SILBERMAN, Senior Circuit Judge.
Petitioner United Airlines sought refunds from the Department of Homeland Security's Transportation Security Administration (TSA) for overpayments it made to TSA. These payments relate to fees charged airline passengers that fund aviation security expenses and are to be remitted to TSA. In an informal adjudication, TSA refused to consider Petitioner's refund request because four years before TSA had concluded an audit of United's remittances during the relevant period, the audit did not discover any overpayments, and United had not objected to the report of the audit. We conclude, however, that TSA's position is unsupportable.
The Aviation and Transportation Security Act created TSA and tasked the agency with civil aviation security.
United Airlines claimed a refund after it hired an outside consultant to review payments it had made to TSA. The consultant determined that Petitioner had overpaid the agency during 2010, 2011, and 2012 in the amount of $1.5 million.
Shortly thereafter, Petitioner responded to TSA's denial. Petitioner "request[ed] [TSA's] guidance concerning the TSA's rules and procedures for obtaining . . . administrative review," and Petitioner suggested that it was "hoping to keep this matter within TSA's administrative review process." It requested a response from the agency within four days. When it did not receive a reply, Petitioner filed this petition for review, identifying the April 18 Refund Denial as the agency decision under review.
On August 10, 2016, after this petition for review was filed and two months after the Petitioner's second request, TSA finally responded. The agency again pointed out that Petitioner had been the subject of an audit of the fees collected during the contested period, and that the audit report stated that Petitioner had thirty days to submit an administrative appeal. Instead, it only paid the trivial sum owed, $3.07. Nor did United file a petition for review before us within sixty days of TSA's audit— which TSA described as its "final order." Then, TSA concluded: "Given the foregoing, TSA has determined that United has no entitlement to administrative review or judicial review."
We are met with a jurisdictional objection. The government argues that since Petitioner's request for administrative review was pending when the petition was filed in our court, the petition was incurably premature, and we should therefore dismiss it. See TeleSTAR, Inc. v. FCC, 888 F.2d 132, 134 (D.C. Cir. 1989). This contention is a rather thin one; it depends on the interpretation of Petitioner's June 6 letter which, in relevant part, stated:
It's clear, then, that Petitioner wished to seek administrative review, but it is also clear that Petitioner wanted to learn how to do so before it pulled the trigger. After all, there were no general regulations describing a procedure for exhaustion of administrative remedies. (The thirty-day period to appeal the audit would be relevant only if Petitioner was challenging the audit.) And Petitioner's specific request for a quick response was obviously designed to allow a petition to our court within the sixty-day period for review of an agency final order, i.e., the April 18 Refund Denial.
The rest of the case turns on the significance of the 2012 audit. Petitioner contends that a fair interpretation of the statute authorizing TSA's audit, as well as TSA's regulations implementing the statute, led United to understand the purpose of TSA audits was solely to determine whether carriers had remitted a sufficient amount to TSA to satisfy their obligation. And that the statutory authority allowing the Under Secretary to issue refunds to carriers because of mistakes is a wholly independent legal authority. The government contends, on the other hand, that the audit was designed to be symmetrical to determine whether a carrier has either underpaid or overpaid during the period covered by the audit. If the government were correct, then its argument that it had virtually unreviewable discretion whether to "reopen" the audit might be persuasive.
But the government is not correct. First of all, TSA has never indicated to the regulated carriers that an audit had the double purpose. Indeed the audit report stated that its purpose was to assess compliance with the security fee regulations. It concluded that the security fee "was correctly imposed, collected, and remitted to the TSA" (with the exception of $3.07). An audit typically seeks to verify information for a particular reason. Here, the audit sought to verify that Petitioner was collecting the security fee from passengers and remitting the collected fees to TSA. Nothing about the audit suggested it also examined whether the airline was too generous in identifying tickets subject to the fee or in calculating currency exchange rates bearing on the amounts it owed.
Putting aside the audit as irrelevant, there still remains the question whether it was arbitrary and capricious for the Under Secretary to refuse to pay a refund, as he is statutorily authorized—but not commanded—to do.
The government also contends that granting a refund to United would somehow prejudice other airlines. We simply do not understand this argument—at all.
Therefore, we remand to TSA for proceedings consistent with this opinion.