Petition — National Airlines, Inc. v. Civil Aeronautics Board

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ceieteiliaineieiiasiltie din —

IN THE mash » CLERK,

Supreme Court of the United States

OCTOBER TERM, 1977

No 97-448

DELTA AIR LINES, INC., ET AL.. Petitioners,

CIVIL AERONAUTICS BoarD, Respondent.

PETITION FOR WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

BERT W. REIN

JON PAUGH

ROBERT K. HUFFMAN

1776 K Street, N.W.

Washington, D.C. 20006

EDWIN O. BAILEY, Esq.

1025 Connecticut Ave., N.W.

Washington, D.C. 20036

Coungel for

Naftonal Airlines, Inc.

September 1977

TABLE OF CONTENTS

OPINIONS BELOW

J URISDICTION

QUESTIONS PRESENTED

STATUTES AND REGULATIONS INVOLVED

STATEMENT OF THE CASE

REASONS FOR GRANTING THE WRIT

I. This Court Should Grant Certiorari to Pre-

clude Courts of Appeals From Sustaining

Procedurally Defective Agency Decisions

Because Their Substantive Results Are

Acceptable to the Courts of Appeals

II. Review By This Court Is Also Required to

Preclude the Use of Formal Retention of

Jurisdiction As A Device For Unwar-

ranted Limitation on the Discretion of Ad-

ministrative Agencies

CONCLUSION

Page

10

11

14

18

ii

TABLE OF AUTHORITIES

Page

CASES:

Air Line Pilots Ass’n, Int’l v. CAB, 458 F.2d

846 (D.C. Cir. 1972) Meas hienlcdne: G

American Public Gas Ass’n v. FPC, No. 76-

2000, et al. sci Cir., June 16, 1977) (Slip

Op.) —.. Tih aad adele asta eee ae 17

Braniff Airways, Ine. v. CAB, | 306 F.2d 739

(D.C. Cir. 1962) - subi lei gece

Braniff Airways, Inc. v. CAB, 379 F.2d 453

Sy GG SE ecco Cu 13

Camp v. Pitts, 411 U.S. 138 (1973) ce a

Continental Air Lines v. CAB, 443 F.2d 745

(1971) eM TRIE bg: 11,15

Continental Air Lines, Inc. v. CAB, 519 F.2d

944 (D.C. Cir. 1975) une 11

Delta Air Lines v. CAB, 442 F.2d 730 ) (De.

Cir. 1970) - RES RN eat : 9g

FCC v. Pottsville Sentient Co., 309 U.S.

134 (1940) iceman U1, 13, 16, 17, 18

Fleming v. FCC, 225 F.2d 523 (D.C. Cir. 1955) 17

Ford Motor Co. v. NLRB, 305 U.S. 364 (1939) 17

FPC @. Idaho Power Co., 344 U.S. 17 (1952) 16

FPC v. Transcontinental Gas Pipe Line Corp.,

423 U.S. 326 (1976) a

Kodiak Airways, Inc. v. CAB, 447 F.2d 341

(uae Gan Eva) we

iil

Northwest Airlines, Inc. v. CAB, 589 F.2d 748

CE: GG ID sicvicnnsmniiainisaaniinmane

Portland Cement Ass’n v. Ruckelshaus, 486

F.2d 375 (D.C. Cir. 1973), cert. denied, 417

Se EE UII inichecdnstied ides snnieseaieendanadinmanilacies

SEC v. Chenery Corp., 332 U.S. 194 (1947) _.

Williams v. Washington Metropolitan Area

Transit Comm’n, 415 F.2d 922 (D.C. Cir.

1968), cert. denied, 393 U.S. 1081 (1969) __.

STATUTES:

Administrative Procedure Act, 5 U.S.C. 88 551

et seq.

Section 10(e) (2) (D), 5 U.S.C. § 706(2) (D)

Federal Aviation Act, 49 U.S.C. 88 1301 et seq.

Section 401(d) (2), 49 U.S.C. § 1871(d) (2)

Section 416, 49 U.S.C. § 1886

Section 1006, 49 U.S.C. § 1486 .

ORDERS, REGULATIONS, RULES:

CAB Order 72-8-95 (August 23, 1972)

Domestic Passenger Fare Investigation, Orders

71-4-54 (April 9, 1971) and 71-4-58 _

OD FEN eric nsticcicigutniciomeciagaiaiiieaaaanen

Southern Tier Competitive Nonstop Investiga-

tion, CAB Order 69-7-135 (July 24, 1969) _

14 C.F.R. Part 378a -

Rule 13(d), Rules of U.S. Court of Appeal for

D.C. Cireuit - naan ,

12

15

15

10

iv

TABLE OF APPENDICES

Page

APPENDIX A

Delta Air Lines v. CAB, et al., Nos. 76-1241,

et al. (D.C. Cir., June 23, 1977) (Slip Op.) A-1

APPENDIX B

CAB Order 76-3-93 (March 15, 1976) B-1

APPENDIX C

CAB Order 76-6-120 (June 16, 1976) C-1

APPENDIX D

Order Amending Opinion of June 23, 1977

(D.C. Cir., August 2, 1977) aa D-1

APPENDIX E

Order Amending Judgment of June 23, 1977

(D.C. Cir., August 2, 1977) E-1

APPENDIX F

Order Denying National’s Petition for Rehear-

ing (D.C. Cir., August 2, 1977) F-1

APPENDIX G

Order Denying National’s Petition for Rehear-

ing En Banc (D.C. Cir., August 2, 1977) G-1

APPENDIX H

Order Denying National’s Motion for Stay of

Mandate (D.C. Cir., August 2, 1977) H-1

APPENDIX I

Judgment (D.C. Cir., June 23, 1977) I-1

APPENDIX J

Federal Aviation Act, 49 U.S.C. §§ 1371(d)

(2), 1386, and 1486; Administrative Proce-

dure Act, 5 U.S.C. § 706(2)(D) | J-1

~~

IN THE

Supreme Court of the GQnited States

OCTOBER TERM, 1977

No.

DELTA AIR LINES, INC., ET AL., Petitioners,

Vv.

CIVIL AERONAUTICS BOARD, Respondent.

PETITION FOR WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Petitioner, National Airlines, Inc. (‘National’),

requests that a writ of certiorari issue to review the

judgment of the United States Court of Appeals for

the District of Columbia Circuit in this case.

OPINIONS BELOW

The opinion of the Court of Appeals, which has not

yet been officially reported, appears at Appendix A

hereto. Therein the Court remanded for further lim-

ited proceedings, without vacating, Board Orders 76-

3-93 (March 15, 1976) and 76-6-120 (June 16, 1976)

granting the application of Western Air Lines, Inc.

(‘““‘Western’’) for Miami-Los Angeles nonstop license

authority and denying competing applications, includ-

ing that of Pan American World Airways (‘Pan

American’). The Board’s Orders appear at Appen-

dices B and C. Subsequent orders of the Court of Ap-

2

peals amending the Court’s June 23 opinion and judg-

ment, denying National’s petition for rehearing and

suggestion for rehearing en banc, and denying Na-

tional’s petition for stay of mandate, all entered Au-

gust 2, 1977, appear at Appendices D, E, F, G, and H,

respectively.

JURISDICTION

The judgment of the Court of Appeals, which was

entered on June 23, 1977, appears at Appendix I. The

jurisdiction of this Court is invoked under 28 U.S.C.

§ 1254(1).

QUESTIONS PRESENTED

At the urging of National, the incumbent carrier on

the Miami-Los Angeles route, and Pan American, a

disappointed route applicant, the Court of Appeals

found that the Civil Aeronautics Board’s issuance of

a Miami-Los Angeles non-stop license to Western was

tainted by substantial procedural shortcomings. Spe-

cifically, the Court of Appeals rejected the Board’s

efforts to update selectively the stale record before it

without any opportunity for adversarial exploration

of the post-record considerations upon which the

Board’s licensing decision was premised.

Despite this finding, the Court of Appeals refused

to set aside Western’s license and attempted to limit

remand proceedings to “adversarial exploration” of

the ‘‘recent developmenis considered by the Board in

reaching its decision to prefer Western over Pan Amer-

ican.” Appendix A at 42. The Court’s mandate may

thus preclude the Board from reexamining, under

proper procedures, ithe issue whether the public con-

venience and necessity requires additional Miami-Los

3

Angeles service, from reconsidering the applications

of carriers other than Western and Pan American,*

or even from considering the full range of relevant de-

cisional factors which might distinguish Western from

Pan American. Apparently, this unique mandate was

shaped by the Court of Appeals’ own conclusion that

additional service was warranted on the route and that

the Board proceedings were already too protracted.

Regardless of the substantive merit of the Court of

Appeal’s position, its refusal to set aside Western’s

tainted license and its efforts to curtail the Board’s

public interest mandate on remand, in derogation of

this Court’s decisions, raise two critical issues:

1. Whether the Court of Appeals Can Refuse to Set

Aside A Procedurally Defective CAB Decision Solely

Because the Result Is Acceptable to the Court?

2. Whether the Court of Appeals, By a Formal Re-

tention of Jurisdiction, Can Attempt to Narrow the

Scope of the Civil Aeronautics Board’s Public Interest

Discretion on Remand?

STATUTES AND REGULATIONS INVOLVED

Pertinent provisions of the Federal Aviation Act, 49

U.S.C. § 1301 et seg. and the Administrative Proce-

dure Act, 5 U.S.C. § 551 et seg., appear at Appendix J.

STATEMENT OF THE CASE

A. The Proceedings Leading to Western's Certification by the

Board

In 1972, the Board initiated a proceeding to consider

whether the public convenience and necessity required

* American Airlines, Continental Air Lines, Delta Air Lines, and

Northwest Airlines were also applicants.

4

nonstop service between Miami and Los Angeles in ad-

dition to that provided by National and, if so, which

carrier should provide it. Order 72-8-95 (August 23,

1972).* By June, 1973, an Administrative Law Judge

rendered an initial decision proposing to license Pan

American to provide service in competition with Na-

tional.

Shortly after the June 1973 initial decision, the

Board indicated its intention to review. Final argu-

ment, however, was not heard until early 1975 to per-

mit, inter alia, consideration of environmental impact.

The Board’s decision ultimately supported the Law

Judge’s conclusion that additional service was required

but selected Western rather than Pan American to

provide it. That decision did not issue until March 13,

1976.

B. Significant Interim Developments

The record upon which the Board acted was closed

at the termination of hearings before the Administra-

tive Law Judge in early 1973. That record projected

1974 operations under various licensing proposals us-

ing available 1971 data. The Law Judge’s conclusions

were based squarely on these 1974 projections which

persuaded him that market growth and relatively low

“break-even” load factors would permit mutually prof-

itable competitive services in 1974.

*In 1969, as part of a wide-ranging route proceeding, the Board

had certificated Northeast Airlines (““Northeast”) to provide com-

petitive nonstop service on the Miami-Los Angeles route in com-

petition with National. Southern Tier Competitive Nonstop Investi-

gation, Order 69-7-135 (July 24, 1969). Northeast’s weakened

financial condition precipitated its merger into Delta Air Lines

(“Delta”), at which time the Board suspended its Miami-Los

Angeles authority. The present proceedings were initiated one

month after the suspension of Northeast’s authority.

5

When the Board acted, officially noticeable 1974

traffic data demonstrated that the Law Judge had been

excessively optimistic. Thus, while the judge had pre-

dicted that the market would grow to 261,000 passen-

gers in 1974, actual traffic reflected by the Board’s sta-

tistics was only 227,350, a rate of market growth closer

to three rather than the predicted eleven per cent. This

shortfall reflected the debilitating effect of the com-

bined forces of inflation and recession on the market

even without the diversionary effects of new Board

initiatives in the nonstop charter area.*

Significant post-hearing events also undercut the

record concerning the potential profitability of com-

petitive operations. The most obvious change was the

unprecedented increase in jet fuel costs, 200° on the

average, between hearing and decision. Inflationary

increases, far in excess of any anticipated by the par-

ties, also occurred in all other areas of carrier costs.

While there had been some compensatory increases in

per passenger revenue yields, these increases were not

* Thus, in 1975, the Board authorized new One-Stop-Inclusive

Tour Charters (“OTC’s”), 14 C.F.R. Part 378a, which permitted

the marketing of transportation and accommodation packages to the

public at large with minimal restrictions, and in 1976 authorized

Advance Booking Charters (““ABC’s”), CAB Regulation SPR-110,

41 Fed. Reg. 37763 (1976), which for the first time made air charter

travel (without related ground arrangements) available to the pub-

lic. Substantial scheduled and supplemental carriers, such as United

Airlines and World Airways, had begun to offer OTC packages in

the Miami-Los Angeles market and are also likely to offer ABC

service. These new alternatives to scheduled nonstop service are

obviously likely to prove attractive to the 65 percent discretionary

travel segment of the Miami-Los Angeles market but the record

was closed before any evidence could be presented on their impact

on scheduled traffic growth and the market stimulation likely from

new services.

6

proportional with the cost increases on the Miami-Los

Angeles route. Thus, the record provided no founda-

tion for assessing “break-even” load factors or the

particular profitability of any post-1974 operations

even on the basis of known or agreed traffic flows.

Attempts by several of the parties to reopen the

record on the basis of these developments were rejected

by the Board. Continental Air Lines moved to secure

reopening in the fall of 1974; National made a similar

motion in January, 1976; and Pan American filed a

motion to reopen in March of 1976. The Board de-

ferred ruling on all three motions until its decision on

the merits.

C. The Board’s Decision

In reaching its decision to certificate Western, the

Board abandoned the traffic and revenue projections

made by the Administrative Law Judge, which it con-

ceded were “largely outstripped by the passage of time

and changed circumstances,” Appendix B at 17, and

constructed a new set of traffic projections for a new

forecast year, 1977. Growth and market stimulation

factors, as well as the percentage of the market

likely to utilize scheduled nonstop service, were deter-

mined without further input from the parties with the

resulting traffic forecast arising from a mixture of

some record data, certain officially noticeable post-

hearing traffic data for 1974, and other extra-record

factors and theories selected by the Board.

As to the profitability of the route in 1977, the Board

had no actual route cost data for years subsequent to

1971 and no projections from the parties for any year

7

after 1974. Accordingly, the Board reached a conclu-

sion of mutual profitability in 1977 by comparing its

own predicted load factors in 1977 with the break-even

load factors forecast by the parties in 1973.*

Turning to its reversal of the Law Judge’s selection

of Pan American, the Board once again relied on its

own projection of 1977 circumstances to determine

that ““‘Western will be able to provide more significant

[beyond-segment passenger traffic] benefits than any

other applicant.” Appendix B at 29.** In so doing,

the Board unilaterally attempted to assess Western’s

1977 traffic as well as the consequences of certain post-

record changes in Pan American’s route structure and

operating patterns. Jd. at 25-42.

Promptly after the Board’s decision in this matter,

National, Pan American and several other parties sub-

mitted petitions for reconsideration and rehearing to

the Board. In its petition, National pointed to specific

areas in which, on rehearing, it would adduce evidence

demonstrating that the 1977 Miami-Los Angeles mar-

ket could not support profitable operations by two car-

riers. All of these requests were rejected by the Board.

* The narrow profit margin anticipated by the Board on the basis

of this inadequate data is suggested by its rejection of the dis-

senting members’ proposal that Pan American be certificated to

provide one flight per day on a test basis. The majority of the

Board concluded that five flights per day, rather than the four to

be provided by Western and National, would push load factors to

dangerously low levels. In sum, even on the basis of lower record

cost data, the Board thought the profitability of competitive service

was a close question.

** A beyond-segment passenger is one who utilizes Miami-Los

Angeles service for a trip which begins and/or ends past Miami

or Los Angeles.

D. The Decision Below

Several parties to the Board proceedings sought re-

view of Western’s license under 49 U.S.C. § 1486. In

its June 23, 1977 opinion, the Court of Appeals found

the Board to have erred both in the selective manner in

which it updated the record and in its unexplained de-

partures from prior carrier selection policy guidelirfes.

More specifically, the Court found the Board’s ma-

nipulation of the record to have violated the basic prin-

ciple enunciated in prior CAB review that “when an

agency chooses to update an administrative record, it

must proceed in a manner fair to all concerned.” Ap-

pendix A at 42. However, despite the fact that the

Board’s selective updating focused primarily on the

issue of the need for competition, the Court addressed

only those aspects of the updating which pertained to

the carrier selection issue and, more particularly, to

the choice between Pan American and Western.

Thus, the Court was particularly critical of the

Board’s unquestioning acceptance of the Administra-

tive Law Judge’s generous projections for Western’s

beyond-segment traffic in view of its rejection, on the

basis of current data, of the greater beyond-segment

traffic which the Administrative Law Judge estimated

Pan American would carry. The Court did not con-

sider the impact of the Board’s irregularities on the

more basic issue of the forecast of market size, how-

ever, and the only reference made to National’s argu-

ments was a footnote stating, ““We do not believe...

that National was injured in any way by the Board’s

refusal to permit participation by the parties” and

that ‘National has not drawn our attention to any

factors which indicate that procedural shortcomings

caused the Board to ignore evidence suggesting a con-

9

trary outcome on the need for competition issue.”’ Id.

at 29, n.15.*

Considering the need to correct the errors of law it

had detected, the Court of Appeals held that “where

the Board’s seemingly inconsistent policy posture is

combined with Pan American’s credible attacks on the

Board’s selective updating technique, we are convinced

that supplementation of the record is necessary to as-

sure fairness to the competing applicants.” Jd. at 40.

By analogy to its previous decision in Delta Air Lines,

Inc. v. CAB, 442 F.2d 730 (1970), the Court pointed

out that “where the delay is long, the case close, and

the intervening events significant, participation by in-

terested parties may well be indispensable.” Jd. at 42.

In contrast with the broad statement of its holding,

however, the Court appeared to limit proceedings on

remand of the case to a hearing on “the recent develop-

ments considered by the Board in reaching its decision

to prefer Western over Pan American” and.limited the

Board to “reexamin[ing] that decision in light of the

record so produced.” Jd. at 42 (emphasis added). In

addition, notwithstanding the Board’s errors of law,

the Court summarily decided that “the Board’s 1976

orders will not be vacated, and service by Western on

* Similarly, while the Court was critical of the Board’s un-

explained departure from prior policies, it discussed in its opinion

only the instance of such conduct which involved Pan American,

i.e., the Board’s failure to explain why beyond-segment traffic was

critical to this licensing decision when it had declared, in an earlier

phase of the proceeding in 1969, that such traffic was of little con-

sequence in transcontinental route determinations. The more seri-

ous instance of Board inconsistency, in criticizing National for

failing to provide excess capacity which would have violated the

Board’s 55 percent load factor standard announced in the Domestic

Passenger Fare Investigation, Orders 71-4-54 (April 9, 1971) and

71-4-58 (April 6, 1971), was never addressed by the Court.

10

the Miami-Los Angeles route will not be suspended.”

Id.

National petitioned the Court for rehearing on July

7, 1977. National vigorously protested the Court’s

determination that National had not been injured by

the Board’s procedural shortcomings and contended

that the Court’s disposition of the case was inconsist-

ent with its holding and threatened to prejudice the

Board’s ability to exercise its permanent and interim

licensing discretion. On August 2, 1977, the Court en-

tered separate orders rejecting National’s petition for

rehearing and amending, sua sponte, the June 23 opin-

ion and judgment by changing the phrase “remand the

case” to “remand the record” wherever it appeared in

the opinion and judgment.* Under the rules of the

United States Court of Appeals for the District of Co-

lumbia Circuit, the latter language retains jurisdiction

in the Court pending completion of the remanded pro-

ceeding before the agency. Rule 13(d), Rules of U.S.

Court of Appeals for D.C. Circuit.

REASONS FOR GRANTING THE WRIT

Plenary review of the Court of Appeals’ decision by

this Court is necessary to avoid the development of a

* At the same time it filed its petition for rehearing, National also

filed a suggestion for rehearing en banc and a petition for stay of

mandate pending disposition thereof, both of which were denied

on August 2, 1977. The Court of Appeals’ attitude toward National

was clearly reflected in its Stay Order, which stated:

“The Court is of the view that in all probability denial of a

stay will not harm National since the Court’s order, even if

not stayed, does not remove Western’s operating authority dur-

ing the pendency of the remand proceeding, and thus National

will not, by the denial of the stay, recapture the monopoly

position it enjoyed prior to the issuance of the Board’s order.”

Appendix H at 1.

11

pernicious doctrine of administrative review which

would permit courts of appeals to ignore procedural

defects in agency actions whenever the agency result

was satisfactory to the reviewing court. Moreover,

this Court must act to reform the abberational man-

date of the Court of Appeals which utilizes formal re-

tention of jurisdiction as a ploy to limit the bounds of

agency remand discretion contrary to a line of this

Court’s decisions commencing with FCC v. Pottsville

Broadcasting Co., 309 U.S. 134 (1940).

L This Court Should Grant Certiorari To Preclude Courts of Ap-

peals From Sustaining Procedurally Defective Agency De

cisions Because Their Substantive Results Are Acceptable To

the Courts of Appeals.

As clearly set forth in Section 10 of the Adminis-

trative Procedure Act, a “reviewing court shall... (2)

hold unlawful and set aside agency action, findings

and conclusions found to be... (D) without observance

of procedure required by law.” 5 U.S.C. § 706(2) (D).

That rule heretofore consistently has been followed in

review of Civil Aeronautics Board licensing proceed-

ings by courts of appeals which have simply set aside

the Board order and remanded defective licensing cases

for further proceedings by the Board. See, e.g., North-

west Airlines, Inc. v. CAB, 539 F.2d 748 (D.C. Cir.

1976) ; Continental Air Lines, Inc. v. CAB, 519 F.2d

944 (D.C. Cir. 1975); Continental Air Lines, Inc. v.

CAB, 443 F.2d 745 (D.C. Cir. 1971) ; Kodiak Airways,

Inc. v. CAB, 447 F.2d 341 (D.C. Cir. 1971); Braniff

Airways, Inc. v. CAB, 306 F.2d 739 (D.C. Cir. 1962).

Indeed, the Court of Appeals for the District of Colum-

bia Circuit has itself stated that when it “cannot es-

cape the conclusion” that the agency erred in reaching

its decision, the erroneous order “‘must be set aside.”

12

Williams v. Washington Metropolitan Transit Comm'n,

415 F.2d 922, 939 (D.C. Cir. 1968), cert. denied, 393

U.S. 1081 (1969).

In this case, the Court of Appeals was compelled to

recognize that the Board’s selective, non-adversarial

updating of the record was a substantial procedural

shortcoming. It was also inescapable that the selective

updating technique was applied by the Board both in

determining whether any additional Miami-Los An-

geles service was required and in selecting Western

over Pan American.* Moreover, National had raised

the selective updating issue before the Board and had

requested reopening of the record so that it could ad-

versarially address significant post-record develop-

ments bearing on the profitability of competitive serv-

ice. **

Nevertheless, the Court of Appeals attempted to

brush aside National’s arguments because, in its view,

National was not “injured in any way” by the Board’s

procedural shortcomings. Per the Court: “National

has not drawn our attention to any factors which in-

dicate that procedural shortcomings caused the Board

to ignore evidence suggesting a contrary outcome on

* Thus, National had shown that the Board, in concluding that

additional service was needed, had used selected post-hearing data

without giving the parties a chance to controvert or supplement

that data (for example, the Board’s independent analysis of post-

record traffic trends and national economic developments in sup-

port of its traffic growth projections) ar.d had ignored post-hearing

data inconsistent with its decision (for example, the Board’s re-

fusal to consider the dramatic post-record increases in carrier costs

in connection with its assessment of the profitability of additional

service). Brief of Petitioner National Airlines, Inc., August 12,

1976, at 31-44.

** See Petition of National Airlines, Inc. for Reconsideration,

Reopening, Rehearing and Reargument, April 5, 1976.

ef

13

the need for competition issue.” Appendix A at 29,

n.15.

The Court below gave no indication how it determined

that the Board would not have been influenced by the

evidence which National had been precluded from pre-

senting to the Board. Indeed, the Court’s own state-

ment demonstrates that National simply had failed

to persuade the Court that a different substantive con-

clusion on competitive service needs was appropriate.

Not only was National unaware that it was obli-

gated to argue the substantive issue to the Court,

but the Court’s intrusion into the area of substantive

Civil Aeronautics Board discretion was inconsistent

with its own precedents as well as the limited discre-

tionary role prescribed for reviewing courts in SEC v.

Chenery Corp., 332 U.S. 194 (1947). In Braniff Air

ways, Inc. v. CAB, 379 F.2d. 453, 465-66 (D.C. Cir.

1967), the District of Columbia Circuit recognized

that the question “whether the agency would have

reached the same result if it had not made... er-

roneous findings” was a “type of issue on which we

think it is appropriate to insist on further guidance

from the agency.”

Unless the decision below is reviewed and reversed

by this Court, the District of Columbia Circuit will

have breached the “vital differentiations between the

functions of judicial and administrative tribunals”

in a particularly egregious way. FCC v. Pottsville

Broadcasting Co., 309 U.S. 134, 144 (1940). -Courts

of appeals will have assumed the discretionary au-

thority to pass on the merits of the position of any

party challenging procedural defects in agency pro-

ceedings on the thesis that a party cannot be “injured”

0 ae E7~~_e Ew

14

unless, in the court’s view, it should prevail on the

merits.

In a recent reversal of a District of Columbia Cir-

cuit decision, this Court instructed that: “If the de-

cision of the agency ‘is not sustainable on the admin-

istrative record made, then the . . . decision must be

vacated and the matter remanded ... for further con-

sideration.’”’ FPC v. Transcontinental Gas Pipe Line

Corp., 423 U.S. 326, 331 (1976) (per curiam) citing

Camp v. Pitts, 411 U.S. 138, 142 (1973) ). The District

of Columbia Circuit has ignored that admonition by

refusing to vacate Western’s license premised on an

improperly updated record simply because it disagrees

with National’s substantive position. Certiorari is

urgently required to overturn this most troublesome

precedent.

Il. Review By This Court Is Also Required To Preclude the Use

of Formal Retention of Jurisdiction As A Device For Un-

warranted Limitation on the Discretion of Administrative

Agencies.

Because the Court below was obviously more sym-

pathetic to the substantive position of Pan American

than National, it absolved the Board of its procedural

irregularities on the need for competition issue and

only remanded “the record for adversarial exploration

of the recent developments considered by the Board in

reaching its decision to prefer Western over Pan

American.” Appendix A at 42.*

By this limited mandate, the Court of Appeals ef-

fectively certificated Western to provide interim ser-

* The word “case” was changed to “record” by the Court’s Order

of August 2, 1977. Appendix D.

2. &

15

vice on the Miami-Los Angeles route pending further

Board decision, effectively precluded the Board from

reconsidering the competitive need issue in light of

post-record developments.* and effectively prevented

the Board from choosing any other applicant beside

Western or Pan American regardless of overall public

interest considerations. Each of these actions unduly

infringed the Board’s public interest responsibilities

as spelled out in this Court’s decisions limiting judi-

cial control of agency remand proceedings. The Court

of Appeals’ effort to justify these limitations by re-

taining jurisdiction of the appeal distorts the concept

of retained jurisdiction and would render it a vehicle

for a significant shift of agency discretion to the courts

of appeals.

First, Sections 401(d)(2) and 416 of the Federal

Aviation Act, 49 U.S.C. §§ 1871(d)(2), and 1386, con-

fer on the Board exclusive interim licensing authority

adequate to meet any public need for interim service.

Prior to this case, the Court of Appeals had consist-

ently deferred to that authority. See, e.g., Air Line

Pilots Ass’n, Int’l v. CAB, 458 F.2d 846 (D.C. Cir.

1972) ; Continental Air Lines, Inc. v. CAB, 443 F.2d

745 (D.C. Cir. 1971); Kodiak Airways, Inc. v. CAB,

447 F.2d 341 (D.C. Cir. 1971); Braniff Airways, Inc.

v. CAB, 306 F.2d 739 (D.C. Cir. 1962). In fact,

the Court below had recognized such interim service

*The Board might well wish to weigh the competitive need

issue in light of Western's actual Miami-Los Angeles experience

which has been a substantial and continuing loss record (see Avia-

tion Daily, June 7, 1977, p. 206), coupled with actual market load

factors well below the Board’s predicted 40-45 percent range for

1977 (data at Appendix B to National's Petition for Rehearing

and Suggestion for Rehearing En Banc).

16

as a matter properly within the Board’s discretion

even where the order under review was not set aside.

Air Line Pilots Ass’n, Int'l v. CAB, supra.

Second, the question of need for competitive service

is undoubtedly one which the Board must resolve on

the basis of public interest considerations. The Court’s

attempt to preclude further review of this issue by the

Board in this licensing proceeding is contrary to this

Court’s opinion in FPC v. Transcontinental Gas Pipe

Line Corp., 423 U.S. 326 (1975). In Transcontinental

Gas, the Court of Appeals found FPC findings insuf-

ficient to support a curtailment order and sought to

require the FPC to compile further evidence for sub-

mission to the Court of Appeals. This Court vacated

the Court of Appeals’ order because it usurped the

FPC’s authority “to decide how to develop the needed

evidence and how its prior decision should be modified

in light of such evidence. ...”” 423 U.S. at 123. See also

FPC v. Idaho Power Co., 344 U.S. 17 (1952) (where

court struck improper license condition, it could not

order issuance of license without further administra-

tive proceeding).

Third, the Court of Appeals’ attempt to limit the

Board’s carrier selection choice to Western or Pan

American flatly contradicts the teaching of FCC v.

Pottsville Broadcasting Co., 309 U.S. 134 (1940). In

Pottsville, this Court held that a reviewing court could

not prevent the Federal Communications Commission

from consolidating a remanded licensing application

with all other pending applications even though two of

the consolidated applications were filed after the erron-

eous denial of the remanded application. 309 U.S. at

145. Similarly, the Court of Appeals should not have

attempted to preclude the Board from considering

-

17

all applicants for Miami-Los Angeles route authority

on remand.*

The Court of Appeals’ belated modification of the

language of its remand to effect a retention of judicial

jurisdiction cannot be used to justify these improper

limits on Board discretion. While a court of appeals

may, in certain circumstances, choose to remand a case

or record without setting aside the agency’s decision,

see, e.g., Ford Motor Co. v. NLRB, 305 U.S. 364 (1939),

this power has been described as one which enables

the court “to perform its task of providing ‘meaning-

ful judicial review. ...’”’ American Public Gas Ass’n

v. FPC, No. 76-2000, et al., (D.C. Cir., June 16, 1977),

Slip Op. at 26, n.14. Accordingly, its use previously

has been confined to instances in which the agency

record was insufficient to permit review of the agency

decision, see. e.g., Air Line Pilots Ass’n, Int'l v. CAB,

458 F.2d 846 (D.C. Cir. 1972), where further proceed-

ings were necessary to aid the court in reviewing com-

plex technical issues, Portland Cement Ass’n v. Ruck-

elshaus, 486 F.2d 375 (D.C. Cir. 1973), cert. denied

417 U.S. 921 (1974) or where it appeared the agency

should be permitted to consider developments occur-

ring subsequent to its order, see, e.g., Fleming v. FCC,

225 F.2d 523 (D.C. Cir. 1955).

In sum, the Court of Appeals’ attempt to bring the

case to a rapid conclusion by limiting the scope of

remand proceedings was clearly erroneous. Review

by this Court is essential to vindicate this Court’s

* Indeed, the Court below went further than the offending court

in Pottsville by apparently limiting the factors to be considered

in the Pan American/Western choice to those “recent developments”

previously considered by the Board. Clearly, the Board should not

be estopped from a comprehensive reconsideration of all selection

factors.

es ee

18

earlier precedents and to prevent a formal retention

of jurisdiction from becoming a vehicle for a massive

shift of power between court and agency.

CONCLUSION

The manner in which the Court of Appeals disposed

of the petitions for review of the Board’s orders in

this case raises a new threat to the proper scope of

judicial vis-a-vis agency authority established by this

Court in Pottsville and a long line of subsequent cases.

In view of the seriousness of the Court of Appeals’

intrusion into protected areas of agency discretion

and the use of a new procedural guise, retention of

jurisdiction and remand of the record, to justify this

intrusion, this Court should grant certiorari and set

this case for plenary hearing.

Respectfully submitted,

BERT W. REIN

JON PAUGH

ROBERT K. HUFFMAN

KIRKLAND, ELLIS & ROWE

1776 K Street, N.W.

Washington, D.C. 20006

(202) 857-5000

EDWIN O. BAILEY, Esq.

Associate General Counsel

National Airlines, Inc.

1025 Connecticut Ave., N.W.

Washington, D.C. 20036

(202) 223-3750

Attorneys for Petitioner

National Airlines, Inc.

September 21, 1977

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