REVISED, APRIL 24, 2001
IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
No. 00-20169
ZEPHYR AVIATION, L.L.C.; ET AL.,
Plaintiffs,
ZEPHYR AVIATION, L.L.C.,
Plaintiff-Appellant,
vs.
ROBERT ALAN DAILEY, also known as Bob Dailey; KENNETH WAYNE CLARY, also known as Ken Clary,
Defendants-Appellees.
___________________________________________
Appeal from the United States District Court for the Southern District of Texas ___________________________________________ April 4, 2001 Before HILL*, JOLLY, and BENAVIDES, Circuit Judges.
BENAVIDES, Circuit Judge:
Zephyr Aviation, L.L.C. (Zephyr) appeals the dismissal of
its constitutional tort action against Robert Alan Dailey and
Kenneth Wayne Clary (the Defendants). Zephyr contends that the
FAA’s administrative remedies do not contemplate constitutional
tort actions against FAA inspectors in their individual capacity,
and, therefore, the district court erred in dismissing its claims
* Circuit Judge of the Eleventh Circuit, sitting by designation. for lack of subject-matter jurisdiction after concluding that
Zephyr failed to exhaust its administrative remedies. Zephyr
also contends that the district court erred in dismissing its
claims under Rule 12(b)(6) before any discovery took place.
Though we agree with Zephyr that its suit should not have been
dismissed because of a failure to exhaust administrative
remedies, we ultimately conclude that Zephyr has failed to state
a claim for which relief can be granted. Therefore, we AFFIRM
the district court’s judgment of dismissal.
Factual and Procedural Background
In April 1997, Zephyr purchased a Lear 24B aircraft, serial
number 160, N190BP (the Jet) for $463,250. In December 1997, the
Houston district office of the Federal Aviation Administration
(FAA) received a hotline complaint alleging that the Jet was
being used for illegal charter flights. Specifically, the
complaint alleged that some flight hours accumulated by the Jet
were not being properly recorded in aircraft logs.1 Defendant
Dailey was an Aviation Safety Inspector working for the FAA’s
Houston office; Dailey, along with other inspectors, initially
investigated the hotline complaint.
On January 16, 1998, the FAA issued a letter of
investigation concerning alleged uncharted flights on the Jet.
On March 20, 1998, FAA officials, including Dailey, obtained
1 In the Fall of 1997, Zephyr had hired an investigation firm to look into the conduct of a pilot suspected of flying the Jet on several unauthorized charter trips. The hotline phone call apparently concerned similar conduct by a pilot.
2 invoices and records related to the Jet indicating to them that
flight hours had not been properly recorded. The inspectors
discussed their findings with David Olson, a Zephyr principal,
and advised Olson of their intent to place a “condition notice”
on the aircraft. A condition notice advises an aircraft operator
that the subject aircraft is not airworthy because of a condition
related to the aircraft. See 14 C.F.R. §§ 39.1, 39.11 (2000).
Until the condition is corrected, the aircraft should not be
flown. See 14 C.F.R. § 39.3 (2000) (“No person may operate a
product to which an airworthiness directive applies except in
accordance with the requirements of that airworthiness
directive.”)
On April 5, 1998, the Jet was flown from Houston to a repair
facility at Addison Airport of Dallas. Dailey contacted Clary, a
Principal Maintenance Inspector with the FAA’s Dallas district
office, to confirm the Jet’s presence in Dallas. On April 15,
1998, Clary placed a condition notice on the Jet at Dailey’s
request. Clary also left a “Notice of Proposed Certificate
Action” specifying that no FAA Part 45 placard had been placed on
the Jet and that the Jet’s airworthiness certificate had been
“revoked.” On May 12, 1998 an amended aircraft condition notice
was issued and attached to the Jet which specified that the Jet’s
airworthiness certificate was “invalid” because of unrecorded
flight time and failure to comply with sections of 14 C.F.R. §
3 91.3.2 On May 15, Zephyr changed the Jet’s insurance status to
“ground coverage only.”
On June 25, Zephyr’s attorney spoke with FAA officials,
including Dailey. During that conversation, as later documented
in a June 26 letter by Zephyr’s attorney, FAA officials made it
clear that the Jet’s airworthiness certificate had never been
revoked, but that the Jet was “unairworthy” because of unrecorded
flight hours. The same letter recorded the steps to be taken to
update the Jet’s maintenance reports and thus remove any doubt as
to its airworthiness. On July 27, 1998, after reviewing the
steps taken to correct the maintenance reports, the FAA retracted
the condition notice in a letter to Zephyr.
On April 1, 1999, Zephyr sold the Jet to XtraJet
International for $320,000.
On June 30, 1999 Zephyr and David Olson filed the present
civil complaint in Texas state court alleging constitutional tort
violations by Dailey and Clary. See Bivens v. Six Unknown Named
Agents of Federal Bureau of Narcotics, 403 U.S. 388, 91 S.Ct.
1999, 29 L.Ed.2d 619 (1971). Zephyr complains that Dailey and
Clary conspired to deprive the company of property – the
airworthiness certificate for the Jet - without due process of
law in violation of the Fifth Amendment of the United States
2 Section 91.3 requires that airplane owners maintain maintenance logs that accurately depict the number of hours that the airplane has been in flight. 14 C.F.R. § 91.3. The FAA inspectors believed that the unauthorized use of the Jet had not been reflected in the Jet’s maintenance logs. As a consequence, it was impossible to know whether the Jet was being maintained in accordance with FAA regulations.
4 Constitution and the Texas state constitution. Essentially,
Zephyr argues that when Dailey and Clary purported to “revoke”
the Jet’s airworthiness certificate in a condition notice that
was affixed to the Jet, the officers were acting ultra vires and
with malice. Zephyr maintains that the inspectors had no
authority to revoke an airworthiness certificate under 14 C.F.R.
13.19(b) (2000), and failed to provide notice of the revocation
as required by federal regulations. After the Jet’s
airworthiness certificate was “revoked,” Zephyr alleges that the
Jet’s market value depreciated substantially.3
The defendants removed the action to federal court. The
district court dismissed Olson as a plaintiff on December 1, 1999
for failing to state an “articulable claim.”4 On December 22,
1999, the Defendants moved for dismissal pursuant to Rule
12(b)(1) arguing that the district court did not have subject-
matter jurisdiction because Zephyr failed to exhaust
administrative remedies. Alternatively, the Defendants argued
that Zephyr’s complaint should be dismissed pursuant to Rule
12(b)(6). On January 21, 2000, the district court granted the
3 In its response to Defendants’ motion to dismiss, Zephyr summarized its damage as follows: “The action of the two FAA inspectors was tantamount to an illegal taking of property. Their action on April 15, 1998, transformed [the Jet] worth approximately $450,000, is [sic] into a multitude of salvageable parts worth about $80,000.” Zephyr implies that this decrease in value was caused by the uncertainty surrounding the Jet’s airworthiness certificate, and the fear that the plane would be more difficult to insure because of this uncertainty. Zephyr does not seek damages for loss of use of the Jet during the period that it was grounded because of the condition notices. 4 Neither Zephyr, nor Olson have appealed Olson’s dismissal from the suit.
5 Defendant’s motion finding that it had no jurisdiction to hear
Zephyr’s suit, and, alternatively, that Zephyr failed to make out
Bivens claims against the Defendants as individuals.
Discussion
The district court granted the Defendants’ motion to dismiss
pursuant to Federal Rules of Civil Procedure 12(b)(1) and
12(b)(6). This Court reviews both rulings de novo. See Martinez
v. American Fed'n of Gov't Employees, 980 F.2d 1039, 1041 (5th
Cir. 1993) (reviewing question of district court’s subject matter
jurisdiction de novo); Lowrey v. Texas A & M Univ. Sys., 117 F.3d
242, 247 (5th Cir. 1997) (calling for de novo review of Rule
12(b)(6) dismissals). We begin by considering the district
court’s determination that it did not have subject matter
jurisdiction over Zephyr’s claims because Zephyr failed to
exhaust administrative remedies provided by the FAA.5
5 The defendants have not argued that the remedial scheme outlined in the Aviation Act displaces Bivens actions against FAA officials. See Carlson v. Green, 464 U.S. 14, 18-19 (1980)(recognizing that a Bivens remedy is not available (1) where Congress has provided an equally effective alternative remedy, and (2) where, even absent affirmative action by Congress, special factors counsel hesitation). Interpreting Carlson’s “special factors” holding, the Court later stated: “When the design of a Government program suggests that Congress has provided what it considers adequate remedial mechanisms for constitutional violations that may occur in the course of its administration, we have not created additional Bivens remedies.” Schweiker v. Chilicky, 487 U.S. 412, 425 (1988); see also Bush v. Lucas, 462 U.S. 367 (1983). Based on the pleadings, we consider only whether the Aviation Act mandates exhaustion of administrative remedies prior to the filing of a Bivens claim, not whether it displaces Bivens claims all together.
6 In determining the role of the doctrine of exhaustion in the
Bivens context, the initial focus is on congressional intent.
McCarthy v. Madigan 503 U.S. 140, 144 (1992). “Where Congress
specifically mandates, exhaustion is required. But where
Congress has not clearly required exhaustion, sound judicial
discretion governs.” Id. (citations omitted). In McCarthy, the
Court instructed that when determining whether exhaustion should
be required as a matter of judicial discretion, “federal courts
must balance the interest of the individual in retaining prompt
access to a federal judicial forum against countervailing
institutional interests favoring exhaustion.” Id. at 145.
According to the Court, this balancing should be “intensely
practical” and consider “both the nature of the claim presented
and the character of the administrative procedure involved.” Id.
Congress has developed an administrative appeal structure
for reviewing “orders” of the FAA, thus our initial task is to
determine whether that structure mandates exhaustion with respect
to Bivens actions for monetary damages. Under the Aviation Act,
parties adversely affected by orders of the FAA Administrator to
suspend or revoke a certificate issued by the FAA may appeal to
the National Transportation Safety Board (NTSB). See 49 U.S.C. §
44709(d) (2000).6 The United States Courts of Appeals then have
6 The Administrator of the FAA may reinspect a civil aircraft at any time, and, following such inspection may suspend or revoke any part of a certificate issued by the FAA if in the view of the Administrator safety so requires. See 49 U.S.C. § 44709(a). Case law clarifies that the appeal provisions apply to orders issued under the authority of the FAA administrator, not just the administrator herself. See Atorie Air, Inc. v. Federal (continued...)
7 “exclusive jurisdiction to affirm, amend, modify or set aside”
orders of the NTSB or the FAA. 49 U.S.C. § 46110(c) (2000). The
FAA’s “exhaustion” requirement, promulgated pursuant to section
46110, mandates only that orders or decisions of the FAA be
“final” before they be reviewed by a federal court. See 14
C.F.R. § 13.16(k) (2000).
It is impossible to conclude that these Congressional and
agency requirements mandate exhaustion of administrative remedies
within the FAA prior to bringing any Bivens action in federal
district court. Indeed, the Aviation Act’s administrative review
structure provides an administrative forum in which parties can
contest adverse FAA orders. That appeal structure does not,
however, provide a forum for redressing constitutional violations
by individual FAA inspectors with monetary damages. See
McCarthy, 503 U.S. at 142 (recognizing that Congress had not
intended general inmate grievance procedures to impose exhaustion
requirement on Bivens actions when the procedures did not address
harms raised or remedies provided by Bivens action).7 Because
6 (...continued) Aviation Administration, 942 F.2d 954, 959, n.1 (5th Cir. 1991) (quoting Southern Cal. Aerial Advertisers Ass’n v. FAA, 881 F.2d 672, 675 (9th Cir. 1989)). 7 In the 1996 Prison Litigation Reform Act, Congress broadened the relevant provisions to provide that "[n]o action shall be brought with respect to prison conditions under section 1983 of this title, or any other Federal law, by a prisoner confined in any jail, prison, or other correctional facility until such administrative remedies as are available are exhausted." 42 U.S.C.A. § 1997e(a) (Supp. 1997). Some courts have held that because Congress has not made available administrative remedies equivalent to that available through a Bivens claim, exhaustion of administrative remedies is still not (continued...)
8 Congress has not “meaningfully addressed the appropriateness of
requiring exhaustion in this context,” extension of the
exhaustion doctrine to cases like the one before us depends on
the exercise of sound judicial discretion.
This Circuit has never taken up the scope of the exhaustion
doctrine with respect to Bivens actions against officers of the
FAA.8 Other circuits have held that federal district courts have
subject matter jurisdiction over Bivens claims raising “broad
constitutional challenges to FAA practices,” but not over claims
that are “inescapably intertwined with a review of the procedures
and merits surrounding [an FAA] order.” See Foster v. Skinner,
70 F.3d 1084, 1089 (9th Cir. 1995)(citations omitted); Green v.
Brantley 981 F.2d 514, 521 (11th Cir. 1993); Gaunce v.
deVicentis, 708 F.2d 1290, 1292-93 (7th Cir.), cert. denied, 464
U.S. 978 (1983). These holdings are based on the principle that
plaintiffs should not be able to circumvent administrative review
through suit in federal court. See, e.g., Mace v. Skinner, 34
7 (...continued) required prior to seeking Bivens relief. See Garrett v. Hawk, 127 F.3d 1263, 1266 (10th Cir. 1997). Thus, even if Congress imposes a more clear exhaustion requirement in the Aviation Act, it might not be applicable to Bivens claims unless comparable administrative remedies were available. 8 In Atorie Air, this Court held that a plaintiff suing individual inspectors of the FAA under Bivens for violating procedural due process rights could waive its right to pursue those rights in federal court by choosing “to take no initiative to mature [its] right to review” within the administrative review framework established in the organization. See Atorie Air, 942 F.2d at 960. Waiver, however, is an affirmative defense that must be raised by the defendant. FED.R.CIV.P. 8(c). The Defendants in this case have never raised the defense of waiver. Therefore, the Defendants’ reliance on Atorie Air is misplaced.
9 F.3d 854, 857-58 (9th Cir. 1994) (explaining that Aviation Act’s
judicial review provision divests district courts of subject
matter jurisdiction over “claims against FAA . . . officials
involving final orders that are otherwise subject to judicial
review under the Act.”)(emphasis added); Gaunce, 708 F.2d at
1292-93 (concluding that where merits of Bivens actions
essentially contest the propriety of agency action, plaintiffs
must comply with Aviation Act’s administrative appeal process);
see also Myers v. Bethlehem Shipbuilding Corp., 58 S.Ct. 459,
462-64 (1937)(explaining that a federal lawsuit may not be used
to pre-empt administrative action).
While we agree that parties may not avoid administrative
review simply by fashioning their attack on an FAA decision as a
constitutional tort claim against individual FAA officers, we
disagree with the Defendants that this case implicates that
concern. Zephyr’s claims do not relate to an FAA order currently
pending against it. Indeed, to the extent that Zephyr sought
review of the FAA’s attachment of a condition notice to the Jet,
its complaint would be moot since the FAA has removed the
condition notice. Instead, Zephyr seeks monetary relief for
alleged extra-procedural and unconstitutional actions by FAA
inspectors. The administrative appeal procedure outlined in the
Aviation Act can provide no such relief. In this sense, the “no
collateral attack” holdings have no application to cases like
this one that do not implicate an FAA order that is currently in
place and hence could not function as a collateral attack on an
FAA order or action.
10 We are convinced that the same factors that counseled
against imposing a judicial exhaustion requirement in McCarthy
also counsel against judicial imposition of an exhaustion
requirement in the context of Bivens suits against FAA officials
like the one alleged in this case. The Supreme Court concluded
in McCarthy that an inmate claiming violations of his Eighth
Amendment rights did not need to exhaust internal prison
grievance proceedings because (1) the administrative procedures
could not authorize an award of money damages, and (2) requiring
exhaustion would severely burden the interests of the inmate.
Id. at 145-47. Initially, the Aviation Act’s appeal structure
grants neither the NTSB, nor the FAA the power to award monetary
relief against FAA officers - the only remedy Zephyr seeks in
this Bivens action. Like the Supreme Court in McCarthy, we
choose not to impose a judicial exhaustion requirement on this
Bivens claim when the agency that would be given initial
authority over the claim lacks authority to grant monetary
relief. See id. at 148 (noting that exhaustion requirement is
not appropriate where an agency is “competent to adjudicate the
issue presented, but still lack[s] authority to grant the type of
relief requested.”) Moreover, we believe that requiring
exhaustion on facts such as these would impose a significant
burden on plaintiffs in that it would require them to engage in
an administrative review process that cannot possibly provide the
relief that they seek. See id. at 153 (recognizing that where
administrative review cannot provide relief sought, but can lead
to dismissal of complaint for failing to meet statutory
11 deadlines, plaintiffs “have everything to lose and nothing to
gain.”) For these reasons, we decline to impose a judicial
exhaustion requirement on Bivens actions against FAA officials
when the Bivens suit does not implicate existing FAA enforcement
actions.
Because Congress has not imposed an exhaustion requirement
in this context and judicial imposition of such a requirement
would not be prudent, the district court erred in concluding that
it did not have subject matter jurisdiction over the Zephyr’s
Bivens action. Nevertheless, we are convinced that the facts
alleged by Zephyr do not make out tenable claims that the
company’s substantive or procedural due process rights have been
violated. For that reason, the district court’s dismissal of
those claims pursuant to Rule 12(b)(6) was appropriate.
In reviewing the district court’s 12(b)(6) ruling, we take
all facts pleaded by Zephyr as true and liberally construe the
complaint in favor of Zephyr. Campbell v. Wells Fargo Bank, 781
F.2d 440, 442 (5th Cir. 1986). All parties agree that on April
15 Clary posted on the Jet a condition notice, which stated in
part “the airworthiness certificate has been revoked.”
Similarly, neither Clary nor Dailey contends that he had
authority to revoke the Jet’s airworthiness certificate without
notice to Zephyr and additional proceedings. To complete
Zephyr’s allegations, we must assume that the defendants used the
word “revoke” maliciously and intentionally, and that the use of
“revoke” in this manner deprived Zephyr of a property interest.
Though this Circuit views motions to dismiss under Rule 12(b)(6)
12 “with disfavor,” see Kaiser Aluminum & Chem. Sales v. Avondale
Shipyards, 677 F.2d 1045, 1050 (5th Cir.1982), we believe it
“beyond doubt” that the facts alleged by Zephyr, even if proven,
would not entitle the company to relief. Conley v. Gibson, 355
U.S. 41, 45-46 (1957).
Zephyr alleges violations of its constitutional right to due
process guaranteed by the Fifth Amendment, though it is unclear
whether it raises procedural or substantive due process claims.
We consider both alternatives.
The defendants allegedly malicious act of placing a
condition notice on the Jet that purported to “revoke” the Jet’s
airworthiness certificate does not rise to the level of egregious
conduct that might constitute a substantive due process
violation. See County of Sacramento v. Lewis, 523 U.S. 833, 846
(1998); Brown v. Nationsbank Corp., 188 F.3d 579, 591 (5th Cir.
1999); Williamson v. United States Dept. of Agriculture, 815 F.2d
368, 381 (5th Cir. 1987); Bass v. United States Dept. of
Agriculture, 737 F.2d F.2d 1408, 1415 (5th Cir.), reh’g denied,
742 F.2d 1453 (1984). Even assuming that the Defendants initial
use of “revoke” was intentional, Zephyr does not allege that the
Defendants had no basis for being concerned about the
airworthiness of the Jet. Zephyr does not dispute that the
Jet’s flight hours were not properly recorded and that this
recording problem rendered the Jet unairworthy. Nor does Zephyr
allege that the defendants insisted on enforcing the condition
notice as if it were a revocation order. Indeed, Zephyr concedes
that Dailey worked with the company to resolve the problems with
13 the Jet’s flight records and maintenance status. Thus, at most,
the Defendant’s allegedly malicious act of revocation mis-
characterized a legitimate and undisputed problem with the Jet.
Moreover, any question regarding the Defendant’s mis-
characterization of the FAA action had been resolved by the
middle of May, long before the undisputed underlying problems had
been corrected. Thus, because the Jet’s legitimate and
undisputed records problem rendered it unairworthy, the allegedly
intentional mis-characterization of the FAA action caused Zephyr
no additional harm. In sum, such conduct simply does not rise to
the level of a substantive due process violation.
We also reject Zephyr’s complaint in so far as it alleges
that the posting of the condition notice itself deprived it of
property in violation of the procedural due process protections.
The Supreme Court has consistently held that government officials
do not violate procedural due process when they deprive an
individual of property, so long as a meaningful post-deprivation
remedy was available. See Hudson v. Palmer, 468 U.S. 517, 533
(1984) (holding that due process was not violated when government
official intentionally deprived individual of property, provided
meaningful post-deprivation remedy was available); Parratt v.
Taylor, 451 U.S. 527, 542 (1981) (holding that due process was
not violated when government official negligently deprived
individual of property, provided meaningful post-deprivation
remedy was available). Even assuming the placement of a
condition notice on the Jet purporting to revoke the Jet’s
airworthiness certificate constituted a deprivation of property,
14 the availability of the FAA’s appeal structure to remedy that
deprivation after the fact provided sufficient process to protect
Zephyr’s procedural due process rights. Indeed, after the
placement of the notice, an informal meeting with FAA officials
led to the removal of the condition notice. Because Zephyr has
not alleged conduct that could possibly support a violation of
its substantive or procedural due process rights, the district
court properly dismissed Zephyr’s complaint.
Conclusion
Though we conclude that Congress has not imposed an
exhaustion requirement with which Zephyr has failed to comply,
and that judicial imposition of such a requirement is not
warranted, we ultimately agree that the allegations raised by
Zephyr fail to state a constitutional claim. Therefore, we
AFFIRM the district court’s judgment of dismissal.