, the Court finds that the Bank's adoption and continued use of the exportable goods screen in the 2007 EIPs and beyond constituted rational agency decisionmaking. Specifically, the Bank used its experience and expertise to make a reasonable predictive judgment that balanced the Bank Act's two competing directives—to consider the likelihood of substantial economic impact on domestic industry and to process financing transactions in an efficient and competitive manner that funnels critical export opportunities to the U.S. Indeed, the screen enabled the Bank to resolve financing applications with the promptness that commercial airlines demand, while also allowing the Bank to focus its limited resources on conducting in-depth economic analysis only on those transactions that it reasonably deemed to be the most likely to cause a serious adverse effect, as the Bank Act permits. As such, the
Having reached this conclusion, the Court also must conclude that Defendants have successfully defended the Bank's authorization of the Air India commitments (both preliminary and final) in the face of Plaintiffs' lawsuit. Specifically, the D.C. Circuit in Delta I gave Defendants three alternative paths to compliance on remand:
Delta I, 718 F.3d at 978 (emphasis added). Because these are alternative options, Defendants must only satisfy one of them to succeed here. Defendants meet that burden through Response One, and as such, the Court grants summary judgment in favor of Defendants as to Plaintiffs' Counts I, II, and III, which allege that the Bank's approval of the Air India commitments violated the APA, the Bank Act, and the Reauthorization Act.
As an alternative to justifying the exportable goods screen, the D.C. Circuit in Delta I gave the Bank a second option on remand: "adequately consider and explain any adverse effects that these particular Air India loan guarantees have on U.S. industries and U.S. jobs[.]" Id. The Bank attempted to do just that through Response Two. Plaintiffs now argue through their motion for summary judgment that the Bank's analysis and conclusions in Response Two are arbitrary and capricious. See Pls.' Mem. Supp. Mot. Summ. J., ECF No. 12-1, at 40. In particular, Plaintiffs criticize the Bank for, among other things, its decision to consider only direct competition and not all indirect competition, its analysis of the "price advantage" that Air India might receive from the Bank's financing, and its finding that there is no chronic oversupply problem in the global airline industry. See id. at 41-52. The Court addresses these issues and others next.
The Court begins with a summary of the Bank's analysis and conclusions in Response Two. Of relevance here, the Bank first determined "that there will be no direct competition to U.S. airlines from the aircraft financed in connection with [the 2011 Air India commitments]" because
AR at 399, 403. In addition, the Bank found that Air India is unlikely to deploy the Bank-financed Boeing 787s on India-U.S. routes in the future because Boeing 787s would not be the optimal aircraft for such routes:
Id. at 406. Without actual or likely direct competition between Air India's Bank-financed aircraft and U.S. airlines on the same routes, the Bank determined that "there will not be an `adverse effect' on U.S. airlines within the meaning of the Bank's Charter." Id. at 405.
The Bank then conducted supplemental analysis to assess the possible magnitude of any adverse effects if, hypothetically, the Air India transactions were to lead to direct competition with U.S. airlines. See id. at 411-19. To do so, the Bank first calculated that the most significant financing "price advantage" that Air India could obtain from the Bank, as determined by comparing the Bank's financing to what a comparable U.S. airline could obtain in the private market, is $482,000 per year.
Thus, in the Bank's experience with aircraft financing transactions and based on general financial commonsense, the Bank concluded that a savings of $482,000 per year is unlikely to influence an airline's decision to make an investment of such magnitude in new aircraft. See id. at 416, 417 & n.20. At the same time, the Bank concluded that this hypothetical $482,000 in savings was unlikely to cause passenger displacement for the hypothetical competing U.S. airline because, using conservative estimates, the $482,000 translates to an $8.33 price advantage per seat, which, the Bank anticipated, is unlikely to affect a passenger's purchasing decision given that the relevant economy-class ticket between the U.S. and India costs $1,000 to $2,000. See id. at 416.
Finally, the Bank determined that the modest hypothetical harm from the Air India commitments is far outweighed by the benefit to the U.S. economy from such transactions. See id. at 416-19. Thus, for the hypothetical new Air India flights that compete directly with a U.S. airline, the Bank determined that the U.S. airline's revenue loss from passenger displacement would be between $32.4 million and $129.5 million. See id. at 419. When compared to the approximate export value of $232 million for two 787s—which, in the Bank's experience, is the minimum number of aircraft required to provide daily service on such routes—the net benefit to the U.S. economy would be between $102.5 million and $199.6 million. See id. Further, the Bank concluded that even assuming more aircraft are used in direct competition with the hypothetical U.S. airline, "the net benefits would still significantly outweigh any adverse effects for the simple reason that the value of the U.S. aircraft being used on
Plaintiffs criticize the Bank's decision in Response Two to focus on direct competition—which is defined as "competition from the specific aircraft being exported and which is flown on a route also flown by a U.S. airline," AR at 406—as the only possible cause for adverse effects under the Bank Act, rather than focusing on both direct and indirect competition.
As the Court has emphasized throughout this decision, the Bank Act provides little guidance (and thus significant discretion) to the Bank regarding how it should "take into account any serious adverse effect" of its loans and loan guarantees. 12 U.S.C. § 635(b)(1)(B)(ii). This discretion includes the need to balance competing statutory mandates and to determine a reasonable, practical approach for carrying out the Bank Act's modest requirements. Here, the Bank has considered and rejected Plaintiffs' preferred approach of calculating and considering all real and potential indirect competition for several reasons, including that "an analysis of indirect competition is too speculative to provide a meaningful determination of adverse impact." AR at 406. On consideration of the Bank's explanation, the Court is satisfied that the agency's interpretation is consistent with the Bank Act.
Specifically, Plaintiffs demand that, in addition to direct competition with U.S. airlines, the Bank also should examine "competition between . . . foreign airlines and U.S. airlines on routes to destinations that the U.S. airlines serve on a connecting basis, either with their own aircraft or those of their alliance partners." Pls.' Mem. Supp. Mot. Summ. J., ECF No. 12-1, at 45 (citing AR at 734-35). Delta, however, has 19 foreign alliance partners, United Airlines has 25 partners, and American Airlines has 13 partners, many of which have received Bank financing in the past.
AR at 410. Such an approach therefore "would require the Bank to analyze hundreds of routes," id., which "would be an impossible burden to undertake on a single transaction." Id. at 407.
At the same time, the Bank has explained why Plaintiffs' proposed approach to measuring competition is unreliable and speculative to the point of uselessness: "For each person that travels, there are myriad factors that go into the decision of which flight to take. It would be highly speculative to derive any conclusion about hundreds of such decisions on each of hundreds of different routes." Id. at 410. Thus, "[e]ven if the Bank were able to collect all of the hundreds of thousands of data points necessary for analyzing indirect competition," as Plaintiffs demand, "deriving reasonable conclusions about indirect competition would be impossible, because the connection of the Bank's loan guarantee to the" speculative indirect effects "is simply too attenuated." Id. at 407. For these reasons, the Bank has concluded that "the only reasonable approach to analyzing adverse effect[s] in the airline context is to compare direct competition on a `route to route' basis." Id. at 408.
Plaintiffs claim that the Bank "exaggerate[s]" the problems in making these calculations because the Bank "would only need to analyze destinations as to which a foreign airline's service is reasonably competitive with a U.S. airline's service." Pls.' Mem. Supp. Mot. Summ. J., ECF No. 12-1, at 46. In comments submitted to the Bank, Plaintiffs define a foreign carrier's routes as being "reasonably competitive" with those offered by U.S. carriers when the foreign carrier serves the same ultimate destination "with a circuity less than 1.5 times the shortest distance of the U.S. carriers and their [joint-venture] partners." AR at 759. Plaintiffs, however, offer no justification for why their proposed definition is correct, why it is required under the Bank Act, or why it does not just amount to more speculation. Relatedly, Plaintiffs argue that they "have repeatedly provided the Bank with examples of how to carry out" their alternative indirect competition analysis, see Pls.' Mem. Supp. Mot. Summ. J., ECF No. 12-1, at 46 (citing AR at 758-60), but the record reveals that Plaintiffs have identified only the "city-pairs" between which a foreign carrier's and a U.S. carrier's routes are "reasonably competitive" but have not undertaken the substantially more complex follow-up task of considering the actual and potential indirect effects of the Bank's support on all of those routes.
Thus, the Court is not convinced that there is relevant evidence "`in the record'" to which the Bank has "`shut its eyes.'" See id. at 46-47 (quoting West
Importantly, the Bank's decision to adopt a practical and time-sensitive approach also is consistent with the Bank Act—which requires the Bank to align its decision-making process within the timeframes of a commercial transaction while carrying out its mission to support U.S. exports, see, e.g., 12 U.S.C. § 635(b)(1)(B); S.Rep. No. 99-274, at 8 (1986) (recognizing "the need for [the Bank] to respond to exporters' requests for support in a timely. . . fashion")—while Plaintiffs' alternative methodology, on the other hand, would make it "practically impossible" for the Bank "to assess all . . . ripple effects" of a proposed transaction in a timely and efficient fashion.
Contrary to Plaintiffs' claim, moreover, the Bank did not dismiss Plaintiffs' proposed alternative analysis solely because it is too "difficult," Pls.' Mem. Supp. Mot. Summ. J., ECF No. 12-1, at 47 (citing Comcast Corp. v. FCC, 579 F.3d 1, 5 (D.C.Cir.2009)); instead, the Bank has demonstrated that considering indirect competition would fail to effectuate the Bank Act's mandates because it would require speculation, produce unreliable results, command undue resources, and
Plaintiffs assert two other objections that the Court must address. First, in Response Two, the Bank explains that the Air India commitments are unlikely to cause serious adverse economic impact on U.S. airlines because Air India does not use, and did not intend to use, the Bank-financed aircraft on India-U.S. routes to compete directly with U.S. airlines. See AR at 405-06. Plaintiffs, however, argue that the Bank's reliance on Air India's assertion that it will not use the Bank-financed aircraft in direct competition is "inconsistent with the record" because the Bank's staff allegedly had informed the Board in 2006 that Air India "planned to use Bank-financed planes to access new markets in general and routes between India and the United States in particular." Pls.' Reply Supp. Mot. Summ. J., ECF No. 21, at 39-40.
As Defendants point out, however, although the Board memorandum Plaintiffs cite does refer to Air India's general business plans to expand to North America, including the United States, the memorandum says nothing about Air India's planned usage of the specific aircraft financed by the Bank through the 2011 commitments at issue here, which is where the Bank's consideration in Response Two must focus because the Bank Act calls for a transaction-by-transaction analysis and the Bank cannot speculate about all future potential uses of aircraft if the agency is to make timely financing decisions. See AR at 51, 171, 283; Defs.' Reply Supp. Mot. Summ. J., ECF No. 23, at 23-24; see also 12 U.S.C. § 635(b)(1)(B)(ii) ("in authorizing any loan or guarantee, the Board of Directors shall take into account any serious adverse effect of such loan or guarantee" (emphasis added)); id. § 635a-2 (requiring the Bank to consider "the extent to which any loan or financial guarantee is likely to have an adverse effect on industries" (emphasis added)).
Second and relatedly, Plaintiffs argue that the Bank's reliance on a foreign airline's representations about its planned usage of a Bank-financed aircraft creates a "loophole" because an airline can "quickly shift" the routes on which it uses the aircraft. See Pls.' Mem. Supp. Mot. Summ. J., ECF No. 12-1, at 47 n.26. The Bank, however, is reasonable to limit its analysis to the data to which it has access, including a foreign airline's representations about its intended use of Bank-financed aircraft, rather than speculating about what an airline perhaps might do at some unknown future time. See AR at 409.
Further, the Bank has no reason to assume that foreign airlines are lying in their financing applications about the intended uses for their Bank-financed aircraft, and Plaintiffs have not justified why the Bank's reliance on such affirmations is unreasonable. Indeed, the Bank's reliance on Air India's assertions appears particularly reasonable here, as not only did Air India not use any of the relevant Bank-financed Boeing 787s on routes to the U.S. after their deliveries, but the Bank also determined that a 787 would not be the optimal aircraft for Air India to use on India-U.S. routes anyways due to the airplane's size and capacity. See AR at 403, 406.
The Court pauses here to point out that the Bank, through Response Two, has satisfied the Delta I remand order based on the Court's conclusions thus far. Specifically, the Court finds that the Bank reasonably interpreted the Bank Act as permitting the agency to consider only direct competition when determining whether adverse effects are likely to occur. In addition, the Bank explained that the relevant Air India commitments did not, and were unlikely to in the future, result in such direct competition with U.S. airlines. Accordingly, the Bank reasonably determined that the Air India commitments were highly unlikely to cause "adverse effects" within the meaning of the Bank Act, and the Court therefore concludes that Response Two complies with the D.C. Circuit's remand instructions. See Delta I, 718 F.3d at 978 (ordering Defendants to "adequately consider and explain any adverse effects that these particular Air India loan guarantees have on U.S. industries and U.S. jobs"); see also AR at 411 ("[B]ecause the Air India Transactions will not result in any direct competition with U.S. airlines, the Air India Transactions therefore will have no significant adverse effect on U.S. airlines. This determination satisfies the remand from the Court of Appeals, and the analysis could end here." (emphasis in original)). Thus, the Bank's remaining analysis in Response Two relies on a hypothetical scenario in which it assumes that direct competition does exist, which, of course, the Bank already ruled out. But even if the Court were to find an error in the Bank's alternative analysis, which it does not, Response Two still is sufficient to meet the agency's burden on remand.
Turning to the rest of Response Two, Plaintiffs next argue that the Bank's financing hurts U.S. airlines and their employees by contributing to an ongoing, systematic problem of oversupply in the airline industry. See Pls.' Mem. Supp. Mot. Summ. J., ECF No. 12-1, at 41-42. Plaintiffs therefore allege that Response Two necessarily relies on the Bank's "fatally flawed" "conclusion that there is no oversupply problem in the global airline industry." See id. Oversupply, however, plays a critical role at Stage I of the 2013 EIPs and Guidelines, see AR at 453 (discussing long-run structural oversupply), while the Air India transactions were approved under the 2007 EIPs, within which oversupply in the airline industry is not a
Plaintiffs also assert that in determining whether Air India received a "price advantage," the Bank improperly compared Air India, an airline that has experienced several years of financial difficulties, with Southwest Airlines, which was the only investment grade U.S. airline. See Pls.' Mem. Supp. Mot. Summ. J., ECF No. 12-1, at 51. In Response Two, however, the Bank explains that Air India was effectively deemed "investment grade" for purposes of the relevant financing commitments because the government of India agreed to serve as a guarantor for the Bank, and as such, if Air India defaults, the Bank can collect from the Indian government directly. See AR at 411; see also id. at 431 nn.4-5. Thus, under the Bank's methodology, the sovereign guarantee of the Indian government carries the equivalent of an investment grade credit rating, thereby accounting for the Bank's comparison between Air India and Southwest Airlines. See id. at 411. Plaintiffs fail to provide any non-conclusory argument discrediting the reasonableness of the Bank's approach to this issue.
Relatedly, Plaintiffs suggest that if Air India were in fact deemed to be an investment grade airline, then private investors would have been willing to fund its aircraft purchases, but internal Bank documents allegedly indicated that Air India could find no such private financing. See Pls.' Mem. Supp. Mot. Summ. J., ECF No. 12-1, at 50-51. Plaintiffs' argument, however, relies on the misguided significance they give to the availability of private financing, which, in turn, ties into another unpersuasive complaint from Plaintiffs. Specifically, Plaintiffs argue that Response Two fails because the Bank wrongly determined the
In particular, Plaintiffs' argument here echoes their similar complaint in regard to the Bank's comparison in Response One. See Part IV.B.3.d., supra. There, the Court upheld the Bank's comparison as reasonable under the Bank Act for multiple reasons, and the Court does so again here. In short, Plaintiffs' novel methodology overlooks the fact that once an airline decides to purchase a new airplane, the airline has a binary choice between purchasing a U.S.-manufactured Boeing airplane or purchasing a foreign-manufactured Airbus airplane. See AR at 420-21. Plaintiffs' favored approach, however, assumes that if the Bank does not provide financing support, U.S. airlines necessarily would be better off because those aircraft will not be purchased otherwise. The administrative record simply does not support that assumption. Instead, in the absence of Bank financing, the foreign airline still would compete with U.S. airlines by purchasing Airbus aircraft with financing support likely provided by a European ECA; this is why the Bank looks to the ECA financing available to the foreign airline to ensure that the Bank's financing is competitive with financing from the foreign ECAs and that those export opportunities are funneled to the U.S. economy. Cf. Pls.' Mem. Supp. Mot. Summ. J., ECF No. 12-1, at 52 (resting analysis on contention that "Air India could not have secured any private financing for its purchases" and ignoring the reality that the Bank also must compete with foreign ECAs to funnel aircraft purchases away from Airbus and to the U.S.).
Additionally, in the summary of Response Two above, the Court noted that the Bank conducted a hypothetical analysis that assumed Air India's Bank-financed Boeing 787 aircraft would compete directly with a U.S. airline on an India-U.S. route, and even with this assumption, the Bank still concluded that the adverse economic effects on the U.S. airline would be negligible because the hypothetical cost savings from the Bank's financing translated to just an $8.33 price advantage per seat, which is immaterial given that an economy-class ticket between the U.S. and India costs upwards of $1,000 to $2,000. See Part IV.C.1., supra. Relying on similar calculations and using the largest possible savings in interest of $12 million over the life of the 12-year loan as calculated in Response Two, Plaintiffs now argue that if Air India buys 30 aircraft, it could save $360 million (i.e., $12 million in interest savings multiplied by 30), which is enough to buy three additional Boeing 787 aircraft. See Pls.' Reply Supp. Mot. Summ. J., ECF No. 21, at 47. Plaintiffs allege that these calculations disturb the Bank's finding that the cost differential is immaterial. See id.
Economically speaking, Plaintiffs' hypothetical is unconvincing because it seems to treat the total $12 million in interest savings over the life of the loan as an upfront cash payment that Air India could accumulate and immediately use to buy
To summarize, the Court is satisfied that the Bank did not act arbitrarily and capriciously when it analyzed the Air India commitments in Response Two. Instead, Response Two constitutes the Bank's wellconsidered and reasonable attempt to demonstrate that the Air India transactions were not likely to cause serious adverse effects on U.S industry and employment, thereby again satisfying Defendants' obligation on remand from Delta I and, at the same time, demonstrating that the Bank's approval of the Air India commitments was reasonable and proper. Though Plaintiffs surely disagree with the Bank's analysis in Response Two and the Bank's procedures in general, they again fail to demonstrate how the Bank's actions were unreasonable or inconsistent with the modest requirements of the Bank Act, particularly given the deference owed to the agency. Accordingly, the Court concludes that, through both Response One and Response Two, Defendants have satisfied the Delta I remand order.
For the foregoing reasons, the Court grants Defendants' motion for summary judgment and denies Plaintiffs' motion. An order consistent with this Memorandum Opinion is separately and contemporaneously issued.
S. Rep. No. 99-274, at 8 (1986) (emphasis added).
AR at 407 n.12.
