# Petition for Writ of Certiorari — North Central Airlines, Inc. v. Civil Aeronautics Board > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA04386419_0871%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1959 - **Citation:** 360 U.S. 903 ## Text 4 f En mee oe bie os js ) | & PO BECANING. Sherk “IN ‘The —upren Court of the Anited States Ss i January Term, 1959” hy . t ig ; 8g me) st . No. me pi *+ : ' Norto CextraL Aimuines, Inc. Petitroner a ¥. Civin- AERONAUTICS Bosnp. Re sponde ut LAKE CENTRAL AikiINeEs, Ixc., litervenor Lake Cextral Exprover Srockuotprn: Grove, litercenos PETITION FOR A. WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT : ce 1200 Sheraton Building ce. Tae 11 14th Street. No W: Vashington 5. Dn C. PP of J Atlornesy. haw. Petitioner v A. L. Witkki “Saree et "" WILSON . Eres Printinc Co - RE 7-6002 . WASHINGTON 1. D. C. Ps “ I TN eaistnsithnercicertccttccess. Ndi ica Sate seenennsenel ag ; INDEX Questidgs Presented 00000008000 oc. scene . Constitutional Provisiens-Statutes and, Regulations — 3 of the Civil Aeronauties Board Involved............ Statement of the Case ie a _ Reasons’ for Granting the, Tt... Tee: A. ( ‘ . . The Board Did Not Have the Power to. In- vite and Permit the Intervention of Other Prospective Purchasers of the Lake Cen. tral Stock and to Thus Convert the Acqui-— "sition Proceeding into a Campetitive Hear- ho nee Megan » GNEPSa A The Board’s Action in Holding Individual . | Ex Parte Conferences with Members of the Lake Central Employee Stockholder -Gro& was an Improper Departure from the Us- ‘ual Course of Administrative Proepeding, a Departure from this Court's Decisions. and a Violation of North Central's Rights to a Full‘and Fair Hearing............ The Civil Aeronautics Board's Action in ‘Permitting the Amendment of the Lake Central Voting Trust Agreement without Notive to North Central Deprived, North . Central ef a Full and Fair Hearing under Amendment Number Five to the Constitu- tion of the United States by Departing from the Prior Decisions of the Supreme ORG cscstilsssrnseasgeatnnenistacsdaechastebasasgompenet iets By 10 13 whe . i INDEX (Continued) Page D. The U.S. Court of inhale for,;the District of Columbia Circuit Improperly Sanctioned an Unexplained. Departure by th# Civil Ae- -* * gonautics Board from its Prior. ‘Norms ‘Concerning Acquisition ‘and Merger Cases.. - Ws Conclusions .. AES TN ee i geet piensa erate sac oe -Appendix A .......... tle Linney sami rosea detanai poles Si _ Appendix B aa accusam Ba ae pecrads csinaitieion, a : Appendix SS csansanceenonsanncnnaiusdecernsine A AAS vitae Po) | CITATIONS Sirsa es. __-brizona-Monarch Merger Cast, 11. CAB 246 (1956). 9,19, 20, 23, 24 . Ashbacker Radio Corp. v. FCC, 326 U.S. 327, 66 S.Ct. 148 (19459 2 RT Se RO 2.16. 17 Continental-Pioneer , Acquisition Case; “ Sowtiat No. 7“ 6457, Order No. E-8803, ‘dated December (, GS St Ra Ties AE Ree Hen eeRP Menem tr : 11. ~— Eastern-Colonial Acquisition o Assets, Docket No. 5666, Order No. F,-8446, dated June zy, 1954, ; Appendia ‘i, p. 1 ........... eiahiledeineescbaicos sdlcaptaamiapninatonnes aay Fluing -Tigers-Slick Merger. Pane, 18 CAB a CORR Ae eee ke Hall, et al. v. FCC, 99 U SS. hve. D.C. 36, 937 F.2d)... a a es ee i Hartman y. North Central Airlines. _Ine., 241 F. 2d_ — E> EE) SER Ren emeee aT non Ean 9 ne \5.8 Lynch ve US 299. US. 571 (1934) Nets taciilbeesickt ear iS McKay ve W wre mmaier, IOUS. App. D. C. 313, 226 B. 2d 39 (1955) ........: ela cea iia iadeabitpe tact Fi Mississippi Valley Case, 8 CAB 726, 752 (1947) ls 20 Monarch-Challenger Merger Case, 11 CAB 38 (1949) Morgan et alive U.S. et al, 304 U.S. 1, = S.Ct. ; res (YBR) Bo i ees ae 14 ts = a ‘ eae Se” kt ge ines NLRB vy. Mall _ Con, is b-2d 700. (ith ¢ i) eR ET rere ERR A ORG ECON ADEN DO MORVOPIDEE ADEE ce Qhia Be M Tele dean Co. v. Public Utilities Comsmis- a | sion, 301 1.8. 292 (1937) . seteduetsied vavhdatlbsysagenetagnccdede ae Reopened Indiana-Ohio Local Service Case, 16 AB are OO Ce incest etecesc secon :...' 4,5, 6,8 Root Refining Co. v. Universal Oil Products Co., 169 | . F. 2d 514 (3d. Cir. 1948) «.......2.: SOREN Raye * He. ‘Secretary of Agricidture v.17 'S8., etal. “SUS. a SI aE, We CE nao aces ontecesis 18, 24 * Service to. Phoenix Case, Docket _ a 6247, Order: No. E-11833 (1957.) .002...2.. eae. TCR eRe anne oe 2} — Seven States Area leretignti, Docket ti. 7454. * Order No. F-1: 3254, Nett Decembér 8, 1958...... 21 Texas-Oklahoma Case, 7 AB 481, 537 (1946)........ 20° West Coast: Empire Case HC AB 971 (1952) 9,19, 20, 23, 24 Williston Basin bigs Case, 18 CAB 873. (1954). 2T “WKAT vo FCC, 25 58. F. 2d 418 (D.C. Cir, 1958)... 15 WORZ, Inc. v. FCC, 79 S.Ct. 114) (1958)...................; oo ee bs onstitution of the U pited States: ed Aniendment _ Abe See Wie kee 2 212, 16,27 Statutes: *- % | : Federal’ Administrative Proc ‘edure, Act: ae. grt uaa Se My ane ee S mae EA ROM eh 27 2b . . DIES APES ee ieee ap a ReO es Lech he OM INT a ® 27, 28 DI Ss Ri rhcar alive cinikicsecagttorttaundioonatecndags cake ta : I et iesedinatash Sener aphenciossehcsnbinieeraginan, 18, 20 Seivil Aeronautics Act of 1938 . Oa taille css sic asetvidtbicite satin nia ooieasieniccie 29, 30 MN ie Stake eaa cena windleas Aden 11 i. Ye EE ANE RN hikitorievuinaee 10, 30, 31 eo) Le eee NN Gh oR S oa “~~ . . . . ihe : . PE a. | ion of the United, States Court of Appeals 1 for the Dis.” trict of Columbia Circuit is set fee in Appendix B ‘to this Brief. — a ess Sie ae Wises: . JURISDICTION . The “‘iedgment of the United States Court of “Appeals for the District of Columbia’ Circuit, was entered on Janu- ary 29, 1959. The jurisdictidn of this Court is. invoked under 28 U.S.C. 1254. : ' QUESTIONS PRESENTED 1. Did the Civil Aeronautics Board have die: power to convert an acquisition proceeding under ‘Section 405. of. the Civil Aeronauties .Act ‘of 1938.into a competitive ‘hearing by inviting and permitting the -intervention of ‘prospective buyers of. the Lake Central stock other. than - North Central, and by permitting the intervention of the - Lake Central Employee Stockholder ‘Group, thereby dis- torting and changing the statutory test of uw hether’ the acquisttion was not consistent with the public inte rest 10 which of several alternatives for the operation of Lake Cejtral was, in the discretion of the Givil Aeronautics Board, preferable? 2. Did the Civil Aeronautics. Hone improperly. ‘eerie Nortlr Central of its right to a ° full and. fair hearing unde’ the Fifth Ame.timent .of the ‘Constitution, , the “A minis- trative. ProcedureAct, the Civil Aeronautics Act of 1938. and the Rules and Regulations’ of the Board by holding , individual ex parte conferences with representaatives of the Lake Central. Employee Stockholder Group concern- ing. matters pertinent to the acquisition of the Lake Cen- tral stock by North Central? 3. Did the Court below : ‘improperly sdfction a depar- ture from the doctrine announced by this Court in Ash- backer Radio a v. FCC, 326 iF UR 327, 66 S.Ct. ® . 4 | nS 148:(1945) and deprive North Central of a full and fair hearing :when it failed.to hold that the Civil Aeronautics. Board had erréd in permitting without notice to North Central the amendment. of the Lake Central Voting Trust ‘Agreement so as to allow the transfer of the voting trust a to’ the Lake. Central Employee . Stockholder Group, thereby placing North Central in the, position of having to displace an éstablished liGensee instead ‘of | merely having to take over the operation of the airline from, an unfit management? — : : cs 4. Did the Court below improperly sanction -an un- bs explained departure by the Civil Aeronautics Board from | "its established precedents concerning acquisition and merger cases?. 2 es . - CONSTITUTIONAL -PROVISIONS, STATUTES AND... REGULATIONS OF THE CIVIL AERONAUTICS _ is BOARD INVOLVED |. The consideration of this. case involves Amendment _ Number V to the. Constitution of the United States, por- | tions of the Administrative Procedure Act {5 U.S.C. 1001 et seq.], the. Civil Aeronautics Act of 1938 [49 U.S.C. ‘401 et seq.], and portions of the Economie Regulations of ‘the Civil’ Aeronautics Board...The pertinent sections of _ are set forth fully in, Appendix A to this: ition. Baqi ess ae us @ 3 Pear’ STATEMENT OF THE CASE Petitioner, North Central Airlines, Inc., is a Wisconsin corporation engaged in’the business of scheduled inter- state air transportation of persons, property and ‘mail pursuant. to a certificate of public convenience and ne- cessity issued by: the Civil Aeronautics Board; Lake. ‘,. Central Airlines, Inc. is a Delaware corporation also engaged in the. scheduled interstate air transportation of persons, property and mail under a certificate of pub-, ? ‘operators. On the other hand, lie yaaa and necessity. Petitioner is one Of the. ke Central Airlines is _ largest, lowest cost and least” Ete a local ervive a and most subsidized . one of the smallést; high®st co local service operators. “44 ee . Petitioner initiated theudivcceedings beléw when it ‘ sought the approval-of the Civil Aeronautics Board. un- der Section 408 of the Civil Aeronautics Att of 1938 of a contract to purchase ‘approximately M5. percent of hie Lake Central stock from John V. Weegper, Rose "OC Weis _ ner, William W,, Weesner and various corporations con. ‘trolled by them (Reg, 43; 54, 60). The acquiSition con- tract, of wick North, Centia] sought approval grew out of: thy Reopened’ Indiana- Ohio. ‘Local. Service. Case, 16 CAB 880°(1953) Which the Board reopened ‘in order to ; investizate alleged improper, illegal and dishonest: prac- * tices ir? thé field of air commerces by the Weesners and their associates and theif effect upon the fitness, willing- | ness and ability of Lake Centraf Airlines to.“engage jin scheduled air transportation. ,:The hearing. examiner in that case found that there had been serious violations .of : ‘the Civil Aeron@utiées Act by. John Weesner, Lloyd Hart- man, the present executive vice ‘president of Lake Central; and several other Weesher associates (Exam, I.D., €AB --Docket No. 4034, pp. 20 and -43).' He: ‘Fecomumended that. Weesner: divest. himself of the management and control vf Lake Central. , Before. the Board had acted on the. _ ‘e 1 Similarly, the examiner in North, Centfal’s acquisition case. ‘found more recent dishonest andilegal practices by the Lake 4 against him by North. Central for breach of: fiduciary "Central. management which involved this same Lloyd Hartman (Rec. 450 and 451). He w: zed at their. alacrity in: (1) \ rajging the salaries of. the etsployees to allow them to. pay for their stock; (2) binding the airline to pay for the. Weesners’ legal fees; (3) indemnifying Dr. Robert Stewart, am of the Lake Central board of directors, for loss arising out ote tion ship; - (4) defraying their ‘expenses incurred. in Opposing the ac- quisicion with company funds; and (5) managing Lake Central ‘for their personal ends rather than for the public interest. -% ce aa ’ / . / « 7} .. | + 5 | ee -examiner’s recomntendations, Weesner attempted to sell his interest in Lake Central in order to salvage his: in- vestment. See Hartman :v. North Central Airlines, Ine., 941. F.2d 859 (7th Cir, 1957): On September 1Q. 1992, North Central’ offeréd to purchase the stock from the’ ‘Weesners and a written contract was entered ‘into on September 17, 1952 (Ree. 46).2. Subsequently, on Octo- , ber 17, 1952,, the Civil Aeronautics oatd upheld theif - fy trial exapymeger in the*Reopened Indidhna-Ohio Local Serv- we Case,.supra, at. O44, and ‘found that the Weesners were unfit to engage -in air transportation and: that they must divest themselves, of control of Lake Central. Solely on ' - the ba®is- of North Central’s contract and. the. financial fitness which North*Central. gave to Lake Central, she Board granted Lake Central a 30-day ‘extension. DuNng - this period, the Weesners were to’ promulgate -and pre- © sent to the oar a plan for divestment of their stock. For this pfirpose, the, Weesners proposed .and the Civil « + Board approved a Voting Trust Agreement.’ etilioner requested Board approval under Section 408 of the Civil ‘Aeronautics Act of its contract by applica-. ¥ ‘tions dated September 30 and November 1, ‘1952. (Docket No. 5770)* and for approtal of interlocking relationships ‘ under Section 409 of the Civil Aeronautics: Act on March "18, 1953 (Docket No. 6024). Ozark Airlines and Trans- ° 2 This contract was aménded by a;subseguent written contract of October 17, 1952 (Rec. 54). sie . ; ‘3 Thereafter, in spite of their contract ‘with, North Central, the "Weesners attempted to resell their interest in Lake Central, now - in the form of voting trust certificates, to Ozark Airlines, Roscoe \ ’ . Turner: and others. Hartmavt v. North Central Airlines, Inc., supra. #n doing so, the Weesners were violating’ a provision in their contract with North Central by which they agreed to fully _ cooperate with North Central in the prosecution of; an application” for approval of the acquisition (Rec. 49). ‘Rec. 43-46,°64. oa * * Rec. 6-11... wae: sig : a 4 J os. | port Air Group requested *éonsolidation into Doeket No 5770 of their applications to be considered as pojgntiat transferees of Lake Central. At the preheaftng confer. ence in Docket No, 5770, North Central objected to the consolidation of applications of other potential purchas. ers and requested that the issues in this case be restricted to ‘the consideration of its acquisition agreement (Orig. Tr. 230). North Central's objections were formalized in _ its answers. to the motions of Ozark and Transport Air ‘Group for consolidation (Orig, Tr. 259). The. Board, however, converted North Central's acquisition progeed- ing into a‘cbmpetitive proceeding when it instituted an investigation ‘*. . . to determine whether and upon what terms the acquisition of tlie majority stockholding in-, terest in.duake Central by North Central, Ozark and/or Air Group, and whether and upon what. terms the acqui- . sition of Lake Central’s Route No. 88, in whole or in part, by North, Central, Ozark and/or Air Group is ‘con. ‘sistent with. the public interest . . .”’ and consolidated this investigation with Docket No. 5770 (Orig. Tr. 301).* Finally, on June 25, 1954,.the Weesners succeeded in contracting to resell the same stock, now in the form of . voting trgyt certificates, that they had previously con- _ tracted .to sell North Central. They entered an_ option contract to sell their voting trust certificates to Lloyd r ebecw i naas Robert Clifford.” Hartman and Clifford i 6 “ The Board further manifested its desire that the acquisition proceeding be a competitive one when ‘it permitted the inter- vention in 1954 of the Lake Central Employee Stockholder Group (Orig. Tr. 484) over North Central's bitter protest. * Lloyd Hartman was one of the associates of the Weesners who had been censured in the Reopened India hio Local Sernic? cae, supra. So far as Hartman and Cliff. were concerned, it was a windfall as they took the Weesners’ certificates subject to any North Central rights. If the value of the stock were to de- preciate, they would not oppose the acquisition ‘by North Central © and permit North Central to bear the loss. If the value appre- ciated, they would (a) claim that North Central had breached its -~ . 2 later sold a part of the certificates ta some of the em- ployees of Lake Central and: thereafter labeled their p for conspicuous consumption purposes as the Lake Central Employees Stockholder Group. . ' During the latter part of May or the first part ef June’ ~ in 194, Hartman and-Clifford and other. representatives of the Employee ‘Stockholder Group proceeded with a& diabolical scheme to capture Lake Central for themselves: and held informal er parte conferences with individual Board members. The matters which were distussed were whether thére would We any official objection to their go- ing forward with the stock purchase program and wheth-_ _er Lake Central should be operated ax a separate entity or merged or dismembered 4Orig. Tr. 1985, 364, Appendix C). The result of these conferences was the consumma- tion of the aption voting trust purchase contract between the Weesners and Hartman arid. Clifford entered into on ‘ the 25th of June, 1954 (Ree. 202). : Now that they had both feet in the door, the Employee Stockholders openly and actively opposed the acqnisition. They petitioned the Board for leave to intervene in Dacket No, 5770 (Orig. Tr. 149)... The Board allowed the intervention of the Employee Stockholder Group * (Orig. Tr. 430), thereby further manifesting itx intention that: the North Central acquisition proceeding be a competi- tive one. This permitted the Weesners’ assignees, the ‘Lake Central Employee Stockholder (iroup, whose ax % ~ a *. , v 7 “* viously meaning “the” acquisition contract entered -into between the acquiring and the acquired airline, “The Board’s power in acquisition eases under Section 408 is sentient can act only if one of the carriers applies fo - r approval of an acquisition agreement, Certainly the oard cannot institute aequisition proceegivgs of its own or force unwilling carriers inte a merger, and it ts obluged - to respect contractual agreements unless they are not consistent with the. public. interest. . Such aA power would have the effect of forcing vither an unwilling buyer or an unwilling seller te ‘consent tu the aeqaisition. Lew wally, therefore, the Board is limited fo the consideration af that agreement of which approval ix reene steed. One of the things cimaide: read to be under Section 20b) of the Civil Aero fostering-6f sound economic conditions tain transporte — tation. Mergers and a a ‘tions -are methods of, effect- ing this consideration. "Undoubtedly, (t. Was the inten- tion of Congress in passing Section 408 to favor strength. ening of weak carriers through mergers and acquisi- tions)? For thi reason, Congress made an. acquisition inferentially ino the public interest by crequyrimg that the Board - “approve the acquisition unless it finh- that it will not be ‘consistent with the public interest. Tf the deci sions of the Civil’ Aeronautics Board and the Court of Appeals are allawed to stand, the Congressional intent wi Wy bn thwarted. Carriers will be reluctant to enter inte Lin publie interest - ities Net is the ‘1! The Executive Branch of the Government and the Civil Aero- nautics Board have given effect to this policy in favor of mer- gets and acquisitions. See Statement of Policy respecting Eto- nomic Program of 1949 issued Feb. 26. 1949: Annual Report of the Civil Aeronautics Board. 1950, p. 2. Easternolorial Ac- quisition of Agaets, et No. 5666. Order No, E-844*. dated June 17. 1964, App x 1, p. 1: Flying Tigers-Slick Merger Care, 18 CAB 326 (1954): Centincste Plancer Acquisition Case, Docket ‘No. 6457, Order No: E-8803, dated Dec. 7, 1954. p. 3: President's Air Coordinating Conese Report on Civil Air Policy. May 1954, p. 14. - a + merger and acquisition agreements: and io institute the expensive, involved, time-consuming procedures: necessary ‘to obtain Board. approval if they know in advance that the Board will protong thesproceedings and make. thei even more hazardous and expensive.by inviting to par- ticipate their competitors, who have absolutely no in terest in the original agreement. and no contractual ey. posure, This is particularly true in view of the fact “that in a eonipetitive hearing each party theoretivall: ‘has equal opportunity, whereas in an acquisition proceed ing the. acquiring. airline has contracted for its position 7 and exposed itself to the economic rigk. The Civil Aero: nauticg Board should not be permitted to transcend Nort) Central's) constitutional: rights under the Fifth:’Amend- ment by violating the sanctity of its ‘contract. Suen,. a Violation results from both enlarging the limited con. dition, which the statute places upon contracts of acqui- sition, and from permitting the assignee ef the seller tw formally and officially violate its contractual commitme: ! to cooperate in ohtaining approval by allowing such 2s signee “to pose the most obstreperous opposition ts approval. P A spike ‘ration of: this question bw. this Court is «of extreme importanee not only as a guide te the Civil Aer. yautics Board’ in future proceedings before ‘it: but alsoe. ‘as a guide te Other administrative agencies. This + the first time that the Civil Aeronautics Board has openly ane flagrantly converted va -hasie Seetion 408 proceeding into a competitive one. This Court‘now. has the opportu. wity te Glarife for the Civil Aeronautics, Board and the air industry the extent of the Board's authority in thy field of mergers and acquisitions. “A decision on th point will be a guide for, future acquiring and mergine. earners in dete ‘rmining whether or not they should ente” into. st th vsihitimeeaies A decision denving certiorari and 12 SeeeLynch V. ws . 292.U S. 571. 579 (1934). i P \ , - 13 e thereby affrming the Court below and the Civil Aero- nautics Board will suppress ‘the desire ot air Qarriers fo enter agreements even though they thay be in the public interest. . This is ‘particulardy important.in Our maturing air. transportation system which iS constantly” * attempting to increase efficiency through every means possible, including acquisition and merger. The ultimate _ effect would be the suppression of the developgrent of the anost efficient type of national air transportatpon system. ; 3 B. The Board's Action in Holding Individual Ex Parte . Conferences with Members of ‘the Lake Central Employee Stockholder Group was an Improper . Departure from the Usual Course of Administrative . Preceeding, a Departure from this Court’s Deci- siens, and a Violation of North Central’s Rights to a Fall and Fair Hearing. , - The record in this case shows that membets of the. Lake Central Employee Stockholder Group held individ. . ual er parte conferences’ with Board méinbers prior 10 entering: into ah option contract: to purchase the Lake Central voting trust certificates (Orig. Ree. 364, 198), Appendix (). The matters discussed af*these ‘confer- ences were whether or not there was any official objection to the Lake: Central Emplovee Stockholders going: for- :’ ward with their option contract and whether such a pro- gran might well be considered as an answer to the ques- tion of. whether Lake Central should be operated as a separate entity or merged or dismembered. “At the very least, these conferences involved a discussion as to the merits of the Lake Centrat Employee Stockholders’ con- tention that. they had an interest in the acquisition: case which would -allow them to intervene, North Central should have been afforded an opportumty to appear and oppose the Lake Central Employee Storkholders’ conten- * fion of interest: No such oppdtunity was afforded North \. Pe. 2 aie E a - * > oe Central and therefore it was deprived of a full and fair - - hearing: | Er parte conferences in judicial tribunals are improper, amounting to reversible error. E.g.,, Root Refining Co. v. Universal Oil’ Products Co., 169 F.2dON, 534-535, 540. honor and dignity ‘as, members of a judicial tribunal. (4 (3d Cir., 1958). Members of admi istrative agen. cies are expected to conduct themselves with. the same Section 3@0.T of~the Board's Economic Regulations re.» quires that the Board members and its ‘staff condug themselves with the same fidelity to standards of pro. priety that charactérize a court and its staff.-- Section 300.2. of these same Economic Regulations ‘specifically — condemns the practice of holding er parfe conferences between ‘Board members and other interested persons or parties (Appendix A). This Court has held that the practice of holding ¢, parte conferences’ in administrative proceedings is) im- “proper, Morgan, et al. v. U. S., et al., 304 US. 1, 5S. S.Ct. 773 (1938). There; Mr. Chief Justice Hughes, speak- ing for the majority, in a much-quoted opinion, said, 204 U.S. at 19: 7 . : ; - ore “Congress, in requiring a ‘fuil hearing’ had regard to judicial standards not in-any technical sense bu: “with respect to those \fundanehtal requirements of fairness which are of the essence of due process in ii proceeding of & judicial nature. {f in an equjty caus: the special master or the trial judge periphied the piaintiff’s attorney to formulate the findi gs upon the evidence, conferred er parie with the plaintiff’: ° attorney regarding them, and then \adopted his. pro- ‘ posals without affording an opportunity to his of ponent to know their contents and present objections, _ there would be’ no hesitation in setting aside the re- ” port er decree as having beer made without a fair hearing. \ +The U. S. Court of Appeais for the District of Columbia. in affirming the decision of the Civil Aeronautics Board. » ° 15 sanctioned the improper es parte conferences of the Board and therefore neglected its responsibility of strict- “Wy enforcing the requirement of a full and fair adminis- trative hearing. Such a requirement should be even more strictly enforced against an: administrative agency than against the Courts since the administrative tribunal has such broad discretionary power. Ohio Bell Telephone Company v.: Public Utilities Commission, 301 USS. 292, 304 (1987). Bs he We ask that .the Supreme Court use its supervisory - powers to remedy the basic impropriety und injustice perpetrated by .the Civil Aerofiauties Board and sane- tioned by the U. S. Court of Appeals in permitting these er parte conferences. This ‘Is ‘the same typeof thing which prompted this same lower Court to remand an- other case, WKAT' v. FCC, 208 B24 418 (D.C. Cir. 1958). to the Federal Scocpiaades tally Culione for a deter- mination as to whether the parties were prejudiced by sitnilar ex. parte’ conferences with a Commission member. The Supreme Court recently granted certiorari in the case of. WORZ, Inc. v. FCC, 79 S.Ct. 114 (1958), and, remanded it to the. Court of Appeals for appropriate action. The WORZ Case also involved ex parte confer-. ences at the Cominission level. Petitioner submits that cunless decisions containing this kind of practice are re- versed and remanded, the administrative process Will be continually eroded and ultimately destroyed. This Hon- orable Court should review sui case= and clearly estab- lish, the proposition that er pc earings” will vitiate an administrative order to the extent that if presented to this Court, it will review and reverse such cases. Suth — a holding will have g salutory effect on the administra-: tive process-and adniinistrative justice. This large and * ever-growing field of law should be given the, guidance and strength necessary to assure the continued public confidence and support which is necessary for its ulti- mate survival. . . | aon 4 16 Cc. The Civil pevesanation Board's Action in. Permit- ting the Amendment of the ‘Lake Central Voting Trust Agreement without Notice to North Central Deprived North Central of a Full and Fair Hear- ing under the. Fifth Amendment to the Constitution : by Departing from the Prior Decisions of the Su- preme Court. . In Ashbacker Radio. Corporation v. FCC, supra, the Supreme Court held . “would create a local service system of unprecedented size with route mileage extending close’ to 5,000'miles . . "_ (Ree. 486). The Board has not previously let the unprecedented size of merged airlines interfere with approval of such inergers. In the’ Arizona-Monarch Case, supra, it cre- ated a local -sérvice -carrier (Frontier Airlines) of un- e —" <>. ¥r 7 | eir operation. We have constantly ey. ° © . : 21 precedented size. Frontier became the largest local serv- ice carrier in the céuhtry. Every time Frontier is granted a new route is achieves unprecedented size, yet the Boaril expresses no hesitancy in granting it, additional route-. Service to Phoenix Case, Docket No. 6247, Order No. E-11833 (1957); Williston Basin Area ‘Case, 18 CAB 873 (1954). Recently, in the Seven States Area. Investigation, Docket No. 7454, Order No. E-13254, dated December 5, ' 1958, the Board increased the route miles served by three carriers, Frogtier, Ozark and North Central, bo that ‘they now exceed 51000 route miles. Each of these three carrier@ “by virtue of the decision in the S@ven States Case, is now , certificated to serve unduplicated route miles equal to “more than the combined route mileage served by* North Central and Lake Central at the time exhibits were first submitted in this case in September of 1955 or at the time of the decision in this case in July’ of 1957. Why is the creation of local service carriers o unprecedented gsizes in area cases and route certification cases in. the public interest, whereas such creation is contrary to the public interest in acquisition cases? Why is Frontier allowed to maintain its status as the largest local serv- ice carrier in terms of route miles while North Central is denied. authority to acquire Lake Central because the combined systems would comprise more route miles than our largest local service carrier (Orig. Tr. 4275, 4276)¢ Since the Board has pot endeavored to answer these ques- tions and explain-its inconsistencies, its findings are in- sufficient. As already suggested, the reasons given by the Board were not only inconsistent with its.prior deter- minations, but are fundamentally inconsistent With each _ other. The finding that North Central ‘and Lake Central @ not,serve complementary trade areas makes ludicrous - - the’ conclusion that there would he a tendeney, if the acquisition Were approved, to coacentrate on the long-haul traffic. Moreover; the Board has already imposed a mul- 2 , ‘ | oe titude of restrictions -in North Central’s and Lake Cen. tral’s certificates to prevent just such situations and to insure the protection of local service. wr The U.S. Court of Appeals for the District of Colum.’ bia’ has itself condemned inconsistent, action by adminis- trative tribunals. Hall, et al. v. FCC, 99 U.S.App.D.C. “36, 237 F.2d 567 (1956) ; McKay v. Wahlenmaier, 96 U.S. | . App.D.C.-313, 226 F.2d 35 (1955). Yet in this’ case. it _ disregarded its own: precedents and sanctioned the Board’s unexplained departure frgm_ prior norms with-. out citing a single authority in support of its action. It said (Rec. 566): . “We think that the judgment. of the Board in-this case was not arbitrary and was not a departure from established norms which, would have bound it.” “~ Basically, the Court is condoning. the improper activity ofthe Board and_attributing it to administrative discre- ‘tion. But it was impossible for the Court to.determine _ wifether the Board was exercising :valid administrative | discretion because the Board did not explain its incon- sistency. The Board’s findings were insufficient to allew the Court to properly perform its task of judicial review. « Furthermore, the Court’s ‘findings on: this point were vague, indecisive and inconsistent. It-admits that. the Board is bound by prior norms, but inconsistently holds . that the agency’s discretionary powers,” or “judgment,’’ are so broad as to permit it to make unexplained de- partures from these norms... Ith allows that the Courts ’ nust insure that agencies stay “within the bounds of reason and outside the realm of eaprice,”’ vet it .does not require that the Board state sufficient “reasons” for its inconsistent action ‘here. It -is impossible for peti- tioner to determine just what the Court is holding when -. it seeks to bind the: Civil Aeronautics Board on. prior precedents yet sustains an unexplained departure on: the gxrounds of. discretion. ; eet { - ; _ = 93 «Obviously the lower Court feels. that there should be some explanation for the -Board’s inconsistent action be- - cause it attempts to supply lame reasons of its own. It . says (Ree, 565) that the Board is entitled to depart from its prior norms with regard to “size’? of the - merged systems because “size” is a relatiye term and its im- portance depends upon the cireunftances.” It is these “circumstances” which petitioner. seeks to. discover. if the Board explains these “circumstances” it has explained its departure from prior norms. Ifthe circumstances are . the same in both’cases then the‘ Board’s action is arbi- ° trar} should be reversed. on) gee e Court goes on to say (Rec. 566) that North Cen- tral has-not accurately assayed the holding-of the Board in the Arizona-Monarch Merger Case, supra. It says that the Atizoga-Monarch Case stands for the proposition that “a merger ‘need not have the effect of increasing the ‘ntra-system long hauls.” . Mergers deal with inter- drea problems and certainly would have no effect what- soever on “intra-system long hauls.’’ Furthermore, “feeder’’ carriers are limited by the conditions of their certificates to. the provision of short haul local service. We submit that it is the Court and not petitioner who has not “accurately assayed” the holding of the Arizona- Monarch Case.’ Moreover, no attempt was made to ex- * plain the findings of the Board i in the West Coast-Empire Case, supra, which also support North Central's conten- tion. : The Court said the Board rested its decision in ‘the Arizona-Monarch Case, supra, on other. circumstances than the find\jng that the routes of the companies were not complemeytary. However, as we assay the decision, the Bourd sai plementary iy/irrelevant. The Board has therefore based its decision’ here on a’ consideration, previously jheld_ in the Arizona-Monarch and West Coast-Empire Cases, su- - that whetlier or not the routes are com- . pra, to be irrelevant. When the other ‘basic finding of “unprecedented size” is found inconsistent with other decisions set forth supra, it is evident that both primary reasons for the Board’s decision are based on findings previously decided to be irrelevant. : Even if there were other circumstances sufficient to ‘in- voke the proper use of discretion in the Arizona-Monarci _ . and West Coast-Empire Cases, no such circumstances ex. isted here. There was-no good reason giten which would distingujsh the prior inconsistent Board actions. Bot) primary findings supporting the Board’s decision had been previously found irrelevant in considering consist. ency With the public interest. « a As a practical matter; the Court of Appeals affirmed the decision of the Board when-it did not have sufficient find. | ings before it to permit it to properly perform its task of judicial review. ‘The question of how much effect sdguld be given to ‘prior administrative decisions and ‘actions is an ill-define« ohe. This case represents an excellent ‘opportunity for the Supreme Court to add substange to: its pronounce- “ments in the Secretary of Agriculture Case, supra, that unexplained departures from prior norms constitute in- Sufficient findings... Such a decision by the Court would be ‘invaluable as a guide for all administrative agenciv - and for the litigants ‘that appear before them. CONCLUSION WHEREFORE, petitioner prays that a wit of cer tiorari may issue under the seal of this Honorable Court in this cause directed to the United States Court of Ap- peals for the District. of Columbia Circuit, and upon such - review the judgment .f said Court of Appeals for the District of Columbia Cireuit he vacated, reversed and set aside, and that thix case be remanded to said Court with a ¢ P . P-3) instructions te praved further in accordance with the views of this Court. © ° yb! A. L. Wrerren : _ 1200 Sheraton Building 711 14th Street, N.-W. o Washington 5, DC.- Atlornes lor Petitrones a ‘on @ as : é Dated: April 28, 19597 PROOF OF SERVICE I, Asher Louis Wheeler, the attorney for North Cen tral Aielines, Inc., the petitioner herein, and a member of the Bar of the Supremé Court of ‘the Lonited States, hereby certify that on the 29th day of April, 199% | served eopies) of the foregeing Petition for Certiorar to the Supret th Court of the Pnited States on the sev eral parties thereto as follows: ¥ On the. U ‘nited States, by leaving a cep) the ‘reel at the office of O. D. Ozment, Eis). = pay Gieneral Coun. sel, Litigation and Research, for the Civil Aeronautic. Board, at Room 906 of the Universal Building, Wash ington, D.C. and by mailing ajeopy on a duly addressed envelope, with first class postage prepaid, te the Soaleitor General, Department of Justice, Washington a D.C. * 2. On the Civil Aeronautics Board, by mailing’ a copy. in a duly addressed envelope, with first class postave prepaid, to Franklin M. Stene, Esq., its General Counsel, at the offices of the Board, Washington, D. C..° 3. On the Lake Central Airlines Employee Stockholder Group, and Lake Centra? Airlines, Inc.. intervening’ re- ‘ o spondents, by mailing copies in duly addressed envelopes, . with first class postage prepaid, to their respective at- -torneys of record as follows: Albert F. Grisard, Esq. ° 412 Metropolitan Baak Building <> ~ Washington 5, De. 7 pM : Attorney for the’ Lake Central Employees Stock- holder Group _ . James L. Highsaw, Jr. Esq. _ Mulholland, Robie & Hickey | ~ Tower Buildin aoe ‘ sae Washington, D. (. ; ; . Attorney for Lake Central Airfines, Ine. 4 ‘ /3/ Asher Louis Wheeler ASHER Lovis. WHEELER. 1200 Sheraton Building | Washington 5D. C. ee : Altoney for North Central Airlines, Inc. = April 28, 1959 i Q ¢ \\ a, , 27 APPENDIX er CONSTITUTION OF THE UN NITED STATES, AMENDMENT {V.] No .person shall pe held ‘to answer for a capital, otherwise infamous rime, unléss on a presentinent or indictment of a Grand Jury, except in cases arising in the land or naval forces, or'in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for thé same offense to be twice put “in jeopardy of: life or- limb; nor shall be compelled in any criminal case " be a witness against himself, nor be deprived of life, Cliberty, or property, without due ‘process of law; nor shall-private property be taken for public use, without just compensation. . oe FEDERAL ‘ADMINISTRATIVE PROCEDURE ACT SEC. 5. [5 US:C..§ 1004]. In every case of adjudi- cation required by statute to be determined on the record after oqportunity for an agency hearing, . o * s P . ‘ y \ provide for tlie exclusion of irrevelant, immateri l, or unduly repetitious evidence anid no sanction cone a im. posed or rule or order be ‘issued except upon donsid- eration of the whole: reegrd or such portions thereof, as may be cited by any party and as supported by and in - &ccordance with the reliable, probative, and substantial — |, ‘evidence. Every party shall have the right to’ present his case or defense by oral or documentary evidence, ‘to submit rebuttal evidence, and to conduct such cross-ex- amination as may be required for a full and true disclo- sure of facts. - ) ae ® @ @ ‘@. SEC. 8.. (5 U.S.C. § 1007]. In cases in ‘which a hear. . ing is required to be conducted in conformity with sec. | tion 7— — | pap ° « ° . (b) Submittals and decisions.—Prior ‘to each recom- ‘mended, initial, or tentative decision, or decision upon “agency review of the decision of subordinate officers the . parties shalf* be afforded a reasonable opportunity. to _ submit for the consideration of the officers participating in such decisions (1) proposed findings and cenelusions, or (2) exceptions to the decisions or recommended deci- sions of subordinate officers or to tentative agency deci- sions, and (3) supporting reasons for such exceptions or - proposed findings or conclusions. The record shall show the’ ruling upon each such finding, conclusion, or ex- ception presented. All decisions (including initial, ree- — “ommended, or tentative decisions) shall become a part of the record and include a statement of (1) findings — and conclusions, as well as, the reasons or«basis therefor. upon ali the material issues of fact, law, or discretion « presented on the record: and (2) the appropriate rule, ‘order, sanction, relief, or denial thereof. | ¢ od 4 toe i) SEC. 10. [5 U.S.C. § 1009]. **°* (e) Scope of review.—So far as nécessary to decision | and where presented the. reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or ap- °. - plieability of the terms of any agency action. It. Shall (A) compel agency action unlawfully withheld or un- - reasonably delayed; and (B) hold unlawful and set ‘aside 4 agency action, findings, ‘and conclusions found to be (1) ; _ arbitrary, capricious, an abuse of discretion, or otherwise not iti accordance with law; (2) comtrary to constitutional right, power, privilege; or immunity; (3) in exéess of statutory jurisdiction, authority, or limitations, or short of statutory right; (4) without observance of. procedure -required by .law; (5) unsupported by substantial evidence ‘in any case subject to the requirements of sections 7 d 8 or otherwise reviewed on the record of any agency - hearing provided by statute; or (6). unwarranted by the faéts to the extent that up facts are subject to trial de nove by the reviewing court. In making the forego- : ing determinations the ‘court shall review the whole rec- _ ord or such portions thereof as may be\cited by .any oe party, and due account shall be taken of ‘the rule of _ prejudicial . error. Be ON bad e e- e. > : - , = : . (b} The regulation of air transportation in sich man- -¢ mer as to: recognize and preserve the inherent.advantages of, assure ‘the highest degree of safety in, and foster sound economic conditions’ in, such transportation, and to improve the. relations betweén,. and coordinate trans. portation ‘by, air carriers; 2 teen (¢) The promotion of adequate, economical, and ct- ficient service by air carriers at reasonable charges, with. out unjust discriminations, undue preferences or advan. | tages,’or unfair or destructive competitive practices: Net , (4d) Coinpetition to the extent necessary to assure tle sound develépment .of ‘an air-transportation system prop- erly adapted to the needs of the foreign and domestic . commerce of the United States, of the Postal Service, | and of the national defense; ©» " i . “*. . i es : > (e) The regulation: of air commerce in-such manner as to best promote its development and safety; and (f) The encouragement and development of civil aero- -° nautics. - Nye eee at a ’ 6 e Sd © . SEC. 401. [52 Stat. 987, as amended by 56 Stat. 265, «G1 Stat. 449, 49 U.S.C. 481) | ee ee G $ e re : _(d)(1) The Authority [Board] ‘shall issue’ a certificate. authorizing the whole of any part of the transportation covered by the application, if it finds that. the applican: ix fit, Willing, and able to. perform such transportation properly, ‘and: to conform .to_ the provisions: of this ‘Act and the rules, refulations, and requirements of the Auth- _ My [Boaed] hereunder, and that such transportation j- ‘required by the public convenience and necessity; other- wise’ such application shail be denied. °° 7. . (2) In the. ease of an application for a certificate to ‘engage in temporary’ air _transportation, the Authority [Board} may issue a certificate authorizing the whole or — 3 “te =" se a% 4 . y . . @. - ‘ . “ 4 : ‘ . . . : 7 ext : ° : +S : : oF any part thereof for such limited periods as may be required by the public convenience and necessity, if it finds that the applicant is. fit, willing, and able properly / - to perform -such_ transportation | And to conform to the ‘ provisions of thiX Act and. the rules, régulations, and requirements of the Authority- [Board] hereunder. ' fe is ‘approved by. the Authority [ ae ‘as ie con- sistent -= - public interest. ° ine 408. [52 Stat. 1001, 49 U.S.C. 488] (b) Any person seeking approval of a consolidation, - merger, purchase, lease, operating contract, ‘or acquisi- tion of control, specified ‘in subsection (a) of this sec- tion,. shall present an application to the Authority [Board], and thereupon the -Authority {Board] shall — notify the persons involyed in: ‘the consolidation, merger, "= purchase,. lease, ——. contract; or. aang ieee of con- ity chase, lease, . operating contract, or acquisition of «ontrol will not be consistent with, the public interest or that the conditions of this section will not be fulfilled, it shall by order, lapprove | such consolidation, merger, purchase, lease, operating contract, or acquisition of control, upon . such terms. and conditions as it shall find ‘to be: just and reasonable and with such modifications as it may pre- ‘ ~\ _ seribe : pee, ? aoe ie e e £ . e' 3 oe SEC. 409 [52 Stat. 1002, 49 U.S.C. 489] > r Agger . one hundred and éighty dase after the effective date of ‘this section,’ it shall be unlawful, unless such relation- ° 32 ~ | oF ship shall have been approved by order of the Author. ‘ity [Board] upon due showing, fn the form and manner préscribed by the Authority [Board], that. the public interest will not be adversely affected thereby— (1) For any air carrier to have and retain an officer \ or director who is an officer, director, or member, or who ‘\. as a’ stockholder holds a controlling interest, in any other “person who is, a: common carrier or is engaged in any sees of aeronautics: of (2)FKor any air. carrier, knowingly and’ willfully, 10 have and™“xetain an officer or director who has a repre- sentative or faminee who represents suck officer or dirc- tor as.an officer, director, or member, or as a stockholder holding a controlling™interest; in any other person who Re is a common carrier or i3¥ vaged in any phase of aero- nautics.?% ero 6 bsp Oe PP tet (3) For any person who, is an offiger-or, director of an air ‘carrier: to. hold the position of officér, director, or member, or to be a_ stockholder holding a controlling © Interest, or to Have ‘a representative or rominee who rep, resents such person as an officer, diréetor, or member, or as a stockholder holding a controlling interest, in any other persen who is a common carrier or is engaged. in y, any phase of aeronaitics. _ (4) ‘For any air carric, have and retain © ¥ officer or director who is an “offi, director, or member, or ‘who asa stockholder holds a- controlling interest, in*any ‘person whose principal business, in* purpose or in fact, _js the holding of. stock in,:or control of, any other per- son engaged in any phase of aeronautics; (5) For any air carrier, knowingly and willfullt, to ’ q@liave and retain an officer or‘director who has a repre- _-Seniative or nominee who represents such officer or di- . tector as an officer, director, or. member or as a stock-. | holder: holding ‘a controlling interest, in any person whose * .33 , . principal business, in purpose or in fact, is the holding of stock in, or control of, any other, pergon engaged -in any ‘phase of’ aeronaunes. , ; 6) For ant person who is an ‘dle ag director®f an air carrier to hold the position of officer, director, ¢@r member, or to be a stockholder holding a controlling -in- terest, or to have a representative or nominee whe repre: > | sents ‘such person as an offiver, director, or member, or as a stockholder holding a controlling interest, in any: person whose princi pat business, in purpose or in. fact, is the holding of stock in,.or control of, angoother person - engaged in any phase of aeronautics, . , se . ° ’ ’ ~ © PROCEDURAL REGULATIONS 7 Principhes or PRacTICcr OF rite Civ, . ArRoNAUTICS Boakp § 300.0 Applicability of part. The principles of prac- gies set out-herein to the extent applicable shall govern ‘the felationghip between the Board, its staff, and all other persons, § 300.1 Judicial standards .of practice. ‘In any re spects the @unctions of the Board are similar to those + of a court and parties to cas® befyreét and those whe represent such ‘partie? are expected to. conduct: them- selves with honor and dignity. By the same token, the members of the Board, and those of its employees who participate with the.Board Members. in ‘the determina: “tion of cases upon a reeord, are expected ‘to conduet «' themselves with ‘the same fidelity to. standards of pro- priety that characterize a-court and its staff. The stand- ing and effectiveness.of the Board are in direct relation . to its observance, that of, its staff, and the parties and attoarfeys appearing before ft, of the highest standard- ‘of judicial and protensienet ethics.» . : ‘ : Q »* * 34 . -- . $300.2 Hearing cases; improper influence. It is os. ‘sential in eases to be detérmined after notice and hear. ing and upon'® record that the Board's judicial charac. ter be recognized and protected. In-sffch cases: f (a). It. is improper that there be any private eommu- nication on the metits of tle case to a member. of the Board or. its staff or examiner in the case by an) person, either in private oF public. life, unless provided for by law. . (b) It is: likewise improper that.there be any private communication on the merits of the case to a member ‘if the Board or to .the examiner in the wase by any meni. bers of the Board’s staff who participate in the hearing as witnesses or as counsel. i Rae Ce Tes, Bh . Ae) st is improper that there be any effort by any per. son interested in. the case to sway the judgment of th ‘ Board by attempting to bring pressure or influence ti. bear upon the members of the Bogrd or its staff, or tha: such person or any member of the Board’s staff, di. rectly 6r indirectly, give statements to the press or rad «, by paid advertisements or otherwise, designed to: influ- “ence the Board’s judgment in the case. ; ee e..°*% e UNITED STATES COURT OF APPBALS POR THE DISTRICT OF COLUMBIA cCIMCL YT ; | No. 14261 Nortu Centra Amunes, LXc., PETITIONER . . v. ' Civu. Arroxautics Boary RESPONDENT Lake Centra Arnuyes Emptoyven, Stockuo iver Grove and Lake Cenrear Aruines, [Nc UN TRRVENORS On Petition for Review of an Order of the ‘ Civil Aeronauties Board. ) -_ * ‘ , “ Decided January 29,1959 * Mr. A.-L. Wheeler gnd Mr, Maruin Klitsner of the bar of the Supreme Court of Appeals of Wisewmsin, pro haé _vice, by special leavot Court, for petitioner. Mr. Emory N. Ellis, Jr., alsoventered an appearance for petitioner. Mr. Robert L.‘ Toomey, Attorney, Civil Aeronautics Board, with whom Mr. Franklin. M. Stone, General Coun- el, Civil Aeronautics Board, Mr. John H. Wanner, Asso- ciate Gerieral Counsel, Civil Aeronautics Board, Mr. O. D. Ccment, Axsistant General Counsel, Litigation and Re- -earch, Civii Aeronautics Board, Mr, Ulrich V. Hoffmann, Attorney, Civil Aeronauti¢s ‘Board, and- Mr. Daniel M. Friedman, Attorney, Department of Justice, were on the brief, for respondent. Mr. Morris © hertkor, Attorney, Civil Aeronanti¢s Board, also entered an appearance for respondent: 36 ts Mr. James L. Highsaw, Jr., with whom Messrs. Clar. ence M. Mulholland and Edward J. Hickey, Jr., were on the brief, for ‘intervenor ‘Lake Central Airlines, Inc. Mr. Albert F. Grisard was on the brief for intervenor Lake Central Airlines Employee Stockholder Group. ' Before PRETTY#Ax, Chiéf Judge, and Wieve K. Mu. Ler and Wasuineton, Circuit Judges. Pretryman, Chief Judge: This is an airline acquisition case, here on a, petition to review an order Of. the Civil Aeronautics Board.'’ North Centtal Airlines, Inc. (which for brevity and clarity we shall call merely “North”) sought to acquire a majority of the stock of Lake Central Airlines, Inc. (which we shall call “Lake”). The dispute has been going on for a long time, at Jeast six years, and has many complications and ramifications. We think we need not here go into that background. In. . September, 1952,-North and the Stockholders of Lake . executed a contract whereby North was to acquire 96 per cent of the stock of Lake. ~The contract had to be ap- proved by the Civil Aeronautics Soard: The, Board re. fused to approve it, and év. the case is here. - . - The key concept in this controversy. is “local service’ qr “feeder service”. This is a type of airline operation . Certificated by the Board upon the ‘basic principle: of fashioning 8 local service route system on the needs of a given trade area for short-haul and feeder service" The purpose is to provide short-haul services “geared to Jocal needs and maximum development: of local traffic” and concentrating the carriers’ efforts “ori operations in reasonably compact and homogeneous marketing areas.” This is 4 clear and reasonable concept. It is in contradis tinction \to: trunkline sé@ryice, which operates to carry _ over long ‘distamees witha minimum of stops. North is certified as a feeder or local service ‘carrier 1 Sec.” 408, Civil. Aeronautics Act, 52 StTaT. 1001 (1988). as _ aménded, 49 U.S.C.A. § 488. 3 Ny) 37 _in the area northwest of Chicago-Detroit. It extends north to the Canadian border. and west to Grand Forks- ‘Fargo-Omaha. It has stops at the big cities in the area’ -—such as Milwaukee and Minneapolis-St. Paul—but also at La (Crosse, Winona, Clintonville, Ironwood, Thief + River Falls, Manitowoc, - and many others of like size and character. ee m ~~! . Lake: is certified ax a feeder or local service carrier _ in the area southeast of Chicago-Detroit. It thus adjoins North on the Chicago-Detroit Jine.. It has stops in the big cities in the area—such as Cleveland, Buffalo and Cincin- nati~but also- at Erie, Youngstown, -Mansfield, ‘Lima, Logansport, Zanesville, Kokomo, Terre. Haute, and — of like size and character. : The problem; from the -Board’s point of view, was whether the combination of these two local feeder services into one operation was inconsistent with the public inter- est. The Board has long been of the view that the .two _ areas on either side of. the Chicago-Detroit line are Sepa- “rate marketing areas and the local traffic requirements are dissimilar. It so decided.in 1950 in a case known as the. Parks Investigation Case.* - Traffic tends to flow toward and. into the big cities—especially Chieago—on .. feeder services, but not beyond such places on these serv. ices, The record in the present case discloses, the Board held, that “the trade centers of Chicago and Detroit serve- | as a dividing line between the two areas’ served by North Central and Lake Central, respectively, and that few local | travelers proceed beyond these terminals via the local service routes: involved.” The thrust of the Board's _ Opinion was .that the combination of these two areas into ome Operation, which would then extend from Buffalo- is Pittshurg to Grand Forks-Duluth, would violate the whole a vrinciple of local or feeder service and would clearly im- pinge upon trunkline cértificates. 211 C.A:B. 779. 38 . . ¢ ; The Board found, as we have indicated, that there is: ' jittle \nter-area traffic between the two local feeder route services. It found that the combined area would be too big for the sort of concentrated local homogeny deséred f@ |» cal feeder certificates. In the Board's opinion feeder sery. ice should be centered in the area to be serwed and should be ‘soundly integrated for that purpose. In terms of - route mileage, nurnber of cities served, density of popu lation, and geographical area covered, the combined car. riers would take.on characteristics akin to a trunkline carrier and pose a threat to existing trunklines, ‘The Roard said it wanted loca) feeder carriers *to con centrate on local needs and local traffic problems, and \' feared that the temptation to woo through traffic over the long distances and between the big cities whieh would be within the service area of «a combined North-Lake operation, would be too insistent to be resisted. The Board found that each of these carriers, North and Lak. is in sizable proportions ax a feeder seryicve and each has. sufficient room for development in its own drea. Thr Board disagreed emphatically with the éxaminer in li- view that the combination was necessary to preserve