Petition for Writ of Certiorari — Century Air Freight, Inc. v. American Airlines, Inc.

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84 = 69 FILED

OCT 5 j004

In The

Supreme Court of the United States

October Term, 1984

CENTURY AIR FRE:iGHT, INC.,

Petitioner,

-VS.-

AMERICAN AIRLINES, INC.,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

SECOND CIRCUIT

MILTON HOROWITZ

Counsel for Petitioner

15 Park Row

New York, N.Y. 10038

(212) 267-0606

MICHAEL E. VEVE

Of Counsel for Petitioner

O’CONNOR & HANNAN

1919 Pennsylvania Avenue, N.W.

Washington, D.C. 20006

(202) 887-1455

Di hk Bur ley Bunter -» 203 Richmond Avenue @ Staten Island, New York 10302

Tel.: (212) 447-5358 — (516) 222-2470 — (914) 682-0848

QUESTIONS PRESENTED

1. Was it proper for the Court of Appeals to affirm

the holding of the District Court herein that §404 of

the Civil Aviation Act; 49 U.S.C. §1374, mandating a

duty on airline operators to furnish air transportation

to those making reasonabie request therefor and pro-

hibiting undue preferencing and unjust discrimination

in air transportation, was not intended by Congress,

and therefore never did imply a right of action by

private parties to recover for executed acts of miscon-

duct violative of §404 of the Act?

That holding effectively overrules Fitzgerald v.

Pan American World Airways, Inc., 229 F. 2d 499 (2d

Cir. 1956) which found that §404 implied such a right

since the Civil Aeronautics Board was powerless to

grant reparation in money for past misconduct, and

that to deny such right of suit to injured parties in

those instances would render §404 unenforceable. Un-

til the instant ruling, Fitzgeraid was followed without

dissent in scores of cases in all Circuits. And now the

shipping public, despite §1002(k) of the Act; 49 U.S.C.

§1482(k), enacted November 9, 1977 for the era of

deregulation and expressly prescribing common car-

riage and therefore public service as the regime for the

air transportation of goods, has been abruptly depriv-

ed of the right of enforcement which it had enjoyed for

close to 30 years.

2. Could the district court, before the filing of an

answer responsive to the complaint, validly dismiss,

as presenting no triable issue, a complaint charging

violation by an airline operator of section 404 of the

Civil Aviation Act of 1958; 49 U.S.C. §1374, and sec-

tions 1 and 2 of the Sherman Antitrust Act; 15 U.S.C.

§§ 1 and 2, where a concededly total denial, sustained

tainerized goods aboard respondent's Flight 841—the

only daily, fully containerized all-freight, overnight

flight from metropolitan New York to Puerto

freight forwarder competitor of petitioner of an alloca-

tion of space aboard the flight of never less than two

thirds of the aircraft’s container capacity?

The dismissal disregards the conclusion of the in-

vestigatory and enforcing Bureau of the Civil

Aeronautics Board, in the course of its exercise of

primary jurisdiction of the case and after investiga-

tion, that respondent had v.olated section 404 of the

Aviation Act and section 1 of the Sherman Antitrust

Act.

The caption of the case in this Court contains the

names of all the parties to the proceedings in the

Court below.

TABLE OF CONTENTS

Page

Ee eNO eNO i

Parties ............. siilsahdelelclcehattinnteaneiniensnnnensteunnennnnnnannnnnnnnn ii

ST sions hacia anenntndninnnnenebnnennainnntia 1

SII sccictbisicinssintictancenbinnacnenncasannenecncneccecazeseseercesesass 2

Reasons for Granting the Writ .....................ccccceeeeeees 2

Statutes which the Case Involves ...........s:..ssssseesseeen 3

SII Or GENE GRIND ee secracescnreccceecsscccnscccenanscnnpeonceonens 9

Century’s Case Against American ......................00008 12

Be ne BND GID GIR cccesccecccssesecescecccencceccccenecenses 15

Argument:

1. Fitzgerald v. American World Airways, Inc.,

229 F.2d 499 (2d Cir. 1956) is valid prevailing

authority for allowing private suit under Section

404(b) of the Aviation Act by qualified suitors il-

legally injured by carrier discrimination in air

TT CN ene eT TTT 22

2. The legal predicate of the undisputed exclusion

of Century’s goods from American’s freighter

flight sustained for six years is that it was a gross

violation of §404 of the Aviation Act and an il-

legal restraint of trade. In those circumstances,

the mere presence of a beneficiary and preferencee

made the possibility of antitrust violation too

strong to allow summery dismissal on antitrust ......28

Conclusion ...........ssssssseseeseesessnsensennenrannenvensensnsansensensnes 30

APPENDICES

1. Order of Court of Appeals Denying Petition for

Rehearing in Banc, July 10, 1984 ........-v-+-ssererssssreeee la

2. Court of Appeals’ Summary Affirmance of

District Court Judgment on Opinion Below, May

31, 1984 ..cccccccsscscsssssescsesssnssenenenssnsnenonssensesensssananenenses 3a

3. District Court Judgment Dismissing Com-

plaint, January 10, 1984 ..........ssss»-svsenssnnsesisnsensennenneess 5a

4. District Court Opinion, January 5, LOBE ...ccccccccceee 7a

5. Letter of Civil Aeronautics Board Director of

Consumer Protection to Counsel for American

Airlines, Inc. Announcing Intention to Institute

Enforcement Proceeding, June 22, 1979 .........-+++++ 30a

CASES CITED

Allied Air Freight, Inc. v. Pan American World

Airways, Inc., 393 F.2d 441 (2d Cir. 1968), cert.

denied 393 U.S. 846 (1968) ........crsserserrenrenennnenees 14,23

Caceres Agency, Inc. v. Trans World Airways,

Inc., 594 F.2d 932 (2d Cir. 1979) .......s-s-sereeeererenererenrers 27

Century Air Freight, Inc. v. Civil Aeronautics Board,

738 F.2d 418 (D.C. Cir. 1982) cert. denied 459 U.S. 943

SPEED <eneerntnesinenietcinnainsicttenteiiiinninaiicaiiiitiiimiinnamth tc 20

Com-Tel, Inc. v. Du Kane Corporation, 669 F.2d

ay UID cniccsninsscesmeaitbatiatietaitietiniacatiibiiaia aia 29

Cort v. Ash, 422 U.S. 65 (1975) ..cccccccccccccccceseoseseee. 24,25

Diefenthal v. C.A.B., 681 F.2d 1039 (5th Cir.

1982), cert. denied 103 S.Ct. 732 (1983) ......cccc00000.-.. 26

FCC v. Midwest Video Corp., 440 U.S. 689 (1979) ....19

Federal Trade Commission v. Cement Institute,

333 U.S. 683 (1948) oc ccccccsccssesssssssssscssesceescesece, 16

Fitzgerald v. Pan American World Airways, Inc.,

229 F.2d 499 (2d Cir. 1956) .............. i,14,22,23,24,25,27

Hecht v. Pro-Football, Inc., 570 F.2d 982 (D.C.

Cir. 1977), cert. denied 436 U.S. 956 ( Ee 15

Herman & McLean v. Huddleston, 459 U.S. 375

IIIT) casensnnetnernniemapnestinnantadisigitioneimediddiunnsutasiael 23,24

Mason v. Belieu, 543 F.2d 215 (D.C. Cir. 1978),

Cert. denied, 429 U.S. 852 wo...cccccccccscsssescessececcsecseees, 26

Merrill Lynch, etc. v. Curran, 444 U.S. 356 ( 1982) 23

National Small Shipments Traffic Conference v.

CAB, 618 F.2d 819 (D.C. Cir. 1980) .o.cccccccccccccoceceeess.. 20

Otter Tail Power Co. v. United States, 410 U.S.

EP UE <einhicrainccciamiantcnsibinaitpeitiadadib at ia 16

Polansky v. Trans World Airlines, Inc., 523 F.2d

Be GREG. BUS cnczseceszzceenscnenscsnsnsbecensneshanesecteteneneenss 26

Transcontinental Bus System, Inc. v. Civil

Aeronautics Board, 383 F.2d 466 (5th Cir. 1967),

cert. denied, 390 U.S. 920 (1968) .............ccccccccceeeeeeeees 19

STATUTORY CITATIONS

Civil Aviation Act of 1958, as amended, inclusive of

the Airline Deregulation Act of 1978

Sec. 404; 49 U.S.C. sec. 1374 .......... i,2,9,10,21,24,25,28

Sec. 404(a); 49 U.S.C. sec. 1374{(a) ......... 3,4,10,13,17,23

Sec. 404(b); 49 U.S.C. sec. 1374(b) ............ 4,10,13,16,20

Sec. 1002(k); 49 U.S.C. sec. 1482(k) .......... i,5,9,17,18,23

49 U.S.C, sec. 155 Man LP) .......ccccccccseesereeseeeeeneenneees 18

49 U.S.C, sec. 1551 (a)(2)(B) ..........ccccsesssessseesenenesnees 18

Sherman Antitrust Act of 1890, as amended ........ =

UCAIOM Bs 2G WB. GOD. 2 cccrcercesecesesecsenccnsnvscccnssesat i,ii,8

Section 2; 15 U.S.C. 900. 2 .......c.ccccccccccccccscccccccess i,ii,8,22

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1984

No.

CENTURY AIR FREIGHT, INC.,

Petitioner,

vs.

AMERICAN AIRLINES, INC.,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Petitioner prays that a writ of certiorari issue to

review the order of the United States Court of Ap-

peals for the Second Circuit herein of July 10, 1984 de-

nying petitioner's petition for rehearing, and of May

31, 1984 summarily affirming the judgment of the

United States District Court for the Southern District

of New York herein of January 10, 1984 on the opi-

nion, dated January 5, 1984, of the District Court

Judge.

OPINIONS BELOW

The Court of Appeals Order of July 10, 1984, de-

nying petitioner’s petition for rehearing, is unpublish-

ed and a notation thereof has not yet been reported.

The summary Order of the Court of Appeals

herein of May 31, 1984 affirming the District Court

Judgment of January 10, 1984 on the District Court

opinion of January 5, 1984 is unpublished except for a

notation thereof in 738 F. 2d 418.

The opinion herein of the United States District

Court for the Southern District of New York, per Hon.

Charles L. Brieant, has not been published. It is found

in the District Court file of the case under case

number 1977 Civil 2195 (CLB).

JURISDICTION

The orders of the Court of Appeals are dated as fil-

ed, viz., for the Order denying petitioner's petition for

reargument, July 10, 1984; fe. the summary Order of

affirmance on the district court opinion below, May

31, 1984.

The jurisdiction of this Court is invoked pursuant

to 28 U.S.C. §1254(1).

REASONS FOR GRANTING THE WRIT

The Court of Appeals has decided important ques-

tions of federai ‘aw, abandoning and overruling its

adherence to an implied right of private suit to en-

force, by money reparation, past acts of misconduct

by airline operators violative of §404 of the Civil Avia-

tion Act of 1958, as amended, and, holding instead

that §404 was neither intended nor allows private suit

thereunder. In doing so, it has brought the Second Cir-

cuit into conflict with every other Circuit on those

questions.

These important questions of federal law have not

been but should, especially in the era of aviation

deregulation and the demise of the Civil Aeronautics

Board, be settled by this Court.

STATUTES WHICH THE CASE INVOLVES

“$404. Rates for carriage of persons and property;

duty to provide service, rates, and divisions;

foreign air transportation rates; discrimination

(al) It shall be the duty of every air carrier to

provide and furnish interstate and overseas air

transportation, as authorized by its certificate, upon

reasonable request therefor and to provide reasonable

through service in such air transportation in connec-

tion with other air carriers; to provide safe and ade-

quate service, equipment, and facilities in connection

with such transportation; to establish, observe and en-

force just and reasonable individual and joint rates,

fares and charges, and just and reasonable classifica-

tions, rules, regulations and practices relating to such

air transportation; and, in case of joint rates, fares

charges, to establish just, reasonable, and equitable

divisions thereof as between air carriers participating

therein which shall not unduly prefer or prejudice any

of such participating air carriers.

(2) It shall be the duty of every air carrier and

foreign air carrier to establish, observe, and enforce

just and reasonable individual and joint rates, fares,

and charges, and just and reasonable classifications,

rules, regulations, and practices relating to foreign air

Ee One, See en a ee fares,

and charges, to establish just, reasonable, and

equitable divisions thereof as between air carriers and

foreign air carriers participating therein which shall

not unduly prefer or prejudice any of such par-

ticipating air carriers or foreign air carriers.

(b) No air carrier or foreign air carrier shall make,

giv, or cause any undue orareasonable preference or

advantage to any particular person, port, locality, or

description of traffic in air transportation in any

respect whatsoever or subject any particular person,

port, locality, or description of traffic in air transpor-

tation to any unjust discrimination or any undue or

unreasonable prejudice or disadvantage in any respect

whatsoever.” '

Pub. L. 85-726, Title IV, §404, Aug. 23, 1958, 72 Stat.

760; Publ. L. 92-259, §1, Mar. 22, 1972, 86 Stat. 95.

1978 amendment of §404(a)(1) of the Act

‘8404. Rates for carriage of persons and property,

duty to provide service, rates, and divisions;

foreign air transportation rates; discrimination

(a)(1) It shall be the duty of every air carrer to

provide and furnish interstate and overseas air

transportation, as authorized by its certificate upon

reasonable request therefor and to provide reasonable

through service in such air transportation in connec-

tion with other air carriers authorizec to engage in

schedule air transportation by certificate or by exep-

ton under section 416(b)(3) of this title; to provide safe

and adequate service, equipment, and facilities in con-

nection with such transportation; to establish,

observe, and enforce just and reasonable individual

and joint rates, fares, and charges, and just and

reasonable classifications, rules, regulations, and

practices relating to such air transportation, and, in

case of such joint rates, fares and charges, to establisn

just, reasonable and equitable divisions thereof as be-

tween air carriers participating therein which shall

alii itetar sie ina 8: cw secs!

not unduly prefer or prejudice any such participating

air carriers.’’ As amended Pub.L. 95-504, §23, Oct. 24,

1978, 92 Stat. 1724.

Aviation Act, §1002(k); 49 U.S.C. 1482(k)

§1002(k) Definitions

‘“(k) (1) For purposes of this section, the term

‘interstate air transportation of property’

means—

(A) the carriage by aircraft of property as a

common carrier for compensation or hire in com-

merce between a place in any State of the United

States, or the District of Columbia, and a place in

any other State of the United States, or the

District of Columbia (other than the Carriage by

aircraft of property by a common carrier between

any pair of points both of which are within the

State of Alaska or Hawaii if such carriage is part

of the continuous carriage of such property and

another common carrier provides, as part of such

continuous carriage, the carriage by aircraft of

such property between any pair of points one of

which is within the State of Alaska or Hawaii and

the other of which is not with the same State); or

between places in the same State of the United

States (other than the State of Alaska or Hawaii)

through the airspace over any place outside

thereof; or between places in the same territory or

possession of the United States, or the District of

Columbia;

(B) the carriage by aircraft of property as a

common carrier for compensation or hire, in com-

merce between a place in any State of the United

States or the District of Columbia and any place

in the Commonwealth of Puerto Rico or the

Virgin Islands or between a place in the Com-

monwealth of Puerto Rico or the Virgin Islands

or between a place in the Commonwealth of Puer-

to Rico and a place in the Virgin Islands;

ee ee ee eT ee ee Te ee ee ree eT eT

Aine

whether such commerce moves wholly by aircraft or

partly by other forms of transportation.

(2) For purposes of this section, the term ‘overseas

air transportation’ means—

(A) the carriage by aircraft of persons as a

common carrier for compensation or hire in com-

merce between a place in any State of the United

States, or the District of Columbia, and any place

in a territory or possession of the United States;

or between a place in a territory or possession of

the United States, and a place in any other ter-

ritory or possession of the United States;

AA AA HP tn a ONE er

(B) the carriage by aircraft of property as a

common carrier for compensation or hire in com-

merce between a place in any State of the United

States, or the District of Columbia, and any place

in a territory or possession of the United States,

or the District of Columbia, and any place in a ter-

ritory or possession of the United States (other

than the Commonwealth of Puerto Rico and the

Virgin Islands); or between a place in a territory

or possession of the United States (other than the

Commonwealth of Puerto Rico and the Virgin

Islands);

whether such commerce moves wholly by aircraft or

partly by aircraft and partly by other forms of

transportation.

(3) For purposes of this section, the term ‘air

transportation of property within the State of Alaska’

means the carriage by aircraft of property (A) by a

common carrier for compensation or hire in commerce

between any pair of points both of which are in the

State of Alaska if such carriage is part of the con-

tinuous carriage of such property and another com-

mon carrier provides, as part of such continuous car-

riage, the carriage by aircraft of such property bet-

ween any pair of points one of which is within the

State of Alaska and the other of which is not within

such State, or (B) by a common carrier for compensa-

tion or hire in commerce between places in the State of

Alaska through the airspace over any place outside

thereof, whether such commerce moves wholly by air-

craft or partly by other forms of transportation.

(4) For purposes of this section, the term ‘air

transportation of property within the State of Hawaii’

means the carriage by aircraft of property (A) by a

common carrier for compensation or hire in commerce

between any pair of points both of which are within

the State of Hawaii and the other of which is not

within such State, or (B) by a common carrier for com-

pensation or hire in commerce between places in the

State of Hawaii through the airspace over any place

outside thereof, whether such commerce moves wholly

by aircraft or party by aircraft and partly by other

forms of transportation.”” As amended Pub.L. 95-163,

§§10(b), 18(a)-(e)(1), Nov. 9, 1977, 91 Stat.

1282,1286,1287; Pub.L. 95-504, §37(a),(b), Oct. 24,

1978, 92 Stat. 1741,1742.

Sherman Antitrust Act of 1890, as amended

Section 1; 15 U.S.C. §1

“$1. Trusts, etc., in restraint of trade illegal;

penalty

nih

Every contract, combination in the form of

trust or otherwise, or conspiracy, in restraint of

trade or commerce among the several States, or

with foreign nations, is declared to be illegal.

Every person who shall make any contact or

engage in any combination or conspiracy hereby

declared to be illegal shall be deemed guilty of a

felony, and on conviction thereof, shall be punish-

ed by fine not exceeding one million dollars if a

corporation, or, if any other person, one hundred

thousand dollars or by imprisonment not ex-

ceeding three years, or by both said punishments,

in the discretion of the court.”’

Section 2; 15 U.S.C. §2

“2. Monopolizing trade a felony; penalty

Every person who shall monopolize, or at-

tempt to monopolize, or combine or conspire with

any other person or persons, to monopolize any

part of the trade or commerce among the several

States, or with foreighn nations, shall be deemed

guilty of a felony, and, on conviction thereof, shall

be punished by fine not exceeding one million

dollars if a corporation, or, if any other person,

one hundred thousand dollars or by imprisonment |

not exceeding three years, or by both said |

punishments, in the disretion cf the court."’

As amended Dec. 21, 1974, Pub.L. 93-528, §3,88

Stat. 1708; Dec. 12, 1975, Pub .. 94-145, §2,89 Stat.

801.

STATEMENT OF THE CASE

Paramount in this case is the fact that the

District Court opinion herein (Appendix 4) as sum-

marily affirmed and validated by the Court of Appeals

(la,3a)*, effectively and without warrant in law,

destroys the decades old right of shippers to sue under

section 404 of the Aviation Act; 49 U.S.C. §1374, for

reparation of executed and completed illegally

discriminatory acts of carriers in air transportation.

That destruction of a hitherto existing right puts the

remediation of the prohibited misconduct beyond

reach, renders the Congressional mandate unen-

forceable, and constitutes an invitation to the

predator since, once the prohibited act is done, the

misconduct cannot be remedied.

Palpably this application involves a question of

great public importance lying at the very heart of

deregulation, namely, whether civil aviation shall con-

tinue as a public service industry bound by en-

forceable rules of fair play in common carriage as re-

quired by §1002(k) of the Airline Deregulation Act; 49

U.S.C. §1482(k), or, abandoning the impartial role of

public transportation, be aliowed to deal individually

and on different terms with its customers, to prefer or

to exclude. That decision, we feel, is for Congress to

make and not for the Courts or for administrative

agencies which are charged with enforcing the law as

it is, and not with their notions of what it ought to be.

*References are to pages of the appendices hereto.

Up to very recently it has been a commonplace of

the law since 1956 that persons—passengers and ship-

pers—who are the beneficiaries of statutes prohibiting

discrimination in air transportation, may sue in the

district court to obtain reparation for past, executed

acts of carrier misconduct violative of those rights. In

its origins of judicial implication of such a right, the

reasons for the rule are simple and were thought com-

pelling, viz., the Civil Aeronautics Board (“CAB”),

unlike other transportation regulatory agencies, never

was and still is not empowered to award money

damages. Its regulatory powers were addressed to the

future and its armory was the equitable range ex-

pressed in cease and desist orders. Therefore, it was

reasoned, private suit for violations already executed

was the only way to render the statutory prohibition

enforceable, else the statute would be stultified and in-

stead of serving as a protection for its beneficiaries,

would be an open invitation to the predator.

But now—with the substantive regulation still in

force and unabated—the Court of Appeals has agreed

with the District Court that the 28-year-old implied

statutory right to sue for discriminatory carrier

misconduct in air transportation was a mistake; Con-

gress never intended, and consequently there never

was, a right of suit by injured beneficiaries to enforce

the antidiscriminatory features of the Act:

“**® this Court concludes that Congress in-

tended no private right of action for a violation of

§404.

** * *

“***® Indeed, there is nothing in the

legislative history of either §404(a) or §404(b) in-

dicating Congressional intent to give any private

ete a mn NB

party a right of action.” (District Court opinion,

15a, emphasis the Court's).

The implications of this holding, now affirmed,

are awesome. Every beneficiary of the stautory pro-

hibition against discrimination in air transportation,

all shippers of air freight, have now had their rights of

entitlement to the protection of their statutory rights

against discrimination in air transportation

destroyed; if they are denied access, if they are squeez-

ed for discriminatory rates, if their competitors are

charged less for the same service, there simply is no

recourse for what has been done even though the law

prohibiting the practices is alive and unrepealed on

the books. And even where, as here, the CAB has in-

vestigated the absolute embargo by American

Airlines, Inc. (‘‘American’’) of every container of peti-

tioner’s (‘‘Century’s’’) goods tendered for the over-

night freighter from New York to San Juan from 1971

until September 1977, expressed the view that

American violated both the antitrust laws and the

Aviation Act, and issued its administrative complaint

charging American with violation of §404 (b) of the

Act thus instituting an Enforcement Proceeding, that

still has not, thanks to the judicial determinations

below, given Century any right of judicial recourse or

any remediation for that matter for the damage of the

six year boycott explicitly prohibited by §404 (a) of

the Act. Neither, for that matter and under the

reasoning there upheld, would a complete litigating

victory in the CAB have accomplished as much for

Century.

Effectively and silently, the action of the District

Court opinion, and its affirmance by the Court of Ap-

peals, works a judicial repeal of section 1002 (k) of the

Act; 49 U.S.C. §1482 (k) thus frustrating a Congres-

sional purpose to fix a regime of common carriage and

public service in the transportation of freight by air

for the era of deregulation. The decision here is indeed

revolutionary. It is also regressive and presump-

tuously usurps the function and jurisdiction of Con-

gress.

CENTURY’S CASE AGAINST AMERICAN

In May 1977 Century brought suit in the United

States District Court for the Southern District of New

York. Claiming under both the Sherman Aci, secs. 1

and 2, and sec. 404 of the Aviation Act; 49 U.S.C.

§1374, the complaint alleged that, early in March

1971, American, which had acquired its New York-

San Juan route from Trans Caribbean Airways, for

which Century’s principals had been the contract local

trucker, started up a large capacity, fully containeriz-

ed, all-freighter flight scheduled for weekday, daily,

prime time (overnight) service from New York to San

Juan, thus affording the only large volume facility for

effecting ‘“‘next day” service in the New York to San

Juan route, i.e., goods picked up in the New York ser-

vice area during the day could be containerized that

evening and flown to San Juan where it would be

broken out of consolidation and delivered to con-

signees throughout Puerto Rico the next day. Profit

By Air, Inc. (“PBA”), a recently started air freight

forwarder which had built up custom through

customer contacts furnished by Century’s principals

as truckers, quickly established primacy aboard that

flight and never had less than two-thirds allocation of

the container space aboard the American flight

throughout its ten year duration. Both American and

PBA feared the capability of Century to divert

business away from them; PBA, as “‘confidential’’ in-

Ne ne ne cage ant atta EE A A I EN. BN AO

formant of calumny, succeeded in delaying Century's

licensure by the CAB as an air freight forwarder from

February 1970 until June 1971. Becoming operative

in 1971, Century constantly requested container space

aboard the flight and was never allowed to load as

much as a single container of its consolidations

aboard the flight until September 1977, four months

after the start of this district court suit, when it was

granted a daily one-container allocation on the flight

with the proviso that American could break Centurys

goods out of containerization. Up until then, in turn-

ing down Century’s requests, American had claimed

that, with twelve main deck container positions, it

was full. But the single container allocation to Cen-

tury disturbed no existing allocations; it was thir-

teenth to the others’ twelve and so continued for the

balance of the flight’s existence. It was, of course,

physically available from the very beginnng, and

American’s will, rather than any physical inability to

accommodate, was what kept Century off the flight

during the boycott.

At that time, September 1977, section 404 (a) of

the Act was in full force and effect, enacted in 1938, re-

enacted in 1958, and again to be reenacted in the

Airline Deregulation Act of October 24, 1978, 92 Stat.

1724, it read as it always has:

“It shall be the duty of every air carrier to

provide and furnish interstate and overseas air

transportation, as authorized by its certificate,

upon reasonable request therefor***.”’

So, too, was section 404 (b) of the Act in full force and

effect from 1938 through reenactment in 1958 and

continuing thereafter to the present day. It was this

subsection which, until this case, was authoritatively

thought to provide the procedural vehicle for suit by

the aggrieved victims of discrimination in air

transportation:

‘“(b) No air carrier or foreign air carrier shall

make, give, or cause any undue or unreasonable

preference or advantage to any particular person,

port, locality, or description of traffic in air

transportation in any respect whatsoever or sub-

ject any particular person, port, locality, or

description of traffic in air transportation to any

unjust discrimination or any undue or

unreasonable prejudice or disadvantage in any

respect whatsoever.”

Also in full force and unquestioned at that time as

binding authority was Fitzgerald v. Pan American

World Airways, Inc., 229 F.2d 499 (2d Cir. 1956) and

Allied Air Freight, Inc. v. Pan American World Air-

ways, Inc., 393 F.2d 441 (2d Cir. 1968), cert. denied,

393 U.S. 846, Lumbard, Ch. J., saying in Allied at 449:

‘In this case two causes of action are pleaded.

The first relates to violation of the Sherman and

Clayton Acts. The second is a tort action for

single damages arising out of alleged violations of

§404 of the Federal Aviation Act by appellee's

discriminating against appellant. In Fitzgerald v.

Pan American World Airways, Inc., 229 F.2d 499

(2d Cir. 1956) we held that the Board does not

have primary jurisdiction over damage actions

for past discrimination in violation of §404. There

is no cause of action under the Federal Aviation

Act which must be referred to the Board for deter-

mination.”’

But when suit was brought in May 1977, the

boycott was still total and underway, destined to run

its course for another four months. Century's District

Court complaint had therefore, in addition to money

damages prayed for a Clayton Act injunction to pry

American open. American moved for dismissal or

stay on primary jurisdiction grounds and, Century

consenting, the CAB eiected to take the case and the

District Court stayed the action pending CAB disposi-

tion of the matter.

THE CASE BEFORE THE CAB

Acquiring primary jurisdiction of the case on Oc-

tober 27, 1977, the CAB’s investigatory and pro-

secuting Bureau, after investigation, concluded by

June 22, 1979 that Americar had violated both an-

titrust laws and the Aviation Act (Appendix 5):

“We have also concluded, on the basis of in-

formation presently available, that there are

reasonable grounds to believe that American's

practice constituted a violation of Section 1 of the

Sherman Act. Specifically, we find that it is in-

consistent with the ‘essential facility’’ doctrine

perhaps best enunciated in Hecht v. Pro-Football,

Inc., 570 F.2d 982 (D.C. Cir. 1977). The relevant

market at issue here is confirmed air freight

traveling from New York City to San Juan, Puer-

to Rico on regularly scheduled cargo service.

American's service constituted a facility essential

to successful operations in this market. Since, as

a practical matter, air freight forwarders are

unlikely to be able to duplicate these services,

they should be allocated on fair terms. Therefore,

in foreclosing the use of American's services, both

American and Profit-By-Air may have violated

Sana iia ae

the antitrust laws. Hecht, supra, 570 F.2d at 992; )

see also, Otter Tail Power Co. v. Uniter States,

410 U.S. 366 (1972). By implication, any such

violations weuld also constitute unfair methods

of trade within the meaning of Section 411 of the

Federal Aviation Act. See, Federal Trade Com-

misssion v. Cement Institute, 333 U.S. 683

(1948).””

CONCLUSION

“For the reasons stated above, the Bureau

has concluded that American violated Section

404(b) of the Federal Aviation Act in excluding

Century from its New York City-San Juan

freighter service and by continuing to restrict the

availability of this service as a result of

preferences given other forwarders. These ac-

tions not only injured Century's business, but

also caused great harm to the general public.

American prevented a smal! torwarder from offer-

ing new, innovative service to the public in com-

petition with the incumbent. Such a result is

directly contrary to the aims of deregulation and |

current Board policies.” (39a-40a) .

On December 14, 1979 the CAB enforcement

Bureau initiated a CAB Enforcement Proceeding

against American and issued its administrative com-

plaint charging it with violation of section 404(b) of

the Act in its exclusion of Century from the flight

despite Century's many requests for such air

transportation service, and seeking an order which

would require American to make equitable allocation

of container space aboard the flight with provisions

for regular periodic revisions.

When the case arrived at the CAB on October 27,

1977, it came at the very threshold of deregulation.

Less than two weeks later, the legislation of

November 9, 1977 establishing a year of preparation

for the effectuation of deregulation was enacted—P.L.

95-113. From that outset, it made it plain that the

deregulated basis for the carriage of air freight would

be a public service industry with transportation ser-

vices performed by common carriers. Thus the newly

enacted §1002(k); 49 U.S.C. §1482(k):

“*** the term ‘interstate air transportation of

property’ means—

(A) the carriage by aircraft of property as a com-

mon carrier for compensation or hire in commerce ***

(B) the carriage by aircraft of properiy as a com-

mon carrier for compensation or hire, in commerce bet-

ween a place in any State of the United States or the

District of Columbia and any place in the Com-

monwealth of Puerto Rico ****"

And when a year later on November 9, 1978, the

CAB, acting with respect to domestic air carriage of

goods, exempted it from the duty to carry under

§404(a), it made plain how far the strictures of com-

mon carriage limited the actual operation of that ex-

emption:

‘The Board is also exempting carriers in domestic

cargo transportation from the duty under section

404(a) of the Act to carry on reasonable request ****.

This exemption, however, does not relieve the car-

riers of their service obligations as common carriers,

and does not apply to a carrier's duty to refrain from

providing preferential treatment to particular com-

panies or persons. Carriers holding certificates under

section 401 or 418 of the Act remain, by definition,

common carriers. The statutory duty to provide ser-

vice upon reasonable request is broader than the ser-

vice obligations of a common carrier at common law.

At common law, a carrier is permitted to hold itself

out as a carrier of only a particular kind of freight, and

is not obligated to carry other types of cargo. This ex-

emption, therefore, only ends the Board’s role in

regulating the extent of the carriers’ service offerings,

***'’ (General Rules for All-Cargo Carriers, ER-1080;

43 Fed. Reg. 53628; 53631, November 16, 1978)

Ironically, it was passengers—the travelling

public—who were withdrawn from the coverage of sec-

tions 404(a) and 404(b), and who never had coverage

under §1002(k) of the Act, who no longer may main-

tain a private suit under 404(b) of the Act. That was

not the doing of a Court nor an administrative body.

Thus in 49 U.S.C. §1551(a)(1)(F) passengers in both in-

terstate and overseas air transportation ceased to

have a right to require an air carrier to furnish air

transportation under sec. 404(a) as of December 31,

1981; and under subsection (a})(2)(B) they ceased to

have any right in section 404 altogether, »ave for the

404(a) right to be provided safe and adequate service,

as of January 1, 1983. Thus Congress has dramatical-

ly mandated the status and effect of its statutes, viz.,

section 404(a) and (b), as well as 1002(k), of the Act

function and exist for the benefit of shippers in air

transportation; they are not to be excluded by some

court’s obiter supposing an exclusivity of benefit for

the ‘‘travelling public.’ As to the rights of shippers by

air, even to the extent of the limited exemption for sec-

tion 404(a)'’s duty to carry on reasonable request affec-

ting domestic air transportation of goods, and putting

out of mind that American’s termination of its six

year embargo in September 1977 a full fourteen

months before the November 9, 1978 exemption from

the duty to carry, came far too early for American to

have its embargo legitimated, the prosecuting

telat An iO.

tens Aan AK ee SAMOS IMR uly le Sete esd DAs hasnt te mae

Bureau's trial brief is sobering:

‘“‘The Supreme Court recently held that one of the

fundamental principles defining the obligations of a

common carrier is to provide a ‘nondiscriminatory

right of access’ to all who seek to use its service. FCC

v. Midwest Video Corp., 99 S.Ct. 1435, 1442-43, [440

U.S. 689] (1979). This genera! principle is reflected in

the proscription against unjust discrimination con-

tained in section 404(b) of the Federal Aviation Act.

Section 404(b), in the words of a leading case:

precludes different treatment of like traffic

for like and contemporaneous service under

substantially similar circumstances and condi-

tions. (Citations omitted) Such discrimination

may result from the charging of different rates to

different shippers or passengers offered the same

service ... or from the offering of specific services

to only a select patron or group of patrons. (Cita-

tion omitted) In either situation, the result is that

the carrier is giving preferential treatment to one

person or group of persons to the prejudice of

another and contrary to the requirement that all

those who seek the service of a carrier must be

treated alike.’ Transcontinental Bus System, Inc.

vu. Civil Aeronautics Board, 383 F.2d 466 at

481-82 (5th Cir. 1967), cert. denied, 390 U.S. 920

(1968).”’

‘‘American’s practice of granting Profit-By-Air

and other favored iorwarders allocations of indefinite

duration on its New York-San Juan cargo flights, and

refusing all others space on the flights is a classic ex-

ample of the ‘offering of specific services to only a

select patron or group of patrons.’ This practice has

resulted in the very harm—to Century and to other

forwarders who have requested space on the

flights—sought to be prevented by sevtion 404(b),

namely, ‘giving preferential treatment to one person

or group of persons to the prejudice of another and

contrary to the requirement that all those that seek

the service of a carrier must be treated alike.’ ”’

The CAB’s case against American was settled

over Century’s litigated objection as giving American

too much leeway in the proposed selection or rejection

of customer applicants. The Court of Appeals for the

District of Columbia Circuit overruled Century’s ob-

jections to the settlement and dismissed its petition

for review, 679 F. 24 261 (D.C. Cir. 1982), and this was

followed by a denial of certiorari, 459 U.S. 943 (1982).

However, in its unpublished judgment, the Court of

Appeals made plain that some selection of customers

on a basis not violative of section 404(b) had been

legitimized by the November 9, 1978 exemption of

domestic air carriage of goods from the Aviation Act’s

section 404(a) duty to carry, thereby validating the

CAB’s settlement with American. It also reiterated

the CAB’s assurance that nothing in the settlement

prejudiced Century’s court case. Thus:

‘““*** The terms of the settlement do not authorize

American Airlines to operate an overnight, all-cargo

flight between New York and San Juan in violation of

Section 404(b) of the Federal Aviation Act, 49 U.S.C.

§1374(b). Nor was there error in allowing American

Airlines to refuse reasonable requests for service on

such a flight. 14 C.F.R. §291.31(a)(2) (1980); see Nat’l

Small Shipments Traffic Conference v. CAB, 618 F.2d

819, 831-832 (D.C. Cir. 1980). *** We note that the

order under review expressly states that it is not in-

tended to prejudice petitioner’s pending suit against

American, and the order does not state or imply that

American’s conduct between 1971 and 1981 did not

violate the antitrust laws. ***”’

The case having been settled on the basis of a

$50,000. civil fine, an annual allocation system, and a

practical guarantee of some space for Century aboard

the flight—and with the flight itself shortly ter-

minating thereafter, the case came back to the

District Court for crossed summary judgment ap-

plications, Century’s for liability, American’s for

dismissal. The result, as affirmed, was dismissal A) of

the Aviation Act action on the ground Congress never

intended a private cause of action under §404 of the

Act and that therefore it never legitimately existed.

and B) of the Sherman Act treble damage cause on the

ground that the unanswered complaint of May 5, 1977

alleging an illegal, unrelentingly total boycott of ac-

cess of Century’s containerized goods aboard

American’s overnight freighter flight from New York

to San Juan, all in favor and preference of Century's

forwarder competitor Profit By Air, starting from the

almost coincidental beginnings of operations in 1971

down to the time of suit and destined to go on un-

broken for another four months until September

1977—could not possibly present a triable antitrust

issue in Century’s favor.

That resu!t is absurd because it tries to flout the

central, immovable and unretrievable feature of the

case which is, of course, the illegally monolithic

restraint of trade exercised by American over an un-

broken six year period of absolute refusal to transport

Century’s goods, a refusal blatantly violative of a

policy statute of the United States imposing on it the

duty to furnish transportation, and to abstain from

unjust discrimination and the granting of undue

preferences.

More than that, the complaint did not come up to

the District Court as a newborn on American's mo-

tion; it had been thoroughly investigated by the ad-

ministrative expert which, far from dismissing it, had

started a companionate Enforcement Proceeding

against American based on its allegations. The

boycott itself was never disputed by American. At

first American’s position was that its action in

preferencing Profit By Air was justified by the

necessity for ‘‘meeting competition,”’ that fear of los-

ing its star customer Profit By Air to others was the

reason for not allocating space to Century. Later,

forgetful that Sherman Act, section 2 was still on the

books, American decided on the strategy of becoming

the sole master of its enterprise. Thus its affidavit on

the motions to the District Court:

‘“‘American had no agreement with PBA to ex-

clude Century from Flight No. 841. American’s failure

to provide Century with a reserved air freight position

until 1977 was American’s independent business deci-

sion dictated by American’s economic needs.***”’

ARGUMENT

1. Fitzgerald v. Pan American World Airways,

Inc., 229 F. 2d 499 (2d Cir. 1956) is valid prevailing

authority fer allowing private suit under Section

404(b) of the Aviation Act by qualified suitors il-

legally injured by carrier discrimination in air

transportation.

What is utterly disheartening here is the Second

Circuit’s unabashed hostility to the protective pur-

poses of section 404 of the Aviation Act, its cheerful

exoneration of American from any wrongdoing in its

-six year blatantly illegal boycott of Century while

ostensibly discharging its public service obligations

as a common carrier. Worst of all is the District

i iis

Court’s deliberate omission to ever mention the vital-

ly operative portion of §404(a) of the Act while purpor-

ting to expound it to the reader so that the opening

sentence of §404(a) of the Aviation Act

“It shall be the duty of every air carrier to provide

and furnish interstate and overseas air transporta-

tion, as authorized by its certificate, upon reasonable

request therefor ***”’

appears nowhere in the Court’s opinion, and is drop-

ped in what purports to be its exposition of the

subsection (13a). Like expounding the Fourteenth

Amendment but omitting its section 1, the distortion

is enormous. Although the interests of shippers are

cheerfully thrown out the window, nowhere can any

reference to sec. 1002(k)—mandating a common car-

rier basis for air transportation of property, enacted

for deregulation, be found in the opinion. From the

beginning of the opinion to the end, the reader will

find no trace of Fitzgerald v. Pan American World Air-

ways, nor of Allied Air Freight v. Pan American

World Airways, 393 F.2d 441 (2d Cir. 1968), cert.

denied, 393 U.S. 846, even though they are paramount

authority for the validity of the Aviation Act features

of this suit. Where there is very recent high authority

sustaining the enduring authority of long adjudicated

cases implying a private remedy, the District Court

ridicules and refuses to follow:

“*** While it is true that the Supreme Court has

backslid on one or two such cases recently, notably

Merrill Lynch, etc. v. Curran, 444 U.S. 356 (1982) and

Herman & MacLean v. Huddleston, 459 U.S. 375

(1983) *** ‘a lower federal court ... must employ the

analysis currently required by the Supreme Court for

making the determination of Congressional intent’ ”’

(emphasis supplied) (Appendix 4, 15a).

Fitzgerald v. Pan American World Airways, Inc.,

229 F. 2d 499 (2d Cir. 1956) is now effectively overrul-

ed by the Court of Appeals’ summary affirmance of

the District Court opinion. Not even mentioned below,

not measured by Cort v. Ash, 422 U.S. 66 (1975),

criteria, nor looked at for Herman & MacLean v. Hua-

dleston unchallenged longevity, the shipping public is

quietly dropped overboard from the protection of the

Act. But Fitzgerald is a persuasive exponent for the

private remedy it finds implied in §404 of the Act.

Speaking of sec. 404(b), then 49 U.S.C. §484(b) in the

1938 enactment, Frank, J. said:

“*** (§484(b)] is for the benefit of persons, in-

cluding passengers, using the facilities of air carriers.

Consequently, by implication, its violation creates an

actionable civil right for the vindication of which a

civil action may be maintained by any such person

who has been harmed by the violation. (229 F. 2d at

501)

eeee

“Defendant also contends that the sole ***

remedy for a violation of any provision of the Act is to

be found in *** a complaint to the Civil Aeronautics

Boad which must investigate the complaint and, if the

facts warrant, must issue an order compelling com-

pliance with the violated provisions of the Act. We

cannot agree. As such an order must look to the

future, obviously it cannot afford redress to one harm-

ed by a violation of Section 484(b). *** no order of the

Board can compel the defendant in 1956 to permit the

plaintiffs to board defendant’s plane on July 19, 1954.

‘This is not a case where the Board has ‘exclusive

primary jurisdiction’: (1) The Civil Aeronautics Act,

unlike the Interstate Commerce Act or the Shipping

Act, confers no power on the administrative agency to

grant reparation in money for past misconduct of the

carrier. (2) The Board has no power to approve viola-

tions of Section 484(b). (3) Nor has it purported to do

so."’ (emphasis supplied; 229 F. 2d at 502)

Not acknowledging the existence of the mandate

of carrier's duty to furnish transportation upon

reasonable request, the District Court matched

nothing against the Cort criteria and found them

grossly unsatisfied. In the actualities, Fitzgerald

would fare handsomely as would §404(a):

1. Was enactment for the benefit of a special class?

Answer:—Yes, for the benefit of persons requesting

air transportation, i.e., passengers and shippers.

‘“*** in those situations in which we have inferred a

federal private cause of action not expressly provided,

there has generally been a clearly articulated federal

right in the plaintiff *** or a pervasive legislative

scheme governing in the relationship between the

plaintiff class and the defendant class in a particular

regard.’’ 422 U.S. at 82.

2. Congressional intention consistent with right to

federal cause of action for damages.

Answer:—‘‘*** ‘in situations in which it is clear that

federal law has granted a class of persons certain

rights, it is not necessary to show an intention to

create a private cause of action, although an explicit

purpose to deny such cause of action would be con-

trolling.’’ 422 U.S. at 82. (emphasis the Court's)

3. Consistency of the implied cause of action with the

statutory purpose.

Answer:—‘‘*** ‘it is the duty of the courts to be alert

to provide such remedies as are necessary to make ef-

fective the Congressional purpose,’ ***’’ 422 U.S. at

84.

Here Fitzgerald is exceptionally apt.

4. Existence of a state law remedy? Answer:—No.

This is a sui generis federal statutory remedy under

sec. 404(b) of the Act to enforce both 404(a) and 404(b).

This is the very first time in the career of Fitz-

gerald as a leading case that it has been challenged, let

alone overruled. Even cases thought critical of private

suit under the Act have been in accord where the

discrimination has been actually in air transportation.

Thus Diefenthal v. C.A.B., 681 F. 2d 1039 (5th Cir.

1982), cert. denied, 103 S. Ct. 732 (1983):

“Section 1374(b) [404(b)] has been recognized to

prohibit the granting of preferential and

discriminatory rates, the denial of access to flights

and terminals on the basis of race and the practice of

‘bumping’ passengers ***. See Mason v. Belieu, 543

F. 2d 215, 219 (D.C. Cir.), cert. den. 429 U.S. 852;

Polansky v. Trans World Airlines, 523 F. 2d 332,

335-36 (3rd Cir. 1975). In Polansky, the Third Circuit

recognized, however, that not every difference in

treatment by an airline does not constitute discrimina-

tion. It found that section 1374(b) was only intended

‘to protect the right of access to air facilities from

discriminatory interference in treatment by the air

carrier. ... It is this denial of access to air ‘cilities,

whether caused directly, or by outright refusal of per-

mission to board, or indirectly, by burdening the

potential user with special requirements not applied to

the general public, which is critical.”

Diefenthal v. C.A.B. makes the rather common

mistake of treating Fitzgerald as though it were ac-

tuated in the interest of combatting racial discrimina-

tion: Thus Diefenthal, 681 F.2d at 1051, ftn. 13:

“We do not suggest that either ad hoc intentional

racial or similar class-based discrimination, or

discriminatory general airline rules, respecting in-

flight service or accommodations should not be the

subject of a private cause of action under section

1374(b). The case before us presents nothing of this

kind.”’

The essence of a suit for discriminatory denial of

access under section 404(b) is not that the discrimina-

tion may have been racially motivated, but that it

was, when the statute was available to passengers, a

violation of the carrier’s duty to furnish transporta-

tion under section 404(a). And, under the fourth

criterion of Cort v. Ash, it was a matter of federal

remediation, the State courts having neither the

statutory mandate nor the statutory remedy. And

Caceres Agency, Inc. v. Trans World Airways, Inc.,

594 F. 2d 932 (2d Cir. 1979), though quoted by Diefen-

thal as finding that a private remedy does not exist

under section 404, is, in actuality no foe to the authori-

ty of Fitzgerald; thus Caceres at p. 933:

“*** Many years ago, this Court stated that sec-

tion 404(b) (then section 484(b) of the Civil Aeronautic

Act) was for the benefit of persons using the facilities

of air carriers. Fitzgerald v. Pan American World Air

ways, Inc., 229 F. 2d 499, 501 (2d Cir. 1956); see also

Lichten v. Eastern Airlines, Inc., 189 F. 2d 939, 941.

What was the the statutory purpose remains the

statutory purpose today; it is the protection of the

travelling public. ***’’

Patently, there is no way to breathe legality into

the six year boycott by American of access of Cen-

tury’s goods aboard its flight. That act was a gross

violation of its public service obligations under sec-

tion 404(a) of the Act and, derivatively, an ‘‘unjust”’

discrimination in air transportation under 404(b) of

the Act. To relieve so gross a violation of the Act from

adverse consequences to American is subversive of

the Act the courts are obliged to enforce. If, as a con-

sequence of relieving American from adverse conse-

quences of its patently illegal boycott, the shipping

public has been deprived of all rational remediation

for violations of sections 404 and 1002(k) of the Act,

an authoritative judicial opinion from this Court is

their entitlement. We urge this Court to grant cer-

tiorari.

2. The legal predicate of the undisputed exclusion

of Century’s goods from American's freighter

flight sustained for six years is that it was a gross

violation of §404 of the Aviation Act and an il-

legal restraint of trade. In those circumstances,

the mere presence of a beneficiary and

preferencee made the possibility of antitrust

violation too strong to allow summary dismissal

on antitrust.

With the boycott itself an uncontested reality and

its illegality under section 404 of the Act palpable to a

point where it has been deemed necessary to hold that

no right of private action exists under the Aviation

Act, it is American which has come forward to admit

the obvious. Thus in a letter to the CAB of September

18, 1979:

“*** American's practice of allocating “A” posi-

tions in favor of PBA is rooted in the economic

necessity of retaining the PBA traffic which no other

forwarder can replace and preventing that traffic from

going to a charter.”

and

“*** if American were required to give a PBA

position to Century, the result could well be

withdrawal of PBA's business and cancellation of the

service.”

And putting aside the inexcusable illegality of a

boycott by a common carrier, Com-Tel, Inc. v.

DuKane Corporation, 669 F.2d 404 (6th Cir. 1982), in-

structs us that where the pressure, seemingly vertical,

originates, in reality, from the competitor preferenced,

that horizontal pressure in itself spells out a violation

of antitrust which is, at the very least, a triable issue.

On the affirmative side, it should not be forgotten

how completely the Courts below have disregarded

the investigatory material, findings and conclusions

of the CAB, supposedly the administrative expert ex-

ercising its primary jurisdiction upon whose work the

courts are supposed, at the very least, to give heed.

CONCLUSION

For the foregoing reasons, petitioner earnestly

prays that this petition for a writ of certiorari be

granted.

Respectfully submitted,

MILTON HOROWITZ

Counsel for Petitioner

15 Park Row

New York, N.Y. 10038

(212) 267-0606

MICHAEL E. VEVE,

Of Counsel for Petitioner

O'CONNOR & HANNAN

1919 Pennsylvania Avenue, N.W.

Washington, D.C. 20006

(202) 487-1455

Dated: October 4, 1984

APPENDIX i—ORDER DENYING PETITION

FOR REHEARING IN BANC, JULY 10, 1984

UNITED STATES COURT OF APPEALS

SECOND CIRCUIT

Ata stated term of the United States Court of Ap-

peals, in and for the Second Circuit, held at the Unitec

States Courthouse, in the City of New York, on the

10th day of July one thousand nine hundred and

eighty-four. '

CENTURY AIR FREIGHT INC.,

Plaintiff-Appellant,

AMERICAN AIRLINES INC.,

Defendant-Appeliee.

A petition for rehearing containing a suggestion

that the action be reheard in banc having been filed

herein by counsel for the plaintiff-appellant, Century

Air Freight Inc.,

Upon consideration by the panel that heard the

appeal, it is

Ordered that said petition for rehearing is

DENIED.

It is further noted that the suggestion for rehear-

ing in banc has been transmitted to the judges of the

court in regular active service and to any other judge

that heard the appeal and that no such judge has re-

quested that a vote be taken thereon.

s/ Elaine B. Goldsmith

Elaine B. Goldsmith

Clerk

APPENDIX 2—COURT OF APPEALS’ SUM-

MARY AFFIRMANCE OF DISTRICT COURT

JUDGMENT ON OPINION BELOW, MAY 31, 1984

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

At a stated Term of the United States Court of

Appeals for the Second Circuit, held at the United

States Courthouse in the City of New York, on the

thirty-first day of May one thousand nine hundred

and eighty-four.

Present: HONORABLE THOMAS J. MESKILL,

| HONORABLE RICHARD J. CARDAMONE,

) HONORABLE GEORGE C. PRATT,

Circuit Judges,

' CENTURY AIR FREIGHT, INC.,

| Plaintiff-Appellant,

‘AMERICAN AIRLINES, INC.,

Defendant-Appellee.

Docket No. 84-7125

| Appeal from a judgment of the United States

District Court for the Southern District of New York,

Brieant, J.

This matter came on to be heard on the transcript

of record from said district court and was argued by

counsel.

ON CONSIDERATION WHEREOF, the judg-

ment of the district court is hereby affirmed on the

opinion of Judge Brieant below.

s/ Thomas J. Meskill

Thomas J. Meskill, U.S.C.J.

s/ Richard J. Cardamone

Richard J. Cardamone, U.S.C.J.

s/ George C. Pratt

George C. Pratt, U.S.C.J.

N.B. Since this statement does not constitute a formal

opinion of this court and is not uniformly available to

all parties, it shall not be reported, cited or otherwise

used in unrelated cases before this or any other court.

APPENDIX 3—JUDGMENT DISMISSING COM-

PLAINT, JANUARY 10, 1984

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

CENTURY AIR FREIGHT, INC.,

Plaintiff

-against-

AMERICAN AIRLINES, INC.,

Defendant

77 CIVIL 2195 CLB

Plaintiff having moved for partial summary judg-

ment and defendant having moved for an order

dismissing certain claims pleaded and granting sum-

mary judgment in its favor with respect to others, and

the said motions having come before the Honorable

Charles L. Brieant, U.S.D.J., and the Court thereafter

on January 5, 1984, having handed down its

memorandum and order denying plaintiff's motion for

partial summary judgment in all respects: granting

defendant’s motion to dismiss the complaint pursuant

to Rule 12(b)(6) F.R. Civ. P., with respect to the claim

under §404 of the Federal Aviation Act; granting

defendant’s motion for summary judgment against

plaintiff as to the claims under Sections 1 and 2 of the

Sherman Act; and directing the Clerk of the Court to

enter final judgment that all relief is denied, it is,

ORDERED, ADJUDGED AND DECREED:

That the complaint be and ix is hereby dismissed.

s/ Raymond F. Burghardt

Clerk

DATED: NEW YORK, N.Y.

January 10, 1984

APPENDIX 4—DISTRICT COURT OPINION,

JANUARY 5, 1984

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

CENTURY AIR FREIGHT, INC.,

Plaintiff,

-against-

AMERICAN AIRLINES, INC.,

Defendant.

77 Civ. 2195-CLB

Brieant, J.

By motions argued on September 9, 1983 and ful-

ly submitted on September 23, 1983, plaintiff seeks

partial summary judgment, while defendant seeks an

order dismissing certain claims pleaded, and granting

summary judgment in its favor with respect to others.

This action was stayed for a time pending applica-

tion by plaintiff to the Civil Aeronautics Board

(“CAB”) for administrative relief upon some but not

all of the claims. These administrative proceedings

have been concluded.' There remains for adjudication

here Federal Aviation Act claims and antitrust claims

pleaded, which were not resolved by the ad-

ministrative proceedings and subsequent appellate

review thereof.

Except where noted, the facts stated below are

not controverted, or may be regarded as conceded

solely for purposes of the motions. Defendant

American Airlines, Inc. (‘‘American’’) is a direct air

carrier of freight and passengers. Plaintiff Century

Air Freight, Inc. (‘‘Century’’) is a licensed air freight

forwarder, authorized to engage in that activity by

the CAB, as are many others.

In January 1970, American acquired Trans-

Caribbean Airways, and as part of that acquisition

assumed its carriage of air freight between New York

City and San Juan, Puerto Rico. On March 1, 1971,

subsequent to that acquisition, American initiated

Flight 841, a weekday all-cargo flight from New York

City to San Juan. The dispute herein arises out ». the

subsequent allocation by American of main deck con-

tainer positions on that flight.

Affiliated interests of the plaintiff apparently had

prior commercial disputes, litigation and arLitration

with American totally unrelated to this action or the

dispute set forth below. Plaintiff suggests, and we in-

fer, that these disputes left a residue of ill will. In ad-

dition, in February 1970, while Century’s application

for a license from the CAB was pending, the president

of a competing licensed air freight forwarder, Profit

By-Air, Inc. (‘“‘PBA’’), wrote a derogatory letter to the

CAB concerning plaintiff, referred to as a

‘devastatingly effective poison pen job on Century

Air Freight.”’ Plaintiff's Memorandum at 1. There is

no showing that this letter reached American, or that

American shares any responsibility for it. Never-

theless, in June 1971 Century’s freight forwarding

license was granted by the CAB.

American Flight No. 841, during the period of its

existence, from March 1, 1971 to August 31, 1981, had

a scheduled departure from New York which varied

between 11:00 P.M. and Midnight, with the return

flight from San Juan, American Flight No. 840,

scheduled for departure in the early morning im-

mediately following discharge of cargo and reloading.

The capacity of the Boeing 707 aircraft operated by

American on these flights was as follows: (1) eleven,

unbroken standard ‘‘A”’ type freight containers on the

main deck of the aircraft; (2) the cubic equivalent in

the breakbulk form, of one additional ‘‘A’’ type con-

tainer on the main deck; (3) two specially contoured

containers each with the cubic capacity of an ‘‘A”’

type container in the tail section; (4) the cubic

equivalent of three ‘‘A’’ type containers of breakbulk

cargo in the cargo bay compartments of the aircraft.

An ‘“‘A”’ type container has a capacity of approximate-

ly 5,500 lbs., and contains 440 cubic feet.

American allocated the space for the twelve main

deck container positions by a “Confirmed Air

Freight’’ method, whereby there was an understan-

ding between American and various shippers and/or

forwarders, to the effect that specific numbers of con-

tainer positions regularly would be available and be

used by them on Flight 841. Recurring daily reserva-

tions were offered and maintained, conditional upon

continuous use of the amount of space reserved by the

shipper. Initially, American made offers in part on

the basis of the shipper’s demand for container space

on the return flight, Flight 840, which was less

lucrative because less air cargo moves in that direc-

tion.

According to American, the recurring daily reser-

vations were granted initially in March 1971 on a first-

come-first-served basis, and such reserved space did

10a

not become fully committed until the end of 1971. By

that time, American had allocated eight main deck

container positions to PBA, three to Shulman Air

reeight, inc. (“Shulmsn’’) aud one to Emery Air

Freight, Inc. (“‘Emery’’). These allocations were in ef-

fect until 1978.

American asserts that on several occasions during

1971, before the main deck container positions were

fully reserved, it offered Century confirmed air space

on Flight 841, but that Century declined the offers,

“apparently because [Century] believed it had

preferable [space] from other carriers.’’ (Affidavit of

George A. Shipman, sworn to August 10, 1983, par.

11 [Shipman Affidavit’’]). Specifically, it is contended

that Century contemporaneously held confirmed air

freight space for six to eight ‘““LD-3”’ type container

positions on a late night Eastern Airlines combination

passenger/freight flight from New York to San Juan.

(Shipman Affidavit, par. 13).

American asserts further that Century’s requests

for specific space on particular dates on Flight 841

were granted or denied solely on the basis of the

availability of space on the particular dates requested.

It also contends that in January 1973 Century was

given a reserved space for one hundred pounds of

cargo, and that in September 1977, after the com-

mencement of this action, American accorded Century

a recurring reservation for a weight volume allocation

on Flight 841 equivalent to one “‘A”’ type container.

American did not confirm, however, that the Century

freight would move in a container rather that as

breakbulk cargo. Finally, American asserts that in

1978 when Shulman abandoned its three reserved con-

tainer positions, these were filled based upon the re-

a ae se

lla

quests of at least seven shippers, and that the three

shippers granted the space has previously been

without any reserved space on Flight 841.

Century contests the foregoing interpretation of

events, and asserts that from the time it was first

licensed as an air freight forwarder in June 1971,

American never offered it any main deck container

positions on Flight 841, and that in fact Century’s

repeated requests for reserved space were denied con-

sistently. (Affidavit of Salvatore Cirami, sworn to Ju-

ly 2, 1983, par. 14 [“Cirami Affidavit’’]). It asserts

further that its constant requests for confirmed space

in main deck container positions were prompted by

necessity, because Flight 841 was the only daily all

cargo flight between New York and San Juan during

the relevant time period with reliable next day

delivery service. (Jd. at par. 15).

While Century does not contest directly that it

had confirmed space on an Eastern Airlines combina-

tion passenger/freight flight, it does contend that the

space on alternatives to Flight 841 was commercially

unacceptable because the ‘“‘LD-3”’ type containers on

such combination flights had only one-third the

capacity of the “A” type containers used on the

American flight, and because the departure times of

the alternative flights were “inconvenient’’ for

loading in New York and ultimate delivery in Puerto

Rico. (Reply Affidavit of Salvatore Cirami, sworn to

August 24, 1983, par. 21). Century also contends that

the offer of 100 pounds reserved space, made by

American in April 1973 was commercially insignifi-

cant, and that the instant litigation was the sole

reason for American’s September 1977 offer of the

equivalent of one “‘A’”’ type container space.

12a

On the basis of the foregoing facts, Century

alleges that American, in conspiracy with PBA, refus-

ed, wrongfully, to deal with it with respect to reserved

air freight space on Flight 841 in violation of §404 of

the Federal Aviation Act, 49 U.S.C. §1374, and sec-

tions 1 and 2 of the Sherman Act, 15 U.S.C. §§1 and 2.

American responds, as it did in the substantial cor-

respondence between the parties (see Plaintiff’s Ex-

hibit 9), that it did not exclude Century from Flight

841 wrongfully, but rather that its reserved space

allocation method or system was commercially

necessary to assure the continued existence of the

flight, and that, therefore, American could not

reasonably cancel the existing continuous reserva-

tions of PBA, Shulman and Emery solely for the

benefit of the plaintiff.

Federal Aviation Act Claim

Century alleges that American’s refusal to accord

it reserved main deck container positions on Flight

841 violates §404 of the Federal Aviation Act. entitl-

ing it to damages on its motion for summary judg-

ment. American, in its motion, seeks to dismiss under

Rule 12(b)(6), F.R.Civ.P. so much of the complaint, fil-

ed May 5, 1977, as is based on the §404 claim, on the

grounds that Century has no implied private right of

action for damages under that statute. In addition, in

opposing Century's motion for summary judgment,

American argues that even if there is an implied right

of action under §404, the plaintiff's motion should not

be granted because questions of fact remain as to

whether (1) American discriminated against Century

in assiging reserved space; (2) Century requested

reserved air freight under similar circumstances as

those who were granted main deck container positions;

ly A OE ON te me

13a

(3) the allocation system resulted in any injury to com-

petition in the relevant market; (4) the challenged

allocation method was commercially reasonable

because necessary to sustain Flight 841; (5) the

challenged practice was necessary to meet competi-

tion from other direct carriers of air freight between

New York and San Juan.

It is umnecessary to consider whether the

aforementioned issues of fact are material and ge-

nuinely in dispute, because this Court agrees with

defendant that an air freight forwarder has no implied

private right of action for damages against an air car-

rier under §404 of the Federal Aviation Act..

Section 404(a)(1) provides in pertinent part that

every air carrier has the duty, with respect to in-

terstate and overseas air transportation, to

“establish, observe and enforce... just and reasonable

classification, rules, regulations, and practices

relating to such air transportation.” Section 404(b)

provides that an air carrier may not make any “unjust

discrimination or any undue or unreasonable pre-

judice or disadvantage in any respect whatsoever”

with regard to any person. A fair reading of Century's

papers indicates that it premises its complaint and its

motion for partial summary judgment upon both of

these provisions.

There is no express statutory authority for a

private right of action under either of these subdivi-

sions, therefore, the question of whether an implied

right of action is appropriate must be considered.

American asserts and Century has not disputed, that

heretofore no court has ever implied such a right

under §404(a). Moreover, defendant contends that no

l4a

court has ever implied a right under §404(b) on the

part of an air freight forwarder.

Prior to the Supreme Court's decision in Cort v.

Ash, 422 U.S. 66 (1975), a private remedy was readily

presumed in favor of one specially injured by the

violation of a regulatory statute. However, in Cort,

supra, such presumptions were rejected, and a four

part tést was devised to determine whether Congress

had actually intended to create a private right of ac-

tion in favor of the particular plaintiff seeking to

assert that right. 422 U.S. at 78. The four factors are

(1) whether the plaintiff is a member of a class for

whose “‘especial benefit’’ the statute was enacted; (2)

whether there is any indication of legislative intent to

create or deny the remedy sought’ (3) whether the im-

plicatien of the right of action would be consistent

with the underlying purposes of the regulatory

scheme involved; and (4) whether the cause of action

sought is one traditionally reserved to the states. Id

In an effort to cram the genie back into the bottle,

and stem the overwhelming flow of federal civil litiga-

tion spawned by J.J. Case v. Borak, 377 U.S. 426

(1964), which Cort v. Ash, did not succeed in doing,

this test has been narrowed further in subsequent

decisions, which emphasize the need to find affir-

mative expressions of Congressional intent before im-

plying a right of action. E.g. Middlesex County

Sewerage Authority v. National Sea Clamimers Ass'‘n.,

453 U.S. 1,13 (1981) (legislative intent is the ‘key to

the inquiry’’); Touche Ross & Co. v. Redington, 422

U.S. 560, 568 (1979) (all considerations should be

subordinated to the determination of Congressional

intent); Transamerica Mortgage Advisors, Inc. v.

Lewis, 444 U.S. 11, 20 (1979), quoting Cannon v.

University of Chicago, 441 U.S. 677, 742 (1979)

ce a A APIO

15a

(Powell, J., dissenting) (the relevant question is

whether “Congress absentmindedly forgot to mention

an implied private right of action’’). See also, Siebert

v. The Conservative Party of New York State,

__F.2d__(2d Cir., December 21, 1983, Dkt. 83-7542).

While it is true that the Supreme Court has backslid

on one or two such cases recently, notably Merril?

Lynch, etc. v. Curran, 444 U.S. 356 (1982) and Herman

& MacLean v. Huddleston, 459 U.S. 375,

(1983), Siebert makes it clear that “‘[a] lower federal

court... must employ the analysis currently required

by the Supreme Court for making the determination

of Congressional intent” (slip op. at 705).

Applying such considerations, this Court con-

cludes that Congress intended no private right of ac-

tion for a violation of §404.

To begin our analysis, we note that Century is not

an intended beneficiary of §404. As an air freight for-

warder, it is itself a regulated entity under the statute,

and therefore cannot claim any “especial benefit.”’

The purpose of the Federal Aviation Act has been

defined to be ‘“‘the protection of the traveling public.”

Carceres Agency, Inc. v. Trans World Airways, Inc.,

594 F.2d 932 (2d Cir. 1979) [travel agent not a

beneficiary under §404(b)}]. Air freight forwarders,

like travel agents, are members of the air transporta-

tion industry who arrange for and purchase air

transportation for the benefit of the public at large.

In Carceres, supra, the Court of Appeals observed

that there is no indication in the legislative history of

§404(b) that Congress intended to give travel agents a

right of action. 594 F.2d at 933-34. Indeed, there is

nothing in the legislative history of either §404(a) or

16a

§404(b) indicating Congressional intent to give any

private party a right of action. See 1958 U.S. Code

Cong. & Adm. News 3741-72. Furthermore, a compa-

nion provision of the Federal Aviation act, 49 U.S.C.

§1487(a) authorizes a private action in the district

court to enforce 49 U.S.C. §1371(a), which prohibits

persons from engaging in air transportation without a

CAB certificate. The only other enforcement provi-

sion of the Act, 49 U.S.C. §1487(b), authorizes the

CAB or the FAA to initiate proceedings for violations

of the Act.

Because Congress has specifically authorized

these remedies, an inference follows that there was no

Congressional intent to have this Court imply addi-

tional remedies. This Court should not alter the

legislative design with remedies of its own choosing

absent an indication of an intention by Congress that

we should do so. Carceres, supra, 594 F.2d at 933;

Siebert, supra.

Also, there has been no showing that the irmplica-

tion of a private right of action in this instance would

be consistent with the underlying legislative scheme

of the Federal Aviation Act, and I believe it would not

be. Damage actions do not inevitable complement the

work with which the federal regulatory agencies have

been charged by Congress. Indeed, in the context of

allegations of economic discrimination or unfair trade

practices, the necessary inquiry involving economic

and policy considerations is often better suited to

resolution by the administrative experts of the agency

charged with the supervision of the industry than by

the results of many disparate civil lawsuits randomly

brought, and just as often randomly decided by dif-

ferent courts throughout the nation.

lia

The absence of any strong need for an implied

judicial remedy of damages is also demonstrated by

the fact that the CAB has already addressed the

issues raised by Century, and American has signed a

consent order resolving the question of future air

cargo space alocations. A damage action is clearly not

necessary to further the purposes of the Act, nor is

there any reason to believe it was intended by Con-

gress.

Finally, although the existence of a state common

law remedy is said to be irrelevant when other parts of

the Cort test have not been satisfied, Touche Ross &

Co. v. Redington, supra at 575-76, it should be noted

that Century, unlike the travel agent in Carceres, has

no damage action under state law.

Accordingly, plaintiff's motion for a partial sum-

mary judgment with respect to its §404 claim is

denied, and defendant’s motion to dismiss the claim is

granted because this Court concludes as a matter of

law that no implied right of action exists for the claim-

ed violations.

Claim Under $1 of the Sherman Act

hel ee a ars etree rte meee wane e+ = ~ eo

Century contends that American and PBA con-

sipired to exclude it from Flight 841 in violation of §1

of the Sherman Act. (Complaint, par. 30; Plaintiff’s

Memorandum at 1). American contends that its mo-

tion for summary judgment against Century should

be granted on this claim because plaintiff has failed to

produce significant probative evidence that American

| and PBA combined or conspired to prevent access by

| Century to Flight 841, and because that flight is not

p the relevant market.

te iat Li, Bees Na Ai

18a

Under §i of the Sherman Act, Century has the

burden of proving that (1) there was concerted activi-

ty by American and PBA to exclude Cer*ury from

Flight 841; and (2) that this concerted activity

resulted in an unreasonable restraint of trade in the

relevant market. National Auto Brokers Corp. v.

General Motors Corp., 572 F.2d 953, 960 (2d Cir.

1978), cert. denied, 439 U.S. 1072 (1979).

In its complaint, Century does allege an agrse-

~ment between American and PBA, and the affidavits

and affirmations submitted on this motion present the

following evidence in support: (1) that PBA was the

beneficiary of American’s refusal to provide Century

with reserved container positions on Flight 841

(Cirami Affidavit, par. 18; Affirmation of Milton

Horowitz, Esq., sworn to July 4, 1983, par. 9

(“‘Horowitz Affirmation’’); (2) that at a prior point in

time, PBA informed the CAB that Century would be

an ‘‘undesirable element” in the air freight forwarding

business (Cirami Affidavit, par. 18); Horowitz Affir-

mation, par. 9); (3) that American’s failure to accord

Century with reserved container positions was

motivated by fear of losing PBA as a customer

(Cirami Affidavit, par. 18); (4) that American and PBA

had frequent meeting at which Flight 841 wa discuss-

ed (Horowitz Affirmation, par. 9).

The proffered evidence, if believed, is insufficient

to establish an unlawful conspiracy between

American and PBA. While it is of course true that

“‘lijllegal conspiracies... can rarely be proved through

evidence of explicit agreement, but must generally be

proved through inferences from the conduct of the

alleged conspirators,’’ Venture Technology, Inc. v.

Natural Fuel Gas Co.; 685 F.2d 41, 45 (2d Cir.), cert.

bes Rat ine Rie in OE TA A ae inp be EDO OO at

19a

denied, 103 S.Ct. 775 (1982), the plaintiff must

nonetheless present evidence of ‘‘qualitative value in

demonstrating that the parties actually entered into a

conspiracy.” Id. at 48. A showing of close relation-

ships between the alleged conspirators, or frequent

meetings between them, without more, will not sus-

tain the plaintiff’s burden. Oreck v. Whirlpool Corp.,

639 F.2d 75, 79 (en banc) (2d Cir. 1980), cert. denied,

454 U.S. 1083 (1981). Moreover, a mere showing that

a customer such as PBA had the economic power to

affect a supplier, here American, in its dealings with

another customer such as Century, does not con-

stitute sufficient circumstantial evidence of an

unlawful agreement or conspiracy. Jd. Nor do the

cornplaints of another customer about the plaintiff's

character, even when followed by a subsequent refusal

to deal, serve as the basis for inferring concerted ac-

tivity, absent other evidence of an understanding bet-

ween the alleged conspirators. See Moore Drug Ex-

change v. Eli Lilly & Co., 662 F.2d 935, 941 (2d Cir.

1981), cert. denied, 103 S.Ct. 362 (1982).

In the instant case, although it is undisputed that

the principal of PBA did send a letter to the CAB

critical of Century, there is no evidence suggesting

that this was anything more than the unilateral act of

PBA, which is not a party to this action. Moreover,

that correspondence was written more than a year

before American commenced Flight 841. (Cirami Af-

fidavit, par. 12).

As to American’s considerations of PBA’s likely

reaction if it decreased PBA’s space allocation in

favor of Century, American has admitted that it did

not wish to risk the ioss of its major customer on the

flight. (Shipman Affidavit, par. 20). This admission,

however, does not point inevitably in the direction of a

20a

conspiracy, rather it supports equally the innocent in-

ference that American was engaged in exercising

reasonable and independent business judgment for its

own best interests in a competitive market. Finally,

the meetings referred to between American and PBA,

(Horowitz Affirmation, par. 9) indicate nothing more

sinister than that PBA complained about American’s

rates and service. There is no reference to the exclu-

sion of Century, or any other competitor for that mat-

ter. Indeed, it is doubtful whether a few such

meetings over the course of a decade could even be

viewed as ‘‘close relations’’ between the two com-

panies.

Furthermore, Century has failed to establish ‘hat

the space allocation system adopted by American had

an illegal purpose or effect.

In its supporting memorandum, Century seeks to

establish a violation of §1 on the basis of two distinct

theories. First, it invokes the ‘essential facility’’ doc-

trine, by arguing that American’s allocation was il-

legal ‘‘given the utter domination in the relevant

market of the southbound New York to San Juan air

freight traffic.’’ (Plaintiff's Memorandum at 2). Se-

cond, a fair reading of plaintiff’s papers indicates that

it also seeks to urge a §1 violation on the grounds that

American and PBA engaged in an illegal group

boycott. Id.

The “essential facility’’ doctrine has four

elements: (1) existence of a facility whose use is essen-

tial to entry into the relevant market; (2) a facility that

for all practical purposes cannot be duplicated; (3) ac-

cess to the facility could be made to the party seeking

entry without interfering with its competitor's use of

eae ee

Zia

the facility; (4) an agreement between the owner of the

facility and the potential entrant’s competitor which

prevents and equitable shaiing of the faclity. See

Hecht v. Pro-Football, Inc., 570 F.2d 982, 992-93 D.C.

Cir. 1977), cert. denied, 436 U.S. 956 (1978).

It is true that the allocation system adopted by

American did prevent an equitable sharing of the

space onboard Flight 841, because the reserved space

was frozen for all time after the initial allocation was

made in 1971. However, Century has not established

nor can it do so, that access to Flight 841 was essen-

tial for entry into the relevant market or that the ser-

vice provided by American could not be duplicated.

Each of these elements of the ‘‘essential facility”

doctrine depends upon an appropriate definition of the

relevant market. Century contends, but the evidence

does not support, that the relevant market is a very

narrow one: direct, regularly scheduled, nightly, all-

freight, air carriage of goods between New York City

and San Juan, Purerto Rico. This definition, in effect,

defines the relevant market as American’s Flight 841.

However, in defining what is the relevant market, this

Court must consider, based upon the facts disclosed in

the record, what services or facilities are ‘‘reasonably

interchangeable by consumers for the same

purposes.”’ United States v. DuPont (Cellophane), 351

U.S. 377, 395 (1955).

This Court finds that the relevant market here ex-

tended at least to all air carriage of goods between

New York and any airport in Puerto Rico. The record

indicates that in addition to charter service, a variety

of regularly scheduled flights were available. In par-

22a

ticular, it is undisputed that at least two direct

flights, Eastern Airlines passenger/freight combina-

tion Flight 929 and American’s passenger/freight

combination Flight 697 left about the same time as

Flight 841. (Cirami Reply Affidavit, par’s 21-22; Ship-

man Affidavit, Ex. A). In addition, throughout the

time period covering the dispute, several early morn-

ing, afternoon and earl, evening flights were

available, as were indirect flights via Miami and

Atlanta. (Shipman Affidavit, Ex. A).

This Court rejects, as unreasonable, Century's

contention the combination flights should be excluded

from the relevant market, because the ‘‘LD-3’’ type

containers used on them were only one-third the size

of the “‘A”’ type containers used on Flight 841, and

similarly finds that the alleged ‘‘inconvenience’’ of the

early morning, early evening and indirect flights is in-

significant in determining the relevant market.

All of the aforementioned flights are reasonably

interchangeable with Flight 841, within the context of

the shipment of goods by air between New York and

Puerto Rico. Indeed, given the flexibility afforded by

trucking, the relevant market might be much larger,

encompassing air transportation of goods to Puerto

Rico from other airports in the mid-Atlantic region

near enough to New York to be reached by motor

truck without passing through the congested

highways which serve New York City.

Century’s second argument in support of its

assertion of a §1 violation is that American and PBA

engaged in an unlawful boycott. This suggests a sim-

ple vertical restraint, and as such must by analyzed

under a rule of reason. See Oreck Corp. v. Whirlpool

23a

Corp., supra at 131. This is not a situation where it

has been alleged that a group of plaintiff's com-

petitors have conspired with several suppliers of a

good or service to exclude the plaintiff. See Klor’s,

Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207,

212-13 (1959). For Century to show that the restraint

was unreasonable, this Court must be presented with

evidence of

“the facts peculiar to the business to which the

restraint is applied; its condition before and after

the restraint was imposed; the nature of the

restraint and its effect, actual or probable. The

history of the restraint, the evil believed to exist,

the reason for adopting the particular remedy, the

purpose or end sought to be attained, are all rele-

vant facts.’’ Chicago Board of Trade v. United

States, 246 U.S. 231. 238 (1918).

Century has offered no evidence whatsoever

regarding harm to the uir freight forwarding business

as a result of American’s space allocation system, nor

has it adduced evidence concerning the history and

conditions in the relevant sector of that business.

It is, of course, true that a motion for summary

judgment may not be granted to defendant herein

unless, after resolving all of the ambiguities and draw-

ing all of the inferences in favor of the party against

whom summary judgment is sought, that there re-

main no material facts in dispute. The burden “‘is on

the moving party to establish that no relevant facts

are in dispute.” Quinn v. Syracuse Model

Neighborhood Corp., 613 F.2d 438, 444 (2d Cir. 1980).

This Court also observes that ordinarily summary

judgment is not entered against a party until that par-

24a

ty has had an opportunity to engage in discovery. See

Modern Home Institute, Inc. v. Hartford Accident &

Indemnity Co., 513 F.2d 102, 109-10 (2d Cir. 1975).

However, in the instant case, plaintiff, who also seeks

summary judgment, has alleged that the facts set

forth in its motion establish American’s liability, and

that any further discovery would constitute a ‘‘sheer

waste.’ Defendant, under these circumstances, need

not be burdened with a round of discovery that plain-

tiff itself concedes would be wasteful. See Contem-

porary Mission, Inc. v. U.S. Postal Service, 648 F.2d

97, 105 (2d Cir. 1981).

Defendant has demonstrated that the facts upon

which Century has relied te establish allegations of a

§1 violation are not susceptible of the interpretation

plaintiff sought to give them: insufficient facts have

been adduced to establish a conspiracy between

American and PBA; the ‘“‘relevant market”’ definition

proffered by Century is inherently unrealistic and

unreasonable; the evidence of an illegal boycott is ut-

terly lacking. This failure of proof on the part of plain-

tiff, coupled with plaintiff's disclaimer of any need for

further discovery, justifies entry of summary judg-

ment against it. As the Court of Appeals noted in

Modern Home Institute, supra, once the defendant

has shown ‘‘‘that the facts upon which [plaintiff] relied

to support [its] allegation were not susceptible of the

interpretation [it] sought to give them’ [plaintiff is]

obligated by Rule 56(e), F.R.Civ.P., to offer evidence

supporting the inference urged by [it] or else face sum-

mary judgment dismissing [its] complaint,’’ 513 F.2d

at 109, quoting from First National Bank v. Cities Ser-

vice Co., 391 U.S. 253, 289 (1968).

25a

In addition, the record indicates that American

has made an affirmative showing, and this Court

finds, that: (1) its failure to accord Century reserved

air space was an independent business decision (Ship-

man Affidavit, Par. 25); (2) that it was unaware at the

time of PBA’s prior communication with the CAB

about Century’s license, and that PBA never told any

officer or employee of American not to deal with Cen-

‘ ury (Shipman Affidavit, par. 25); (3) that the relevant

market in the instant action, as this Court has found

previously, consisted at the very least of all air car-

riage of goods between New York and Puerto Rico

(Shipman Affidavit, par. 23 and Ex. A); (4) that

American could not have granted Century reserved

air space without the loss of PBA’s business (shipman

Affidaivt, par. 19); (5) that this loss would have jeopar-

dized the continued existence of Flight 841, in light of

the high volume of freight shipped by PBA on the

return flight, and advantage not offered by others

(Shipman Affidavit, par. 24); and (6) that competition

was not harmed by American’s failure to accord Cen-

tury reserved air space at the expense of others (Ship-

man Affidavit, Ex. A).

Century’s motion for summary judgment with

respect to its claim under §1 of the Sherman Act is

denied.

American’s motion for summary judgment

against Century on the §1 claim is granted.

Claim Under §2 of the Sherman Act

Century also contends that American’s conduct in

denying it reserved main deck container positions on

26a

Flight 841 constitutes attempted monopolization as

defined by §2 of the Sherman Act. In order to prevail

on this claim, Century must establish that American

(1) had monopoly power in the relevant market; and (2)

willfully maintained that monopoly. United States v.

Grinnell Corp., 384 U.S. 563, 570-71 (1966).

Century has failed to meet its burden in

establishing that American had monopoly power in

the relevant market, because it has failed to present

credible evidence that the relevant market is defined

as it claims. As stated previously, this Court finds

that the relevant market is at the least inclusive of all

air carriage of goods between New York and Puerto

Rico. Therefore, Century’s assertion that American

has a 75% share of the market, is, if the two late night

combination passenger/freight flights of American

and Eastern Airlines are taken into account (Cirami

Reply Affidavit, par. 21), unsupportable. This Court

makes no specific finding as to the percentage of the

relevant market that was accounted for by

American’s Flight 841, however, the evidence adduc-

ed by American (Shipman Affidavit, Ex.A), as to the

number of alternative flights, scheduled and charter,

available to air freight forwarders indicates clearly

that American did not have the ‘power to control

prices or exclude competition."’ United States v. Du-

Pont, supra at 391.

Century has also failed to present any credible

evidence demonstrating that wilfully attempted to

maintain any market power it had in the carriage of

goods by air between New York and San Juan. The

only evidence offered by Century is that American

failed to provide Century with reserved main deck

container positions on Flight 841. It is indeed dif-

27a

ficult to fathom how the identity of the customers on

this flight could help to maintain American's position

in the market or prevent entry and competition from

other scheduled airlines or charted flights. Nor can

Century show that American somehow used its posi-

tion in the market to eliminate it competitors. The un-

disputed evidence, (Shipman Affidavit, Ex. A), does

not show any noticeable decline in the number of

flights, nor the number of direct air carriers offering

flights to Puerto Rico from New York during the

period of this dispute. Moreover, by its own admis-

sion (Cirami Affidavit, par. 12), Century concedes that

the reason there was no other late night all freight

flight, between New York and San Juan at the time,

was that demand, especially on return flight, was in-

sufficient to support a rival service.

Defendant has established that the facts

presented by Century cannot support an actionable

claim under §2, and Century has not adduced any

evidence which would militate against entry of sum-

mary judgment against it. As noted earlier, defen-

dant has established affirmatively that: (1) the rele-

vant market is at the very least inclusive of all air car-

riage of goods between New York and Puerto Rico; (2)

American lacked the power to control prices or ex-

clude competition in this market; (3) American did not

further its position in this market wrongfully by fail-

ing to allocate reserved air space to Century; (4)

American's conduct did not demonstrably reduce

competition in the relevant market; and (5) that Flight

841 was the only nightly, all freight flight was at-

tributable solely to inadequate market demand,

especially on the return flight.

28a

Accordingly, Century’s motion for partial sum-

mary judgment with respect to its §2 claim is denied

and the motion of defendant is granted.

Conclusion

In summary, plaintiff's motion for partial sum-

mary judgment is denied in all respects. Defendant's

motion to dismiss the complaint pursuant to Rule

12(b\6), F.R.Civ.P., with respect to the claim under

§404 of the Federal Aviation Act is granted. Defen-

dant’s motion for summary judgment against plain-

tiff as to the claims under Sections 1 and 2 of the Sher-

man Act, pursuant to Rule 56, F.R.Civ.P., is granted.

The Clerk of the Court shall enter final judgment

that all relief is denied. See Rule 58 F.R.Civ.P.

So Ordered.

Dated: New York, New York

January 5, 1984

s/Charles L. Brieant

Charles L. Brieant

U.S.D.J.

29a

FOOTNOTES

1. In response to American's motion for dismissal on

grounds of primary jurisdiction, Century stipulated to

referral to the CAB of so much of the action as was within

its jurisdiction, and a stay of all other proceedings in this

Court. On December 14, 1979, the CAB's Bureau of Con-

sumer Provection instituted enforcement proceedings

alleging that American's allocation practices on Flight 841

violated §404(b) of the Federal Aviation Act. American

denied any violation. Thereafter, on August 18, 1980,

American and the CAB reached agreement, prior to any

hearing, on a consent order disposing of the Bureau's com-

plaint, providing for the payment by American of $50,000

in civil penalties, and establishing a new allocation system,

subject to annual reassessment. whereby American

guaranteed that one “‘A”’ type container would be available

on Flight 841 to any shipper which regularly used the

equivalent of such a container on the northbound Flight

840. The settlement expressly excluded any consideration

of anti-trust claims against American, nor did it, quite pro-

perly, address itself to the availability of private damage

actions under §404. Century opposed the settlement, but

its objections were rejected by the CAB and the Court of

Appeals, Century Air Freight Inc. v. Civil Aeronautics

Board, 679 F.2d 261 (D.C. Cir. 1982). Century's petition for

certiorari was denied by the United States Supreme Court

on October 18, 1982, 103 S.Ct. 256 (1982). On April 25,

1983, Century requested that this action be removed from

our Suspense Docket and reactivated.

30a

APPENDIX 5—LETTER OF REUBEN B. ROBERT-

SON TO AMERICAN’S RICHARD FAHY, JR.

ESQ. ANNOUNCING BUREAU’S INTENTION TO

INSTITUTE ENFORCEMENT PROCEEDING;

JUNE 22, 1979

[Letterhead of Civil Aeronautics Board, Washington,

D.C.]

June 22, 1979

Richard Fahy, Jr., Esquire

American Airlines, Inc.

633 Third Avenue

New York, New York 10017

Re: Century Air Freight, Inc. v. American

Airlines, Inc., No. 77 Civ. 2195 (CLB) (S.D.N.Y.)

Dear Mr. Fahy:

On July 27, 1977, this case was referred to the

Civil Aeronautics Board so that the Board might

assist the U.S. District Court for the Southern

District of New York in resolving plaintiff's com-

plaint. As you know, our inquiry into this case

has unavoidably been protracted because of the

many changes enacted since the summer of 1977

in the law governing the duties and obligations of

carriers engaged in the transportation of air

freight. We are now writing to you and Mr.

Horowitz to advise you of the results of the

review which has been conducted by the Bureau

of Consumer Protection.

3la

BACKGROUND

This referral arose from a civil action in which

Century Air Freight, Inc., a small air freight for-

warder, alleged that American Airlines, Inc. had

improperly denied it access to American’s reserv-

ed all-cargo service between New York City and

San Juan, Puerto Rico. Century contended that

its exclusion had been the result of a standing

priority allocation given by American to Profit-

by-Air, Inc., one of Century’s competitors. In its

Federal Court complaint, Century asserted that

the agreement to provide this priority constituted

an unlawful restraint of trade in violation of Sec-

tions 1 and 2 of the Sherman Act, 15 U.S.C. §§1

and 2, as well as unjust discrimination in air

transportation prohibited by Section 404(b) of the

Federal Aviation Act of 1958, as amended, 49

U.S.C. §1374(b). It alleged that these activities

had caued it $7.5 million of injury and sought tre-

ble damages in the sum of $22.5 million. In addi-

tion, Century asked for injunctive relief to ensure

that American discontinued this practice.

As discussed in our letter to the Court of Oc-

tober 20, 1977, the Board determined that exer-

cising its primary jurisdiction over Century’s

complaint would be in the public interest for

several reasons. First, the Board’s expertise in

aviation matters would be quite helpful in resolv:

ing the complaint. See, e.g., Far East Conference

v. United States, issued against American, a

remedy whose imposition would best be con-

sidered by the Board as the federal agency charg-

ed with regulating the air transportation in-

dustry. See, e.g., Carnation Co. v. Pacific Con-

32a

ference, 383 U.S. 213 at 221 (1966). F inally, the

best resolution of the issues presented in

Century’s complaint would take into account the

public welfare and not just the interests of the

private parties. Together, these factors suggested

to the Board that referral would be the most ap-

propriate procedure to follow.

With the consent of both parties, the Bureau

of Enforcement (now the Bureau of Consumer

Protection) wrote to the District Court and sug-

gested that the complaint be referred to it.! We

stated that the complaint would become the sub-

ject of a thorough Bureau investigation and that,

depending upon its outcome, the complaint would

either be dismissed or made the subject of an ad-

ministrative enforcement proceeding or a Federal

Court action. Accordingly, on October 27, 1977,

Judge Brieant ordered the matter formally refer-

red to the Board. He also ordered all further

judicial proceedings stayed pending the outcome

of our investigation.

In the year that followed, information re-

quests were presented to both parties, meetings

among counsel were held, plaintiff’s principals

provided sworn testimony during a session of in-

formal depositions, and several of defendant’s

employees and officers submitted to formal in-

vestigatory interviews. During that time, the

Board carefully monitored the developments in

the law in this area brought about by amend-

ments to the Federal Aviation Act made in Public

1. This step was concurred in by the Board’s General Counsel’s

office.

wail

33a

Law 95-163 (November 9, 1977); the Airline

Deregulation Act of 1978, Public Law 95-504; and

general trends of deregulation. We also awaited

the outcome of the initial decision in the Priority

Reserved Air Freight Rate Investigation

(“PRAFRI’), Docket 26838, to determine its im-

pact on the applicable law.

FACTS

There is little, if any, disagreement about the

facts material to Century’s complaint. American

commenced its freighter service in approximately

March of 1971, an operation it obtained through

its acquisition of Trans Caribbean Airways. At

the time of the acquisition, TCA offered only ser-

vice on Boeing 727’s. Shortly thereafter,

American expanded TCA’s operations and in-

stituted service on Boeing 707’s, the service it

provides today.

Upon expanding its operations, American offered

standing priorities to forwarders who would commit

themselves to regularly using one or more full cargo

positions on its planes.” Once a position was allocated

to a forwarder, it was committed indefinitely.

Originally, seven of the twelve main deck positions

were allocated to Profit-By-Air, two were reserved for

Shulman Air Freight, and one was awarded to Emery

Air Freight. In the latter part of 1971, both Shulman

and Profit-By-Air increased their allocations by one

2. American did not choose to offer belly space or the nose posi-

tion to forwarders on a confirmed basis. I assume the reasons

for not doing so are that shipments in belly space must be broken

out of their containers for shipment and the nose position is of an

odd size. These factors made the belly and nose positions unat-

tractive, and so they were kept for use on a daily basis only.

34a

position. There were no other changes in position

allocations until August, 1978, when Shulman went

out of business. At that time, Shulman’s three posi-

tions were divided between Air Express International,

Burlington Northern, and Bor-Air.*

Throughout most of this time, Century repeatedly

sought the allocation of two main deck positions. Let-

ters exchanged between Century and American pro-

vide written documentation for the fact that Century

made requests on the following dates:

1972 1973 1974

Oct. 5 Jan. 15 Apr. 1

Oct. 26 June 22 Sept. 16

Nov. 9 Nov. 12

Dec. 18

In addition, Century has provided the Bureau with an

operations diary confirming that it made oral requests

on the following dates:

1975

Apr. 21 July 9 July 15

April 23 July 10 Oct. 10

July 8 July 14

3. Although only three positions were freed by Shulman’s

demise, seven different forwarders, seeking a total of 11 positions,

requested to take Shulman’s place.

35a

June 4

June 7

June 15

June 17

June 18

June 21

June 22

June 23

June 28

June 29

June 30

July 2

July 6

July 8

July 12

July 14

July 15

Aug. 4

Aug. 5

Aug. 6

Aug. 9

Aug. 10

Aug. 11

Aug. 12

Aug. 13

Aug. 16

Aug. 18

Aug. 19

Aug. 20

Aug. 25

Aug. 26

Aug. 27

Aug. 30

Oct. 1

Oct. 5

Oct. 8

Oct. 11

Oct. 12

Oct. 13

Oct. 14

Oct. 15

Oct. 18

Oct. 20

Oct. 21

Oct. 22

Oct. 17

1977

Jan. 12

Jan. 31

36a

Sometime during the prosecution of its complaint,

Century was provided with some space on American’s

freighter, although I have been informed that its

shipments are often broken out in the plane’s belly

space. American has not, however, provided Century

with all the space it requested, nor has American ever

required other forwarders to relinquish some of their

space in favor of Century.

American’s practices clearly prevented Century

from firmly establishing itself in the southbound

market. To be competitive, a forwarder must be able

to offer overnight service during prime time. Yet,

throughout most of the period at issue here, there

were no alternatives available to Century comparable

to American’s service. Using combination service on

passenger planes was not acceptable for several

reasons. First, the smaller containers offered on com-

bination service would substantially increase a for-

warder’s costs, since the freight in this market is not

dense and is often of an unusual size.‘ Second, the

availability of container space on combination flgihts

is subject to the needs of transporting passenger bag-

gage. Thus, it is impossible for a forwarder to

guarantee overnight delivery to its shippers, a service

demanded by many of the large shippers in this

market. Third, a forwarder must be able to time

delivery to his shippers’ specifications.> However,

combination service is timed to passenger schedules.

4. This fact, originally stated to the Bureau by Century, was

corroborated in our interviews with American’s personnel held in

June of 1978.

5. Usually, this calls for late evening departures, a fact attested

tc by the scheduling of American's freighter.

37a

In addition, although other carriers have periodically

offered freighter service in this market, no other car-

rier matches American's frequency, service, or depen-

dability.6 For these reasons, American’s long-

standing exclusion of Century and its restriction on

the amount of space ultimately provided were in-

jurious to Century’s development of a southbound

operation.

LEGAL DISCUSSION

Prior to the passage of P.L. 95-163 and the

development of new policies during deregulation,

there was no question that American’s standing

preference in favor of Profit-By-Air and the resulting

exclusion of Century constituted unlawful discrimina-

tion under Section 404(b) of the Federal Aviation Act.

Under prior law, the proscription against unjust

discrimination:

precludes different treatment of like traffic for like

and contemporaneous service under substantially

similar circumstances and conditions. (Citation omit-

ted.) Such discrimination may result from the charg-

ing of different rates to different shippers or

passengers afforded the same service . . . or from the

offering of specific services to only a select patron or

group of patrons (citation omitted). In either situa-

tion, the result is that the carrier is giving preferential

treatment to one person or group of persons to the pre-

judice of another and contrary to the requirement that

all those who seek the service of a carrier must be

6. The same is true of the other carriers now in the market.

Airlift’s service is often chartered to other destinations without

advance warning, and Flying Tiger's new operation is limited to

Saturday only.

38a

treated alike. Transcontinental Bus System, Inc. v.

Civil Aeronautics Board, 383 F.2d 466 at 481-82 (5 Cir.

1967); cert. denied, 390 U.S. 920 (1968).

Guided by these principles, the Board explicitly found

that an agreement giving Emery Air Freight a stand-

ing priority over other forwarders in having its cargo

boarded on commuter carriers was unduly preferential

and refused to approve it under Section 412. Emery

Air Freight and Air Midwest, Inc., et al., Order 73-4-8.

pp. 1, 2, 6. Thus, prior to the enactment of the P.L.

95-163, American’s practice clearly violated the probi-

tions of Section 404(b).

After reviewing several Board decisions and

regulations issued since that time, the Bureau has

concluded that the requirements of equal treatment

enunciated in Transcontinental Bus System, Inc.,

supra, are largely unchanged with regard to boarding

preferences and that American’s practice remains

unlawful. In ER-1080 (November 9, 1978), the Board

began reviewing the obligations of freight carriers

with a view toward amending them to conform to the

new law. After a full rule-making proceeding, the

Board decided that it would be in the public interest to

utilize its power under Section 416(a) to exempt car-

riers from several statutory obligations, such as the

duty to carry upon reasonable request arising under

Section 404(a). However, the Board explicitly provid-

ed that this exemption did not alter obligations aris-

ing under Section 404(b), stating that:

This exemption, however, does not relieve the carriers

of their service obligations as common carriers, and

does not apply to a carrier’s duty to refrain from pro-

viding preferential treatment to particular companies

39a

or persons. Carriers having certificates under Section

401 or 418 remain, by definition, common carriers.

ER-1080, p. 12.

Accordingly, although the Board codified sweeping

changes in carriers’ duties in Part 291 of its regula-

tions, it has never exempted carriers from the re-

quirements of Section 404(b). See, eg. 14 C.F.R.

§§291.30-35.’

The Board has shown that it will continue to

adhere to the longstanding interpretation of Section

404(b) in cases involving standing service preferences.

In the matter of the application of Trans-

Mediterranean Airways, S.A.L., Docket 30255, the

Board specifically found a contract under which TMA

had agreed to give the freight of one particular ship-

per a standing delivery priority over other freight to

be unlawful. In its own words:

The Board has rejected similar priority arrangements

in interstate air transportation and we see no per-

suasive reason for adopting a different policy....

Order 78-5-67, p. 12.°

7. Nothing in the Board’s Proposed Policy Satement on Price

Discrimination, PSDR-58, which specifically concerns price

discrimination and not service preferences, excuses American's

discriminatory actions either. In fact, the proposed statement

provides further support for finding these practices to be

unlawful since American's discrimination caused Century severe

financial injury which the force of free entry did not dilute over a

substantial period of time. See, 14 C.F.R. §399.34(b) (proposed).

8. See also, the matter of the application for a foreign air carrier

permit submitted by P.7. Merpati Nusantara Airlines (Air Bali),

Docket 30826, in which the Board found that a proposal to offer one-

way charters on the basis of nationality was discriminatory and

violated Section 404(b), citing Transcontinental Bus System with

approval. Order 78-6-217, p. 3.

40a

On the basis of this precedent, the Bureau has con-

cluded that American’s treatment of Century which

resulted from a standing preference in favor of Profit-

By-Air is unjustly discriminatory and must be discon-

tinued.®

We have also concluded, on the basis of informa-

tion presently available, that there are reasonable

grounds to believe that American's practice con-

stituted a violation of Section 1 of the Sherman Act.

Specifically, we find that it is inconsistent with the

“essential facility’ doctrine perhaps best enunciated

in Hecht v. Pro-Football, Inc., 570 F.2d 982 (D.C. Cir.

1977). The relevant market at issue here is confirmed

air freight traveling from New York City to San Juan,

Puerto Rico on regularly scheduled cargo service.

American's service constituted a facility essential to

successful operations in this market. Since, as a prac-

tical matter, air freight forwarders are unlikely to be

able to duplicate these services, they should be

allocated on fair terms. Therefore, in foreclosing the

use of American’s services, both American and Profit-

By-Air may have violated the antitrust laws. Hecht,

supra, 570 F. 2d at 992; see also, Otter Tail Power Co.

v. United States, 410 U.S. 366 (1972). By implication,

9. As you know, the Bureau was of the opinion that the outcome

of PRAFRI might affect our interpretation of Section 404(b). In

PRAFRI, the questions of whether the rates charged for priority

freight were discriminatory and whether the Board had jurisdic-

tion to make such a determination were raised. In his initial deci-

sion, presiding Judge Yoder found that priority rates were

unlawfully discriminatory and that the Board still had jurisdic-

tion over such matters even in light of cargo deregulation. In

reaching his decision, Judge Yoder relied on the interpretation of

Section 404(b) advanced in Transcontinental Bus System, Inc.,

supra, showing that it is still current. I.D. at 57-58. Thus, based on

the long-awaited outcome of PRAFRI, this interpretation of car-

riers’ obligations is still valid.

4la

any such violations would also constitute unfair

methods of trade within the meaning of Section 411 of

the Federal Aviation Act. See, Federal Trade Commis-

sion v. Cement Institute, 333 U.S. 683 (1948).

CONCLUSION

For the reasons stated above, the Bureau has con-

cluded that American violated Section 404(b) of the

Federal Aviation Act in excluding Century from its

New York City-San Juan freighter service and by con-

tinuing to restrict the availability of this service as a

result of preferences given other forwarders. These ac-

tions not only injured Century's business, but also

caused great harm to the general public. American

prevented a small forwarder from offering new, in-

novative service to the public in competition with the

incumbent. Such a result is directly contrary to the

aims of deregulation and current Board policies.

By July 20, 1979, the Bureau will determine what

further course of action should be taken here.'® On the

basis of the evidence presently available, we have con-

cluded that American must begin allocating space on

its freighter in a different manner. If you wish to

dispute this conclusion by drawing additional

evidence or legal precedent to our attention, please

contact Robert C. Seldon, the Bureau's attorney

responsible for the case's development, prior to the

20th.

10. We have already decided to take no action of our own in

response to Century's antitrust claim. Our reasons for doing so

are stated more fully in our letter to Century's counsel, a copy of

which is attached here.

42a

I must advise you that unless we are presented

with a contrary view of the facts or applicable prece-

dent, the Bureau is prepared to institute an ad-

ministrative proceeding to ensure that, in che future,

American will allocate space on its freighter in a non-

discriminatory manner. In addition, if American's

practices were found to be unlawful, American could

also be subject to civil penalty liability under Section

90 l(a) of the Act. We would prefer to resolve these and

other ancillary matters without resort to litigation. If

American is amenable to such a solution, I suggest

you discuss this matter as well with Mr. Seidon prior

to July 20th. In particular, I believe it would be fruit-

ful to discuss future practices in the market as well as

remedies for American's past activities.

Very truly yours,

s/ Reuben B. Robertson

Reuben B. Robertson

Director

Bureau of Consumer Protection

Attachment

cc: Milton Horowitz, Esq.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.