On July 29, 2026, the United States Court of Appeals for the Seventh Circuit issued a decision of real practical value to Illinois municipalities that own airports, lease municipal property or otherwise contract with competing private businesses.

KTJ attorneys Carmen P. Forte, Jr. and Colleen M. Shannon secured a victory for the City of Aurora in Joliet Avionics, Inc. v. City of Aurora, in litigation that spanned several years and involved complaints filed in Kane County Circuit Court, federal district court and before the Federal Aviation Administration. Writing for a panel, which included Judges Kirsch and Kolar, Judge Hamilton affirmed summary judgment for the City and held that a disappointed municipal tenant cannot use the Equal Protection Clause to attack the terms a municipality negotiated with a competitor, or the municipality’s decision not to insist on strict performance of the competitor’s lease.

Background

The City of Aurora is the airport sponsor for the Aurora Municipal Airport in Sugar Grove. Two fixed-base operators leased space at the airport: the plaintiff, Joliet Avionics, Inc., and Carver Aero, which had purchased a longtime tenant, Lumanair.

• Consistent with a Federal Aviation Administration recommendation, the City maintained a Minimum Standards policy requiring, among other things, that any tenant installing fuel storage build it above ground and carry environmental and liability insurance.
• As a recipient of federal assistance, the City was also subject to FAA grant assurances, including one requiring that fixed-base operators making similar use of similar facilities be subject to the same rates, fees, rentals and other charges.

The leases at issue were negotiated years apart and were materially different. The plaintiff’s 2007 lease ran 20 years with two five-year renewal options and covered three hangars plus a parcel for a fuel farm, with the City issuing bonds for improvements and the plaintiff making debt service payments in lieu of ground rent.

The plaintiff fell behind, and a 2015 amendment discharged some of that debt. Lumanair, at the airport since 1982, had never built an above-ground fuel farm despite the policy. Its 2020 lease waived ground rent for five years in exchange for at least $1.2 million in capital improvements and construction of an above-ground fuel farm. After Carver acquired Lumanair, a 2022 lease waived ground rent for 20 years conditioned on compliance with the Minimum Standards policy by July 1, 2024, required at least $10 million in investment, and substituted an environmental indemnity agreement for environmental insurance.

The plaintiff sued in 2019, alleging that:

• the competitor received more favorable terms in violation of the grant assurance and
• the City had failed to enforce the fuel farm and insurance requirements against the competitor.

It pleaded a class-of-one equal protection claim and breach of contract. Judge Durkin granted summary judgment to the City on both counts.

Holding 1: No class-of-one claim where the municipality is acting as a contracting party

The Court held that the reasoning of Engquist v. Oregon Department of Agriculture, 553 U.S. 591 (2008), which bars class-of-one claims in the public employment context, applies with at least equal force to municipal contracting. Contracting, the Court explained, is a classic exercise of discretion:

• parties are free to strike their own bargains, and
• real estate negotiations for specialized commercial property at different times and under different circumstances necessarily involve individualized judgment calls that resist apples-to-apples comparison.
• Governments weigh budgetary, operational and sometimes political factors that are difficult to articulate and quantify.
• The Constitution does not require a municipality to enter identical contracts with each tenant.

The Court rejected the plaintiff’s attempt to recast the City as a sovereign on the theory that the Minimum Standards policy had been adopted under home rule authority. The airport is a commercial enterprise the City owns and operates, and the competitor’s leases obligated it to follow the policy. Enforcement of the policy against a tenant, the Court held, is an exercise of contract rights, not sovereign power. On that basis the Court distinguished Village of Willowbrook v. Olech, 528 U.S. 562 (2000), which involved the village acting as a regulator.

Two additional points in the opinion are worth flagging for municipal officials.

• First, the Court recognized that a municipality faced with a tenant’s breach may select from the ordinary menu of contract remedies, including the choice to excuse or waive delays or defects in performance rather than sue.
• Second, the Court observed that the plaintiff’s theory would functionally make it a third-party beneficiary of every contract the City signs with other operators.
  • Illinois law does not permit absent contractual authorization, and
  • The theory would cut both ways: competitors could then demand strict enforcement against the plaintiff, whose own payment history was not clean.

The holding is deliberately narrow. The Court did not say that every discretionary contracting decision is beyond the reach of an equal protection claim, and it preserved claims resting on class-based allegations. It held that a company complaining about the terms of its own lease, or about a competitor’s treatment under a similar contract, without any class-based allegation, cannot proceed on a class-of-one theory.

Holding 2: Grant assurances and aspirational policy language are not implied contract terms

The District Court found that the Minimum Standards policy and the grant assurance were not expressly incorporated into the plaintiff’s lease. On appeal, the plaintiff shifted to the implied incorporation doctrine, the familiar principle that statutes and laws in existence when a contract is executed are treated as part of it. The Seventh Circuit rejected that argument on two grounds.

As to the grant assurance, the doctrine reaches existing laws, statutes, ordinances and regulations. A grant assurance is an agreement between the FAA and the airport sponsor arising on acceptance of federal funds. It is a contract, not a provision of law, and therefore is not swept into a third party’s lease by implication.

As to the Minimum Standards policy, the provisions the plaintiff invoked (that it is the City’s “intent and duty” to encourage free enterprise and its “responsibility” to protect tenants from unfair competition) were vague and aspirational and imposed no obligation on the City. The policy sets baseline requirements for tenants; it does not prescribe terms for the City itself to obey.

The Court explained that the implied incorporation doctrine functions as an economizing measure that rests on the presumption that parties know the law and understand what they are agreeing to, and that presumption cannot support incorporating language that no one would read as a concrete commitment.

Finally, the Court held that the City’s earlier breach of contract suit against Lumanair did not help the plaintiff, because that lease expressly required compliance with at least some of the policy’s specific requirements. Express incorporation, in other words, did the work there that implication could not do here.

What this means for municipalities

1. Municipal lessors have meaningful latitude to negotiate different terms with different tenants at different times, and to choose how to respond to a tenant’s default, without creating federal constitutional exposure to a competitor.
2. Adopting a policy through home rule authority does not convert proprietary enforcement decisions into sovereign regulatory acts. The proprietary versus regulatory line remains the pivotal one, and decisions made in a genuinely regulatory posture continue to be measured against Olech.
3. Drafting matters more than the policy’s existence. If a municipality intends a policy to bind a tenant, it should be expressly incorporated in the lease, as the Lumanair lease did. Conversely, aspirational preamble language about the municipality’s “intent,” “duty” or “responsibility” invites the kind of claim litigated here, and boards should consider whether such language belongs in an enforceable document at all, or whether it should be paired with an express statement that it creates no private rights.
4. The decision addresses private enforcement in court. It does not address the FAA’s own administrative processes for grant assurance compliance, which remain available to complainants and are a separate consideration for airport sponsors.
5. Documenting the business rationale for differential treatment remains good practice. The Court’s reasoning rested in part on the visible complexity of the transactions and the City’s contemporaneous handling of a defaulting tenant.

Klein, Thorpe & Jenkins, Ltd. represents municipalities, airport sponsors, and other units of local government throughout Illinois in lease negotiation, tenant compliance and litigation defense. For questions related to the issues described above or any other municipal law matters, please contact Carmen P. Forte, Jr., Colleen M. Shannon, or another member of Klein, Thorpe & Jenkins’ Municipal Law Practice Group.

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