Opposition Brief — Flying Tiger Line, Inc. v. Murphy

Bi conccnn a name tah oe A a

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CITATIONS.

Air Freight Case, 10€, A. B. 572, affirmed sub

" - nom. American:Airlines v. Civil Aeronautics

Board, 192 F. 2d 417

5.

‘ Domestic Cargo-M. ail Service Case, 36 C.A. BL

; a EEE NRE MES See Sh

_ Federal. Power Commission.v. Texaco, 377 U. 8.

coat EE RE

Flying Tiger Line Inc.’ v.. Civil Aeronautics ©

Board, 204 F. 2d 404.

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. 236-554—66—1 .

ee ee a I A I A a Gay ay ais DU di: as i ly tan se tins din ta ts .

i

-OeKENINNNeE

a

‘ Statutes and sinibiithitiae

Civil Aeronautics “Act of 1938, 52 Stat. 987: page

EE sb oka Shanda week wake cians 3.

Federal Aviation Act,-76 Stat. 143, 49 m S.C.

130l.e¢ seqg.:

Sec.. p<: ae epee Sara

GERD x Senecnncesessdnacedancs

i ctknakcokeinecseitinnaeus ad 3, 4;

vectdh a eg Ce Ee 4, 6,7,8

i vtuvidennd ceeded uoekes

14 C.F.R. 207 (1952 rev.)_..--.-.._____.__- 4,13

207 (1966 rev.)------- sancbea caine . 66.

207. RE i aero ES eS

DN a id cen ea Nahe a Me 5, 14

cic awidchinadens douse 9

ESE CROR SIntaoalel py 5, 6, 15

I or et 15

Dahan sadn cacnMncecaaedee 9,15

cg, LE ES OO Cane 15

I cevrnn caiairiankansenne 7

RIAs... haaees aioe 5

Oe i aera cus cckaccaskoesckncues 5

BIER re hres beet OR te 5

PS ae pitasac 4 taken ee ee 8

Congressional material: 3 _ | -

— 108 Cong. Rec. 12318. _ ____- “Lone ssscecse -Q-—_

i Conf. Rep. No. 1950, 87th Cong., od in

ESSE eee penwe 4,8,9

Miscellaneous: : (

2 Davis, Administrative Law, § 15. 03, p. 353 _ 10 “

Civil Aeronautics Board, Atr Carrier Financial’

Statistics, -- cena benaeaeas pemcuamaanews 7

In the Sinpreme Gout of he United States

‘ OCTOBER TERM, 1966.

No. 508

THe FLyine -TiGer Line, INC., PETITIONER —

CuarLes 8. MurPHY, ET AL.

ON PETITION FOR A WRIT OF. CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA

” OIROUIT °

‘BRIEF FOR THE RESPONDENTS IN orrearrscs

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. A.

la) is not yet reported. The opinion of the district

court is reported at 244 F. Supp. 889, and is reprinted

_in the Joint Appendix. printed for the use df the court

of appeals (J.A! 105-111). |

JURISDICTION 3

The judgment of the court of appeals was entered

on June 2, 1966. ‘The petition for a writ of certiorari

was filed on August 31, 1966. The eneietion of

this Court i is invoked under 28 U.S.C, 1254(1). are

3 Nine copies of this Joint homie have ee filed with the

Court. VTA" citations refer to this document. *

(1)

— es

2 ;

| | QUESTIONS PRESENTED - : -

1. Whether the Federal Aviation: Act authorizes the |

‘Civil Aeronautics Board to prescribe regulations re-

stricting the passenger charper operations. of =e

air carriers. | ;

2: Whether the Civil See ee Board’s emia:

tions governing such charter operations are reasonable.

3. Whether the Civil Aeronautics Board was re-

quired .to hold an adjudicatory hearing prior to

promulgating the challenged regulations.

STATUTES AND REGULATIONS INVOLVED

The. relevant provisions of the Federal Aviation

Act are set forth in Appendix B to the petition for

certiorari. The relevant ‘regulations are set forth in

- the —— to this brief (infra, pp. 13-16). |

STATEMENT ,

-Under the Federal Aviation Act (49 U.S.C. 1301

et seq.), air carriers are prohibited’ from engaging in *

“any air transportation unless there is if force ¢ a cer-

__-tifieate’-of public convenience and necessity, or other

3 authorization, issued by the Civil Aeronautics Board

- (“the Board”) allowing the carrier to engage in such

transportation. (49 U.S.C. 1371 (a)). The certificates.

of regular route carriers, such as petitioner, designate

both the geographic points between which” the carrier

is authorized to fly-and- the type of service the carrier

—. may - provide.’ With respect to the type of service

provisions, two broad categories have been: recognized.

Some certificates authorize the carriage of passengers,

property. and mail; holders of such certificates are

called “‘ebiubination. carriers.” Other certificates, held -

. by: the so-called “al cargo carriers,” authorize the |

a ‘carriage of property and mail but not of passengers.

9

BOREAL LE PID See hom ©

1 3 :

The distinction between combination and all-cargo _

eS carriers has been recognized for regulatory purposes -

ever since the Board certified a group of carriers to

serve as specialists in‘ air-cargo service some twenty

years ago.’ Petitioner has been an all-cargo carrier.

under a certificate initially granted in 1949, _ renewed rae

in 1956 and:‘made permanent in 1962 (J.A. 44).

Under their- certificates, both combination and all-

cargo carriers can engage in both: scheduled and char- .

~ ter flights. between the points and of the type desig-

nated in their respective certificates. In addition, prior .

_ to 1962, Section 401(e) of the Federal: Aviation Act,'

authorized both’ types of’ carriers to “make charter

trips * * * without regard to the points named in

[their] certificaté[s], under regulations prescribed by .

the Board.”’ Thus, under Section 401(e), combina--

tion carriers ‘could make charter combination flights,

and all-cargo carriers, such as petitioner, could make

charter cargo flights between points other than those

‘designated in their respective certificates, subject to

Board regulation. Section 401(e) did not, ‘however,

. authorize all-cargo carriers to make charter passenger

flights. See Flying Tiger’ Line, Ine. v, Civil Aero-

2 Air Freight Case, 10 C:A.B. ‘572, affirmed in nom. American 3

Airlines v. Civil Aeronautics Board, 192 F. 2a 417 (C.A.D.C.).

“The history of the all-cargo industry is traced in Domestic

, Cargo-Mail Service Case, 36 C.A.B. 344, 352-355.

* Section 401(e) of the Federal Aviation Act of 1958 reen-

acted without’ change the provisions of Section 401(f) of the

. Civil Aeronautics Act of 1938 (52 Stat, 987, 988-989). 9

nautics Miata. 204. F. 2d 404 (CA. D0): ‘Pur-

- suant to its authority. to regulate charter flights 2

under Section 401ée), in 1951 the Board adopted_ a:

variety of regulatiéns designed to limit the volume of

the.off-route chartering in which the combination and ’

“all-cargo carriers engaged. (see 14 C.F.R. 207 (1952

rev.)) in order to encourage concentration on the de- a

velopment. of Service on the certificatéd routes. Most

Significantly, the Board limited each ecarrier’s: off-

2

routé charter flights under Section 401(e) in each

calendar quarter to 2%, percent of the revenue plane

‘ miles flown in scheduled service during the preceding ~

12'months (see J.A. 16). .

In 1962 Congress amended Sectién 401(e) of the.

Federal ‘Aviation Act (76 Stat. 143)-so as to permit

carriers to engage in charter service “without regard

to * * * the type of. service’ designated in their certifi-

‘ cates as well as “without regard to the points named’*in -

their certificatés, subject to regulations pres¢ribed by

the Board.’ As amended, Section oe (6) ° (49

U.S.C. 1371 (e) (6 d

” (e) (6)) provides:

Any: air carrier, ‘other than. a supplemental air

carrier, may perform charter trips or any other

‘special service, without regard to the points:

named in its certificate, or the type of service

* Any passenger charters that were performed by all-cargo”

carriers, such gs petitioner, were authorized by exemption order :

issued by the Board pursuant to Section _416(b). While the

Board has given no indication that it intends td grant such —

exemptions as a matter of course, the present regulations do

not nreclude thie i issuance of-exemption orders by the Board for

passenger charters. ,

* See H. Conf. Rep. No. 1950, 87th Cong., 2d Sess. (Ss. 1969)

PP. 12-138. ;

4

provided therein, under regulations prescribed

by the Board. [New material in italics.]) wy —

In N ovember 1962, in light of the amendment of Sec-

tion 401(e), the Board instituted rule-making pro- .

ceedings for the purpose of revising its regulations —

thereunder. :The Board issued a notice of proposed .

rule-making and invited comment from the air car-

riers as to revision of the régulations (27 FR. 11322) ;

latex, comments were solicited from’ the. carriers on. |

specific proposals for the revision of the regulations.

(29 E.R. 1476). -The carriers: were given the op-

portunity‘ to present: ‘oral argument to the Board (29

F.R. 8121); and finally, on September 18, 1964, the”

Board adopted the present regulations (29 F.R. 13246;

14 C.F.R. § 207 (1966 rev.) ) which petitioner chial-

lenges here.*

‘The revised Part 207 Regulations, like their a

_ cessors, limit'the volume of charter operations ‘that a

carrier can ,onduct under Section °-401(é) (6); the

regulations do not restrict. charter flights conducted;

within the terms of a carrier’s certificate—that is,

»—~ between the: points. and of the type. designated in its

certificate. The regulations provide that, after Janu-

cary 1, 1965, neither a combination carrier (14 'C.F.R.

§ 207.5) nor. an all-cargo carrier (14°C.F.R. § 207.6)

&The Board issued a statement, when it promulgated the

regulations, containing a lengthy and detailed explanation of |

the basis for, and purpose of, the revised regulations (J.A.

15-30). The Board noted that the primary function of certif- ~~

icated carriers was to serve their authorized routes. with sched-

uled service and that ‘restrictions had: been adopted to restrain

the carriers from placing undue emphasis upon charter oper-

ations thereby prejudicing their capacity to meet their obliga-

tion to provide adequate scheduled service (J.A. 17, 22).

6

may “ during-any calendar year perform i -aieke .

charter trips which in the aggregate, on a reveriue

[ plane-mile basis, exceed two \percent: of the: base rev-

"enue plane miles flown by it during the preceding calen- |

dar year.” As used heré, the term “off-route charter.

trip” encompasses arly charter. trip for which au- *

thority i is derived from Section 401(e) (6), rather than , -"

from a carrier’s certificate; either because the trip is

— not between certificated points or not of the certificated .

-type of service or both '\C.FR. °§ 207. 6). This, a

passenger charter -by an all-cargo carrier: is deemed

“off-route’’ whether or not it is. between points for

which the éarrier is certificated to provide carge serv-

lee. The restrictions’ do not: apply to military char-..

ters, which, the Board - noted, constituted “the great .

bulk”’ of the all-cargo carriers’ charter operations —

(J.A. 23). Furthermore, each all-cargo carrier is ex- -

empted from the two percent limitation with respect ~

" _-to off-route cargo. charters. within its “area of opera-

tions’’; pétitioner’s area.of operations embraces the

48 contiguous States (14 'O.F.R. § 207.6).. Thus, the |

principal practical ‘effect of the regulations, insofar

as all-cargo carriers are concerned, is to limit civilian: ~~

passenger charter ‘service to two percent of certifi- -

cated revenue miles. ; ors ee:

Petitioner, the only all-car go car rier ‘whose civilian

passenger charter operations exceeded the two percent

limitation (see J.A. 23, n. 3), challenged the validity.

of Part 207 in the district court and sought injunctive )

and declaratory relief. The district court dismissed /

the complaint, holding that the; Board had not ex-

— its any authority, that the > regulations

- ee as = ad : ‘¢

were not discriminatory, and that it: was ‘not neces-

sary for the Board tt conduct an’ adjudicatory pro- -—

a ceeding prior to their adoption (J.A. 109-11 0). The:

court of appeals affirmed per curiam (Pet. App. A

a Wee nas mae eae i) ak eS.

- . : a ARGUMENT % els,

1. Contrary to petitioner’s suggestion that this liti-

‘gation is of general importance ‘to. the air transport

— industry (Pet. 5, 20), the only members of the indus- ~

_ try whose operations are immediately affected by the —

_ Yegulations. are two combination carriers. (Trans -

Caribbean Airlines, Ine. and Mackey Airlines, Inc.). .

(J.A. 21), and petitioner (J:A. 23). . And-as to peti-

tioner, ‘whose certificate contemplates only the car- |

' riage of cargo, the effect’ is limited to one subsidiary ~—

aoe aspect of its operation,.i:e., civilian passenger charter

flights.’ Thus, this casé does not present an issue of

general: significance warranting review by this Court.

.2. Furthermore, ‘the issues raised in the petition

lack merit. The very wording of Section 401(e)(6) -

' indicates an intent to.-give the Board the authority’

to limit, by regulation, any charter service authorized

_* Petitioner’s prediction, in its amended ‘complaint (filed >

_ October 20; 1964) (J.A. 11) and reiterated in its petition (Pet. - »

9, 20), that the two percent limitation would imperil its “eco- .

nomic survival in the immediate future,” is not borne out a

data filed with the Board. It appears from those data that,

for the 12 months preceding the effective date of the new. regu- s

ations (January 1, 1965) petitioner had operating revenues of .

Pompey an operating profit of $4,005,000 and a return on.

total investment of 7.59 percent. For the 12 months following

_ the effective date of the regulations petitioner enjoyed operating

_ revenues of $56,156,000, an operating ‘profit of $8,820,000, and

a return on total investment of 10.71 percent. See ‘Civil: Aero-

_nautics Board, Air Carrier Financial Statistics.’ Under 14 C.F R.

-, §302.24(m), the Board takes official notice of these_statistics."

236-554—66——2 ', ¢ oe.

ay.

8

, by that section, and the legislative history of the 1962

) * ameridment resolves any doubts as to the congressional

purpose and intent. Prior to 1962 it was settled that

_ all-eargo carriers, such as. petitioner, were not author- _

daed (except by special exemption’ granted by the

| Board), to engage in civilian passenger charter serv/

ice.’ The 1962 amendment is fully explained in the

House conference report (H. Conf. Rep. No. 1950, 87th

Cong., 2 Sess. (S. 1969), p. 13): -

ee -This amendment wiil perniit the me to

~ > authorize cargo carriers to engage in passenger

' charter operations to the extent that it may

find, from: time to time, that the publicsiefterest

so requires. * * * [T]he Board will have the .

necessary flexihility to limit frequency of serv-

ice and to impose such other limitations, condi-

tions, and restrictions as the public interest may

require. [Emphasis added, |

The authority of the Board to restrict charter flights

authorized under Section 401(e) (6) -was thus retained

_ by the 1962 amendment notwithstanding the Board’s

well established practice of restricting such opera-

tions to a percentage of scheduled operations (see,

supra, p. 4). There is, therefore, no reason. to sup-

pose .that _Congress did not anticipate the promulga-

tion of the very se of ern at the Board

has adopted. ..

8. Petitioner’s contention, that the Board’s regula- «

tions discriminate against the all-cargo carriers in|

_ favor ofthe combination carrier, is also without merit.

The regulations provide the same two percent limita-

* Flying Tiger Line, Ine. v. Civil Aeronautics Board, 204 F. 2d

404 Bs A. D.C.). ‘ .

+ eau

’ ar are Fee 9 ;

‘. tion for combination carriers as for all-cargo carriers.

Compare 14 C.F.R. 207.5(b) with 14 C.F.R. 207.6(b).

| Petitioner contends, however, that the regulations

discriminate by permitting the combination carriers

to engage in passeriger charters over their certificated

routes, without limitation, while restricting passenger

charters by all-cargo carriers over their certificated

routes (Pet. 13-14). The complete answer to this.con-

tention is that the ination carriers’ authority to

provide on-route passenger charters comes from the

carriers’ certificates, issued pursuant to Section 401

(d) (1), and not from Section 401(e) (6), which is lim-

ited to proviging authority for charters beyond -the

scope of a carrier’s certificate (H. Conf. Rep. No. 1950,

87th Cong., ‘2d Sess. (S. 1969), p. 12; 108 Cong. Ree.

‘ 12318). Thuis, the authority of ccuibiindion carriers

to: engage in passenge?. charters between the cities

they serve is based upon their certificates to engage in

regular passenger service, just as the all-cargo car-

riers may engage in unrestricted cargo charter service

between the cities they serve. The difference in au-

_ thority to operate such ‘‘on-route” charters is based

upon the fundamental difference in the certificates be-

tween combination and all-cargo carriers.’

* Petitioner’ points out (Pet. 17-18) that, sanaiadias to pas-

sage of the 1962 amendment, Senator Engle of California, a

Conference Committee member, in the proceedings which led to

the ions in dispute here, disputed@he existénce of a dis-

tinction if Section 401(e)(6) between off-route and on-route

charters (J.A. 69-74). While we st¥ongly doubt the probative-

ness of such post-enactment legislative “history,” we note that

Senator Cotton of New Hampshire, another member of the

Conference Committee, in a letter to the Board, reaffirmed the

existence of that distinction (J.A, 103-104).

e

10

4. Petitioner also contends that the regulations are’

invalid because the Board did not hold an adjudica-

tory proceeding to establish the need for the two

percent limit (Pet. 22-26).° But the regulations ob-

jected to are clearly within the normal scope of agency

rule-making. They were adopted after protracted

proceedings in which all interested parties were in-

vited. to participate, they are general in application

and prescriptive in character. The reasons for, their

adoption, spelled out in the Board’s memorandum

(J.A. 15-30), relate to the future growth and develop- .

ment of the industry. It is well settled that general

rules. or regulations of this kind, though they may,

adversely affect members of a regulated industry,

need not be preceded ‘by an adjudicatory proceeding

or supported by an evidentiary record. See, ¢.9.,

_ Umted. States v. Storer Broadcasting Co., 351 U.S.

192, 202-204 ; Federal Power Commission v. Texaco, 377

U.S. 33, 39-45; 2 Davis, Administrative Law, § 15.03,

p. 353. See also National rNNNG Co. v. United

States, 319. U.S. 190."

_ A siniilar contention was presented wad rejected in ‘Ameri-

can Airlines, Inc. v. Civil Aeronautics Board, 359 F.2d 624

(C.A.D.C.), certiorari denied, Cae 10, 1966 (No. 304, this >

Term).

"In urging that an evidentiary snned was needed to support .

the two percent off-route charter limitation, petitioner relies

heavily on American Trucking Associations v. United States, ;

344 U.S. 298 (Pet. 22-24): Such reliance is misplaced. To be

sure, evidentiary hearings were held by the Interstate Com-

merce Commission prior to its adoption of. the challenged.

regulations, and this Court did rely on evidence adduced at

those hearings in demonstrating that the regulations had a

rational basis. But this Court specifically noted: that the

agency was not a eat! to hold —. hearings: ‘344

ae )

CONCLUSION

For the reasons stated, the petition for sidan.

Should be denied. - ~

, Respecttully submitted.

THURGOOD MarsHALL,

| Solicttor General.

: Bareroot SanpErs

| Assistant Attorney General.

Davw L. Ross,

Harvey L. Zuckman, :

Attorneys.

Jo OSEPH B. GoLpMan, |

General Counsel,

Civil Acroniutics Board.

Octoser 1966.

‘US. at 320. The Court: did not indicate in “any way that,

had such hearings not been held, it would have declared the

regulations invalid.

\

APPENDIX >

Part 207 of . the Civil Aeronatities Board Regula- Sk:

tions, 14 C.F.R. 207 (1966, rev. )s provides in pertinent

part:

* § 207.1 Definitions. —

x : . * *

‘‘All-eargo carrier’? means an air -carrier

holding a certificate of public convenience and

necessity issued pursuant to section 401(d) (1)

or (2), which authorizes the carriage of prop-

-erty only or — and mail only.

n

‘Charter trip’? means air transportation per- .

formed by an air carrier holding .a certificate

. of public convenience and necessity where. the

entire capacity of one or more aircraft has been

engaged for the movement of persons and their

baggage or for the movement of property, on a

tinfe, mileage or trip basis: .

(1) By a person for his own use,

(2) By a person (no part of whose busi-

ness is the formation of groups for trahs-

portation or the solicitation or sale of trans-

portation services) for the transpartation —

of a group of persons as agent or repre-

sentative of such group,

. (3) By two or more’ persons acting

jointly for the transportation of such group .

of persons, or their property,

‘ (4) By an air freight forwarder holding

a currently effective letter of registration

issued under Part 296 or Part 297 of this

_ subchapter ‘for the carriage of ah sa’ in

air transportation.

‘ * * ¥

~ (42)

°

13 -

- “Combination carrier’”’ means an air carrier

holding a certificate of public convenience and

necessity issued pursuant to section 401(d) (1).

or (2) which authorizes the carriage of persons,

property and mail or persons and property

only.

es * * “* * *

“On-route’’ shall refer to service performed

by an air carrier between points between which

said carrier is authorized to provide service

* pursuant to either its certificate of public con-

venience and necessity or: exemption authority :

‘Provided, however, That passenger charter

trips by any all-cargo carrier are not considered

to be on-route whether or not they are per-

formed. between points designated to receive

service by such carrier in its certificate of pub-

lie convenience and necessity, except that in

the event services are performed pursuant to

’ a contract with the Department of Defense or

an agency thereof, by an all-cargo carrier be-

tween points designated to recéive service by

such carrier in its certificate of publie con-

venience and necessity which (1) involves cargo

transportation in one direction and ‘passenger

transportation in the other direction or (2).

involves a mixed charter, the passenger charter

- leg or the mileage operated in the mixed char-

ter, as the case may be, will be considered ‘on-

route. “Off-route” shall refer to any ‘charter

except those performed for the Department of

Defense which is not on-route.

* * * * *

§ 207.5 Limitation on amount of charter trips which

°%

may be performed by combination carriers.

(a) Prior to January 1, 1965, a combination —

carrier shall not during any calendar quarter

perform off-route charters which in the aggre-

gate, ona revenue plane-mile basis, exceed 214

reent of the revenue plane miles flown by

it in scheduled air transportation during’ the

preceding 12-month period. ‘

14-

| (b) Effective January 1, 1965, a cambination

carrier ‘shall not during any calendar year

perform off-route charter trips which in the

aggregate, on a revenue plane-mile basis, exceed

| two percent of the base revenue plane. miles

flown by it during the precedirig caleridar year. :

“¢§ 207.6 All-cargo carriers; limitation on amount of

: charter trips whith may -be performed.

(a) Prior, ,to*January 1, 1965, an all-cargo

_ carrier shall not during. any calendar quarter .

perform off-route charters which in the agere- —

gate, on a revenues plane-mile basis, exceed 214

_ percent of the reventie plane miles flown by

it in scheduled. airtransportation during the

. receding’12-month period: Provided, however,

=~ That an all-cargo carrier shail be permitted

to perform off-route cargo charters within its

_area of operations without any limitation as to

volume of service.. | 3

(b) Effective January 1, 1965, an’ all-cargo

carrier shall not (luring any calendar year

perform off-route charters which in the aggre-

gate, on a revenue plane-mile basis, exceed two

percent of the base revenue plane miles flown

by it during the preceding calendar year: Pro- |

vided, however, That an.all-cargo carrier shall

be permitted to perform off-route, cargo char-

ters within its area of operations without any

limitation as to volume of service. _

(c) Within the meaning of paragraphs (a)

and (b) of this section, the areas of operations

ne of the all-cargo carriers are the following:

Meck. (1) Within the 48 contiguous States—

: Slick. Airways, Inc.; Flying Tiger Line,

_Ine.; and Airlift International, Ine. - ©

(2) Between the 48 contiguous States

= Kurope—Seaboard World Airlines, |

ne. -

. (3) Between the 48 contiguous States

| _ Puerto Rico—Airlift International/

Ine. »” : Rees

15 :

(4) Between the 48 contiguous States

on the one hand and ‘the Caribbean, Cen-

tral and South America on. the other

-hand—Aerovias Sud Americana, Ine.

se re

f& .

wa:

U.S. GOVERNMENT PRINTING OFFICE: 1966