Petition for Writ of Certiorari — Railway Express Agency, Inc. v. Civil Aeronautics Board

Supreme Court brief1965

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aI PRE ee CG QuURT, ue ‘S ce

JOHN F. DAVIS, cuERK 7

In Tue

* bupeeate Court of the ited States :

_ Ocrosse Tena, 1964.

RAILWAY ; EXPRESS AGENCY; INC,

EN AERC ie Petitioner,

v. |

cin AERONAUTICS BOARD, AIR FREIGHT FOR- -

WARDERS ASSOCIATION, AMERICAN AIRLINES,’

INC, UNITED AIRLINES, INC, TRANSWORLD AIR. _

LINES, IN a a ee a Respondents. :

| PETITION FOR A WRIT OF CERTIORARI TO THE ;

_ UNITED STATES COURT OF ‘APP FOR -

'. THE DISTRICT OF COLUMBIA CIRCUIT. __

WILLiaM Q. KEENAN,

| _ New York, N. Y. 10017

- Joan E. PowEL,

' Brawner Building,

Washington, D. C. 20006

Counsel for Petitioner.

’ Droury,. ‘Lynam & PowsL,

. Brawner Building, |

ees: Weskingten, I D. C. 20006

Wuuiuam J. Tayior, —

219 East 42nd Street,

New York, N. Y. 10017

Of Counsel.

Pandick Press, Inc., 22 Thames St., New York, N. Y. 10006, U. S. A.

219 East 42nd Street, Ce a

AiRaaipap eI Bh iain A wind tinal

- INDEX.

Crration To Oprstons BeLow vets

: Y...---

JURISDICTION ae . .

‘QuEsTIONS PRESENTED

Statutes Invowven |

STATEMENT

REASONS FOR tineiinss THE Wuir a

1. The decision forecloses effective. collabora-

= tion in the service of the public between the

air and surface transportation industries......

2. The decisién forecloses joint agency regula- ,

tion of through service Faas by air and

surface carriers

—— through service has been achieved. at the

expense” of due —

ConcLusion

Appanpix A:

Statatory F Provisions Cited and Quoted... wo

Aprenpix B: — ;

, Copy of tle Opinion Below.....

-8--The ©. A. B. rg feskelosiars of air-surface

14,

Eisler v, Clark, 77 EF. Supp. 610 (D: ©., 1948)... 18

: National Air Freight Forwarding Corporation v. |

‘Civil Aeronautics Board, 197 F. 2d 384 (D. Cc.

Cir., 1952) - on aa

: Railway, Express, Airfreight Forwarder Appli-

cation, 27 C. A. B. 500 (1958)__...... —-~8,11

Riss ¢ Co. v. United States, 341 U.S. 907 (1951). 18

' Substituted Service—Piggyback, 322 L 0. C. 301 |

_. (1964) - : 17

. Wong Yang Sung v. MeGrath, 339 U. 8. suena 18

_ Srarorgs: | 3 ; 7 nea

re Hepburn Act of 1906, | c. 3591, 34 Stat. 584 Sec. 1

"(49 U.-S.*€. See. 1(3)(a)) | _-—

_ Act of June 25, 1948, c. 646,.62 Stat. 928 (28 |

U. S. C. Sec. 1254) ane ee, a

Federal Aviation Act of 1958, 72. Stat, a ae

' Sec. 1°(49 U.S. C. Sec. 1301)..... Ls 2. SC

Sec. 401 (49 U. 8. 0. See | Coe 7, 14,20

Crrations. |

CasEs: is Tae : * PAGE

Air Freight: Forwarder Case ae) lier

Oc ANB. 182 (1949).......:......, 8

Airfretght Forwarder Investigation, 23°C. A ‘B.

376 (1956) -: : ee Pe

Airfreight Forwarder Investigation, 24 «, rv B. , Mees atl

755 (1957)... Se Geet te

American “President Lines, Ltd., et al., Petition he i

+o A. B. 799 (1947)..: a? Ff

a Continental Southern Links v. . Civil Aaicsianitios :

' Ba., 197 F. 24. 897 (D.C. €ir., 1952) 7

Cis

Se FL SPP Rae SORT RO

A A hat : .

’ ‘ - ‘ — : pare j : - PAGE ¢

Sec. 408 (49 U.. S. O. 1378)... | in: oe

Sec. 412 (49 U. S. C.,Sec. 1582). eesewneenee 2y 8, 4422

’ See, 1002 (49:U.'S. C. See. |" | ns o

| a éc.1003 (49 U. 8. C. See. 1483)... 2, 3,10, 12,

| "16,19, 95

be) "00,1006 (49 U. 8. C. $00, 1486) nanan 9

MiscentaNgous:. A

. “An Efficient Transportation System”, 108 Cong. |

Record 5509,. House Doe. No. 384........ oa 3

2 ¢ ‘ . é

° ° é r .

. > . a 4

4 : : .

. . ow

‘IN THE -

_Bupryne Court ofthe Huited Sits

Ocrozss vias 1964, *

BOOS Nictictssiinaes qeceee

: ees Exess Acency, Inc. °

Sos Petitioner,,

cabin ‘aebiainaael Boaro, Amr — ‘Forwanpers Asso- |

_ ciation, AMERIcaN ArRLinEs, INc., ‘Us > Arana, Inc., _ / :

- ‘TRANSWORLD Aanuixzs, _ 7 - |

3 . Respondents.

' - PETITION F OR A WRIT OF CERTIORARI TO THE ~ ¢

_-- UNITED STATES COURT OF APPEALS FOR |

_ THE DISTRICT OF COLUMBIA CIRCUIT.

Salles Express Agency, Inc. Petitioner, prays thata "A

writ. of certiorari issue to. review the judgment of the ‘ te :

United States Court of Appeals for the District of Colum-

. bia in the above-entitled case'‘on March 18, 1965, reconsid- 6

eration of which v was denied by order dated April 26, 1965.

~ Citation to Opinions Below. iS foe i

| The Orders of the Civil Aesunialinn Board No. BE-20332

' and No. E-21188 are unreported and are. printed in the

_ Joint Appendix, pp. 174 and 247, nine copies of which have

"Ser

ae)

. ‘ . . x i os

been filed with this petition. The opinion of the Circuit —

Court of Appeals, infra, p. 27, is saiuhambe in 345 F. 2d at

page 445. .

e , Jurisdiction.

\ -

The jadermet of the Circuit Court of ‘Appeals was

entered on March 18, 1965. Rehearing was .denied on

April 26, 1965. The jurisdiction of this Court is invoked

"under 49 U. S. C. 1486(f) and 28'U.,8. C. 1254(1).

Questions “Presented.

~ 1. Does the-law forbid a surface-carrier unlicensed by.

_ the Civil Aeronautics Board and an air carrier to issue a —

joint bill of lading, to provide a through transportation

service, and to : assess charges: for it according to”a single

factor rate per - hundred pounds published in a joint tariff

” filed with the C. A. B. and the Interstate Commerce Com- >

‘mission? |

2. If a 0. A. B. license ‘is required, how can a surface

carrier ever enter into joint rates and through service with

an air c&rrier, in the light of the Board’s reluctance to.

aa issue air carriage licenses to gurface carriers?

3. Caii C. A: B. licensing of a surface.carrier’s engage-

. ment in such a joint enterprise with an air carrier be recon- -

ciled with the Congressional mandate'in section 1003 of the

Federal Aviation Act of 1958, 49 U. S. C. 1483, that ai

| - surface joint rates and through service be regulated ge a.

joint I. C. C.-C. A. B. Board! ;

4. Whena disputed i issue of fact i arises in the course of .

| “review. by the Civil Aeronautics Board of intercarrier

_ contracts ‘under section 412 of the Federal Aviation Act of

de ie are

S ace :

2 ah Ses ;

ae 3

3 1958, 49 U.S. C. 1382, does due process entitle the respond-

| _ ent carriers toa hearing -before an order issues Cegeree- 7

ing their contracts?

- Statutes Involved. |

‘The statutory provisions involved are sections 412,

1003, 101(3), 401(a), and 1002(g), (h), and (i) of the. .

' Federal: Aviation Act of 1958, 49 U. S. C. 1382, 1483,

1301(3), 1371(a), and 1482(g), (hb), and (i). They. are

printed in Appendix A, infra, pp. 20-26.

Statement.

Petitioner (hereinafter sometimes called: REA) is a

‘common carrier of property: ‘by express in interstate com-

merce under section 1(3)(a) of the Interstate Commerce

Act, 49 U. 8. C. -1(3)(a). Between 1960 and 1963 REA

entered into contracts with several airlines who engage in

the common carriage of property by air under section

401(a) of the Federal Aviation Aet of 1958 (hereinafter

sometimes called the Aviation Act), 49 Uy S. C. 1371(a).

These contracts provided for the. establishment of a

- through, air-surface cargo transportation service via REA

from the shipper’ s dock to the; point of air-surface inter-

change, via airline to the terminal point of air-surface inter-

change, and via REA from ‘said second interchange point -

to the receiver’s dock. (JA 106). The contract of carriage

(bill of lading) was to be a document rendering REA and

the air ‘carriers jointly liable for performance al the.

. promises contained: in ‘it, viz.:

‘*1. The provisions of this saaiiad shall i inure to

the benefit of and be binding upon the consignor, the

consignee and all carriers — this —

tat an oe Seg nlite ao

Ten Oe ANS we OE

under investigation included the following elements:

. 4

and shall apply to any récosxignment or return

‘thereof’? (JA. 75). :

-The rate to be charged per hundred’ pounds was to be a |

‘ single-factor rate. This rate was to be set out in a tariff

jointly subscribed by REA and the airlines, and filed both

with the C. A. B. and the Interstate Commerce Commission.

(JA 106). ;

REA and the airlines filed copies of these sensei

* with the C. A. B. in accordance with the requirements of

section 412 of the Aviation Act, 49 U. S. C. 1382 for dis-

closure of intercarrier agreements affecting air transpor-

tation and on April 15, 1963 the Board by Order E-19497

(JA 171) opened an investigation to determine whether

these agreements should be disapproved on the ground that —

‘they were “‘in violation of’’ the Aviation Act.

At the.Board’s invitation REA filed written, ‘unverified

representations supporting the legality of the agreements

and certain air carriers* filed similar statements opposing

. their legality. On January 2, 1964 the Board entered.

: Order. E-20332 (JA 174) finding the agreements illegal

_. and disapproving them.

The transportation activities called for by the contracts .

(a) REA and the airlines were to provide a

‘through transportation service by ‘surface and air via _:

specific points of interchange named i in the. tariff’

1The Air Freight Forwarders Association, American Airlines,

Ine., United Airlines, Inc. and Transworld Airlines; Inc. Obvi-

ovrly, none of these airlines and no members of the Air Freight —

ers Association were parties to the agreements in question.

The seven airline contracting parties are listed at JA 190.

1«6@ © © (T)he service that is actually offered to the shipper

is a complete transportation service.’’ “(C..A. B. in Order —

E-20332, JA 182). An example of an REA-airline through ser-

‘vice joint tariff naming — routes and points of interchange

is.supplied at JA 106.

"gee aes

(b) Issuance of a pill of lading making REA and |

all other carriers of the shipment responsible for the

: transportation movement.”

ing to a single-factor rate covering the entire trans-

portation movement.’ |

_ (d), Publication of the applicable single-factor rates |

- in a tariff jointly subscribed by REA and the air car-

riers, the tariff to be filed both with theI. C. C. and the

C. A. Bt bike halen

(e) Division of the through service charges col-

lected among the carriers, participating’ in the haul

according to a formula set. out in the contracts.®

2 The first_ paragraph of the uniform express receipt issued to

the shipper as a bill’ of lading states, ‘‘The provisions of this

receipt shail inure to’ the benefit of and be binding upon ® ® ® all.

earriers handling this shipment * * *.’’ (JA 76). :

8 The contracts provided that ‘‘the parties shall cause to be

filed * * * tariffs containing reasonable joint rates * * * covering

the through service provided herein.* * *.’’ (e.g. JA 34-35). &

typical tariff which the ‘parties sought to file under.one of the

agreements set out, for example, a single rate of 71¢ per cwt. for

- the through movement from Allendale, N. J. to Alderpoint, Cali-

_ fornia via route ‘‘B’’ (JA 95), indicating air-surface interchanges

at New York and San Francisco (JA 106). | 3 3

_*A typical contract says, ‘‘The parties shall cause to be filed

-with-the-Civit Aeronautics Board and the Interstate Commerce

Commission a tariff or tariffs containing reasonable joint rates -

* *#»? (JA 34). The Board.found the agreements to ‘‘provide-

fér the filing with the Board® and with the Interstate Commerce

Commission, at the cost of REA, of appropriate tariffs covering

the through services.’” (JA 108, Order E-19497, instituting the

investigation). A typical ‘such tariff recites that it is ‘‘published

and:-filed by L. R. Burke, Agent, for and on behalf of the following

participating air and surface carriers, under the authority of

Powers of Attorney filed with the Civil Aeronautics Board and

.. the Interstate Commerce Commission: * ® * Eastern Airlines, Inc., |

Railway Express Agency, Incorporated, The Flying Tiger Line,

Inc., The Slick Corporation * * *.’’ (JA 69). :

5'The Board’s finding was, ‘‘As compensation for providing the

air transportation, the direct air carriers are to receive specified

divisions of the joint‘rates in the form of a rate per 100 pounds

The Board had several reasons for disapproving these .

REA-airline transportation activities. The. Court of.

Appeals below, however, found one to be determinative

and the merits of this certiorari petition must stem from

this issue. The Board found these facts to show REA as

' engaged in indirect air transportation such as is described

in section 101(3) of the Aviation Act, 49 U. S. C, 1301(3)

and prohibited in section 401(a), 49 U. S. C. 1871(a), unless

licensed. REA lacked:.the Tequisite license. The Court

- of Appeals, agreed, saying:

.'Tn this case the Board found, upon substantial

evidence, most of which was submitted by REA at

the Board’s invitation, that REA’s operations under

‘the proposed agreements would constitute indirect

air carriage. Since REA is not authorized to carry

on such operations, approval of the agreements was

properly withheld.’ (Appendix B, imfra, p. 32;

345 F. 2d at. 448-449). ;

To explain the resulting dilemma for REA and many .

other surface carriers it ‘is necessary only to recite the

~ history of REA’s application to the-Board for a license as

indirect air carrier.

pate with the direct air sabres @ a senthiy or other agreed

basis.’’-(JA 108, Order E-19497, footnote omitted).

6 “In Order E-19497 the Board indicated its concern as to

whether REA’s operations under the agreements ‘involve the per-

“formance of indirect: air transportation in. addition to surface

_ express transportation. If,in fact the agreements contemplate

. the performance of indirect air transportation by REA, then. the

agreements would be in violation of the Act because REA’ $ present

authority to engage in air transportation would not. extend to the

operations embraced by these agreements.’’ (JA 178). ‘‘ Accord-

ingly, on the basis of the facts before us, we conclude that the

agreements eontemplate the holding out by REA of air transporta-

tion services which that carrier is not —— to perform.’’

A 186, footnote omitted ).

| \gption 408 of the Aviation Act, 49 U..S. C. 1378, pro-

hibits any common carrier from purchasing the ‘properties

of any air carrier without Board approval, and whenever

the vendee is a surface carfier ‘‘the Board shall not, enter

such an order of approval unless it finds that the trans- — ,

action proposed will promote the public interest by ena-

bling such carrier other than an air carrier to use aircraft

to public:advantage in its operation. and will not restrain

competition.”? (Sec. 408(b), 49 U. S.-C. 1378(b), second

proviso).. In American President Limes, Ltd., et al., Peti-

tion 7 C. A. B. 799: (1947) the Board acknowledged that .

its licensing powers under section 401 of the Aviation Act

were not similarly limited; nonetheless the Board deter-

mined as a matter of solten that a license. to engage in air

carriage should: not issue to a. surface carrier who failed

to satisfy the section 408 criterion because otherwise

engagement in air carriage by a surface carrier would not

‘meet the ‘‘public convenience ‘and necessity’’ criterion of '

_ section 401. ‘This C, A. B.-policy was approved in Conti-

nental Southern Lines v. Civil Aeronautics Bd., 197 F. 2d

397 (D. C. Cir., 1952). :

True, the Board has ruled that the second proviso of —

section 408 applies to engagement in air carriage by indirect

‘air carriers neither in terms of law nor of policy, saying:

‘‘The simple fact is that the second proviso of

section 408(b) does not reflect a policy against the

entry of indirect air carriers controlled by surface

earriers.’’ Airfreight oe Investigation 23

‘ -C. A. B. 376, 378 (1956). L 4

However, two years later, in. 1958, the C, A * aes

this ruling, saying,.

‘“We conclude that REA’s whic to enter air

_ transportation as an international airfreight for-

— if not otherwise denied wes the Act, should 7

—

“8

‘be denied under section 408.’’ Rathway Express, a

Airfreight Forwarder Application, 27 C. A. B. 500,

502 (1958).

This occurred ‘aie: after it had been pending for many «

years’ the C. A. B. decided REA’s application for an air

freight forwarder license in Railway Express, Airfreight

Forwarder Application, 27 C. A. B. 500 (1958). It found

REA’s ““gurface affiliations’’ of ‘‘central importance”’ and

because of them denied the application, saying,

° “Section 408 reflects the established general pol-

*- icy that our air transportation system slfall he free ~~

of control. by surface | carriers,”? “nS C. A:\B: at;

" 508.) xe |

Thus it Slices apparent that, aie in extraordinary “

‘situations or in situations so lacking in economic signifi-

cance as never to com¢ before the Board in an adversary

regulatory proceeding, a surface carrier cannot engage in

joint rates and through service with an air carrier because

- the only two avenues of qualification. have been closed—the. -

possibility of. obtaining an air carrier license by Ratlway

Express, Airfreight Forwarder Application, 27 C. A. B.

500, supra, and the use of joint rates and through service

by Board order E-20332 herein- under review.° ‘

TSee the discussions. in Air Freight Forwarder Case (Inter- _ .-

national) 11 C: A. B. 182, 183-185 (1949), and National Air Freight

Forwarding Corporation v. Civil Aeronautics Board, 197 F. 2d

384, 388-389 (D. C. Cir., 1952). . ‘.

$It is true that the Board at one time licensed REA as an

indirect air express carrier. However, this was done only because

REA’s ‘‘history.’’ of engagement in the air express business ante-

dated the Civil Aeronautics Act of 1938 and hence was an enter-

prise which ‘‘ Congress was deemed not to have intended to disturb.’’

Railway Express, Airfreight Forwarder Application 27 C. A. B.

500, 503, supra; National Airfreight Forwarding Corporation v.

Civil. Aeronautics Board 197 F. 2d 384, 388-389 (D. C. Cir., 1952),

supra. Concededly this air express license does not. permit the type ,

of transportation. activity herein under review (JA 178).

“4 A

ae]

ees ee

eee :

In reaching its decision. below that the REA-airline

_ joint rate agreements were unlawful the Board relied. on _

a number of factual aspects of the transportation operation |

_ other than those listed above. For example, it criticized

REA’s method of soliciting business, indicated a desire

‘that REA’s shipment documentation be altered, and dis-

approved the measure of revenue allocation which: REA

and the airlines were using to divide the proceeds of their

joint rates... _REA filed a’ reconsideration petition with eo

__the Board responsive to these. In part REA took issue

_ with the Board’s factual premises and in part. offered to .

comply: with any regulations the Board might issue which i

could guide REA as to the Board’s specific desires con-

cerning the conduct of through, air-surface service. To

settle the disputed factual issues REA requested a hearing

(J A 194-216). The Board in a final order (No. E-21188)

rejected REA’s arguments on ‘two grounds: (1) No mod}

fication of* the agreements . could alter REA’s Status (in

the Board’s view) as an indirect air carrier (JA 252) and ©

' (2) ‘*The essential facts are undisput > (JA 253).

On August 25, 1964 REA petitioned review of C. A. B.

Orders E-20332. and H-21188 in the Court of Appeals for

the District of Columbia. .The Court of Appeals affirmed

the Board March 18, 1965 and denied reconsideration April

26,. 1965.

- Reasons for Granting the pi

1. The decision forecloses effective collaboration in the

service of the public between the air and surface transpor-

tation industries.

In 1938 Congress ordered the Interstate Commerce

ie Cémmission, and the Civil Aeronautics Board to combine

their memberships in a i sear — for the purpose of

10 |

regulating through service and joint rates of surface and

air carriers. In the more than quarter century since sec-

tion 1003 of the Aviation Act, 49 U. 8. ‘C. 1483, first set

forth this expression of Congressional ’ purpose, a joint,

I. C. C.-C. A. B. board has never ‘eonvened. On April 5, -

1962 President Kennedy’s Message to the 87th Congress

concerning ‘‘An ‘Efficient. Transportation System’’’ (108

~Congressional Record 5509, H. Document No. 384), took |

note of this state of affairs:.

“Through routes and joint rates: For many |

years some-regulatory agencies have been authorized

to appoint joint boards to act ‘on proposals for

' intercarrier services; but they have taken virtually

no initiative to foster these arrangements which

could greatly increase service and convenience to the

general public and open up new opportunities for

_all carriers. I recommend, therefore, that Congress

declare as a maiter of public policy that through

routes and joint rates should be vigorously encour-

aged and authorize all transportation agencies to

participate in joint boards.” U.S. Code Congres-

- . sional and AeA EATS News, 87th’ Cong. +» p. 4154. -

: Lnplicit § in this state of affairs { is the truth that no joint, _

air-surface rate and no. through, air-surface service has: “

heretofore achieved the minimum level of economic signi-

ficance necessary to merit regulatory attention. The case

at bar ‘represents the first attempt since the enactment of '

the Civil Aeronautics Act to make such rates and service _

_an importantly realistic and practical means of transporta-

__ tion for the shipping public. Unless reversed, the Judgment

S below will mark the last such attempt so long as herrea

statutory law remains me eae

-Why?

There are only two ways a surface carrier ‘such as REA’

and an ‘airline can make arrangements for through routes

and joint rates. The first requires the C. A. B. to license

the surface carrier as an air freight forwarder. Although -°

the Board said in 1956 that it has no ‘‘policy against the

entry’ of indirect air carriers’ controlled bygurface car-

riers,’’ (Airfreight Forwarder Investigation 23 C. A, B:

376, 378), two years later it withheld an indirect aigs carrier

license from REA relying specifically on the: ground thet

REA is owned by railroads:

“We conclude that REA’s sri 3 ‘ ten air

transportation as an international airfreight for-

warder, if not otherwise denied under the Act, should

be denied under section 408.’ Railway Express,

Airfreight Forwarder Application 27 C. A. B..500,

502 (1958). te

| The Board in its brief below to the, Court of deppenle

acknowledged that it has ‘‘consistently refused to permit

REA to engage in any * * * air transportation services”’ |

_ other than air express. (Board Brief, p. 4). As noted above,

REA’s existing air express license concededly fails to

cover the: transportation | operation herein under review.

- That the C. A. B. has set its face against. the licensing of

surface carriers to join air carriers in threugh service is .

. apparent from the Board’s sapment below that, if REA

were to prevail,

$¢(T)t would mean that every other. cuctnes car- -

Ny rier operating within the large metropolitan areas —

\\ could do the same thing: Thus, REA is contending

“for a construction of Section 1003 which is com-

pletely inconsistent with the Congressional plan of

air transportation system regulated with a view to

the maintenance of sound economic conditions.’’

( Board brief below, p. = |

ee eee - —

tn atiort, the first path seine joint rates and through

service for REA and the airlines has been blocked by the

. Board belief that the li to that end of REA or any

_ other surface carrier “operating within the large metro-

politan areas’? would conflict with ‘‘the maintenance of -

sound. economic copditions.’* eck

” The’ second and only -remaining path for REA ‘ the

goal of joint, air-strface rates and routes isto contract

for them with an airline, file joint tariffs with the I. C. ©.

‘and C. A. B., and initiate the service subject to such regu- .

lation as a joint board may prescribe. The enabling

statutory language, enacted in 1938, is: |

See. 1003 (72.Stat. 791, 49 U. S. C. 1483):

eo: . ae « ae ns ae

(b) Air carriers may establish reasonable

through service and joint rates, fares, and charges

with other common carriers; * * * Any air carrier,

and any common carrier subject to. the Interstate

Commerce Act, which is participating ‘in such .

‘ through service and joint rates, fares, or charges,

‘shall include in its tariffs, filed with the Civil Aero-

nautics Board or the Interstate Commerce Commis-

sion, as the case may be, a statement showing such

' through service and joint rates, fares, or charges.

joint rates, fares; or ‘charges may be referred by

: the Board or the Interstate Commerce Cominission,

\ om ‘Katwaily, the Board has prohibited airfreight hereetdets and

airlines from contracting for joint rates. and through service..

Airfreight Forwarder. Investigation, 24 C. A. B. 755, "758 (1957).

:‘Even were the Board to issue REA-a license as an airfreight

forwarder, this second policy would have to change before the

~~ Tieense could serve the purpose contemplated by Congress in

' - enacting section 1003 of me Aviation Act <n air-surface

through service.

upon complaint or upon its-own initiative, to a joint |

board ‘created as provided in subsection (a). * * °

(d) With respect to matters referred to any

joint board * * *, if such board finds, after notice |

and hearing, that any. such joint rate, fare, or charge, |

or classification, rule, regulation, or practice affect- :

ing such joint rate, fare, or charge or the value of |

unjustly discriminatory, or ‘unduly preferential or’

prejudicial, or that any division of any such joint ©

rate, fare, or charge is or will be unjust, unreason-

* able, inequitable, or unduly preferential or prejudi-:

cial as between: the carriers _parties thereto,:it is

~ authorized and directed‘ to Gake the same action

with . respect thereto as the (Civil Aeronautics) -

Board is empowered to take with respect to any

_ joint rate, fare, or charge, between air carriers, or

~ any division thereof, or any classification, rule, régu-

lation, or practice affecting such joint rate, fare, or.

charge or oe value of service thereunder,’ ee

REA and seven sirlines have filed such tariffs, have

contracted for such divisions of” joint rates, and have

included in their tariffs, statements showing these through

gervices and joint rates. These tariff statements include

rules and regulations affecting the joint rates, and REA

and the airlines have instituted practices affecting the

joint rates’? such as the form of a bill of lading, exchanges

of intercarrier receipts, methods. of traffic solicitation,

methods of handling claim a ans and the baring of 3

_ claim liabilities. §9.© ©" .

The GC. A. B., after catefully reviewing a arrange-

| ments, has not adjudged these rates and tariffs and divi-

sions and regulations and ‘practices ‘unjust, tareqsanieble,

unjustly discriminatory, or, unduly preferenti », Instead ~ :

it has implied that the joint rates under review here ‘are .

ins 9

ie _service thereunder is or will be unjust, unreasonable,

‘

———— ;

—_——==.

’ / ' ‘ : 14

not ‘‘true” joint fates. The Board nowhere defmes

“trae”? joint rates in such fashion as to allow REA or

any other surface carrier to chart a course toward them —

with any assurance; therefore as a practical matter section

(1003 of the porta Act, as‘ interpreted by ‘the Board,

affords surface carriers and airlines no ‘feasible: method

for arrangement of joint rates and through service.

Thus the decision below signals to the transportation:

- industry of the United States the warning and the decree

‘ that the combination of air and stirface common carrier

technologies’ in joint rates and through service is risky to

the point of being impossible. Unless reversed, the prac-

tical effect of the Board’s orders«is to build in the iegal

context a barrier between surface and air carriage in an

era successfully devoted to the destruction of such barriers

in the contexts of technology and ecoriomics. The writ .

should be granted. because without. it we cannot use the

‘through routes and joint rates’’ for air-surface carriage

for’ ‘which Congress provided in 1938; and which President

Kennedy thought in 1962 — “he vigoronely « -encour-

aged. 9 ;

2 The decision einai a agency regulation of -

, ‘through : ‘service supplied by air and surface carriers.

Perhaps in the future the ©. A.B. will reverse its

“policy of denying airfreight forwarder dicenses to surface

‘earriers: in ‘‘large metropolitan areas,’’ and perhaps the

C. A. B. will begin to allow’ airfreight forwarders, to make

joint. rates with airlines. Should: the Court rely on this

1**We recognize that ** *4 joint bosed has the power Pie pass

. upon the ‘reasonableness. of a true joint rate. However, such a

board does not have the power. to confer on REA- operating

authority under section. 401 which we have found would be

required in this instance.’’ (JA 252, Order E-21188 on reconsidera-

tion). ( Hmphonig supplied. ) :

ar in evaluating REA 's petition for the writ? we think

not. ; :

- Congress has not ‘merely authorised joint, air-surface

rates in the Aviation Act; it has also set down the method

for their regulation by a joint. board composed of C. A. B.

members and I. C. C. commissioners. The wisdom of this

can be discerned after reading the observations of. ane. Court °

of Appeals below: 3

rm **In the sia REA has sought authority from the

° Board: to. operate as an air freight forwarder. The

_ Board has refused such authority because it felt that’ .

the impact of REA’s entry into the industry would

have effects harmful to the public. However, it is |

_ now argued that Section 1003 permits REA to engage

“in operations which the Board has held to be not in ©

the public interest.’’ (Appendix ‘B, p. 34, wmfra;

345 F. 2d at 450.) (Footnotes omitted.) |

- Whether rightly. or wrongly, the Board has in the past.

based its judgment concerning REA’s joinder with airlines «

_ in through serviee partially on the effects on the’airfreight -

forwarder industry of such joinder. The airfreight for-

warder industry is the Board’s creation and exclusively

the Board’s regulatory responsibility. The surface carrier

operations of REA, on the other hand, are exclusively the

regulatory responsibility of the Interstate Commerce

Commission. Assignment of air-surface joint rates and.

through service to the exclusive jurisdiction either of the

I. C. C. or the C. A. B. runs.a measurable risk of parochial

regulation. It is difficult to doubt that Congressional

“assignment of such jurisdiction to a joint board had the

design of avoiding this risk. When denying an airfreight

forwarder operating license to REA in the past the C. A. B.

' has not taken account (nor perhaps should it be expected

| to) of the needs and potentiality for public service of the

surface, common carrier transportation industry.

Because a joint, I. C. C.-C. A. B. beard can be expected

to give reasonable and informed weight to such a con-

_ sideration it is the better agency to guard the public interest

- fairly in the regulation of air-surface through service.

Reliance on C. A. B. licensing procedures for such regula-

tion inevitably forecloses use of a joint board, because, . —

once a surface carrier operation becomes that of an air -

carrier, then joint rates with an airline must be regulated’

not by a joint board under section 1003 of the Aviation :

Act, but under section 1002 which grants regulatory juris-

diction to the C. A. B. alone.

_ One cannot evade the force of this conclusion by polit.

ing to the disability of an I. C. C.-C. A. B. joint board to

license a carrier’s market entry. Section 1003(b) of-the

Aviation Act refers to ‘‘common carriers subject to the -

Interstate Commerce Act.’’ Plainly discipline of the market

entries of such carriers depends on prior, unilateral action

by the Interstate Commerce Commission, just as the C. A. B.

regulates the market entries of the air carriers who take

part in through, air-surface sgrvice. Once their respective

agencies have licensed their market entry within the scope

of their respective technologies, surface and air carriers

need no further market “entry supervision under section

1003; their ‘‘impact’’ on the market and their ‘‘impact”’

on competition, including airfreight forwarders, is regulated

not by prohibiting market entry or forcing market exit

' through licensing procedures, but by requiring that their

prices: and practices be just, reasonable and nondiscrimi-

natory. The only agency endowed with Jariediction to

impose these requirements is a joint board.

There can be no doubt that REA passes the only market |

entry test to which section 1003 puts it; the Board has

found explicitly that ‘‘the services in question, which are

- performed as: an integral part of the carrier’s (REA’s)

¢ overall express operations, are in all material respects:

indistinguishable from REA’s express services * * *.”? (JA

180). As such, the performance of these services must

come within the scope of REA’s existing, surface franchise.

- Thus the writ should issue secondly, because without it

regulation. of through, : air-surface service will never cross

the jurisdictional threshold of the agency best equipped

and explicitly designated by Congress to discharge t this

- @, duty, namely an I. C. C.-C. A. B. joint board. 7

3.’ ‘The 0. A. B.’s tsuuine of sdemasitant through ser-

vice has been achieved at the expense of due process.

The Board below disapproved the REA-airline joint

rate contracts, among other réasons, because the through

service supplied under same of them included REA pickups

and REA deliveries within 25 miles of the REA-airline

interchange airports on the route of movement. These, said

the Board, are not ‘‘fileable’’ joint rates.under section .

1003. (JA 186). Within the context of trailer-on-flat-car

transportation the Interstate Commerce Commission has

~ eategorized such carrier interlining as a through service _

performed under joint rates. Substituted Service—Piggy-.

back, 322 I. C. C. 301, 356-357, 360 (1964). us this case

gives rise to a legal question which the I. C. C. and the

©. A. B. answer differently and which ie have been

particularly apt for consideration by a joint board. -How-

ever, REA affirmed that some of the contracts under review

did not give rise to this problem (JA 214), and the Board

explicitly refrained from ruling that every one of the con-

_-» . traets under review came under this aspect of the Board’s

ban? Although the question was argued and briefed to

2No purpose would = Served by othemptiog to iui,

precisely which services are exempt and which are not.”’ (JA 188).

the Circuit Court of Appeals the opinion below does not

refer to it and does not rely on this ‘‘terminal area’’ dispute

in affirming the Board. To the. extent, however, that

reliance must be placed on this issue to affirm the Board,

the fundamental barrier exists that the facts were in dis- —

pute, the Board refrained froni finding facts necessary to

support its terminal area ruling in its totality, and REA

.."was denied a hearing at which to prove the facts. Due

process prohibited the Board from foreclosing REA’s

options in this manner. Lisler v. Clark, 77 F. Supp.‘ 610

(D. C., 1948); Riss & Co. v. United States, 341 U. S. 907

. (1951); Wong Yang Sung v. McGrath, 339 U. S. 33, 49-51.

The Board relied on other disputed issues of fact in

reaching its conclusion below. At JA 211-213 REA’s recon-

| sideration petition to the Board itemizes these specifically

and requests a hearing for their determination. The Court

-of Appeals erred in finding that ‘‘the underlying facts of

REA’s operations under the proposed agreements. were not

disputed’’ (Appendix ‘B, p. 35, infra, 345 F. 2d at 450),

and REA’s reconsideration petition made the dispute clear.

. Po the extent the Board relies on these aspects of the pro-

ceedings below for support, due process calls for issuance

of the writ, because REA was denied a hearing at which

these issues could be resolved. Because these factual issues

involved ‘‘rules, regulations and practices affecting the

joint rates’’ they came within the exclusive: jurisdiction of

a joint board to resolve, and arrangements for their resolu- ~

tion return the case at bar to its central theme, namely the

interpretation of the Congressional mandate i in section 1003

of the Aviation Act. | | :

Thus the third reason why the writ should i issue is a con-

tingent one: if the Board relies on issues other than those.

discussed in paragraphs 1 and 2 above, future Board: eva-

. | 19 e

sion of the jurisdictional strictures of | section ~1003 will

acquire immunity from the discipline-of due process of law

_ and hence from. effective review in the Circuit Court of

Appeals, unless a hearing is required. |

a Conclusion.. |

For the foregoing reasons, this petition for a writ of

certiorari should be granted.

‘Respectfully submitted,

WiiuaM Q. Kennay, |

219 E. 42nd St.,

New York, N. Y. 10017

Joun E. Powel,

.. Brawner Building,

. Washington, D. C. 20006

. Counsel for Petitioner.

Drury, Lynuam & PowELt, .

- Brawner Building, |

_. Washington, D. C. 20006

WruiaM J. Tayor,

219 E. 42nd St.,

New York, N. Y. 10017 ne

Of Counsel. : -

ee .

APPENDIX A. .

y Statutory Providieus: Cited and Quoted.

_FEDERAL ‘AVIATION ACT OF 1958

teat a a

ee ee

" Sec. 101. [72 Stat. 737,.as amended by 75 Stat. 467, 76

Stat. 143, 49 U. 8. C. 1301] As used in this. Act, unless the

context otherwise requires—

« ; + *” . | * _ -

(3) ‘Air carrier’? means any citizen of the United

States who undertakes, whether directly or indirectly or

by a lease or any other arrangement, to engage in air trans-

portation: Provided, That the Board may by order relieve

air carriers who.are not directly engaged in the operation ~

of aircraft in air transportation from the provisions of this ~

Act to the extent and for such periods as may be in the

public interest.

Seo. 401. [72 Stat. 754, as amended by 76 Stat. 143, 49

U. 8S. C. 1371] (a) No air carrier shall engage in any air

transportation unless there is in force a certificate issued by

the Board authorizing such air carrier to engage in such

transportation.

Sec. 408. [72 Stat. 767, as amended by 74 Stat. 901, 49

U. 8. C. 1378] (a) It shall be unlawful unless approyed, by

order of the Board as provided in this section—_

( 1) For two'or more air carriers, or for any air

’ carrier and any other common carrier or any person

engaged in any other phase of aeronautics, to con-

solidate or merge their properties, or ‘any part -

- thereof, into one person for the ownership, manage-

ment, or operation of the properties theretofore 1 in

‘separate ownerships; -

_ (2) For any air carrier, any person’ controlling

an air carrier, any other common carrier, or any

- person engaged in any other phase of aeronautics, to

Ae a eae an me eens.

‘purchase, lease, or contract to pe the propertice,

: or any substantial part thereof, of any air carrier;

(3) For any air carrier or person controlling an

air carrier to purchase, lease, or contract to operate

. the properties, or any substantial part thereof, of —

any person engaged in any phase of aeronautics

otherwise than as an air carrier ;.

(4) For any foreign air carrier or person con- ©

trolling a foreign air carrier to acquire control, in .

any manner whatsoever, of any citizen of the United

States engaged in any phase of aeronautics;

(5) For any air carrier or person controlling an

air carrier, any other common carrier, or any person.

engaged in any other phase of aeronautics, to acquire

control of any air carrier in any manner whatsoever ;

(6) For any air carrier or person controlling an

air carrier to acquire control, in any manner whatso-

ever, of any person engaged in any phase of aero-

nautics otherwise than as an air carrier;.or

(7) For any person to continue to maintain any

relationship established in: violation of any of ,the

foregoing subdivisions of this subsection. - - \

(b) Any person suliiein approval of a cisaliiuliie,

merger, purchase, lease, operating contract, or acquisition

of ‘control, specified in subsection (a) of this section, shall

present an application to the Board, and thereupon the

Board shall notify the persons involved in the consolidation,

merger, purchase, lease, operating contract, or acquisition.

of control, and other persons known to have a substantial

interest in the proceeding, of the time and. place of a public

hearing. Unless, after such hearing, the Board finds that

the-consolidation, merger, purchase, lease, operating con- —

tract, or acquisition of control will not be consistent with the

public interest or that the conditions of this section will not

be fulfilled, it shall by order approve such consolidation,

merger, purchase, lease, operating contract, or acquisition

of control, upon such terms and ‘conditions as it. shall find -

to be just and reasonable and with such modifications as it

may prescribe: Provided, That the Board shall not approve

.any consolidation, merger, ‘purchase, lease, operating con-

tract, or acquisition of control which would result in creat-

ing a monopoly or monopolies and thereby restrain compe-

tition or jeopardize another air carrier not a party to the

consolidation, merger, purchase, lease, operating contract,

or acquisition of. control: Provided further, That if the

applicant-is a carrier other than’an air carrier, or a person

controlled by a carrier other than an air carrier or affiliated

therewith within the meaning of section 5(8) of the Inter-

state Commerce Act, as amended, such applicant shall for

> the purposes of this section be considered an air carrier and

the Board shall not enter such an order of approval unless

it finds that the transaction proposed will promote the

public interest by enabling such carrier other #han an air

carrier to use aircraft to public advantage in its operation

and will not restrain competition: Provided further, That,

in any case in which the Board determines that the trans-

‘action which is the subject of the application does not

affect the control of an air carrier directly engaged in the

operation of aircraft in air transportation, does not result

in creating a monopoly, and. does not tend to restrain com-

petition, and determines that -no person disclosing a sub-:

stantial interest then currently is requesting a hearing, tlie

Board, after publication in the. Federal Register of notice —

of the Board’s intention -to dispose of such application

without a hearing (a copy of which notice shall be furnished

by the Board to the. Attorney General not later than the

day following the date of such publication), may determine

that the public interest does not require'a hearing and by.

order approve or disapprove. such transaction.

Sec. 412. [72 Stat. 770, 49 U. 8. C. 1382] (a) — air

carrier shall file with the Board a true copy, or, if oral, a

true and complete memorandum, of every contract or agree-

ment (whether enforceable by provisions for liquidated

oo am Re SR EN a

‘damages, penalties, bonds, or otherwise) affecting air

_ transportation and in force on the effective date of this sec- _

tion or hereafter entered into, or any modification or can-

cellation thereof, between such air carrier and any other air

carrier, foreign air carrier, or other carrier for ‘pooling or

apportioning earnings, losses, traffic, service, or equipment,

or relating to the establishment of transportation rates,

fares, charges, or classifications, or for preserving and

improving safety, economy, and efficiency of operation, or

for controlling, regulating, preventing, or otherwise elim-

‘inating destructive, oppressive, or wasteful competition; or

for regulating stops, schedules, and character of service, or

for other cooperative working arrangements. — 7

(b) The Board shall by order disapprove any ‘incl con-

tract or agreement, whether or not previously approved by

it, that it finds to be adverse to the public interest, or in

violation of this Act, and shall by order approve any such

contract or agreement, or any modification or cancellation

thereof, that it-does not find'to be adverse to the public

‘interest, or in violation of this Act; except that the Board :

- May not approve any contract or agreement betweerian air

carrier not directly engaged in the operation of aircraft in

air transportation and a common carrier subject to the

Interstate Commerce Act, as amended, governing the corn-

pensation to be received by such common carrier. for trans-

portation services performed by it.

Src. 1002. [72 Stat. 788, 49 U. S. C. 1482]

(z) Whenever any air carrier shall file with the Board

a tariff stating a new individual or joint (between air car-

_riérs) rate, fare, or charge for interstate or overseas air

‘transportation or any classification, rule, regulation, or

practice affecting such rate, fare, or charge, or the value

of the service thereunder, the Board is’ empowered, upon —

complaint or ‘upon its own initiative, at ‘once, and, if it:

SO orders, without answer or other formal pleading by the

air carrier, but upon reasonable notice, to enter upon a

hearing concerning a lawfulness of such rate, fare, or

. O

| charge, or such classification, rule, regulation; or practice;

‘ and pending such hearing and the decision thereon, the

Board, by filing with such tariff, and delivering to the air —

carrier affected thereby, a statement in writing of its rea-

sons for such suspension, may suspend the operation of

. such tariff and defer the use of such rate, fare, or charge,

or such classification, rule, regulation, or practice, for a -

. period of ninety days, and, if the proceeding has not been

. concluded and a final order.made within such period, the

‘Board may, from time to time; extend the period of suspen-

/ sion, but not for a longer period in the aggregate than one

hundred and eighty days beyond the time when such tariff |

would otherwise gu into effect; and, after hearing, whether

completed before or after the rate, fare, charge, classifi--

cation, rule, regulation, or practice goes into: effect, the

Board may make such order with reference thereto as would

be: proper in a proceeding instituted after such rate; fare,

charge, classification, rule, regulation, or practice had

become effective. If the proceeding has not been concluded

and an order made within the period of suspension, the

_ proposed rate, fare, charge, classification, rule, regulation,

_ or practice shall go into effect at the end of such period:

Provided, That this subsection shall not apply to any unital

tariff filed by any air carrier.

(h). Whenever, after notice and hearing, upon complaint :

or upon its own initiative, the Board is.of the opinion that

the divisions of joint rates, fares, or charges for air trans-

portation are or will be unjust, unreasonable, inequitable,

or undniy preferential or prejudicial as between the air.

carriers or foreign air carriers parties thereto, the Board |

shall prescribe the just, reasonable, and equitable divisions

thereof to be received by the several air carriers. The

Board may require the adjustment of divisions between

such air carriers from the date of filing the complaint or.

entry of order of investigation, or such other date subse- ~

quent thereto as the Board finds to be just, reasonable, and

equitable: Sian

(i) The Board shall, whenever required by the public

convenience and necessity, after notice and hearing, upon

| complaint or upon its own initiative, establish through —

service and joint rates, fares, or charges (or the niaxima’

or minima, or the maxima and minima thereof) for inter- ~

_ state or overseas air transportation, or the classifications,

rules, regulations, or practices affecting such rates, fares,

. or charges, or the value of the service thereunder, and the

terms and conditions under which such through service

shall be operated: Provided, That as to joint rates, fares,

_ and charges for overseas air transportation the Board shall

-determiine and prescribe only just and reasonable maximum

‘ or minimum or maximum and minimum joint rates, fares,

or charges.

Szo. 1003. [72 Stat. 791, 49 U. S. C. 1483] (a). The ;

. Board and the Interstate Commerce Commission shall

direct their respective chairmen to designate, from

time to time, a like number of members of each to act as

a joint board to consider and pass upon matters referred

to such board as. provided in subseetion (¢) of this section.

(b) Air carriers may establish reagonable through |

' service and joint rates, fares, and charges with other

common carriers; except that with respect to transporta-

tion of property, air carriers not directly engaged in the

operation of aircraft in air transportation (other than com-

panies engaged in the air express business) may not

establish joint rates or charges, under the provisions of

this subsection, with common carriers subject to the Inter- . :

state Commerce Act. In case of through service by .air

carriers and common carriers subject to the Interstate |

Commerce Act, it shall be the duty of the carriers parties

thereté to establish just and reasonable: rates, fares, or

charges and just and reasonable classifications, rules, regu-

lations, and practices affecting such rates, fares, or charges,

or the value of the service thereunder, and if joint rates,

fares, or charges shall have been established with respect to

such through service, just, reasonable, and equitable divi- —

je eed Bey * ; $6.

sions of such joint sated, eve or charges as between the

carriers participating therein. Any air carrier, and any

- common carrier subject to the Interstate Commerce Act,

which is participating in such through: service and joint

rates, fares, or charges, shall include in its tariffs, filed

- with the Civil Aeronautics Board or the Interstate Com-

merce Commission, as the case may be, a statement showing

such. through service and joint rates, fares, or charges. :

’ (ec) Matters relating to such through service and joint

rates, fares, or charges may be -referred by the Board or

the Interstate Commerce Commission, upon complaint or

“upon its own initiative, to a joint board created as provided

in subsection (a). Complaints may be made to the Inter-

- state, Commerce Commission or the Bodrd with respect to

any*matter which may be referred to a joint board. under

‘this subsection. ’

(d) With respect to matters referred to any ¥ Joint board

as provided in subsection ’ (c), if such board finds, after |

notice and hearing, that any such joint rate, fare, or charge,

or classification, Tule, regulation,’ or practice, affecting such

‘ joint rate, fare, or charge or the value of the service there-

“\. under is or will be unjust, unreasonable, unjustly discrimi-

“natory, or unduly preferential or prejudicial, or that any

division of any such joint rate, fare; or charge, is or will

be unjust,,.unreasonable, inequitable, or unduly preferential

«sa ‘prejudicial as between the’carriers parties thereto, it is

; authorized and directed to take the same action with respect

thereto as ‘ the; Board is empowered to take with’ respect to

any joint rate, fare, or charge, between air carriers, or

any divisions thereof, or any classification, rule, regulation,

or practice affecting such joint rate, fare, of charge or the _

value of the service thereunder.

(e) Orders of the joint boards shall be enforceable and

‘reviewable as provided in this Act with, respect to orders

of - Board. .- : /

| APPENDIX B.

— Copy of the Opinion Below.’

UNITED STATES COURT OF APPEALS,

For tHe District or Cotumsia Circuit.

No. -18,868

Rartway Express Acency, Inc.,’

eg ' Petitioner,

W,.

Civ Arronavtics: Boar,

Respondent. —

Am Freicut ForwArpers: Assoctation, AMERICAN ArRLrnEs,

Inc., Unitep Arr Lines, Inc. anp Trans Wortp AIRLINES,

a ino. be

Intervenors.

Petition for Review of an Order —

of the Civil Aeronautics Board

“Decided March 18, 1965.

Mr. William Q. Keenan, of the bar of the Court of

Appeals of New York, pro hac vice, by special leave of

court, with whom Mr. J ohn E. Powell was on the brief, for

petitioner.

_ Mr. 0. D. Oameii, Associate - General Counsel, Litiga-

tion and Legislation, Civil Aefonautics Board, with whom

1C. A. B. Orders E-20332 and E-21188 herein under review are

set forth at pp. 174 to 247 of the Joint Appendix filed with ts

petition. :

Assistant “Attorney General William H. Orrick, Jr. and

Messrs. John H. Wammer, General Counsel, Joseph B.

Goldman, Deputy General Counsel, and Robert L. Toomey,

Attorney, Civil Aeronautics Board, and Ltonel Kesten-.

baum, Attorney, Department of Justice, were on the omer,

for respondent.

Mr. Louis P. ‘Haffer for intervenor Air Freight For-

warders Association.

Mr. Gordon W. Bickert, of the bar of the Court of:

Appeals of New York, pro hac vice, by special leave of

court, with whom Messrs. Warren E. Baker and Joseph F.

Healy, Jr. were on the brief for intervenor Trans World

Airlines, Inc., argued: for intervenors Trans World Air-

lines, Inc., American Airlines, Ine. and United Air Lines,

Ine.

Messrs. Robert L. Stern and James Francis Reilly were

on the brief for intervenor United Air Lines, Inc.

Mr. Alfred V. J. Prather was on the brief for inter-

venor American Airlines, Ine.

Before Bazeton, Chief Judge, and Fany ond Wricnt,

Circuit Judges. =

Wricut, Circuit Judge: By its Order No. E-20332, the

Civil Aeronautics Board disapprovid certain agreements

entered into between the Railway Express Agency, Inc.

1 The shlinen involved were Alaska Airlines, Inc., Eastern

Airlines, Inc., The Flying Tiger Line Inc., Pan American World

Airways, Inc., Riddle Airlines, Inc., Slick Corporation, and, Trans-

portation Corporation of America. The agreements had been sub-

mitted by the airlines for approval under §412 of the Federal

Aviation Act of 1958, 72 Star. 770,49 U.S. C. §1382, which provides.

in pertinent part:

“*(a) Every air carrier shall ‘file with the Board a true

air. transportation * * * between such air carrier and any

other air carrier, foreign air carrier or other carrier for

pooling or apportioning earnings, losses, traffic, service, or

equipment, or relating to the establishment of transporta-

: pee SJ

airline promised to carry, ‘hens specified points, cargo

‘presently moving in the services of [REA]’’ to the extent

the airline determined it had space available. The parties

agreed that the airline should receive a fixed amount for

each 100 pounds of cargo carried? and that REA would

receive ‘‘the balance of the charges collected from the pub-

lic.’? REA was to issue to the shipper its Uniform Express

Receipt, on which it assumed responsibility to.the shipper

for the entire transportation, but the agreement provided

that, as between themselves, each party would bear liability

’ for damages occurring during its carriage of the shipment.

REA contended before the Board that the agreements

were simply contracts between itself (a surface carrier

‘subject to regulation by the Interstate Commerce Commis-

sion) and a specific air carrier for through service and

joint rates, and that such contracts were clearly authorized

under Section 1003 of the Federal Aviation Act.? The

tion rates, fares, charges, or classifications, or for preserving

and improving safety, economy, ahd efficiency of operation,

or for controlling, regulating, preventing, or otherwise

el‘ininating destructive, oppressive, or wasteful competition,

er for regulating stops, schedules, and character of rn

or for other cooperative working arrangements.

‘*(b) The Board-shall by order disapprove any such

contract or agreement, whether: or not previously. approved

by it, that it finds to be adverse to the public interest, or in

violation of this chapter * * *.’?

2 The Board found that in the Alaska Airlines and the Flying

‘Tiger Line agreements the rate charged: by the airline was equal.

. to or less than the local deferred freight rate regularly charged by

the airline.

8Section 1003, 72 Star. 791, 49 U. S. C. §1483, provides:

- _ **(a) The Board and the Interstate Commerce Com-

mission shall direct their respective chairmen to designate,

from time to time, a like number of members of each to act

as a joint board to consider and pass upon matters referred

to such board as provided in subsection (c) of this section.

‘service and joint rates, fares, and charges with other common

carriers ; except that with respect to transportation of

property, air carriers not directly engaged in the operation

’. of aircraft in, air transportation (other than a

¢o™

e . eae . J

30 ©

Board concluded, however, that the operations of REA

under the proposed agreements would not be those of a

engaged in the air express business) may not establish joint

rates or charges, under the provisions ‘of this subsection, with

common carriers subject to the Interstate Commerce Act.

In case of through service by air carriers and common

carriers subject to the Interstate Commerce Act, it shall be

the duty of the carriers parties thereto to establish just and

reasonable rates, fares, or charges and just and reasonable

classifications, rules; regulations, and practices affecting such

rates, fares, or charges, or the value of the service thereunder,

and if joint rates, fares, or charges shall have been established

with respect to such through service, just, reasonable, and _

equitable divisions of such joint rates, fares, or charges as

between the carriers participating therein. Any air carrier,

and any common carrier subject to the Interstate Commerce

Act, which is participating in such through service and joint

rates, fares, or charges, shall include in its tariffs, filed with

the Civil Aeronautics Board or the Interstate Commerce

Commission, as the case may be, a. statement showing such

through service and joint rates, ‘fares, or charges.

‘‘(¢) Matters relating to such through séfvice and joint

rates, fares, or charges may be referred by the Board or the

Interstate Commerce Commission, upon complaint or upon

its own initiative, to a joint board created as provided in

subsection (a) of this sectio.. Complaints may be made to

‘ the. Interstate Commerce ‘ommission or the Board with

respect to any matter which may be referred to a joint board

under this subsection.

**(d) With respect to matters referred to any joint

board. as provided in subsection (c) of this section, if such

board finds, after-notice and hearing, that any such joint

rate, fare, or charge, or classification, rule, regulation, or

practice, affecting such joint rate, fare, or charge or the

value of the service thereunder is or will be unjust, unrea-

sonable, unjustly discriminatory, .or unduly preferential or

prejudicial, or that any division of any such joint rate, fare,

or charge, is or will be unjust, unreasonable, inequitable, or

unduly preferential or prejudicial as between the carriers

parties thereto, it is authorized and directed to take the same

~ - action with respect thereto as the Board is empowered to

take with respect to any joint rate, fare, or charge, between

air carriers, or any divisions thereof, or any classification,

rule, regulation, or practice affecting such joint rate, fare, -

or charge or the value of the service thereunder.

’ *“(e) Orders of the joint boards shall be enforceable and

reviewable as provided in this chapter with respect to orders —

of the Board.’’

' 31

joint carrier of through traffic, but rather that the agree-

ments called for REA to undertake indirectly to engage in

. air transportation—an undertaking which requires Board

authorization not presently held by REA.* The Board’s’.

conclusion was based on its finding that, as contemplated by ~

the parties to each agreement, REA would be responsible

to. the shipper for the entire transportation and could

charge the shipper a rate having no relation to the rate pay-

able to the airline. The Board found, moreover, that REA —

would determine whether or not to ship any particular ship-

ment by’air and, if so and a choice of airline existed, REA

_ could determine which airline to use. In short, the Board

found that REA would be engaged in selling air transporta-

tion to the public. Since REA has no authority so to do, the

agreements were held to violate the Federal Aviation Act

and, hence, under Section 412, were not + entitled to Board -

approval.

REA petitioned the Board for reconsideration and, in

‘addition, requested that the Board refer the case to a joint

_ board appointed under Section 1003 or, in the alternative,

_ that the Board grant REA a hearing. The Board denied

. these requests and refused to reconsider its order. REA

now petitions for review of the actions of the Board.’ _

The Federal Aviation Act permits engagement in air

transportation, whether direct or indirect, only by persons

who hold a certificate of public convenience and necessity

4 Section 401(a), 72 Stat. 754, 49 U. S. C. §1371(a), provides:

‘‘No air carrier shall engage in any air transportation

unless there is in force a certificate issued by the Board

authorizing such air carrier to engage in such transporta-

tion.’’

The term ‘‘air carrier’’ is defined in §101(3),.72 Star. 737, 49

U. S. C. §1301(3), as follows:

‘¢ * Air carrier’ means any citizen of the United States

who undertakes, whether directly or indirectly or by a lease.

or any other arrangement, to engage in air transporta-

tion eo,” .

5 Jurisdiction in this court is based on Section 1006 of the

Federal. Aviation Act, 72 Stat. 795, 49 U. S: C. §1486.

32 f -

issued by the Civil Aeronautics Board,* or who have been

exempted from the provisions of the Act.’ The Board has

defined an ‘‘indirect air carrier’’ as one who ‘‘holds out

to the ‘public that it will undertake to transport property —

by air, and enters into contracts with “shippers wherein .

it binds itself to discharge such an undertaking with respect

to particular shipments.’ In this case the Board found,

upon substantial evidence, most of which was submitted

by REA at the Board’s invitation, that REA’s operations |

under the proposed agreements would constitute indirect

air catriage.® Since REA is not authorized to carry on

such operations, ore of the agreements was "properly

withheld, —

The case would end here were it not for REA’s con-

of the Federal Aviation Act overrides the requirement

that indirect carriers be either certificated under Section

401 or exempted under Section 101(3). In essence, REA

contends that when a surface carrier contracts with a direct

* See Note 4, supra.

7 Under Section 101(3) of the Federal ‘Aviation Act, 49 U.S. C.

§1301(3), the Board may grant an indirect air carrier an exemption

‘from the provisions of this chapter to the extent and for such

periods as may be in the public interest.’’ See American Airlines

v. Civil Aeronautics Board, 7 Cir., 178 F. 2d 908 (1949).

8 Railway Express Agency, Grandfather Certificate, 2 C. A. B.

531, 536 (1941). See also Consolidated Flower Shipments v.

Civil Aeronautics Bd., 9 Cir., 213 F. 2d 814 (1954) ; National Air

Freight Forward. Corp. v. Civil Aero. Bd., 90 U. S. App: D. C.

330, 331-332, 197 F. 2d 384, 385-386 (1952) ; ; American Airlines v.

Civil Aeronautics Board, supra, Note 7; Intra-Mar Shipping,

Enforcement Proceeding, 27 C. A. B. 568 (1958).

The Board’s definition of this statutory term is entitled to the

deference usually accorded to statutory interpretations given by

_ the agency charged with the administration of the statute. Udall .

v. Tallman, ....:....... _ See (No. 34, Oct. Term, 1964, decided

March 1, 1965), slip opinion p. 14; Unemployment Comm’n v.

Aragon, 329 U.S. 143, 153 (1946).

* Under well settled principles of. judicial review of administra- .

tive action, Board findings supported by the record are conclusive. .

49 U.S.C. §1486(e); N.L.R.B. v. Hearst Publications, Inc., 322

U. 8. 111 (¢ 1944.)

bn.

air carrier and the contract calls for the surface carrier

to operate as an indirect air carrier, the requirement for

Board authorization differs from what it would be if no

surface carrier were involved. This difference arises,

according to.REA, because of the provisions in Section

1003 which authorize air carriers to ‘establish reasonable

through service and joint rates, fares, and charges with

other common carriers’’ and which provide procedures for

regulation of the rates, charges, and practices of carriers

- operating under through service..arrangements. Under

REA’s theory, all transportation in which the cargo is

carried part way by surface carrier and part way by air

must be regulated by a joint board convened according ~

to Section 1003(a).

Such a‘construction, however, is not consistent with the

regulatory system ordained by Congress. Under the Fed-

eral Aviation Act, the Board is given exclusive authority -

and responsibility for the economic regulation of the ‘air

transportation industry, as therein défined. No one is

permitted to engage in air transportation, either directly

or indirectly, without Board -authorization, either in the

form of a certificate or, in the case of indirect carriers,

possibly by exemption. Section 1003 is not designed to

create an exception to the Board’s responsibility in those

cases where a surface carrier engages in operations which:

the Act includes in its definition of “air transportation.”’

That section merely provides a procedure for regulation

of rates and practices in cases where an air . Carrier

arranges with a surface carrier for through transportation

service. When such an arrangement is made, and each

participating carrier is operating within the proper scope

of its authority, Section 1003 provides a method which

may be invoked by either the Board or the Interstate:

Commerce Commission for regujating the participating

_ carriers. But when, as in this case, an arrangement for

through service calls for the surface carrier to perform

operations which require permission from the Board, the

_ surface carrier is not relieved of the necessity of obtain-

ing such permission. . |

Adoption of the statutory construction urged by REA

would give’ Section 1003 an effect which could hardly *

have been intended by Congress. At present, the opera-

tion of assembling packages for air shipment is per-

formed largely ‘by concerns known as air ffeight forward-

ers..° These concerns are extensively regulated by the

Board." In the past REA has sought authority from the

Board to operate as an air freight forwarder. The

Board has refused such authority because it felt that the

- impact of REA’s entry into the industry would have effects

‘harmful to the public.®. However, it is now argued that

Section 1003 permits REA ta engage in operations which

the Board has held to be not in the public. interest. We |

cannot agree that Section 1003 has the effect of allowing.

REA/’s. entry, without Board approval, into an industry

expressly committed by Congress to the exclusive regula-

tory power of the Board.*

10 An ‘‘air freight forwarder’’ is defined as one who ‘‘in the

ordinary and usual course of its undertaking, assembles and con-

solidates or provides for assembling and consolidating of property

or performs or provides for the performance of break-bulk and

distributing operations with respect to consolidated shipments, or

both, is responsible for the transportation of such property from

the point of receipt to point of destination, and utilizes for the.

whole or any part of such transportation the services of a direct

air carrier.”’ 14 C. F. R. §297.2 (1964).

11 The Board’ $ regulations concerning. air freight forwarders

appear at 14 C. F. R. Parts 296 and 297: (1964).

12 See Railway Express, Airfreight Forwarder Application, 27 -

C. A. B. 500 (1958) ; and cf. Railway Express Agency, Inc.,.and

. Northwest Airlines, Enc., Agreement, 9 C. A. B. 905 (1948).

13 Railway Express, Airfreight Forwarder Application, supra

Note 12 at 537-538. Another reason for the Board’s refusal is the

fact that REA is.controlled by railroads. See Section 408 of the

Federal Aviation Act, 72 Strat. 767, 49 U. S. C. §1378; Railway.

Express, Airfreight Forwarder Application, supra Note 12 at

502-504. Cf. ‘National Air Freight Forward. Corp. v.:Civil Aero.

Bd., supra Note 8.

14 We find nothing i in the legislative init of Section 1003 to

warrant the conclusion that the section was intended to provide

any exceptions to the broad provision in Section 401. See H. R.

Rep. No. 2254, 75th Cong., 3d Sess., p. 8 (1938).

REA also contends that the Board cond in denying

its request for a hearing. This request was made at the

same time REA petitioned for reconsideration of the .

Board’s order disapproving the agreements. The Board

had previously invited REA to submit any relevant infor-

mation. .REA has done this, and it was on this informa-

tion that the Board based its order.

Section 412 contains no requirement for a hearing in

contract approval proceedings. Nevertheless, REA con-

tends that it is entitled to a hearing as a matter of due

process.* But due process does not require that every

administrative action be preceded by a ‘hearing. The under-.

lying facts of REA’s operations under the ‘proposed agree-

ments were not disputed. The Board accepted as true the

information submitted by REA. The only issues before the

Board involved the legal consequences of those facts. Under .

such eircumstances, a hearing i is not required.”

Affirmed.

15 Cf. Wong Yang Sung v. _ McGrath, 339 U. S. 33. (1950) ; The

Japanese Immigrant Case, 189 U. 8S. 86. (1903).

16 Mississippi River Fuel Corp. v. Federal Power Com’ m, 108

U.S. App. D. C. 284, 292, 281 F. 2d 919, 927 oo cert. denied,

365 U. 8. 827 (1961). -

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.