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Teton Historic Aviation Foundation & Teton Avjet LLC v. United States Department of Defense and United States

United States Court of Appeals, District of Columbia Circuit

May 8, 2015


Argued: October 7, 2014.

Page 720

Appeal from the United States District Court for the District of Columbia. (No. 1:09-cv-00669).

Kevin R. Garden argued the cause and filed the briefs for appellants.

Peter R. Maier, Assistant U.S. Attorney, U.S. Attorney's Office, argued the cause for appellees. On the brief were Ronald C. Machen Jr., U.S. Attorney, R. Craig Lawrence, Assistant U.S. Attorney, and Kevin Laden, Special Assistant U.S. Attorney. Oliver W. McDaniel, Assistant U.S. Attorney, entered an appearance.

Before: GARLAND, Chief Judge, GRIFFITH, Circuit Judge, and WILLIAMS, Senior Circuit Judge.


Page 721


Teton Historic Aviation Foundation and Teton Avjet LLC (Teton) together operate as a nonprofit entity devoted to maintaining historic military aircraft. Teton is challenging various decisions of the Department of Defense that made it effectively impossible to buy surplus aircraft parts from the Department. The district court found that Teton lacks standing to sue because victory in court would not redress its injury. We disagree.


Congress has authority to " dispose of" all surplus government property. U.S. Const. art. IV, § 3. Congress has delegated this authority to the General Services Administration, 40 U.S.C. § 541, which has, in turn, delegated the authority to dispose of military equipment to the Department of Defense. The Department assigns a demilitarization code (Demil Code) to each type of its surplus military equipment that indicates its permissible disposition, including the conditions under which the equipment may be sold to the public.

At issue are aircraft parts assigned Demil Code A, B, Q, and D. Demil Code A includes equipment that is harmless and can be freely released by any means, including by sale to the public. At the beginning of the events giving rise to this dispute, the same was true for equipment designated as Demil Code B and Q.[1] Demil

Page 722

Code D indicates equipment that is too dangerous to be released to the public; if the Department does not wish to reuse or store such equipment, it must be destroyed through shredding or other means.

The Department has a variety of ways to dispose of its surplus military equipment. It can, for example, make equipment available for humanitarian relief purposes; lend or sell it to state or federal law enforcement agencies, National Guard units, the Reserve Officer Training Corps, museums, foreign governments, or international organizations; or use it for " morale, welfare, and recreation activities and services." As it has done in this case, the Department can also release equipment for sale to the public. See 40 U.S.C. § 545.

Disposal of property through public sale is administered by an agency within the Department known at the time of the events at issue here as the Defense Reutilization and Marketing Service (DRMS).[2] DRMS has for some time organized these sales by releasing equipment to a private third-party contractor called Government Liquidation (GL) to be sold through public auctions. As relevant here, GL auctions off particular equipment with the understanding that winning bidders will have the right to obtain certain components from that equipment, subject to the Department's policies on the release of individual parts. A bidder who wins the auction knows that no matter how many parts are ultimately made available, it will still have to pay the entire sum of its winning bid or otherwise cancel the sale. The winning bidder submits to GL a list of the individual parts or items it hopes to recover from the auctioned equipment. GL transmits each buyer's list to DRMS. On its receipt, the agency determines the Demil Code applicable to each type of part or item the buyer seeks and returns the list to GL, indicating which items from the auctioned equipment are actually available for sale. The winning bidder must still pay the full amount of its bid, no matter how few of the parts it sought turn out to be available. If the winning bidder is dissatisfied with the parts that it will obtain, the bidder can cancel the sale and receive a full refund.

In August 2008, Teton bid successfully in a GL auction to obtain the parts from five surplus A-4 military aircraft. Teton hoped to use the A-4 parts to perform maintenance and conversion work on historic aircraft it already owned. Teton put down a deposit of $50,000 to participate in the auction and won with a bid of $8,250. It sent a list to GL of the parts it hoped to obtain from these five aircraft, including 600 different part types for a total of approximately 5,000 discrete items. DRMS began to review Teton's list against the Demil Code database. Some number of these parts did not have a previously assigned Demil Code. Through an internal administrative process, these unclassified parts were classified as Demil Code D, which made them effectively unreleasable. Other parts Teton sought were already categorized as Demil Code A, B, or Q, meaning that they were available for sale.

Meanwhile, on November 14, 2008, the Department promulgated a new policy regarding the release of surplus property (the 2008 ...

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