Petition — NATIONAL ASSOCIATION OF REGULATORY COMMISSIONERS v. CIVIL AERONAUTICS BOARD (Nos. 78-447, 78-417)

IN THE

Supreme Court of the United States

October Term, 1978

No. €@8-447

NATIONAL ASSOCIATION OF

REGULATORY UTILITY COMMISSIONERS,

Petitioner,

Vv.

CIVIL AERONAUTICS BOARD,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

September 18, 1978

PAUL RODGERS

General Counsel

CHARLES A. SCHNEIDER

Assistant General Counsel

WILLIAM R. NUSBAUM

Deputy Assistant General Counsel

National Association of

Regulatory Utility Commissioners

1102 ICC Building

Post Office Box 684

Washington, D.C. 20044

Counsel for Petitioner

LN, FANS TIE LS I SRE MG OES RS

CASILLAS PRESS, INC.—1717 K Street, N.W.—Washington, 0.C.—223-1220

(i)

TABLE OF CONTENTS

—_—

es a inns Samad hon ee av en seneesee meade 1

PE iia Mba We anee ena ee ences vadecessnenheeb in 2

EE eo dnc ces Ah iweccscaewnsevenees 2

STATUTORY PROVISIONS INVOLVED .........2ccccceee 2

STATEMENT OF THECASE ...... hua ba ben hone treats 3

REASONS FOR GRANTING CERTIORARI ................- 7

I. The Lower Court Has Fundamentally Misconstrued

The Federal Aviation Act In Total Disregard Of Its

Plain Language And Accepted Interpretation Thus

Creating A Very Important Question of Federal

Law Which Must Be Settled By This Court.............. 9

Il. The Court Of Appeals Has Rendered A Decision Of

First Impression Which Misapplies The Shreveport

Doctrine And Misconstrues The Federal Aviation

Mace s AE RRS OA ARS SRKESOEES LO SERA SHER bE SKS 11

Ill. The Ruling Below Is In Conflict With Decisions Of

This Court Holding That Preemption Is A Remedy

NUS 6c david dees ah beenecnee nied poses 16

em SET ETT T TEEETL LET CLE T CT Te 22

(ii)

TABLE OF AUTHORITIES

Cases: Page

Arkansas Railroad Commission vy. Chicago,

R.I. & P.R. Co., 274 U.S. 597, 71 L.Ed. 1224,

SPEED Ao eke SPAR REEN EAU beh ecb iene secone st 19

Bacon vy. Illinois, 227 U.S. 504, 47 L.Ed. 615,

33 S.Ct. 299 (1913) ..2..... Deg OS A oa 21

Brown vy. Houston, 114 U.S. 622, 29 L.Ed. 257,

SR I hr te ey oe ath ee thoes w .> 21

Cuminetti vy. United States, 242 U.S. 470,

Se ee ee Se SER TD en oa e'decdednees anaes Se 14

Commonwealth of Virginia vy. CAB, 498 F.2d 129,

SE eC cached Crh ado. verter esabae cb ae anes > 6 12, 13

Cooley y. Board of Wardens, 53 U.S. (12 How.) 299,

| Ee res Fre ee ee ee ee 16

Florida Avocado Growers vy. Paul, 373 U.S. 132,

a ee ee, SEE o's 5b bs ob oc wb owes aes be bce 8

Florida vy. United States, 282 U.S. 194,

ee ge EE om ob oom wine o's cv oe Cae aoe 19

Head v. New Mexico Board, 374 U.S. 424,

BO Le. BE SRS, SS SAU, ATP CRIORD ok ce wc ce cee scwwes 8, 16

Houston and Texas Ry. y. United States, 234 U.S. 342,

58 L.Ed. 1341, 34 S.Ct. 833 (1914) [the Shreveport

NE beak Rohs vp RAO a ee eee cea bas 6 keh o 98 passim

North Carolina vy. United States, 325 U.S. 507,

Be Be Bee ee. errr 14, 18, 19

People vy. Western Air Lines, lic., 268 P.2d 723

(Calif. 1954), appeal dismissed for want of

a substantial federal question, Western Air

Lines vy. California, 348 U.S. 859, 99 L.Ed. 677,

pe | PPP Per eevee L ET TT ee ee ee 7, 8, 10

(iii)

ph

Savage v.Jones, 225 U.S. 501, 56 L.Ed. 1182,

RL so oak 0 Uae MERE Cah 05 6 pe ehh ne eee s 16

Schwartz v. Texas, 344 U.S. 199, 97 L.Ed. 231,

Fe A CEE Soe C4 Oe HATES ce CK OO eh pees oe 14, 16

Susquehanna Coal Co. vy. City of South Amboy,

228 U.S. 665, 57 L.Ed. 1015, 33 S.Ct. 712

ai has Vatnee yeaa weeds OF Ka Koso 40 meee eeene 21

Texas Aeronautics Commission v. Braniff Airways, Inc.,

454 S.W.2d 199, cert. denied, 400 U.S. 943,

BF Ee eg Fe De CPEMEOTEE 6c else cece vececesscenee 10

Texas International Airlines, Inc. vy. CAB,

SFP ene Re BUTE 6 ick Skee dec swtodeusucds 8, 10

Transcontinental Bus System v. CAB, 383 F.2d 466

Te ae en re Sea ee eee 13

TV Pix, Inc. v. Taylor, 304 F.Supp. 459 (D. Nevada,

1968) aff'd 396 U.S. 556, 24 L.Ed.2d 746,90

Re See eT eS Tee ee TET e Tes 16

Administrative Decisions:

Domestic Passenger Fare Investigation, CAB Dockets 21866-4;

21866-9; Part 399-Statement of General Policies,

Dockets 31290, 30891. Final Order (August 25, 1978) ......... 20

Interstate and Intrastate Fares in California and

Texas Markets, CAB:

Order of Investigation, 72-9-90 (September 25, 1972)........... 4

Initial Decision of Administrative Lav Judge

William H. Dapper (April 23, 1974) ......... 0. cece eee eeee 4

Order Granting Discretionary Review, 75-3-2

ee eC L eee ieee else bccn d i000 660 e008 06 5

Opinion and Order 76-7-23 (July 7, 1976) ........--2005- passim

ge Ee, rere Pee eee eee eee ee ee cre 8

(iv)

Page

Order on Reconsideration, 76-10-138 (October 29,

Pb hid 6d bce oo chk Ore bSPuRe or ee ReGen 6

Order Granting Partial Stay, 77-1-137 F

CT FD 0 odcinek eS encgeivigssnied es tri gewes 6

Statutes:

Federal Aviation Act of 1958, 49 U.S.C.

ee SRPTETECL OCTET Tro ee passim

Be Pere err te ee 7, 9,12

REED 6-0. 6.0 v.00 cbc veo echt us-elleed ae Geet ee 7,9, 14

DR von ci vcvccsadvigesancduvetsaun ease saben 7

RRs b cc cccdadsveecband as ¢heus ol wena tne een 7

UME “web veceeusevhsh css acsink pesos sega nee 7

a ern ery ees rn) tk 7,9

AST v.ci0.)) oan > adeinees bus ss suka shee 10

2: errreerrrrrrrT Tere. eer

OE pki eb bN 0c netde eo eevekien by peepee saa ean 7

Interstate Commerce Act, 49 U.S.C.

SOE OM, 5.0.0 v.0.0¢.00 gine 40 cee e kes Shae Eee 2

Mids ar ateas mie keeh beh eens beee eae Cees 13,14

RUE sho ks nwele hae Lend ites bine eee eee 18

Judiciary and Judicial Procedure Act, 28 U.S.C.

Be | eRe ee ee erent & rier Sate ee 2

Miscellaneous:

“The CAB California-Texas Fare Case: An Intrastate

Stopover Takeover?”’, 42 Journal of Air Law and

Comsmnarcs 675 Galt 8977) xc gan 0 in Ci be 50 ba ccindabae ee 21

Report of the Federal Aviation Commission, Sen. Doc.

No. 15, 74th Cong., Ist Sess. January 30,1935) .............. 11

Lea-Bailey Aviation Bill, H.R. 1012, S. 246,

FN hs nh eae cha hos-nsavns rene des esau ae 11

(v)

Page

Revised Form of Lea-Bailey Aviation Bill,

ES Le eee 11

es Se, FNS i ccc cecsccccececece 11

SUOUCS Brey ees I, PONE vce cdeeecedesceces 11

EP a ick ace weccccrccssisonces 11

Johnson Bill, S. 541, 79th Cong. ...... ene tees eee reer 11

Wobveston Hii, F1.0: 2337, GOI Comg. 2.2... cece c cc cccccoce 11

tees sve cower eeeredoeen 11

POR Bs ie OO a so ct cece cecvcccessvess 11

ee Lt eee eee eee reer ee eer eee ee 11

National Association of Regulatory Utility

Commissioners Annual Proceedings, 1944-1950 ..........244. 11

IN THE

Supreme Court of the United States

October Term, 1978

No.

NATIONAL ASSOCIATION OF

REGULATORY UTILITY COMMISSIONERS,

Petitioner,

v.

CIVIL AERONAUTICS BOARD,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Petitioner, the National Association of Regulatory Utility

Commissioners (NARUC) respectfully prays that a writ of

certiorari be issued to review the judgement and opinion of

the United States Court of Appeals for the District of

Columbia Circuit entered on June 20, 1978.

OPINIONS BELOW

The opinion of the Court of Appeals, which has not yet

been generally reported, appears at Appendix B to this

petition. The Court of Appeals affirmed the Opinion and

Order of the Civil Aeronautics Board (CAB or Com-

mission), Order 76-7-23 (Docket 24779) of July 7, 1976,

which appears at Appendix C.'

‘Petitioner NARUC has joined with petitioner California Public

Utilities Commission in preparing a Joint Appendix which has been

separately bound in a companion volume, hereinafter cited as “App.”

2

JURISDICTION

The judgement of the Court of Appeals was entered on

June 20, 1978. This petition is filed less than 90 days from

that date pursuant to Supreme Court Rule 22. The jurisdic-

tion of this Court is invoked under 28 U.S.C. § 1254(1).

QUESTIONS PRESENTED

1. Whether the United States Court of Appeals for the

District of Columbia Circuit, in affirming an order of the

CAB which preempted State rate regulation of intrastate

fares of Federally-certificated airlines, has misconstrued

the Federal Aviation Act in total disregard of its plain

language and accepted interpretation?

2. Whether the United States Court of Appeals for the

District of Columbia Circuit, in holding that the CAB has

Shreveport authority [Houston and Texas Ry. v. United

States, 234 U.S. 342, 58 L.Ed. 1341, 34 S.Ct. 833 (1914)]

over the intrastate rates of Federally-certificated airlines,

has misapplied the Shreveport doctrine and has thus ex-

tended CAB jurisdiction far beyond that intended by

Congress?

3. Whether the United States Court of Appeals for the

District of Columbia Circuit’s adoption of the remedy of

last recourse — preemption — was in error since less harsh

and more equitable remedies were available as a solution to

the alleged unjust discrimination?

STATUTORY PROVISIONS INVOLVED

1. Federal Aviation Act of 1958, as amended, 49 U.S.C. §

1301 et seq.

2. Interstate Commerce Act, as amended, 49 U.S.C. § 1

et seq.

3

Relevant sections of the statutes are set out in App. J and

K.

STATEMENT OF THE CASE

The genesis of this case lies with the Federal Aviation Act

of 1958, as amended, 49 U.S.C. § 1301 et seg. In that Act

(as well as in its predecessor, the Civil Aeronautics Act of

1938), Congress envisioned a dual regulatory structure for

the economic regulation of air transportation. Certification

of carriers and regulation of their rates for interstate air

transportation has historically been delegated to the

Federal Civil Aeronautics Board, while the authority to

regulate intrastate air transportation was left with the

States.

Pursuant to this Congressionally mandated demarcation

of authority, the California Public Utilities Commission

(California PUC), regulates the fares of non-Federally cer-

tificated carriers operating exclusively within California

(e.g. Air California, PSA), and it exercises jurisdiction over

the intrastate fares of Federally-certificated carriers within

the borders of California (e.g., United Air Lines, Western

Air Lines). It is the latter form of regulation which the CAB

has preempted herein.

In Texas, the Texas Aeronautics Commission (TAC)

licenses intrastate carriers, but does not regulate the fares

charged by the intrastate carrier, nor does it regulate the in-

trastate fares charged by the Federally-certificated carriers.

Thus, in Texas, the intrastate and interstate carriers have

been free to raise or lower their intrastate fares at will.

On September 28, 1971, Ralph Nader and the Aviation

Consumer Action Project (ACAP) filed a complaint with

the CAB [Docket No. 23859] in which they alleged that the

differences charged by United Air Lines to interstate and

intrastate passengers in the Los Angeles-San Francisco

4

market were unjustly discriminatory against interstate

passengers.

Mr. Nader’s complaint arose in connection with separate

flights on which he was a passenger from Washington, D.C.

to San Francisco, where he conducted business; from San

Francisco. to Los Angeles, where he also conducted

business; and from Los Angeles back to Washington, D.C.

The total fare charged by United for this airline trip was

$345, which included a $35 charge for the San Francisco to

Los Angeles segment. While enroute from San Francisco,

Mr. Nader discovered that other intrastate passengers were

paying approximately half his $35 fare for the same flight.

On September 25, 1972, the CAB dismissed the Nader-

ACAP complaint and opened an investigation into the com-

plainants’ allegations. In its Order of Investigation (Order

72-9-90, App. E), the CAB found, inter alia, that dif-

ferences did exist between interstate and intrastate fares in

numerous intra-California markets and in several intra-

Texas markets. Upon making this finding, the Board or-

dered an investigation to determine whether the differences

in these fares were unjustly discriminatory or otherwise

unlawful.

After the submission of briefs, a hearing was held before

Administrative Law Judge William H. Dapper. In his

Initial Decision, served on April 23, 1974 (App. F), Judge

Dapper found that the differences between interstate and

intrastate fares charged by the CAB-certificated carriers in

California and Texas markets were not unjustly

discriminatory, unduly preferential, unduly prejudicial or

otherwise unlawful. Such differences, he determined, were

justified by transportation-related factors, especially by the

need to meet the competitive prices of State-certificated

carriers.

Nader and ACAP thereupon petitioned the CAB for

discretionary review of the Initial Decision. The Board

S

granted review [Order 75-3-2, March 3, 1975 (App. G)] with

respect to the one primary issue of whether the difference in

fares, in the markets in question, resulted in unjust

discrimination against interstate passengers.

By order of the Board, initial and reply briefs concerning

the Petition for Review were filed. On July 7, 1976, in Order

76-7-23 (App. C) the CAB reversed Administrative Law

Judge Dapper’s decision and held that the differences bet-

ween the interstate and intrastate fares charged by the

CAB-certificated carriers in California and Texas markets

were unjustly discriminatory. The CAB concluded that the

discrimination could be corrected only by eliminating the

fare differentials, and ordered the establishment of a single

level of fares applicable to both interstate and intrastate

passengers moving in the markets in question. Such fares

were to be computed on the basis of Federal formulas. The

Board further ordered that the new tarifts be filed on not

less than 60 days notice and be established within 90 days

of the order. With proper justification, the CAB ordered

that the carriers could reduce fares to meet competition

from intrastate carriers.

The basis for the CAB’s decision was that the existing

fare system allowed an interstate passenger who is

knowledgeable about the lower intrastate fares for a

segment of his journey to take advantage of the situation

and purchase separate tickets accordingly. An

unknowledgeable interstate traveler would pay the higher

interstate charge for his entire trip. Since ‘the carriers are

unable or unwilling to distinguish all interstate passengers

moving over the intrastate segment,’’ then unjust

discrimination exists because “limited groups of persons

are receiving a more favorable price than others purchasing

the same service.’’ Order 76-7-23 (App. C, at 27). The

Board argued that State agency orders cannot compel the

6

maintenance of differences in fares, citing the Shreveport

case.”

Pursuant to a petition filed by Western Air Lines, the

CAB decided to defer the tariff filing date until further or-

der of the Board. Order 76-8-15, August 3, 1976. The time

for filing petitions for reconsideration of Order 76-7-23 was

also extended to August 11, 1976.

Several petitions for reconsideration were filed, including

a joint petition by the NARUC and the California PUC.

On October 29, 1976, in Order 76-10-138 (App. D), the

CAB denied the petitions for reconsideration and required

new tariffs to be filed and implemented by February 1,

1977.

The California PUC, the NARUC, and the TAC

thereupon filed petitions for review with the Court of Ap-

peals for the District of Columbia Circuit in Docket Nos.

76-2117, 76-2123 and 76-2155 respectively.

By Order 77-1-137 (App. I), adopted on January 24, 1977,

the Board granted a partial stay of Order 76-7-23 insofar as

that order required Federally-certificated carriers to

establish a single fare level constructed in accordance with

Federal fare formulas in markets where there is no com-

petition from intrastate carriers. Where there is such com-

petition, fares were expected to be established at the State

approved level.

By order dated February 9, 1977, the Court of Appeals

consolidated the three pending appeals and established a

briefing schedule for consideration on the merits.

After briefing, oral argument was heard on February 17,

1978.

*Houston and Texas Ry. v. United States, 234 U.S. 342, 58 L.Ed.

1341, 34. S.Ct. 833 (1914).

7

In a decision entered on June 20, 1978 (App. B), the Court

of Appeals affirmed the CAB’s order. In upholding CAB

ouster of valid State jurisdiction, the Court first held that

there was substantial evidence upon which the Board could

find unjust discrimination. After making this finding, the

Court, in a precedent-setting opinion, ruled for the first

time that the CAB does have Shreveport-type authority

allowing the Board to preempt State rate-making efforts

upon a finding of unjust discrimination.

Dismissing petitioners allegations of ‘‘locality

discrimination” against monopoly market intrastate

passengers (those markets having no effective competition

with CAB-certificated airlines), the Court of Appeals af-

firmed the CAB’s remedy as being fully within the Board's

authority. In so doing, the Court of Appeals affirmed the

Board’s attempted destruction of the pervasive dual

regulatory structure authorized by the Federal Aviation

Act.

REASONS FOR GRANTING CERTIORARI

A writ of certiorari should issue in this case for several in-

dependent reasons. The CAB’s order, as affirmed by the

United States Court of Appeals for the District of Columbia

Circuit, represents a radical departure from well-

established jurisdictional limitations in the Federal

Aviation Act. The decisions below are in direct conflict with

the plain language of the Federal Aviation Act which ex-

plicitly limits economic regulation by the CAB to interstate

and foreign travel and which specifically mandates a dual

regulatory structure for the regulation of airline trans-

portation. [49 U.S.C. §§ 1301(10), 1301(21), 1301(22),

1301(23), 1302, 1371, 1374 and 1482]. Further, the decision

of the Court of Appeals is in direct conflict with case law

interpreting the limits of CAB jurisdiction which has con-

stantly recognized this dual regulatory structure. People v.

8

Western Air Lines, Inc., 268 P.2d 723 (Calif. 1954), appeal

dismissed for want of a substantial federal question,

Western Air Lines v. California, 348 U.S. 859, 99 L.Ed. 677,

75 S.Ct. 87 (1954); Texas International Airlines, Inc. v.

CAB, 473 F.2d 1150 (D.C. Cir. 1972). Thus, the instant case

involves a very important question of Federal law which has

not been, but should be settled by this Court.

In addition, the Court of Appeals, in affirming CAB

jurisdiction over intrastate rates of Federally-certificated

airlines under the authority of 49 U.S.C. § 1374(b) and

Houston and Texas Ry. v. United States, 234 U.S. 342, 58

L.Ed. 1341, 34 S.Ct. 833 (1914) [the Shreveport case] has

totally misconstrued the plain language of Section 1374(b)

and the historic application of the Shreveport doctrine. The

issue of whether or not the CAB has Shreveport authority

was one of first impression in the Court below. The decision

rendered by the Court of Appeals is in direct conflict with

this Court’s consistent rulings as to the applicability of the

Shreveport doctrine and thus review is sorely needed to

correct the lower court’s erroneous holding.

Finally, this Court should grant review of the decision

below because the Court of Appeal’s ruling is in direct con-

flict with decisions of this Court that hold that a Federal

authority may not preempt State regulation unless the

nature of the regulated subject matter permits no other

conclusion or the Congress has unmistakably so ordained.

Florida Avocado Growers v. Paul, 373 U.S. 132, 10 L.Ed.2d

248, 83 S.Ct. 1210 (1963); Head v. New Mexico Board, 374

U.S. 424, 10 L.Ed. 983, 83 S.Ct. 1759 (1963). Many alter-

native remedies were available for both the CAB and the

Court of Appeals rather than the preemption of valid State

authority. Yet, rather than choose the most equitable and

fair remedy, the CAB and the Court of Appeals have

vivlated all established principles of law and preempted

State regulation.

9

l. THE LOWER COURT HAS FUNDAMENTALLY

MISCONSTRUED THE FEDERAL AVIATION ACT

IN TOTAL DISREGARD OF ITS PLAIN LANGUAGE

AND ACCEPTED INTERPRETATION THUS

CREATING A VERY IMPORTANT QUESTION OF

FEDERAL LAW WHICH MUST BE SETTLED BY

THIS COURT

The Federal Aviation Act of 1958 (49 U.S.C. §1301 et

seq.), explicitly limits CAB jurisdiction to the regulation of

“air transportation,’ defined as “interstate, overseas, or

foreign air transportation or the transportation of mail, by

aircraft.” [49 U.S.C. § 1301(10)]. “Interstate air trans-

portation”’, in turn, is defined in Section 1301(21) as “‘the

carriage by aircraft of persons or property as a common

carrier . . . by aircraft, in commerce between .. . (a) a place

in any State. . ., or the District of Colombia, and a place in

any other State. . . or the District of Columbia.”

The carriage of “‘persons’’ between points in different

States is “air transportation’’; the carriage of persons be-

tween points in the same State is not. It is true that any

carrier which provides, in any part, “interstate air trans-

portation” is subject to certification or exemption;

however, this cannot, in and of itself, give the Board

jurisdiction to regulate totally intrastate service provided by

a certificated carrier.

It can hardly be argued that the Congress, after going to

such lengths to define the parameters of the Board’s

jurisdiction in terms of carriage of persons by aircraft

across State lines, did not intend by such definitions to ex-

clude CAB jurisdiction over intrastate air transportation,

including intrastate rates.

Further, most of the economic regulatory provisions

throughout the Federal Aviaticn Act are phrased in terms

applicable only to “air transportation” (i.e. interstate). For

example, Section 1371(a) requires the issuance of a CAB

certificate of public convenience and necessity for any air

10

carrier to engage in “‘air transportation.”’ Section 1373,

dealing with tariffs of air carriers, provides that every ‘‘air

carrier’’ must file rates and fares with the Board for ‘‘air

transportation’, and that no air carrier may receive a

greater or different fare for such ‘‘air transportation.’’ Pur-

suant to Section 1374, every air carrier must provide ‘‘air

transportation’”’ at ‘just and reasonable rates.”

These and other provisions of the Federal Aviation Act

evidence a scheme of regulation designed to promote a dual

regulatory structure in the aviation field. This dual system

of regulation — State and Federal — has existed, in the

California markets, for the past 25 years and has

specifically been afrirmed by the courts. People v. Western

Air Lines, Inc., 268 P.2d 723 (Calif. 1954), appeal dismissed for

want of a substantial federal question, Western Air Lines

v. California, 348 U.S. 859, 99 L.Ed. 677, 75 S.Ct. 87

(1954); Texas Aeronautics Commission v. Braniff Airways,

Inc., 454 S.W.2d 199, cert. denied, 400 U.S. 943, 27

L.Ed.2d 247, 91 S.Ct. 244 (1970); Texas International

Airlines, Inc. v. CAB, 473 F.2d 1150 (D.C. 1972).° .

Not only have the courts enforced the clear mandate of

Congress to leave the economic regulation of intrastate air

transportation to State authorities, but Congress has also

confirmed, at least several times, its original decision to

divide the economic regulatory responsibilities over air

transportation between State and Federal authorities by

‘In the Zexas International Airlines case, the D.C. Circuit ruled that

the CAB did not have the authority to regulate intrastate carriers

stating that, ‘‘[njothing in this definition [of air transportation in the

Act] is directed at activities which merely affect interstate commerce.”

473 F.2d at 1152. Yet, in the case at bar, the same Court has now ruled

that the CAB can regulate intrastate operations, even where there is no

proven effect on interstate commerce. The conflict is patent.

11

refusing to amend the Aviation Acts to place all such

responsibilities in a Federal body.*

Yet, in spite of the overwhelming authority evidencing a

Congressional intent to have both State and Federal

regulation of the airline industry, the Court of Appeals, in

one sweeping blow, has destroyed over 25 years of pervasive

State regulation and has seen fit to take upon itself the

legislative function of rewriting the Federal Aviation Act.

Such an action must not be allowed to go unchecked for it

threatens the basic structure of our governmental system.

Il. THE COURT OF APPEALS HAS RENDERED A

DECISION OF FIRST IMPRESSION WHICH MISAP-

PLIES THE SHREVEPORT DOCTRINE AND

MISCONSTRUES THE FEDERAL AVIATION ACT

For the first time in the history of aviation regulation a

Federal court has specifically ruled that the CAB has the

inherent power to set intrastate rates in spite of a pervasive

State regulatory structure. Allegedly, this power is to be

exercised ‘“‘when unjust discrimination results from an in-

trastate rate structure.” [Decision of Court of Appeals,

App. B at 13]. In application, however, the Court of Ap-

peals has granted the CAB carte blanche preemptive

authority over the intrastate rate-setting process.

The authority for this far-reaching power lies, according

to the CAB and the Court of Appeals, in the language of the

*Report of the Federal Aviation Commission, Sen. Doc. No. 15, 74th

Cong., Ist Sess. Jan. 30, 1935) 237-239; 78th Congress: Lea-Bailey

Aviation Bill introduced as H.R. 1012 and S. 246; revised form of Lea-

Bailey Aviation Bill, H.R. 3420; Boren Bill, H.R. 4845; Reece Bill, H.R.

4848; 79th Congress: Lea Bill, H.R. 674; Johnson Bill, S.541; Lea Bill,

H.R. 3383; 80th Congress: Wolverton Bill, H.R. 2337; 81st Congress:

Brewster Bill, $.423; Johnson Bill, S. 445; Johnson Bill, S. 2435; See

also 1944 National Association of Regulatory Utility Commissioners

Annual Proceedings, 221; 1945 Proceedings, 299; 1946 Proceedings, -

210; 1947 Proceedings, 128; 1948 Proceedinys, 69; 1949 Proceedings, -

166; 1950 Proceedings, 106.

12

Federal Aviation Act itself. The Court has ruled that 49

U.S.C. § 1374(b) explicitly gives the CAB Shreveport-type

authority to regulate intrastate rates. Such an _ in-

terpretation of Section 1374(b) belies the plain language of

that provision and the underlying legislative history since

Section 1374(b), on its face, only proscribes discrimination

in ‘‘air transportation,’’ defined in Section 1301(10) as ‘‘in-

terstate air transportation.’”*

The Court of Appeals’ attempts to twist the legislative

history and judicial interpretation of Section 1374(b) so as

to specifically promote the application of Shreveport

authority is also an erroneous analysis. In the opinion below

the Court states that:

. , . the courts have repeatedly held that Section

1374(b) [49 U.S.C. § 1374(b)] of the Federal

Aviation Act was modeled after the Interstate

Commerce Act, the latter being an appropriate

guide for construing the former, Transcontinental

Bus System v. CAB. In addition, the legislative

history of the Civil Aeronautics Act of 1938 in-

dicates that Congress, although asked to do so,

decided not to limit the application of the

Shreveport doctrine in air transportation as it had

done in highway transportation.

App. B at 13.

The Court’s assertion that the anti-discrimination

provisions were modeled after the Interstate Commerce Act

may perhaps be true. However, that, in and of itself, does

not mean that the provisions in each of the Acts in question

are to be interpreted the same. As the court stated in Com-

monwealth of Virginia v. CAB, 498 F.2d 129, 134 (4th Cir.

1974), cited by the Court below:

*For full text of Section 1374(b) see App. J.

13

It is, of course, true that the anti-discrimination

provisions of the Federal Aviation Act are closely

modeled on their counterparts in the Interstate

Commerce Act, but that is not to say that the

decisional precedents of one statute can be in-

discriminately imputed to another.

Furthermore, Transcontinental Bus System v. CAB, 383

F.2d 466 (Sth Cir. 1967), as well as the Commonwealth of

Virginia case, did not even deal with the exercise of

Shreveport-type authority over intrastate rates. Thus, the

Court’s emphasis upon these cases is misplaced.

In addition, it is imperative to note the basic distinction

between Interstate Commerce Commission (ICC) authority

over intrastate rates and CAB authority in the same sphere.

The Shreveport authority of the ICC to affect intrastate

rates is derived from Section 3(1) of the Interstate Com-

merce Act [49 U.S.C. § 3(1)]. In certain respects, Section

3(1) of the Interstate Commerce Act does resemble, as the

Court of Appeals alleges, Section 1374(b) of the Federal

Aviation Act. Both define jurisdictional carriers’ respon-

sibilities to avoid acting in ways which unjustly discriminate

against specified traffic. However, the similarities end

there. Section 3 of the Interstate Commerce Act, as

recognized in Shreveport, grants the ICC plenary authority

over the carrier itself thereby allowing the Commission to

remove any and all unjust discrimination.© The CAB’s

authority, however, is strictly limited to authority over the

service performed, i.e. ‘‘air transportation.” [49 U.S.C. §

1374(b)].’

“Section 3(1) pertains to ‘any common carrier subject to the

provisions of this chapter.”

With the exception of authority to require air carriers to submit cer-

tain reports.

14

Thus it is evident that Section 3(1) of the Interstate Com-

merce Act does not speak of ICC authority to order a

carrier to remedy discrimination in interstate tran-

sportation in the same manner that the Federal Aviation

Act, in § 1374(b), speaks of CAB authority to remove

discrimination “‘in air transportation.” With plenary

authority over the rail carriers themselves, the ICC could

therefore order the carriers to remove any unjust

discrimination caused even by activities outside the normal

jurisdiction of that agency -— but only for the purpose of

removing that discrimination. See North Carolina v. United

States, 325 U.S. 507, 510-511, 89 L.Ed. 1760, 1765-1766, 65

S.Ct. 1260 (1945).

The CAB has no such authority over the carriers,

especially in its rate making activities. Rather, § 1374(b), in

accord with the basic demarcation of CAB authority set

forth in the definition in § 1301(21), limits the CAB’s jurisdic-

tion to remove discrimination to those instances in which

the discrimination is ‘‘in air transportation.” An intrastate

rate charged by an interstate carrier is not “‘in air tran-

sportation.”

Furthermore, the CAB’s argument, apparently given

great weight by the Court, to the effect that Congress con-

sidered and rejected an amendment to the Federal Aviation

Act which would preclude Shreveport authority is patently

meritless since legislative history is primarily of value only

where the language of the act is ambiguous. Caminetti v.

United States, 242 U.S. 470, 485, 61 L.Ed. 442, 453, 37

S.Ct. 192 (1917). In this case it is just as logical to assume

that Congress felt such an amendment to be superfluous in

light of the CAB’s clear jurisdictional limitations to matters

involving ‘‘air transportation.” Moreover, it is well

established that “‘it will not be presumed that a federal

statute was intended to supersede the exercise of the power

of the State unless there is a clear manifestation of in-

tention to do so.”’ Schwartz v. Texas, 344 U.S. 199, 202, 97

15

L.Ed. 231, 235, 73 S.Ct. 232 (1952). Mere inference, as the

Court used below, is not sufficient.

In addition to the aforementioned reasons why the Court

of Appeals’ decision granting the CAB Shreveport

authority is erroneous, another primary reason remains —

the Shreveport case itself.

In the Shreveport case [Houston and Texas Ry. v. United

States, 234 U.S. 342, 58 L.Ed. 1341, 34 S.Ct. 833 (1914)],

the Supreme Court held that the ICC was authorized to

eliminate differences between rates approved by the ICC

and a lower intrastate rate when the relations between such

rates resulted in an undue preference for one locality over

another and a resulting burden on interstate commerce.

The instant case, however, does not involve a question of

intrastate fares favoring intrastate persons or localities as

against interstate persons or localities as was the issue in

Shreveport. In Shreveport, there was an undue preference

in favor of intrastate traffic and against interstate traffic.

This case involves alleged unjust discrimination between in-

terstate passengers — the knowledgeable interstate

passenger is receiving a favored lower rate while the

unknowledgeable interstate passenger pays the higher rate.

This is not the type of discrimination Shreveport has been

held to reach.°

*The Court below has attempted to characterize the problem herein

as one involving a preference for intrastate traffic as against interstate

traffic [Decision of Court, App. B at 11]. However, this assertion

disregards the entire record. The CAB specifically found that, “the

more knowledgeable interstate passengers moving in these markets are

routinely paying the lower intrastate fare, leaving only those interstate

travelers who are unaware of the lower fare . . . to pay the higher fares.”

(CAB Order, App. C at 25]; “*. . . because the carriers are unable or un-

willing to distinguish all interstate passengers moving over the in-

trastate segments, some are charged the high interstate fares for the in-

trastate segment while others are charged the lower intrastate fares.”

[App. C at 27]. Thus it is clear that the problem here does not arise

because of a Shrevepurt-type discrimination, but is due to a CAB en-

forcement problem.

16

Ill. THE RULING BELOW IS IN CONFLICT WITH

DECISIONS OF THIS COURT HOLDING THAT

PREEMPTION IS A REMEDY OF LAST RECOURSE

It is well established that if State legislation or regulatory

policy is not in conflict with or repugnant to the

Congressional scheme, the States are not preempted from

legislating in those areas. Cooley v. Board of Wardens, 53

U.S. (12 How.) 299, 13 L.Ed. 996 (1851); TV Pix, Inc. v.

Taylor, 304 F. Supp. 459 (D. Nevada, 1968) aff'd 396 U.S.

556, 24 L.Ed.2d 746, 90 S.Ct. 749(1970). *

In Savage v. Jones, 225 U.S. 501, 56 L.Ed. 1182, 32 S.Ct.

715 (1912) the Supreme Court, at 553, stated:

But the intent to supersede the exercise by the

state of its police power as to matters not covered

by the Federal legislation is not to be inferred

from the mere fact that Congress has seen fit to

circumscribe its regulation and to occupy a

limited field. In other words, such intent is not to

be implied unless the act of Congress, fairly in-

terpreted, is in actual conflict with the law of the

state.

This Court has reiterated the above holding time after

time. In Schwartz v. Texas, 344 U.S. 199, 97 L.Ed. 231, 73

S.Ct. 232 (1952) the Supreme Court noted that:

If Congress is authorized to act in a field it should

manifest its intention clearly. It will not be

presumed that a federal statute was intended to

supersede the exercise of the power of the state

unless there is a clear manifestation of intention

to do so. The exercise of federal supremacy is not

lightly to be presumed.

344 U.S. at 202-203, 97 L.Ed. at 235.

In Head v. New Mexico Board, 374 U.S. 424, 10 L.Ed.2d

983, 83 S.Ct. 1759 (1963), the Supreme Court, in discussing

17

preemption under the Communications Act of 1934, stated

(at 429-430):

In dealing with the contention that New Mexico's

jurisdiction to regulate radio advertising has been

preempted by the Federal! Communications Act,

we may begin by noting that the validity of this

claim cannot be judged by reference to broad

statements about the ‘comprehensive’ nature of

federal regulation under the Federal Com-

munications Act. ‘‘[T]he ‘question whether

Congress and its commissions acting under it

have so far exercised the exclusive jurisdiction

that belong to it as to exclude the State, must be

answered by a judgement upon the particular

case.’ Statements concerning the ‘exclusive

jurisdiction of Congress’ beg the only con-

troversial question: whether Congress intended to

make its jurisdiction exclusive.’’ California v.

Zook, 366 U.S. 725, 731, 93 L.Ed. 1005, 1010, 69

S.Ct. 841. Kelly v. Washington, 302 U.S. 1, 10-13,

82 L.Ed. 3, 10, 12, 58 S.Ct. 87. In areas of the law

not inherently requiring national uniformity, our

decisions are clear in requiring that State statutes,

otherwise valid, must be upheld unless there is

found “such actual conflict between the two

schemes of regulation that both cannot stand in

the same areas, (or) evidence of a Congressional

design to preempt the field."’ Florida Avocado

Growers v. Paul, 373 U.S. 132, 141, 10 L.Ed.2d

248, 256, 83 S.Ct. 1210 (Emphasis supplied.).

The above cases make it imminently clear that preemp-

tion of valid State authority must not be allowed unless the

nature of the regulated subject matter permits no other

conclusion or the Congress has unmistakably so ordained.

Preemption is a remedy of last recourse.

18

In the leading case of North Carolina v. United States,

325 U.S. 507, 89 L.Ed. 1760, 65 S.Ct. 1260 (1945), the

Supreme Court set out certain “‘guiding principles’’ for the

application by the ICC of Shreveport authority under Sec-

tion 13(4) of the Interstate Commerce Act (i.e. the

codification of Shreveport, North-Carolina v. U.S., supra,

note 3, at 513, 89 L.Ed. at 1766). There the Court said:

Intra-state transportation is primarily the con-

cern of the state. The power of the Inferstate

Commerce Commission with reference to such in-

tra-state rates is dominant only so far as necessary

to alter rates which injuriously affect interstate

transportation. American Exp. Co. v. South

Dakota, 244 U.S. 617, 625, 61 L.Ed. 1352,

1358, 37 S.Ct. 656, PUR 1917 F. 45. A scru-

pulous regard for maintaining the power of

the state in this field has caused this Court to

require that Jnterstate Commerce Commission or-

ders giving precedence to federal rates must meet

a ‘high standard of certainty."’ Illinois C.R. Co. v.

State Pub. Utilities Commission, 245 U.S. 493,

510, 62 L.Ed. 425, 438, 38 S.Ct. 170, PUR 1918C

1279. Before the Commission can nullify a State

rate, justification for the ‘exercise of the federal

power must clearly appear.’’ Florida vy. United

States, 282 U.S. 194, 211, 212, 75 L.Ed. 291, 301,

302, 51 S.Ct. 119. See also Yonkers v. United

States, 320 U.S. 685, 88 L.Ed. 400, 64 S.Ct. 327.

And the intention to interfere with the state's

rate-making function is not to be presumed,

Arkansas R. Commission v. Chicago, R.I. & P.R.

Co., 247 U.S. 597, 603, 71 L.Ed. 1224, 1228, 47

S.Ct. 724;....

North Carolina v. United States, supra, at 511, 89

L.Ed. 1765, 1766. (Emphasis added.)

19

From the above, it is apparent that a regulatory agency

similar to the ICC faces a high burden of proof which it

must meet prior to the control of intrastate rates. As the

Supreme Court stated in summarizing the above cases:

. . . the Interstate Commerce Commission is

without authority to supplant a state-prescribed

intrastate rate unless there are clear findings, sup-

ported by evidence of each element essential to

the exercise of that power by the Commission.

North Carolina v. United States, supra, 325 U.S.

at 511, 89 L.Ed. at 1766.

If the ICC, which enjoys greater latitude in the in-

tervention into intrastate affairs than most agenices, must

make its justification for such intervention “definitely and

clearly apparent,’’ then can it be presumed that the CAB

must meet a lesser standard? The “‘high standard of cer-

tainty’’ has not been satisfied in the instant case.

In the North Carolina case, the Supreme Court ruled that

the mere existence of a disparity between rates on intrastate

and interstate traffic does not authorize the ICC to enter

the field properly belonging to a State commission and in-

terfere with lawfully established intrastate rates, North

Carolina v. United States, supra, at 512, 514, 516, 89 L.Ed.

1766, 1767, 1768. Accord, Florida v. United States, 282

U.S. 194, 212, 75 L.Ed. 291, 302, 51 S.Ct. 119 (1931);

Arkansas Railroad Commission v. Chicago, R.J. & P.R.

Co., 274 U.S. 597, 599, 71 L.Ed. 1224, 1226, 47 S.Ct. 724

(1927). Yet, here, the Court of Appeals has authorized such

usurpation of State authority.

Not only did the Court of Appeals authorize an invalid

preemption, but it did so in the face of many more

equitable and fair remedies which would not necessitate the

unlawful incursion into valid State authority. The basic

inequity of the Court’s decision is most glaring in its effects

20

upon those intrastate passengers who fly in the California

monopoly. markets — i.e. those markets where a CAB-

certificated carrier holds a monopoly position. The obvious

result of the Court’s decision will be substantial fare in-

creases to intra-California travelers on the monopoly

routes. Moreover, the effect of the Court’s decision is to

remove the intrastate California traveler from effective par-

ticipation in proceedings to determine the justness and

reasonableness of intra-California rates and _ services

provided by CAB-certificated carriers.

The Court defends its ruling by relying upon the prin-

ciples established in the Domestic Passenger Fare In-

vestigation (DPFI), stating that the major premise of DPFI

rate standards is nationwide fare equality. The Court ex-

presses its concern that there should be no passenger sub-

sidizing another passenger in another market. However,

this reasoning completely ignores the fact that-the CAB

now looks upon the DPFI with displeasure. Investigations

are being conducted with a view toward Jess fare equality,

not more.’

The NARUC submits that the decision of the Court below

is unduly restrictive. The Court could easily have focused

upon solutions that were less restrictive and less disruptive

of legitimate State interests in the economic regulation of

intrastate rates.

It is quite evident that this proceeding basically involved

a CAB enforcement problem. The Board itself

*On August 25, 1978, the CAB released its Final Rule and Order in

the DPFI, Docket Nos. 21866-4, 21866-9, 31290, 30891. As part of its

Final Rule, the Board eliminated the uniform fare requirement relied

upon by the Court of Appeals. [See esp. Part 399 — Statements of

General Policy, Domestic Passenger-Fare Level Policies, Domestic

Passenger-Fare Structure Policies, Discount Fare Policy, Amendment

No. 59 to Part 399 Docket Nos. 31290, 30891]. Also see CAB

proceedings ADR-353, PDR-52, PSDR-S51.

21

acknowledged that it was simply trying to eliminate what it

deemed to be unjust rate discrimination solely among in-

terstate passengers; the CAB was attempting to solve the

problem of double ticketing. Rather than preempting State

regulation, the CAB could have instituted procedures

prohibiting double ticketing including the publication of

penalties and strict enforcement. Another solution, also far

superior to ignoring Congressional intent and destroying

dual regulation, would have been adoption of the Ad-

ministrative Law Judge’s opinion, thus maintaining the

status quo.

Finally, the CAB, as well as the Court of Appeals, could

have easily ruled that interruptions in the interstate journey

non-incidental to the transportation provided will break the

interstate movement whether the planned interruption is

communicated to the carrier in advance or not. Thus, Mr.

Nader would be considered an intrastate passenger for the

San Francisco to Los Angeles flight and he would therefore

pay the intrastate fare. This solution would establish a

single fare level, end any unjust discrimination, and preserve

the Congressionally mandated dual regulatory structure.

Legal authority for such a solution is plentiful. [See Brown

v. Houston, 114 U.S. 622, 29 L.Ed. 257, 15 S.Ct. 1091

(1885); Susquehanna Coal Co. v. City of South Amboy, 228

U.S. 665, 57 L.Ed. 1015, 33 S.Ct. 712 (1913); Bacon v.

Illinois, 227 U.S. 504, 57 L.Ed. 615, 33 S.Ct. 299 (1913). See

also ‘“The CAB California-Texas Fare Case: An Intrastate

Stopover Takeover?”, 42 Journal of Air Law and Com-

merce 675 (July 1977)].

22

CONCLUSION

For these reasons, a writ of certiorari should issue to

review the judgement of the United States Court of Appeals

for the District of Columbia Circuit.

Respectfully submitted, |

PAUL RODGERS *

General Counsel

CHARLES A. SCHNEIDER

Assistant General Counsel

WILLIAM R. NUSBAUM

Deputy Assistant General Counsel

National Association of Regulatory

Utility Commissioners

1102 ICC Building

Post Office Box 684

Washington, D.C. 20044

(202) 628-7324

September 18, 1978