This complaint, brought by eight airline companies which provide transportation services to the federal government, seeks the return of several hundred thousand dollars the General Services Administration ("GSA") set off from payments due to plaintiffs from the federal government. Plaintiffs have moved for summary judgment. Defendants moved for summary judgment on Counts I, III, and IV of the Complaint, and plaintiffs cross-moved for summary judgment on Count III.
The motions have been fully briefed and are ready for disposition as to Counts I, III, and IV. There is no dispute over the facts necessary to resolve the motions, which are set forth below.
I. Factual Background
On September 28, 1989, GSA sent each plaintiff a written demand to refund amounts previously paid by the government for allegedly unused tickets purchased for travel between January 8, 1985, and September 7, 1989. The demands totalled over $ 2,500,000. Plaintiffs challenged the claimed indebtedness and asked GSA to produce the unused tickets and to allow plaintiffs an opportunity to inspect and copy government records of the relevant transactions. GSA was unable to provide copies or documentation of the unused tickets for which the refund demand was made. To support its request for the total amount, GSA instead calculated an estimate of the number of unused tickets by extrapolating from a statistical survey of unused tickets issued to the Army and the Air Force over a one-year period.
In response to plaintiffs' objections to the total request and the lack of documentation, GSA modified its demand, limiting the request to tickets purchased by the Army and the Air Force during 1985. The revised demand came to a total of $ 333,782. As evidence of the claim, GSA produced a limited number of unused tickets from this period, accounting for only a fraction of the amount demanded. GSA represented that the tickets produced were the only available records to support its demand and that all other allegedly unused tickets and corresponding government transportation request forms ("GTR's") were lost or irretrievable.
Plaintiffs filed this lawsuit on June 14, 1990, challenging the government's demands. The allegations presented in the three Counts of plaintiffs' Complaint that are presently before the Court are set forth below, along with the Court's analysis.
II. Count I: Violation of Transportation Act Regulations
Plaintiffs assert in Count I that GSA's offset is unlawful because GSA failed to comply with the regulatory requirements for processing unused tickets. Defendants offer two arguments in response: first, that the regulations have no bearing on GSA's right to offset, which is governed by statute; and second, that the regulations bind the agencies to whom the tickets were issued, but not GSA as the collecting agency.
A. Administrative Offset
The administrative offset procedure is authorized by 31 U.S.C. § 3716:
(a) After trying to collect a claim from a person under section 3711(a) of this title, the head of an executive or legislative agency may collect the claim by administrative offset. . . .
Id. The statute prescribes procedures that must be followed, such as providing written notice and an opportunity for review, but does not offer any guidance as to what claims may be properly collected. In justifying the offset for this particular claim, GSA cites 31 U.S.C. § 3716(f), which provides that "payment for transportation ordered but not provided may be recovered by deduction or other means." Id.
GSA's authority under the statutes to collect payments by administrative offset is clear. See United States v. New York, N.H. & H. R.R., 355 U.S. 253, 254 & n.1, 264, 2 L. Ed. 2d 247, 78 S. Ct. 212 (1957). The right to exercise this authority does not, however, settle the substantive issue of the validity of the government's claim to the offset amounts. Seaboard Surety Co. v. United States, 107 Ct. Cl. 34, 67 F. Supp. 969, 971 (Ct. Cl. 1946). The question of what constitutes "transportation ordered but not provided" is not illuminated by the statute authorizing offsets and must therefore be examined in the light of the regulations.
B. Transportation Regulations
The regulations spell out the appropriate procedures for government agencies to follow in requesting tickets and for the carriers in matters of payment and services. According to 41 C.F.R. § 101-41.210-2, unused tickets must be exchanged or returned to the carrier, accompanied by standard government forms. GSA was unable to comply with the regulation in this case (and other instances) since the tickets and related forms for which GSA sought a refund have been lost.
Recognizing that the problem of lost or unreturned tickets made compliance with the regulation impossible, GSA decided to amend the regulations in order to avoid losing refunds for unused tickets. This led to the proposal of 41 C.F.R. § 101-41.210-5a, which would have placed the burden on the carriers to refund the government automatically for tickets issued but not used. This automatic refund would be required unless the carrier and GSA worked out an acceptable alternative process in accordance with 41 C.F.R. § 101-41.210-5c. If valid, these regulations would have made resolution of this case very simple, but because they have been struck down on procedural grounds, American Airlines, Inc. v. Golden, No. 3-86-0532-T (N.D. Tex. July 25, 1989) (Ex. 1 to Defendants' Motion To Dismiss), they are not dispositive. The question at issue is therefore what process the valid regulatory framework provides for allocating losses due to allegedly unused yet unproduced tickets.
Without recourse to the stricken regulations, GSA is unable to justify the offset in this case. The language of the refund regulations is mandatory, requiring GSA and other agencies to follow the ticket return procedures they set forth. The regulation on unused or unreturned tickets provides:
Unused or unreturned tickets are those which have not been used for passenger service, exchanged, or returned to a carrier. Agencies shall demand the refund value of these tickets from carriers through the use of an SF 1170, Redemption of Unused Tickets. A separate SF 1170 must be prepared for each GTR . . . . Each ticket must be listed on the SF 1170. Unused or unreturned tickets purchased under a GTS account must be returned to the appropriate Federal agency office . . . .