## Facts

- The City of Naples Airport Authority, a Florida entity operating Naples Municipal Airport, adopted an access restriction aimed at reducing aircraft noise.
- After conducting noise studies and proceeding under ANCA-related procedures, the Authority banned Stage 2 aircraft (older, noisier jets) from the airport.
- The Authority’s record indicated the ban would significantly reduce community noise exposure while affecting a small percentage of airport operations.
- The FAA concluded the Stage 2 ban imposed an “unreasonable condition” on public use of the airport under federal grant-assurance requirements in the Airport and Airway Improvement Act.
- Based on that finding, the FAA issued an order disqualifying the Authority from receiving further federal grants.
- The Authority petitioned for judicial review, arguing the FAA’s “unreasonableness” finding was unsupported and that ANCA constrained the FAA’s ability to penalize an ANCA-compliant restriction through grant ineligibility.

## Issues

1. Whether substantial evidence supported the FAA’s determination that the Stage 2 ban was an “unreasonable condition” on public use under 49 U.S.C. § 47107(a)(1), such that the order was not arbitrary or capricious under the APA.
2. Whether ANCA limited the FAA’s authority to withhold Improvement Act grants based on an airport proprietor’s Stage 2 restriction adopted pursuant to ANCA procedures.

## Decision

- The court vacated the FAA’s order and remanded for further proceedings.
- The court held the FAA’s finding that the ban was “unreasonable” was not supported by substantial evidence and was arbitrary and capricious.
- Because the grant-disqualification order depended on the unsupported “unreasonableness” finding, vacatur followed.
- The court did not definitively resolve the broader statutory question about ANCA’s effect on the FAA’s grant-withholding authority.

## Legal Principles

- Under APA review, agency action must be reasoned and supported by substantial evidence for material factual determinations.
- An agency may not rest key conclusions on assumptions or unsupported inferences; it must address significant contrary evidence in the record.
- When an agency rejects or discounts technical studies and local circumstances offered to justify a restriction, it must explain why the evidence does not support the restriction.
- If an agency’s dispositive finding lacks substantial evidentiary support, the resulting sanction (including loss of grant eligibility) cannot stand.

## Conclusion

The D.C. Circuit set aside the FAA’s grant-ineligibility order because the agency failed to substantiate, with record evidence and adequate explanation, its conclusion that Naples’s Stage 2 aircraft ban imposed an unreasonable condition on public use of the airport.


City of Naples Airport Auth. v. FAA, 409 F.3d 431 (D.C. Cir. 2005)