DEPARTMENT OF TRANSP. v. PARALYZED VETERANS(1986)

No. 85-289

Argued: March 26, 1986Decided: June 27, 1986

Section 504 of the Rehabilitation Act of 1973 prohibits discrimination against handicapped persons in “any program or activity receiving Federal financial assistance.” The United States provides financial assistance to airport operators through grants from a Trust Fund under the Airport and Airway Development Act of 1970 and its successor statute, the Airport and Airway Improvement Act of 1982 (Trust Fund Acts). The Government also operates a nationwide air traffic control system. Respondent organizations representing handicapped individuals brought an action in the Court of Appeals challenging, inter alia, the conclusion of the Civil Aeronautics Board (CAB) that its regulatory authority under 504 was limited to those few airlines that receive subsidies under the Federal Aviation Act. The Court of Appeals held that 504 gave CAB jurisdiction over all air carriers by virtue of the extensive program of federal financial assistance to airports under the Trust Fund Acts, and that the air traffic control system was an additional source of financial assistance to airlines. The court then vacated the regulations to the extent that their application was limited to carriers receiving funds under the Federal Aviation Act, and instructed the Department of Transportation, CAB’s successor, to issue new regulations that would apply to all commercial airlines.

Held:

Section 504 is not applicable to commercial airlines. Pp. 603-612.

(a) Section 504’s scope is limited to those who actually “receive” federal financial assistance. Congress sought to impose 504 coverage as a condition or obligation tied to the recipient’s agreement to accept the federal funds. By so limiting coverage to recipients, Congress imposed 504’s obligations upon those who are in a position to accept or reject those obligations as part of the decision whether or not to “receive” federal funds. In this case, the only parties in that position are the airport operators who are the recipients of federal funds under the Trust Fund Acts. Pp. 603-606.

[477 U.S. 597, 598]

distinction that Congress made in 504 that the statute covers only those who receive the aid and does not extend to those who benefit from it. Pp. 606-607.

(c) To tie 504’s scope to economic benefit derived from the Trust Fund expenditures in question here would give 504 almost limitless coverage. Congress recognized a need to improve airports in order to benefit a wide variety of persons and entities, all of them classified together as beneficiaries, and did not set up a system whereby passengers are the primary or direct beneficiaries and all others, including airlines, benefited by the Trust Fund Acts are indirect recipients of the financial assistance to airports. Pp. 608-610.

(d) The Court of Appeals’ attempt to fuse airports and airlines into a single program or activity for purposes of 504 is unavailing. Regulatory coverage tied to the scope of the intended beneficiaries of the Trust Fund Acts is inconsistent with congressional intent in passing 504. Pp. 610-611.

(e) Since the air traffic control system is “owned and operated” by the United States, it is not “Federal financial assistance” within the meaning of 504. Rather, it is a federally conducted program that has many beneficiaries but no recipients. Pp. 611-612.

243 U.S. App. D.C. 237, 752 F.2d 694, reversed and remanded.

POWELL, J., delivered the opinion of the Court, in which BURGER, C. J., and WHITE, REHNQUIST, STEVENS, and O’CONNOR, JJ., joined. MARSHALL, J., filed a dissenting opinion, in which BRENNAN and BLACKMUN, JJ., joined, post, p. 613.

Solicitor General Fried argued the cause for petitioners. With him on the briefs were Assistant Attorney General Reynolds, Deputy Solicitor General Kuhl, Deputy Assistant Attorney General Disler, Kathryn A. Oberly, and Miriam R. Eisenstein.

Douglas L. Parker argued the cause for respondents. With him on the brief were Arlene Battis and Karen Peltz Strauss. *

[ Footnote * ] Briefs of amici curiae urging reversal were filed for the Air Transport Association of America by James E. Landry; for the Equal Employment Advisory Council by Robert E. Williams, Douglas S. McDowell, and William S. Franklin; and for the International Air Transport Association by Gordon Dean Booth, Jr., and Robert Glasser. William C. Gleisner III filed a brief for the National Federation of the Blind as amicus curiae urging affirmance. [477 U.S. 597, 599]

JUSTICE POWELL delivered the opinion of the Court.

Section 504 of the Rehabilitation Act of 1973 prohibits discrimination against handicapped persons in any program or activity receiving federal financial assistance. The United States provides financial assistance to airport operators through grants from a Trust Fund created by the Airport and Airway Development Act of 1970. The Government also operates a nationwide air traffic control system. This case presents the question whether, by virtue of such federal assistance, 504 is applicable to commercial airlines. 1

I

Respondents successfully challenged regulations promulgated by the Civil Aeronautics Board (CAB) to implement 504 of the Rehabilitation Act of 1973, 87 Stat. 390, as amended; 29 U.S.C. 790 et seq. (1982 ed. and Supp. II). To understand respondents’ arguments, it is necessary to review the process by which the regulations were promulgated.

A. The Rulemaking Process

Section 504 provides:

“No otherwise qualified handicapped individual in the United States . . . shall, solely by reason of his handicap, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance. . . .” 29 U.S.C. 794.

The statute did not specifically provide for administrative implementation. In 1976, however, the President issued Executive Order No. 11914, 3 CFR 117 (1976-1980), calling on the [477 U.S. 597, 600] Secretary of Health, Education, and Welfare 2 to coordinate rulemaking under 504 by all federal agencies. At that time two federal agencies were principally concerned with aviation: the Federal Aviation Administration (FAA), which is primarily concerned with the Air Traffic Control System and the safety of airline operations, including airports, and CAB, which was primarily concerned with economic regulation of the airline industry. 3 Because 504 had been modeled after Title VI of the Civil Rights Act of 1964, 42 U.S.C. 2000d et seq., 4 both FAA and CAB patterned their proposed rules after the regulations issued to implement Title VI.

1. The Notice of Proposed Rulemaking Under 504

CAB issued a Notice of Proposed Rulemaking on June 6, 1979. 5 CAB concluded that its authority under 504 was limited to those few airlines that receive a subsidy under 406(b) or 419 of the Federal Aviation Act. 6 CAB announced [477 U.S. 597, 601] its intention, however, to go beyond its 504 jurisdiction in order to regulate the activities of all commercial airlines. CAB relied on its authority under 404 of the Federal Aviation Act of 1958, 49 U.S.C. App. 1374.

Section 404 contains two provisions relevant here: 404(a)(1), requiring all air carriers to “provide safe and adequate service, equipment, and facilities,” and 404(b), prohibiting carriers from “subjecting any particular person . . . to any unjust discrimination or any undue or unreasonable prejudice or disadvantage in any respect whatsoever.” CAB explained that “the proposed rules would emphasize that the handicapped are protected by the adequacy of service and antidiscrimination provisions of Section 404 . . . which are applicable to all air carriers, whether or not receiving Federal financial assistance.” 44 Fed. Reg. 32401-32402 (1979). Somewhat inexplicably, CAB relied on both provisions of 404 taken together to support its regulatory authority over the on-board activities of air carriers, even though it was aware that, under the Airline Deregulation Act of 1978, 7 the antidiscrimination provision of 404(b) would lapse as of January [477 U.S. 597, 602] 1, 1983, and only 404(a)(1), requiring “safe and adequate service,” would remain in effect.

2. The Final Regulations

CAB received public comment on the proposed regulations. Several airlines and the Air Transport Association challenged CAB’s regulatory jurisdiction over the airlines. In the interim, Executive Order No. 12250, 3 CFR 298 (1981), transferred responsibility for coordinating the administration of various civil rights statutes, including 504, from the Secretary of Health and Human Services to the Attorney General. After public comment and consultation with the Attorney General, CAB issued final regulations. 14 CFR pt. 382 (1986), 47 Fed. Reg. 25948 et seq. (1982).

The regulations have three subparts. Subpart A prohibits discrimination in air transportation against qualified handicapped persons. Subpart B contains specific, detailed requirements that must be followed by all air carriers in providing service to the handicapped. Subpart C sets forth compliance and enforcement mechanisms. As to all three subparts, CAB adhered to its original position that 504 supported regulatory jurisdiction only over those carriers that receive funds under 406 or 419. CAB concluded, however, that the surviving portion of 404 – the “safe and adequate service” clause of 404(a)(1) – did not support imposition of the specific provisions of subparts B and C on nonsubsidized carriers. Thus, those subparts would apply only to the extent authorized by 504, that is, to carriers receiving subsidies under 406 or 419. CAB concluded, however, that it had authority to extend the reach of subpart A to all air carriers by virtue of 404(a)(1)’s “safe and adequate service” clause. The Attorney General approved these regulations.

B. The Court of Appeals Decision

Respondents Paralyzed Veterans of America and two other organizations representing handicapped individuals [477 U.S. 597, 603] (collectively PVA) 8 brought this action in the Court of Appeals for the District of Columbia Circuit. PVA challenged the substance of some of the regulations, as well as CAB’s conclusion regarding its rulemaking authority under 504. Only the latter claim is before us. On that issue, PVA contended that CAB’s interpretation of the scope of its rulemaking authority under 504 was inconsistent with congressional intent and controlling legal precedent.

The Court of Appeals agreed with PVA’s position. Paralyzed Veterans of America v. CAB, 243 U.S. App. D.C. 237, 752 F.2d 694 (1985). In the court’s view, 504 gave CAB jurisdiction over all air carriers by virtue of the extensive program of federal financial assistance to airports under the Airport and Airway Development Act of 1970, 49 U.S.C. 1714, as amended (1976 ed., Supp. V). 9 The Court of Appeals found an additional source of financial assistance to airlines in the form of the air traffic control system in place at all major airports. The court vacated the regulations to the extent that their application was limited to carriers receiving funds under 406 or 419. It instructed DOT – CAB’s successor agency after CAB was disbanded 10 – to issue new regulations that would apply to all commercial airlines.

We granted certiorari to resolve the question of the scope of DOT’s regulatory jurisdiction under 504. 474 U.S. 918 (1985). We now reverse.

II

It may be helpful briefly to explain the limited nature of the question before us. This case does not present any challenge to CAB’s interpretation of the scope of its regulatory jurisdiction under 504. Nor is there any challenge to the application [477 U.S. 597, 604] of subpart A – the general antidiscrimination regulation – to all commercial airlines. The only issue before us is the Court of Appeals’ conclusion that 504 applies to commercial airlines as recipients of federal financial assistance.

Section 504 prohibits discrimination against any qualified handicapped individual under “any program or activity receiving Federal financial assistance.” We examine first the grants of federal funds to airport operators, which clearly are federal financial assistance, to determine whether it fairly can be said that commercial airlines “receive” these grants.

A

The starting point of any inquiry into the application of a statute is the language of the statute itself. Reiter v. Sonotone Corp., 442 U.S. 330, 337 (1979). By its terms 504 limits its coverage to the “program or activity” that “receiv[es]” federal financial assistance. At the outset, therefore, 504 requires us to identify the recipient of the federal assistance. We look to the terms of the underlying grant statute.

The grant statutes relied on by the Court of Appeals are the Airport and Airway Improvement Act of 1982 (1982 Act), 49 U.S.C. App. 2201 et seq., and its predecessor statutes, particularly the Airport and Airway Development Act of 1970 (1970 Act), Pub. L. 91-258, 84 Stat. 219 et seq. (formerly codified at 49 U.S.C. 1701 et seq. (1976 ed.)). The 1970 Act established the Airport and Airway Trust Fund, appropriations from which are used to fund airport development. The purpose of disbursements from the Trust Fund is to establish “a nationwide system of public airports adequate to meet the present and future needs of civil aeronautics.” 84 Stat. 224. Congress directed the Secretary of Transportation to prepare a national airport system plan, id., at 221, and required airport project applications to be consistent with that plan. Id., at 226. In the 1982 Act Congress authorized disbursements from the Trust Fund for the Airport Improvement Program (AIP). Under AIP airport operators [477 U.S. 597, 605] submit project grant applications for “airport development or airport planning.” 49 U.S.C. App. 2201(a). Funds are disbursed for a variety of airport construction projects: e. g., land acquisition, 14 CFR 151.73 (1986); runway paving, 151.77; and buildings, sidewalks, and parking, 151.93. The use of the Trust Fund is strictly limited to projects that concern airports. See, e. g., 151.89 (authorizing road construction) (“Only those airport entrance roads that are definitely needed and are intended only as a way in and out of the airport are eligible”).

It is not difficult to identify the recipient of federal financial assistance under these Acts: Congress has made it explicitly clear that these funds are to go to airport operators. Not a single penny of the money is given to the airlines. Thus, the recipient for purposes of 504 is the operator of the airport and not its users.

Congress limited the scope of 504 to those who actually “receive” federal financial assistance because it sought to impose 504 coverage as a form of contractual cost of the recipient’s agreement to accept the federal funds. “Congress apparently determined that it would require contractors and grantees to bear the costs of providing employment for the handicapped as a quid pro quo for the receipt of federal funds.” Consolidated Rail Corporation v. Darrone, 465 U.S. 624, 633 , n. 13 (1984). We relied on this same rationale in Grove City College v. Bell, 465 U.S. 555 (1984), where we noted that the recipient of the federal assistance – the college – was free to terminate its participation in the federal grant program and thus avoid the requirements of Title IX. Id., at 565, n. 13. Under the program-specific statutes, Title VI, Title IX, and 504, Congress enters into an arrangement in the nature of a contract with the recipients of the funds: the recipient’s acceptance of the funds triggers coverage under the nondiscrimination provision. See Soberal-Perez v. Heckler, 717 F.2d 36, 41 (CA2 1983) (“This emphasis upon the contractual nature of the receipt of federal moneys in exchange [477 U.S. 597, 606] for a promise not to discriminate is still another reason to conclude that Title VI does not cover direct benefit programs since these programs do not entail any such contractual relationship”), cert. denied, 466 U.S. 929 (1984). By limiting coverage to recipients, Congress imposes the obligations of 504 upon those who are in a position to accept or reject those obligations as a part of the decision whether or not to “receive” federal funds. In this case, the only parties in that position are the airport operators.

B

Respondents attempt to avoid the straightforward conclusion that airlines are not recipients within the meaning of 504 by arguing that airlines are “indirect recipients” of the aid to airports. They contend that the money given to airports is simply converted by the airports into nonmoney grants to airlines. Under this reasoning, federal assistance is disbursed to airport operators in the form of cash. The airport operators convert the cash into runways and give the federal assistance – now in the form of a runway – to the airlines. In support of this position, respondents point to the fact that many of the structures constructed at airports with aid from the Trust Fund are particularly beneficial to airlines, e. g., runways, taxiways, and ramps. They also find support for their position in Grove City’s recognition that federal financial assistance could be either direct or indirect. This argument confuses intended beneficiaries with intended recipients. While we observed in Grove City that there is no “distinction between direct and indirect aid” and that “[t]here is no basis in the statute for the view that only institutions that themselves apply for federal aid or receive checks directly from the Federal Government are subject to regulation,” we made these statements in the context of determining whom Congress intended to receive the federal money, and thereby be covered by Title IX. 465 U.S., at 564 . It was clear in Grove City that Congress’ intended recipient was [477 U.S. 597, 607] the college, not the individual students to whom the checks were sent from the Government. It was this unusual disbursement pattern of money from the Government through an intermediary (the students) to the intended recipient that caused us to recognize that federal financial assistance could be received indirectly. While Grove City stands for the proposition that Title IX coverage extends to Congress’ intended recipient, whether receiving the aid directly or indirectly, it does not stand for the proposition that federal coverage follows the aid past the recipient to those who merely benefit from the aid. In this case, it is clear that the airlines do not actually receive the aid; they only benefit from the airports’ use of the aid.

Respondents do not contend that airlines actually receive or are intended to receive money from the Trust Fund. Nor can they argue that the airport operators are, like the students in Grove City, mere conduits of the aid to its intended recipient, since, unlike the students, the airports are the intended recipients of the funds. Rather, respondents assert that the economic benefit to airlines from the aid to airports is a form of federal financial assistance. This position ignores the very distinction made by Congress in 504, and recognized in Grove City: The statute covers those who receive the aid, but does not extend as far as those who benefit from it. In Grove City we recognized that most federal assistance has “economic ripple effects.” We rejected the argument that those indirect economic benefits can trigger statutory coverage. Id., at 572. Congress tied the regulatory authority to those programs or activities that receive federal financial assistance; the key is to identify the recipient of that assistance. In this case, it is clear that the recipients of the financial assistance extended by Congress under the Trust Fund are the airport operators. 11 [477 U.S. 597, 608]

C

By tying the scope of 504 to economic benefit derived from Trust Fund expenditures, respondents would give 504 almost limitless coverage. Congress’ purpose in passing the Acts and establishing the Trust Fund was to confer economic benefits on a large number of persons and businesses. As the House Committee on Interstate and Foreign Commerce explained:

[477 U.S. 597, 609]

Even if the reach of 504 were limited to those whom Congress specifically intended to benefit, the scope of the statute would be broad indeed, covering whole classes of persons and businesses with only an indirect relation to aviation. The statutory “limitation” on 504’s coverage would virtually disappear, a result Congress surely did not intend.

Respondents contend that distinctions can be drawn among classes of beneficiaries under the 1982 and 1970 Acts. In particular, they assert that the ultimate beneficiaries under the Acts are the passengers, while the economic benefit derived by the airlines is intended to aid the airlines in benefiting the passengers. Section 504 provides no basis for this distinction. Nor can we find a basis in the Trust Fund Acts for preferring passengers over other beneficiaries. Nowhere has Congress expressed a special intent to benefit passengers. Nor has it indicated that the economic benefit to airlines, either because it was more direct or for any other reason, makes them a recipient of federal financial assistance. Rather, Congress recognized a need to improve airports in order to benefit a wide variety of persons and entities, all of them classified together as beneficiaries. 12 Congress did not set up a system where passengers were the primary or direct beneficiaries, and all others benefited by the Acts are indirect recipients of the financial assistance to airports.

In almost any major federal program, Congress may intend to benefit a large class of persons, yet it may do so by funding [477 U.S. 597, 610] – that is, extending federal financial assistance to – a limited class of recipients. Section 504, like Title IX in Grove City, draws the line of federal regulatory coverage between the recipient and the beneficiary.

III

The Court of Appeals found that airports and airlines are “inextricably intertwined” and that the “indissoluble nexus between them is the provision of commercial air transportation.” 243 U.S. App. D.C., at 257, 752 F.2d, at 714. For these reasons, the Court of Appeals concluded that commercial airlines are part of a federally assisted program of “commercial air transportation” because they make use of airports that accept federal funds, and because airports are “indispensable” to air travel.

We find this reasoning overbroad and unpersuasive. The Court of Appeals defined “program or activity” in part by reference to who is benefited by the financial assistance to airports. See id., at 257-258, 752 F.2d, at 714-715. As shown above, regulatory coverage tied to the scope of the intended benefits of the Trust Fund Acts is inconsistent with congressional intent in passing 504. We recognized in Alexander v. Choate, 469 U.S. 287, 299 (1985), that “[a]ny interpretation of 504 must . . . be responsive to two powerful but countervailing considerations – the need to give effect to the statutory objectives and the desire to keep 504 within manageable bounds.” The Court of Appeals’ reasoning extends 504 beyond its bounds. Under the Court of Appeals’ view various industries and institutions would become part of a federally assisted program or activity, not because they had received federal financial assistance, but because they are “inextricably intertwined” with an institution that has. For example, Congress, with the assistance of the States, has engaged in a mammoth program of interstate highway construction and maintenance. See the Federal-Aid Highway Act of 1956, Pub. L. 627, 70 Stat. 374. Congress in this program [477 U.S. 597, 611] used a Trust Fund approach similar to the Airport and Airway Development Act of 1970. If we accepted the Court of Appeals’ construction of “program or activity,” we would also be compelled to conclude that industries that depend on the federally funded highways for their existence, such as trucking firms and delivery services, are part of a program or activity of national highway transportation. The same could be said of federally supported port facilities. This interpretation of 504 would give it a scope broader than its language implies, and one never intended by Congress.

The Court of Appeals’ reliance on Grove City in support of its definition of the relevant program or activity is misplaced. In Grove City, despite the arguably “indissoluble nexus” among the various departments of a small college, we concluded that only the financial aid program could be subjected to Title IX. In any analogy between Grove City and this case, airport operators would be placed in the position of the college. It is readily apparent that our conclusion in Grove City that only a portion of the college was covered by Title IX cannot support the conclusion that commercial air transportation – a concept much larger than the airports – is the program or activity covered by 504. The Court of Appeals’ attempt to fuse airports and airlines into a single program or activity is unavailing. It is by reference to the grant statute, and not to hypothetical collective concepts like commercial aviation or interstate highway transportation, that the relevant program or activity is determined.

IV

The Court of Appeals also held that the federally provided air traffic control system is a form of federal financial assistance to airlines. 13 The Federal Government spends some [477 U.S. 597, 612] $2 billion annually to run this system 24 hours a day nationwide and in various spots around the world. The air traffic controllers are federal employees, and the Federal Government finances operation of the terminal control facilities. In short, the air traffic control system is “owned and operated” by the United States. For that reason, the air traffic control system is not “federal financial assistance” at all. Rather, it is a federally conducted program that has many beneficiaries but no recipients. The legislative history of Title VI makes clear that such programs do not constitute federal financial assistance to anyone. As then-Deputy Attorney General Katzenbach explained:

“Activities wholly carried out by the United States with Federal funds, such as river and harbor improvements and other public works, defense installations, veterans’ hospitals, mail service, etc., are not included in the list [of federally assisted programs]. Such activities, being wholly owned by, and operated by or for, the United States, cannot fairly be described as receiving Federal `assistance.’ While they may result in general economic benefit to neighboring communities, such benefit is not considered to be financial assistance to a program or activity within the meaning of title VI.” 110 Cong. Rec. 13380 (1964).

That reasoning, of course, applies with equal force to 504. The federal air traffic control system is a public program that does not involve “financial assistance” to anyone. 14 [477 U.S. 597, 613]

V

The judgment of the Court of Appeals is accordingly reversed, and the case is remanded for proceedings consistent with this opinion.

It is so ordered.

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