UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


D&F AFONSO REALTY

v.

FAA


99-1129a

D.C. Cir. 2000


*	*	*


United States Court of Appeals


FOR THE DISTRICT OF COLUMBIA CIRCUIT


Argued April 7, 2000 Decided July 18, 2000 


No. 99-1129


D&F Afonso Realty Trust,  Petitioner


v.


Jane F. Garvey and Federal Aviation Administration,  Respondents


On Petition for Review of an Order of the  Federal Aviation
Administration


Rachel B. Trinder argued the cause for petitioner. With  her on the
briefs was Craig M. Cibak.


William G. Cole, Attorney, U.S. Department of Justice,  argued the
cause for respondent. With him on the brief were  David W. Ogden,
Acting Assistant Attorney General, and  Robert S. Greenspan,


Before: Silberman, Ginsburg and Sentelle, Circuit  Judges.


Opinion for the Court filed by Circuit Judge Sentelle.


Sentelle, Circuit Judge: D&F Afonso Realty Trust peti- tions for review
of the Federal Aviation Administration's  issuance of an aviation
hazard determination declaring the  roof of a house constructed by the
petitioner to be a naviga- tional hazard. The FAA defends the
procedure and evidence  underlying its determination and also argues
that the peti- tioner lacks standing to bring its case before this
court.  After considering several affidavits submitted by the
petition- er, we conclude that it has Article III standing. We further
 conclude, based on a review of the administrative record, that  the
FAA inexplicably failed to follow established agency  procedure, did
not adequately explain its decision, and acted  arbitrarily and
capriciously in making its hazard determina- tion. Therefore, we
vacate and remand the agency's determi- nation.


I. Background


D&F Afonso Realty Trust ("D&F"), a husband and wife- owned construction
company, decided to build a single family  home in Hopedale,
Massachusetts near a small, privately- owned airport. In October 1997,
construction on the house  began after the town of Hopedale issued
construction permits  to the company. After building commenced, D&F
learned  from the Massachusetts Aeronautics Commission that it need-
ed to notify the Federal Aviation Administration ("FAA")  about the
structure in order for the FAA to determine  whether the house would
violate any federal regulations.  D&F informed the New England
Regional Office of the FAA  about the house-in-progress in late
December 1997 by having  its engineering firm file with the agency a
Notice of Proposed  Construction or Alteration (FAA Form 7460-1)
required by  14 C.F.R. s 77.17 to be submitted at least thirty days
before  the earlier of either the start date of construction or the 


construction permit's filing date. In early January, D&F  informed the
FAA of the house's completion.


After reviewing D&F's filing, the FAA determined that the  completed
house exceeded one of the air navigation obstruc- tion standards
listed in 14 C.F.R. s 77.25. Specifically, the  FAA found that 16.1
feet of the house's roof penetrated one  of the "imaginary surfaces"
around the airport. An imagi- nary surface is essentially an
artificial engineering boundary  "drawn" in the air around airports.
The imaginary surface at  issue here is the "transitional surface"
which extends "out- ward and upward at right angles to the runway
centerline  and the runway centerline extended at a slope of 7 to 1
from  the sides of the primary surface and from the sides of the 
approach surfaces." 14 C.F.R. s 77.25(e). Because the roof  penetrated
the transitional surface, the FAA initiated an  administrative inquiry
to ascertain whether the structure  would present a hazard to air


Specifically, the FAA began an "aeronautical study" be- cause the house
exceeded a Part 77 obstruction standard.  Part 77 of the Federal
Aviation Regulations "establishes  standards for determining
obstructions to air navigation." 14  C.F.R. s 77.21(a). The FAA uses
the standards to evaluate  whether an object represents a hazard to
air navigation. See  id. ss 77.31-39 (Subpart D).


At the conclusion of the study, the FAA made a finding  that the house
had a substantial adverse effect on air naviga- tion and issued a
determination of hazard. The FAA conclud- ed, without further
explanation, that because the house "is  immediately adjacent to the
final approach course" for the  runway, "it represents a hazard to all
aircraft landing on [the]  runway." In justifying the substantial
adverse effect finding,  the FAA concluded, without explanation, that
the house would  adversely affect all arrivals using Visual Flight
Rules. Given  the FAA's cursory reference to some aerial photographs 
showing the house's proximity to the runway's final approach  course,
the agency apparently relied sub silentio on the  photographs as the
core support for its hazard determination.


D&F sought administrative review of the FAA's determina- tion and
requested a hearing. The FAA denied D&F's  request for a hearing and
issued a final determination uphold- ing its prior conclusions. In
explaining its position, the FAA  stated:


[T]he proposed structure would lie within the Hopedale  ... runway ...
traffic pattern buffer. This buffer area  is designed to provide a
degree of protection for those  pilots, departing and landing at an
airport, operating in  accordance with visual flight rules (VFR)....
[B]ecause  of the proposed structure's height and its relative posi-
tion within the traffic pattern buffer, it is the FAA's  position that
the planned structure would be a distraction  to pilots during a
critical phase of flight.


To effectuate its findings, the FAA published a warning to  pilots to
"use extreme caution when landing ... due to a two- story house
located approximately 400' northwest of the  runway threshold."


In addition to the FAA finding the house to be a hazard to  air
navigation, the Massachusetts Aeronautics Commission  determined that
the house penetrated certain protected air- space in violation of the
Code of Massachusetts Regulations.  After the administrative findings
came to light, the Hopedale  Airport asked the town to remove the
house. Currently, the  town of Hopedale refuses to issue an occupancy
permit to  D&F. In light of the foregoing events, D&F seeks review of 
the FAA's hazard determination and asks this court to re- verse the
FAA's determination in an effort to obtain an  occupancy permit from
the town as a result.1




__________

n 1 Subsequent to D&F's filing a Petition for Review in this  court,
the FAA issued a new policy which, with certain exceptions,  makes
exceeding "[t]he height of the transition surface (other than  abeam
the runway)" a per se hazard. Policy Memorandum 99-02.  We will not
analyze this case under the new policy. We leave  consideration of the
new policy to the FAA because the agency, not  this court, must
interpret and apply a new agency policy in the first  instance. See
NLRB v. Food Store Employees Union, Local 347,  417 U.S. 1, 10 n.10


II. Discussion


A. D&F's Standing


The FAA challenges D&F's standing to bring this appeal.  In order to
establish Article III standing, D&F must show  that "(1) it has
suffered an 'injury in fact' that is (a) concrete  and particularized
and (b) actual or imminent, not conjectural  or hypothetical; (2) the
injury is fairly traceable to the  challenged action of the defendant;
and (3) it is likely, as  opposed to merely speculative, that the
injury will be re- dressed by a favorable decision." Friends of the
Earth, Inc.  v. Laidlaw Envtl. Servs., Inc., 120 S. Ct. 693, 704
(2000)  (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 
(1992)); see also Florida Audubon Soc'y v. Bentsen, 94 F.3d  658, 663
(D.C. Cir. 1996) (en banc). D&F established an  actual and concrete
and particularized injury consisting of a  diminution in property
value due to its inability to obtain an  occupancy permit from the
town. The FAA argues, however,  that D&F has not shown a causal link
between the agency's  hazard determination and D&F's injury, given the
Massachu- setts Aeronautics Commission and airport's independent ob-
jections to the house. The FAA also challenges the ability of  this
court to redress D&F's injury by reversing the agency  because the
town, not the agency, controls permit issuance.


If the FAA hazard determination independently diminished  the house's
property value or constituted the only factor  motivating the town's
denial of the occupancy permit, causa- tion and redressibility would
be non-issues because our rever- sal of the FAA would either provide a
remedy for the  financial injury caused by the FAA or prompt the town
to  issue the permit. However, neither the record nor the briefs 
submitted to this court established which of the events among  the
FAA's findings, the Massachusetts Aeronautics Commis- sion's findings,
the airport's complaint, or some combination  thereof prompted the
town's denial of the occupancy permit  and the diminution in property
value. However, at oral  argument, D&F asserted that the FAA's hazard
determina- tion in and of itself caused a diminution in property value
and  that the town was withholding the occupancy permit solely 


due to the FAA's hazard determination. Therefore, we af- forded D&F the
opportunity to submit affidavits supporting  its allegations, if
true.


Upon review of D&F's submissions, we conclude that D&F  alleges facts
satisfying the standing requirements of causation  and redressibility.
D&F supplied an affidavit explaining that  "a real estate broker ...
informed [D&F] that the FAA's  Hazard Determination has resulted in a
diminution of value to  the Afonso House independent of whether an
occupancy  permit is granted." In addition, D&F submitted an affidavit
 establishing that the Massachusetts Aeronautics Commission  would
"defer to the outcome of the FAA-related proceedings  currently before
this Court." Moreover, D&F supplied an  affidavit from the Hopedale
Building Commissioner declaring  that "the only obstacle to issuance
of the occupancy permit is  the FAA's Hazard Determination. But for
that Determina- tion, the occupancy permit would have already issued.
If the  FAA's Hazard Determination is withdrawn or reversed, [the 
town] will issue an occupancy permit for the Afonso House  forthwith."
We must construe the statements made in the  affidavits in the light
most favorable to the petitioner. See  Warth v. Seldin, 422 U.S. 490,
501 (1975). Taken together,  the statements show that the FAA's hazard
determination  causes D&F injury in the form of diminished property
value  and comprises the sole obstacle between D&F and an occu- pancy
permit. Therefore, we conclude that D&F has stand- ing to challenge
the FAA's hazard determination.


B. The Hazard Determination


We review decisions of federal agencies, including the FAA,  under the
standards set forth by the Administrative Proce- dure Act. See Public
Citizen, Inc. v. FAA, 988 F.2d 186, 196  (D.C. Cir. 1993). That Act
provides that a reviewing court  must set aside agency action if it is
"arbitrary, capricious, an  abuse of discretion, or otherwise not in
accordance with law."  5 U.S.C. s 706(2)(A). As we have often held,
"[t]he require- ment that agency action not be arbitrary or capricious
in- cludes a requirement that the agency adequately explain its 
result...." Public Citizen, 988 F.2d at 197. In the hazard 


determination under review, the FAA has offered no such  explanation.
As we have stated before, we must strike down  agency action if the
agency failed to consider relevant factors  or made a clear error of
judgment. See Motor Vehicle Mfrs.  Ass'n v. State Farm Mut. Auto Ins.
Co., 463 U.S. 29, 43  (1983); Starr v. FAA, 589 F.2d 307, 311 (7th
Cir. 1978).


The FAA made a finding that the house penetrated an  imaginary surface,
specifically the transitional surface. How- ever, mere penetration,
and even evidence of adverse effect  alone, do not provide adequate
support for a hazard determi- nation. In dealing with obstruction
standard violations, the  FAA follows a handbook entitled "Procedures
for Handling  Airspace Matters," FAA Procedures 7400.2D (1993) ("Hand-
book"), which mandates conducting aeronautical studies, in  accordance
with Subpart D of Part 77, of proposed structures  exceeding Part 77
obstruction standards. See Br. for FAA at  4 (citing chapter 5 of
Handbook). According to Subpart D of  Part 77, "[i]n the aeronautical
studies, present and future ...  aeronautical operations and
procedures are reviewed and any  possible changes in those operations
and procedures and in  the construction proposal that would eliminate
or alleviate the  conflicting demands are ascertained." 14 C.F.R. s
77.31.  Pursuant to the Handbook, objects exceeding an obstruction 
standard are "presumed to be hazards to air navigation  unless an
aeronautical study determines otherwise." Id. at  s 7-1(b). In order
to issue a hazard determination, the FAA  must find by a clear showing
that the penetration in question  will have a "substantial adverse
effect" on air navigation. See  id. at ss 7-2 to 7-5, 8-2. The
Handbook provides that  "substantial adverse effect" occurs when a
structure has or  would have an "[a]dverse effect" and "a significant
volume of  aeronautical operations would be affected." Id. at s 7.4.


A substantial adverse effect finding requires three ele- ments. First,
the structure in question must have exceeded  the relevant obstruction
standards or have been found to have  a physical or electromagnetic
radiation effect on the operation  of air navigation facilities. See
id. at s 7.3. Second, the  structure will be considered to have an
adverse effect if it  would, inter alia, "require a [Visual Flight
Rules] operation," 


that is, an operation in which the pilot lands an aircraft or  takes
off using visual approach procedures only, "to change  from a regular
flight course or altitude," "[d]erogate airport  capacity/efficiency,"
or "[a]ffect future [Visual Flight Rules]  ... operations indicated by
plans on file." Id. Third, the  structure must affect a significant
volume of aeronautical  activity; the FAA considers the type of
activity involved and  the frequency of occurrence. See id. at s 7.5.
In addition, a  study must include, inter alia, an evaluation
regarding mark- ing and lighting the structure, see id. at s 7-9, and
every  hazard finding is supposed to include "a clear, but brief, 
statement why aviation can or cannot accommodate the pro- posal." Id.


Here, the FAA first sought comments from twenty-four  interested
parties concerning the effect the house would have  on aviation. Apart
from the manager of the Providence,  Rhode Island Traffic Control
Tower who declared, without  further elaboration, that the house
"would result in a negative  impact to air traffic operations," the
responding parties either  did not object to the house or failed to
provide any comments  pertaining to the hazardousness of the


Based on the FAA's explanation, or lack thereof, in the  issuance of
this hazard determination, we conclude that the  FAA acted arbitrarily
by issuing a hazard determination  inconsistent with established
standards. Thus, we hold that  the FAA exceeded the permissible bounds
of agency action.


Nowhere in the record before us can we find a link between  established
hazard determination standards and the hazard  determination reached
by the FAA in this case. The FAA  made a finding that the house
penetrated an imaginary  surface. However, as we previously noted,
mere penetration,  and even evidence of adverse effect alone, cannot
support a  hazard determination. See Handbook ss 7-3, 7-4, 8-2. Ac-
cording to the Handbook, the FAA is to conduct a "substan- tial
adverse effect" inquiry and only upon a clear showing of  substantial
adverse effect issue a hazard determination. See  id. at ss 7-1, 7-3,
7-4, 8-2(b)(3). However, here, the FAA 


failed both to conduct a complete inquiry and make a clear  showing of
substantial adverse effect.


More specifically, the FAA arbitrarily based its hazard  finding on an
unsupported pilot distraction finding instead of  following the policy
outlined in the controlling Handbook.  "We review the FAA's findings
of fact merely to see whether  they are 'supported by substantial
evidence.' " Public Citi- zen, 988 F.2d at 196 (quoting 49 U.S.C. App.
s 1486(e)  (1988)). Here, if there is substantial evidence, the FAA
has  not alluded to it.


The FAA also acted contrary to its own procedure by  failing to
explicitly apply the established multi-factor test  which considers
adverse effect and the volume of operations  affected. See Handbook ss
7-3 to 7-5. For example, the  FAA based its finding on the house's
effect on VFR opera- tions but failed to consider the relevant VFR
adverse effect  factors of potential changes in flight course and
potential  effects on future VFR operations. See id. at s 7-3. In 
addition, the agency did not investigate the available airport 
traffic figures and instead based its "significant volume"  finding on
the "proximity of [the] structure to the final  approach course." Even
assuming the FAA's reference to a  traffic buffer zone in the order
affirming the hazard determi- nation has meaning as a technical and
practical matter, the  agency did not do its job of connecting the
buffer zone  concept to the "substantial adverse effect" inquiry. In
short,  the FAA did not consider relevant factors or sufficiently 
explain the basis of its hazard determination.


The FAA's post hoc rationalizations for deviating from  procedure and
for failing to substantiate its hazard determi- nation cannot pass
muster as a matter of law. For example,  the Handbook requires that
every aeronautical study include  an evaluation regarding the marking
and lighting of the  structure in question. See id. at s 7-9. However,
the agen- cy did not make any findings concerning the marking or 
lighting of the house. The agency cannot claim to be engag- ing in
reasoned analysis when it cavalierly brushes off specific  mandates
such as a marking and lighting evaluation. Nor 


can it claim to be acting reasonably when it ignores, without 
explanation, policy provisions such as the one establishing the 
inclusion of "a clear, but brief, statement why aviation can or 
cannot accommodate [a] proposal." See id. at s 8-2.


Moreover, the agency inexplicably refused to take into  consideration
the trees and other structures in the vicinity  also apparently
intruding into the transitional surface in the  surrounding terrain
which might alter the geometry of its  calculations. In Aircraft
Owners and Pilots Association v.  FAA, 600 F.2d 965 (D.C. Cir. 1979),
we recognized that  surrounding terrain could possibly "mitigate what
might oth- erwise have been a potential hazard to aircraft." Id. at
973.  In other words, the FAA should have considered the land- scape
in its entirety when making its hazard determination.  See id. Yet,
according to the FAA, only D&F's house  presents cause for concern.
All in all, the FAA failed to  rationally substantiate or explain its
process and findings.


In essence, the FAA adopted an ipse dixit approach to  making a hazard
determination: the house creates a naviga- tional hazard because the
agency says so. Even our highly  deferential standard of review
requires more than the FAA  offers. Thus, the FAA's abandonment of its
own established  procedure and its lack of reasoned analysis on the
record  constitute arbitrary and capricious agency action in violation
 of the law. Due to the shortcomings in the FAA's hazard 
determination, we reverse and remand D&F's case to the  agency in
order for it to undertake an appropriate hazard  analysis.


III. Conclusion


In sum, we hold that D&F has alleged facts sufficient for  standing to
challenge the FAA's hazard determination. Upon  review, we vacate and
remand the FAA's determination due  to the agency's engaging in an
arbitrary and capricious  hazard determination procedure.