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FEMA Snow Aid Fight Plows Ahead in Chicago

CHICAGO (CN) - Six airlines that fly in and out of Chicago's O'Hare and Midway airports can intervene in a dispute over $6 million of federal snowstorm aid, the 7th Circuit ruled.

Several severe snowstorms crippled the Chicago airports in 1999 and 2000. The Federal Emergency Management Agency paid the city for 75 percent of the cleanup costs - totaling $6 million - under the Robert T. Stafford Disaster Relief and Emergency Assistance Act. But years later, FEMA ordered Chicago to return the money.

"The order was based on a provision of the Stafford Act called (in a triumph of bureaucratic obfuscation) 'deobligation,'" according to the federal appeals court. "It provides that 'a person receiving Federal assistance for a major disaster or emergency shall be liable to the United States to the extent that such assistance duplicates benefits available to the person for the same purpose from another source.'"

Under the airports' use agreements, Chicago typically charges airlines a maintenance fee per landing, calculated by dividing estimated maintenance costs proportionately by each airline's plane traffic. At the end of the year, the city compares actual expenditures to estimates and either reimburses or charges airlines for the difference.

According to FEMA, the use agreements provided the city with a duplicate source of reimbursement for the runway cleanup - the airlines.

The city of Chicago filed suit, claiming that the act refers only to duplicate benefits received under an insurance policy.

"Unwilling to put all its eggs in that basket, because another Ninth Circuit case has interpreted the [statute] to require that the recipient of FEMA assistance have sought reimbursement from a co-owner of property repaired with FEMA funds ... even though the co-owner is not an insurer," a three-judge appellate panel said the city stipulated that the use agreements require the airlines to reimburse it for the costs of snow-removal.

United, Continental, Southwest, Delta, American Airlines, and AirTran Airways filed a motion to intervene, arguing that the use agreement is limited to ordinary expenses of an airline's use of an airport "therefore excluding expenses incurred to prevent or overcome a disaster."

Litigating as a single party, the airlines added that they were "the victims of the snowstorms" and that FEMA is supposed to pay for disaster relief, not make the victims pay.

U.S. District Judge Charles Norgle denied the motion to intervene, observing that additional parties could cause delay in the litigation process.

But the 7th Circuit reversed Monday, finding that the airlines' financial stake in the outcome provided standing.

"There is no doubt that the airlines' interest in the lawsuit satisfies the constitutional requirement of standing; their ability to retain almost $6 million may depend on whether the court sides with FEMA, which the court won't do unless it rules that the Use Agreements entitle the City to obtain reimbursement of the snow removal expenses from the airlines," Judge Richard Posner wrote for the court.

"The District Court (or this court on appeal) will decide that issue only if the airlines are parties, because only the airlines contend that the use agreements disentitle the city to that reimbursement," he added. "If they are not parties, the district court will doubtless accept the stipulation."

Whether the airlines have already been charged for the runway cleanup is unclear. Chicago contests FEMA's contention that the airlines have already reimbursed it for the expenses.

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