In Re Gull Air, Inc., Debtor. Federal Aviation Administration v. Gull Air, Inc.

890 F.2d 1255, 21 Collier Bankr. Cas. 2d 1324, 1989 U.S. App. LEXIS 18556, 19 Bankr. Ct. Dec. (CRR) 1835, 1989 WL 146952
CourtCourt of Appeals for the First Circuit
DecidedDecember 7, 1989
Docket88-1780
StatusPublished
Cited by47 cases

This text of 890 F.2d 1255 (In Re Gull Air, Inc., Debtor. Federal Aviation Administration v. Gull Air, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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In Re Gull Air, Inc., Debtor. Federal Aviation Administration v. Gull Air, Inc., 890 F.2d 1255, 21 Collier Bankr. Cas. 2d 1324, 1989 U.S. App. LEXIS 18556, 19 Bankr. Ct. Dec. (CRR) 1835, 1989 WL 146952 (1st Cir. 1989).

Opinion

CAFFREY, Senior District Judge.

This is an appeal from an order of the United States District Court for the District of Massachusetts which affirmed two orders entered by the United States Bankruptcy Court for the District of Massachusetts. In its first order, issued on July 15, 1987, the bankruptcy court authorized the debtor, Gull Air, to sell certain arrival and departure slots at LaGuardia Airport, ruling that the automatic stay provisions of the Bankruptcy Code prohibited the Federal Aviation Administration (“FAA”) from withdrawing these slots from Gull Air. On July 29, 1987, the bankruptcy court issued its second order approving Gull Air’s private sale of these slots. The FAA appealed both orders of the bankruptcy court to the district court. On April 27, 1988, the district court affirmed the bankruptcy court's decisions without an opinion. The FAA now appeals the district court’s af-firmance to this Court. We reverse.

I.

Congress enacted the Federal Aviation Act for the purpose of centralizing in a single authority the power to frame rules for the safe and efficient use of the nation’s airspace. French v. Pan Am Express, Inc., 869 F.2d 1, 5 (1st Cir.1989); Pension Benefit Guaranty Corp. v. Braniff Airways, Inc. (In re Braniff Airways, Inc.), 700 F.2d 935, 941 (5th Cir.1983); Air Line Pilots Association, International v. Quesada, 276 F.2d 892, 894 (2d Cir.1960). In the Act, Congress authorized the Secretary of Transportation to develop plans for and formulate policy with respect to the use of the navigable airspace. 49 U.S.C. App. § 1348(a), (c). Congress further directed the Secretary to assign the use of the navigable airspace under such terms, conditions and limitations as deemed necessary to insure the safety of aircraft and the efficient utilization of such airspace. 49 U.S.C.App. § 1348(a). Congress empowered the Secretary to prescribe rules and regulations to perform these functions. 49 U.S.C.App. § 1348(c).

The Secretary of Transportation delegated to the Federal Aviation Administrator the authority to carry out its powers and duties regarding the safety and utilization of the nation’s navigable airspace. 49 U.S. C.App. § 1655(c)(1); 49 C.F.R. 1.47 (1988). Pursuant to its authority, the FAA promulgated a comprehensive scheme of federal regulations governing all aspects of air travel, including operations at high density airports. 14 C.F.R. § 1-199 (1989). The FAA’s regulations prescribe rules governing the allocation, withdrawal and transfer of arrival and departure slots to individual air carriers and commuter operators at the high density airports. 14 C.F.R. § 93.211 (1989). A “slot” is the operational authority to conduct one landing or takeoff operation each day during a specific hour or thirty-minute period. 14 C.F.R. § 93.213(a)(2) (1989).

Pursuant to its regulations, in April of 1986 the FAA held a random lottery of *1257 arrival and departure slots to determine their distribution. 14 C.F.R. § 93.225 (1989). By this lottery, the FAA allocated four slots at LaGuardia Airport to Gull Air, a regional commuter airline. Gull Air utilized these takeoff and landing slots until March 10,1987 when Gull Air filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. 1 Upon filing, Gull Air ceased all active flight operations.

On July 7, 1987, the FAA notified Gull Air that its slots at LaGuardia had been withdrawn for nonuse. See 14 C.F.R. § 93.227(a), (d) (1989). The FAA specified that the effective date of withdrawal was July 17, 1987. The FAA planned to reallocate the slots to another carrier at a lottery to be held on July 22, 1987. On July 10, after receiving notification of withdrawal from the FAA, Gull Air filed with the bankruptcy court a motion for authority to sell landing slots and to enjoin the FAA from obtaining property of the estate, arguing that the automatic stay provision of the Bankruptcy Code protected the slots against FAA action. See 11 U.S.C. § 362(a).

At a motion hearing held on July 15, 1987, the bankruptcy court ruled that pursuant to the automatic stay provision of the Bankruptcy Code, which the court found applicable, Gull Air’s bankruptcy petition operated as a stay on any action the FAA sought to take regarding Gull Air’s slots at LaGuardia. During the hearing the bankruptcy court articulated two separate grounds for its ruling that the automatic stay applied. First, the bankruptcy court stated that the automatic stay applied because “this [was] a post petition attempt by the FAA to take action against a debtor ... to deprive it of whatever license it may have to use these slots.” See 11 U.S.C. § 362(a)(1). The bankruptcy court then rejected the FAA’s argument that its action qualified as a regulatory exception to the automatic stay. Although the FAA action was purely regulatory in nature, the bankruptcy court did not believe it was established to protect the health and safety of the general public. See 11 U.S.C. § 362(b)(4). Second, the bankruptcy court articulated another independent rationale for its ruling that the automatic stay provision applied: “Because it is a property right that you attempt to foreclose on. Basically, in essence, the action of the FAA is an attempt to foreclose upon this license.” See 11 U.S.C. § 362(a)(3). Regarding the nature of the slots, the bankruptcy court stated,

... This may well be a property right. But I did not want to in effect say that, because I didn’t want, necessarily, to have the FAA stuck with an off the bench opinion based upon what I had before me. But, if the FAA wants to know what the feeling of the Court is, and once again gentlemen counsel, please remember that it is only what you have given me orally here, I am inclined to the proposition that, pressed to the wall, this would be a property right. But I don’t know that I have to find that it is a property right in its total sense. It’s a license in which the debtor has a proprietary interest since the regulation gives the debtor the privilege to sell it (emphasis added).

Thus ruling that the automatic stay provision applied, the bankruptcy court granted Gull Air’s motion for authority to sell, subject to FAA approval.

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890 F.2d 1255, 21 Collier Bankr. Cas. 2d 1324, 1989 U.S. App. LEXIS 18556, 19 Bankr. Ct. Dec. (CRR) 1835, 1989 WL 146952, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-gull-air-inc-debtor-federal-aviation-administration-v-gull-air-ca1-1989.