DECISION ISSUED IN UNITED AIRLINES V. TSA CASE REGARDING REFUNDING OF TSA FEES
January 7, 2022
On December 14, 2021, the United States Court of Appeals for the District of Columbia Circuit (the “Court”) issued a decision in the case between United Airlines (“United”) and the U.S. Transportation Security Administration (“TSA”) in which United sought refunds of TSA fees that it had erroneously remitted to TSA on two occasions.
Specifically, United said that it had erroneously remitted overpayments of TSA fees of (a) $1,059,743.06 for tickets associated with passengers who purchased their tickets from other airlines but who were later involuntarily transferred to United flights; and (b) $478,244.88 for tickets for which, because of currency and exchange rate fluctuations, the recorded and remitted fee amount deviated from the fee amount statutorily required. United asserted that in the first instance, the responsibility for collecting and remitting TSA fees was maintained by the transferring airline, therefore relieving it of this responsibility, while in the second instance it explained that due to foreign currency fluctuations, United often adjusted upward and remitted a higher amount of TSA fees if the converted fee amount was less than the statutorily required amount, but did not adjust downward if the converted amount of fees was more than the statutory amount, resulting in it paying the higher amount of fees in both instances which resulted in an overpayment to TSA. TSA denied United’s refund request for both sets of tickets, which resulted in United filing a complaint in the hopes of obtaining a refund.
In its complaint, in addition to making the above-mentioned assertions, United also alleged that TSA’s rejection of its refund request was arbitrary and capricious. In response to United’s assertions, TSA alleged that the burden to establish the fact that a net overpayment had actually occurred was on United, and that in this instance, United failed to demonstrate that it had not simply remitted fees to TSA that another airline had collected and then transferred to United along with the rest of the funds associated with an involuntarily transferred passenger. In regard to the exchange rate difference tickets (“ERD”), TSA asserted that “material limitations” in the overarching methodology and accounting data used by United and provided to TSA when it requested a refund rendered the submission “insufficiently reliable to warrant a refund.”
In the end, the Court found that TSA’s denial of a refund for the first set of tickets related to involuntarily transferred passengers was arbitrary and capricious because even though United did not verify that it did not receive TSA fees as part of the funds it received from transferring airlines, TSA merely put forth conclusions and unsupported hypotheticals to support its denial. This in effect vacated the TSA’s decision with respect to the involuntary transfer tickets. On the ERD issue, the Court found that TSA’s decision to deny United’s refund request was “reasonable” given the facts presented and therefore denied United’s petition for a refund on the ERD tickets.
If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com 202-659-6622) or Drew Derco (dderco@eckertseamans.com 202-659-6665).
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