Petition for Writ of Certiorari — Bandy v. United States

Supreme Court brief1968

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IN THE

Supreme Court of the uiten $1 States

‘Come TERM, 1967

No. «ak S

: TRANSOONTINENTAL Bus SysTEM;, INO. ET AL, ’

| Petitioners, |

: Stage v. oie

Crvm, AERONAUTICS Boarp, Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

_ UNITED STATES COURT OF APPEALS

- FOR THE FIFTH CIRCUIT

1120 Connecticut Avenue, N. W.

Washington, D. C. 20086 _

Wanren A. GOFF

315 Continental Avenue_ B

Dallas, Texas

_ Attorneys for Petitioners...

November 14, 1967

Pumss of Braon S. Anams Parrrina, Inc., Wasurweron, D.C.

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TABLE OF CONTENTS

eee a Page

Citations to. Opinion Below ........... Veeeeeeeeeetne 2

Jurisdiction | 7: EL OP EM ROO E TEe Tere rappers Se

Question Prseaed aeine +090auds Reena een oan 8 |

Deahaten Bev io. Nei cieepeiseescestasesscons 3

NN ica csvavetiedcynebives Peereereeee ave 3

' Reasons for Granting the Writ racks jddssdameeete a1

| eh a a en alenteed os pase bene cunie nea:

De eh soca sn osscp thine ince edevssvuecneetsgeiuan, 16

Ma Sar cenecvdvidadcceretnasensusatdanieiessnes 19

Ge S60bebSaes i oceNe pudee sede suvessabecesWeeuseds 28

Conclusion ......... YT eewesever ess cere cedeersse's 31

poem i Decision and Opinion of the United

States Court of Appeals for the Fifth Circuit in

Transcontinental Bus System v. Civil Aeronautics

Board, Case No. 22791, WM Suicecscieddscacre: aR

Appendix B: Military Standby Fares ‘Proposed by

Allegheny Airlines, et al., cand K-22186, May 20,

WVGS .ncccccccsecssvecesevcvocssessesesegescs . 45a

= Appendix C: Extracts from the Federal Aviation Act

of 1958, as amended ... bs gE IF OLR, PSR GSE 58a

Extracts from the Interstate Commerce Act of

i, as amended vee eee e eee e ees pesewbacece 67a.

| ees Ak " Contenta Continued _ cee

TABLE OF CITATIONS

Court Cases: |

, Supreme Court— , Us Ste’ Ao awe a Page

American Airlines-v. North American Airlines, Inc., 351.

U.S. 79;82; 100 L. ed. 953, 960 ee A. at

‘American Trucking Association; Inc. v. Atchison

Topeka & Santa Fe Ry. Co., 387 U.S. 397 (1967) . .9, 20 |

Baltimore & Ohio R. BR. Co. v. United States, 305.U.8.

| 507; 83.1. ed: 318 (1938) - van sweuhhedts ie dheckon 9, 16

Civil Aeronautics Board v. Summerfield, 347 US. 74, .-°.

79-80 ; 98 L. ed. 513, 519-520 (F066) oc csieks ee 20521

Eastern-Central Motor Carriers Association v. United |

States, 321 U.S. 194, 205-206 ; 88 L. ed. 668, 676-677

(1944) ose gjesecereteceescnceteceesceccesceers 19, 20

Interstate Commerce: Caillat v. Alabama Midland

Ry. Co., 168 US.. 144, 167-168 ; 12 L. ed. 414, 423

TOS A. cicckisvcss laddee cease ihedeei eee 9,19 -

Interstate Gommerce Commission v. Raltiners & Ohio

~-R.R. Co., 220 U.S. 326; 56 L. ed. 1107 (1912) .... . 16

° Interstate Commerce Commission v. Baltimore & Ohio

R. R. Co., 225 US. 326, 342; 56 L. ed. 1107, 112

(1918). ......: sud asa vantaacsase ccs 9

Interstate Commerce Piette V. Delaware Le & W.

‘R. R. Co., 220 U.S. 235, 243 ; he , 453

Epa cy Beene Pacem pee 9,15

Interstate: Commerce Ciabaiaien v.. Mecher, 330 US.

567 ; 91 L. ed. 1102 (1947) ...........00.. betecw 16

, Interstate Commerce Commission v. New York, N. H.

& H. R.R. Co., 372 U.S. 763-764; 10 L. ed. 2d, 108,

120-121 (1963) Bes FON OR i A Hace Np ED

Louisville & Nashville R.R. Co. v. United States, 989

« US. TH; TG L. od. O72 (10G1) .... ec cessccoecec’ 9, 16

. New York, N.H. & H. RR. v. Interstate. Cunanieeh

Commission, 200 U.S. 361, 391-392; 50 L. ed. 515,

B21 (1906): -..2.esseeeeeeeeeeeeeeeeeeeeeeees 9

~~ Senate Reports—

: Contents. Continued ee

Page

United States v. Chicago. Heights Trucking Co., 310. |

. US. 3445, 84 L. ed. 1243 (1940) ....:......00ee. 9,16 .

Wie ht: v. United States, 167 US. 512; 42 L. ed. 258

a) ET Bera eioiay 9, 16,19

: United States Court of Appeals—

fix Parte: Koehler, 31 F. 315 (Cir. Ct., D. Oregon, ot

Bete adeagaan af yt ening 93

Flying Tiger Line, Tne. v. C. ‘ B., 350 F. 2d. 462 (D. C.

Cir., EE WepaleckscendetebeeVeswuns sent teens 10

Apwmnisrrative CASES:

Civil Aeronautics Board—

Order E-19376, p. 21, March 14, 1963 ....... pe oe at 5, 12

Government First-Class Fares Proposed by Frontier

caterers Ine.; Order E-22929, November 24, we

14-15

Tn the Matter of an A.T.C. - Resolution, Order

E-14349, Avigust 17, 1959 .......c..eceeeececees 17-18

Joint Application of Pan: American orld Airways

. and en Air Lines, Order E-25757, September -

29, 1 sukeaertckauabeves suas WGetasaedtences ;

Mohawk Airlines Golden Age Excursion Tariff, Order

E-17111, July.6, 1961..... IA ea aria oe a

Ozark Air Lines Senior Citizens Excursion: Tariff,

Order E-21973, March 31, 1965 .............04. 14

Trans Caribbean Airways Individual Senior: Citizens.

- Excursion Tariff, Order E- 23370, ‘March 19, 1966 14

: ConGRESSIONAL Huantwos , AND REPORTS: °

an

ot

Senate Report No. 1281, 86th ee ., 2d Sess., pp. 3, 9,

_ U.S. Code Congressional and Administrative News,’

86th Cong., 2d Sess., p. 3064 ....... cece ee eees 4,18

Senate Report No. 1585, 84nd Cong., 2d Sess. p.1..... 22

7

“Contents Continued }

| Seiiite Hearings— A : ‘Page

| Hearings Before the thaocmanittes of the Senate Com- ;

mittee on Appropriations, 90th Cong., Ist. Sess, on. :

H.R. 9960, pp. 886-887 ...+.... aiveasdeeiecedene Ww

“Hearings Before the Aviation Subcommittee of the le

. Senate Committee on Interstate and Foreign Com-

merce of the’ Senate, 56th Cong. »y 2d Sess. “ ) BP. 3,

10-11, Oe dan cd on Cnc isG hs heveenaabetwaesbuewets '3, 18 ie

._ House H earings—

Hearings on Airline Pom Privileges 1 Before the House |

Subcommittee on Interstate and Foreign Com- —

merce, 86th Cong., 1st Sess., p. 17 pesaceuweveon + 22

Congressional Record—

106 we. Record, pp. 14770-14771, Ju une 29, r

SraTurEs:

Federal Aviation Act of 1958, as suit Sec. 2, 24

Stat. 379 (as amended by 41 Stat. 479, 48 Stat. ,

1102, 49 Stat. 543), 49.U.8.C. atuee< i sauavadss 15, 16

- Federal Aviation Act of 1958, as° tamonded, See. 101.

(21), 72 Stat.°737, 49 U.S. BE WIE cess ceveesess

Federal Aviation Act of 1958, as amended, Sec. 102,: 12. a

Stat. 740, 49 U.S.C. OME Lo ok ceecccun'ey 2, 6; 8, 15, 19° *

Federal Aviation Act of 1958, as selena Sec. 403(b),

72 Stat. 758 (as- amended by 74 Stat."445), 49°

DR a secscentecbosnn cs eee +2, 8, 5, 15, 16,17

- Federal Aviation Act of 1958, as amended, Sec. 404(b), |

72-Stat. 760, 49 U.S.C. 1374(b) weeeeedy 3, 5, 6, 8, 15, 16

Federal Aviation Act of 1958, as amended, Bee. 1002, 72

Stat. 788, 49 USC. ati tai igiaccnne ins Rae

Contents ee. 7 . i

STATUTES. ies ; ‘ : : Page

Federal’ Aviation Act of 1958, as Sieh: Sec. 1006, |

° 72 Stat. 795, 49 U.S.C. 1486 .... ak weduawewas seen

Interstate Commerce Act of 1887, 24 Stat: 379, 49 , |

Bo 53) Bers Sere peer ero re 9

Interstate Commerce Act of 4887, as amended, tian 22,

' 95 Stat. 862 (as amended by 25 Stat.-862, 28 Stat.

643, 43 Stat. 827, 44 Stat. 1247, 44 Stat. 1446, 48

“Stat. 1264, 49 Stat. 543, 50 Stat. 475, 50 Stat. 809, 54

‘Stat.- 900-901, 58 Stat. 751, 70 Stat. 702, 71° Stat.

| 564, 72 Stat. 1264), 49 U.S.C. De cksncinessss 2 00316,17-

_ MISCELLANEOUS: f ee

21 Fed. Reg. 264-65, January 1G, WIE Sc ccccsesteess :S

Address by the Hon. Robert T. Murphy, Vice Chair-.

man, CAB, before the National: Airports Confer-

ence of the American Association of Airport Exee-

_. -utives, October 11, 1967 ...... 0. ieee ee cece eet 10

CAB Air Carrier Financial Statistics 1957, 1966 sedans 12

CAB Air Carrier Statistics 1957, 1966 ...... ave ae

- McGuire, “Federal Aviation ‘Aéb--Taterntainan of

7 Sees. 403 and’ 404—Military Standby. Fares’’, 32 —

Journal of Air Law and Commerce, 571 ( 1966) . 22

Reuben H. Donnelley; Official Airlines Guide (Quick ey

ND MOD coer svessce rosettes) ae 10

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patil aieipielllpenaeihneseniniilibiaaisteninnsiadansdate

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io eee IN THE

_ Singreme Court nf the. Huited Stats

OcTOBER TERM, 1967

@ ,

——

“ 7 ®

_ «TRANSCONTINENTAL Bus System, INc. ET AL, _

: Petitioners; 3

_ Jae *

a

_ Crviu AERONAUTICS BoArp, Respondent.

ya

Se

PETITION FOR A WRIT.OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS ~

: FOR THE FIFTH ECUIT | :

Petitioners * pray that a writ of certiorari issue to

review the judgment of thesUnited States Court of

1The Petitioners are: Adirondack Transit. Lines, Ine., Atlantic

Stages, Inc., Capitol Motor Liries, Capitol Bus Company, Inc.,/

Carolina Coach Co., Carolina Scenic Stages, Coastal Stages Corp.,

Colonial Trailways, American Buslines, Inc; Arkansas Motor

Coaches, Ltd., Continental Central Lines, Continental Crescent

Lines, Continer tal Dixie Lines, Continental Eastern Trailways, Mid-

west Buslines, Inc., Continental Pacific Lines, Continental Pan-

handle Lines, . Continental Rocky. Mountain Lines, Continental *

2

: Apoedle for the Fifth Circuit entered i in Case No. 22791

et al.” on July 24, 1967.

CITATIONS TO OPINION | BELOW

The opinion of the United States Court of Appeals

for the Fifth Circuit in Case. No. 22791 is unreported.

It is printed i in Appendix A hereof (pp. la-44a, infra).

The decision and opinion of Respondent Civil Aero-.

nautics Board which was reviewed by the said United

States Court of Appeals in Case No. 11791 ¢é¢ al. is“

designated Order No. E-22186 , May 20, 1965 (Appendix

B, pp. Se-Sia, infra). /

JURISDICTION

The judgment of the United States Court of Appeals :

_ for the Fifth Circuit was entered on July 24, 1967.

On October 13, 1967 Justice Hugo L. Black granted an

_ extension of time to file this Petition until November 14,

1967. The serge of this court rests on 28 U.S.C.

1254.

Southern Lines, Continental -Tennessee Lines, * Continental Bus

System, Inc., Union Bus Lines, Inc., Continental Western Lines,

De Luxe Trailways, Inc.,-D.C:S.P. Motor. Way, Ine., .D.S.L.P. —

Stages, Inc., Western New York Motor Lines, Inc., Evergreen :

Trails, Inc., Georgia-Florida Coaches, Inc., Martz Coach Company,

Ohio Trailways, Ine., Mt. Hood Stages, Ine., Queen City Coach Co.,

Safeway Trails, ‘Ine., Service Coach Line, Inc., Smoky Mountain

Stages, Indianapolis "and “Southeastern Trailways, ‘Ine., Southern

Stages, ‘Ine., Tamjami Trail Tours, Inc., Tennessee ‘Trailways,

_ Trailways of ‘New England, Inc., Transcontinental Bus System, Inc.,

Valley Transit Lines, Inc:, Virginia State Lines, Inc., National

Trailways Bus System and Southern Tier Trailways. ‘

: e Nos. 23020-23027, inclusive, 23054, 23099, 23512, 23513,

23410 and 23411 were consolidated with 22791. Petitioners are

seeking a writ of certiorari in all of the consolidated cases except

. 23410-.and 23411.

“-

3

- QUESTION PRESENTED | .

Whether airline passenger tariffs which offer half-

_ fare air transportation to members of the armed forces

on active duty but to no one else are unjustly dis-

* eriminatory or unduly preferential and prejudicial in

violation of Section 404(b) of the Federal Aviation

Act of 1958, as amended.

STATUTES INVOLVED

. Section’102 (72 Stat. 740, 49 U.S.C. 1302), Section

403(b) (72 Stat. 758, 49 U.S.C. 1373(b)), —

404(b) (72 Stat. 760, 49 U.S.C. ~1374(b)), and

Section 1002 (72 Stat. 788, 49 U.S.C. 1482) of the

' Federal Aviation Act of 1958, are summarized - in

pertinent part in the Statement, ‘ ‘p. 3.e¢ seq., fra,

and are set out in full:in Appendix ©, p. 58a & seq., -

infra.

STATEMENT ae

Air fare discounts for military personnel travelling

at their own expense were first authorized by the Civil

Aeronautics Board (‘‘the Board’’) in 1956 when Part —

_ 227 of the- Economic Regulations was " promulgated. ¥

It provided for discounts to servicemen travelling in

overseas transportation between the then territories. of

Alaska and Hawaii, on the one hand, and the forty-

eight states and the District of Columbia, on the other.

This rule was issued pursuant to Section 403(b) of the —

Civil Aeronautics Act of 1938, as amended,* which in

ain part provides:

. Nothing in this Act shall prohibit nel air.

: carriers or foreign air carriers, under such terms

91 Fed. Reg. 264-65, January 13, 1956.

* Re-enacted as Section 403(b) of the Federal Aviation Act of |

1958. (72 Stat. ioe 49 U.S.C. 1873(b) ).

Vm

a,

and conditions as the Board ay prescribe, from

issuing or interchanging tickets or passes for free

or reduced-rate transportation » . . in-the case of

overseas or foreign air transportation to such .

persons and under such . . . circumstances as the

Board may by regulations prescribe ....’’*

After Alaska and Hawaii became states, air trans- _

portation between these areas and the other states

constituted interstate rather than overseas transporta-

tion as defined by the Federal Aviation Act of 1958, as

amended: (the ‘‘Act’’).6 Therefore, the Board no

longer possessed authority under Section 403(b) to-—

permit reduced rates for servicemen. It advised the

Senate that it required specific authority by amendment .

‘of Section ‘403(b) to continue the practice of permitting

carriers to offer servicemen reduced-rate transporta-

tion between Alaska and Hawaii and the other states.’

The Board also urged that the requested amendment be

sufficiently broad to authorize transportation of service-

men on leave or furlough at reduced rates between any:

-points’in all fifty states.*- The Senate adopted this

proposal in part by amending a pending bill which

provided for reduced-rate transportation for other

classes of. persons. However, the Senate armendment

limited the scope of reduced. rates for servicemen fo

: 5The full text of Section 408(b) | is set forth in | Appendix C,

pp. 59a-60a, infra. ;

® Section 101 (21), 72 Stat. 737, 49 US. C. 1301 (Appendix C,

* p. 68a, infra).

-™ Hearings before the nahin Subcommittee of the Quite

‘Committee on Interstate and alae: Commerce, 86th Cong., 2d

Sess., pp. 3, 10-11, 20.

8 Ibid.

5

air travel between Alaska and Hawaii, on the one hand,

and the other forty-eight states, on the other.’ This

proposed amendment was delet ed from the final bill by

‘a conference committee at the insistence of the House.

of Representatives.” Thereafter, all outstanding tariffs

providing discounts for servicemen travelling at their

own expense were cancelled.

Three years later, in’ 1963, poe Airlines. pub-

lished a military ‘“‘standby”’ tariff which offered

servicemen on furlough 50 percent discounts from

regular.coach fares when travelling subject to space

availability: This tariff was applicable over Ameri-

can’s entire interstate route network. Delta Air Lines

_’ and Northwest Airlines filed complaints requesting that

_ the tariff be suspended and investigated by the Civil.

Aeronauti¢és Board. Complainants maintained that.

reduced rates for servicemen were unjustly dis- _

criminatory and unduly—preferential and’ prejudicial

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

_ 1958,.as amended.” They urged that servicemen were

not exempt from the proscriptions of Section 404(b)

_ by Section 403(b) as were a limited number of classes

® Senate Report No. 1281, 86th Cong., 2d Sesé., p. 3.

1© 106 Cong: Record pp. 14770-14771 (June 29, 1960).

41 “*No air carrier or foreign air carrier shall make, give, or

cause any undue or unreasonable preference or /advantage to any

particular person, port, locality, or description of traffic in air -

transportation in any: respect whatsoever or subject any particular

person,-port, locality, or description of traffic in air transportation

to any unjust discrimination or any undue or unreasonable preju-

dice or disadvantage in any respect whatsoever. ”? Section _—

(72 Stat. 760, 49 US.C. pees j

| 6 |

of traffic, and, therefore, the military “standby”

tariff was illegal. Complainants also contended that

the proposed. 50 percent: discount was unreasonable

from a value of service and cost, standpoint, and would

prove uneconomic. :

American ines responded to the complaints

pointing out. that military furlough traffic was

- principally transported by surface carriers and that the

proposed tariff could make substantial _inroads into

thta traffic. It estimated the potential air travel market

at $20,000,000 annually.

>~-\ The Civil ‘Aeronautics Board dismissed the com- -

plaints (Order E-19376, March 14, 1963). It found

“ 4%2Tn pertinent part, Section 403 (b) (74 Stat. 445, 49 U.S.C.

1373(b)) reads as follows: ‘‘. - Nothing i in this Act shall pro-

hibit such air carriers or. foreign air carriers, under such terms

and conditions as the Board may prescribe, from issuing or inter-

changing tickets or pasess for free or reduced-rate transportation

to their directors, officers, and-employees (including. retired direc-

tors, officers, and employees who are receiving retirement benefits

from any carrier or foreign air carrier), the parents and im-

‘mediate families of such officers and employees, and the immediate

families of such directors; widows, widowers, and: minor children

of employees who have died as a direct result of person injury

' sustained while in the performance of duty in the service of such. .

air carrier or foreign air carrier; witnesses and attorneys attend-

ing any legal: investigation in which any such air earrier is in-

terested ; persons injured in aircraft accidents and physicians and

nurses attending such persons; immediate families, including

parents, of persons injured or killed in aircraft accidents where

the object is to transport such persons in connection with such

_ accident; and any person or property with the object of providing

Yelief im cases of general epidemic, pestilence, or other calamitous

visitation ; and, in the case of overseas or foreign air transportation

to such other persons and under such other circumstances as the

Board may by regulations-prescribe. Any air carrier or foreign air

. earrier, under such terms and conditions as the Board mgy pre-

scribe may grant reduced-rate . transportation to, ministers of .,

religion on a space-available basis.’’ :

-7

that the standby character of the proposal distinguished

it from regular fare service, particularly as passengers

availing themselves of the discount fare could be off- °

- loaded at intermediate points ‘to provide space for full

_ fare passengers. The Board recognized that the tariff

‘was ‘‘inherently discriminatory’’ because its avail-

ability was-restricted to servicemen. But it concluded |

. that the discrimination was justified because of the .

national defense interest in promoting military morale,

- and the economic benefit accruing to the air carriers

‘from being granted the opportunity to compete more ©

effectively with surface carriers for military furlough

traffic. | +

Virtually all certificated air carriers adopted . Amer-

ican’s military standby tariff. in one form or another. -

Gradually the applicability of these'fares was broad- .

ened. Military standby passengers were permitted

to be carried in the first-class compartment of all air-

_° eraft when the coach compartment was fully occupied. |

_ The special discount was also made available -to

servicemen traveling on permanent change of station,

or within seven days after discharge from the armed

services, irrespective of whether they received a trans-

portation allowance from | the government for their

travel. In some instances, the tariffs granted free

_ baggage allowances greater ‘than those available to ;

civilian passengers paying first class fares.”

These tariffs were at first: regarded as experimental.

| Generally, they were due to expire during the early

months of 1965. Allegheny Airlines, 9 subsidized local.

service: carrier, requested.the first extension. Its -

‘proposal bore no expiration date. Petitioners filed a

of station ; forty pounds for first-class passengers.

18 Sixty-six pounds for servicemen traveling on permanent change.

lap

8.

complaint requesting suspension and investigation of

that tariff (R. 1). The complaint alleged that the

discount military standby fares had diverted traffic

and revenue from complainants’ bus services, and

- would continue to do so in the future. It maintained ~

that fhese reduced fares represented illegal, unjust

discrimination under. Section 404(b) of the Federal

Aviation. Act. of 1958 because they were based solely

‘upon the identity and mission of a class of travelers

upon which class Section 403(b) of the Act did not

confer preferential rate treatment. Petitioners con-

~ terided that such preférential treatment was unlawful

absent specific Congressional authorization in-Section

403(b), and that Allegheny’s tariff was unduly

' , preferential and prejudicial, unreasonable, unjust, and

otherwise unlawful under Sections 102, 403(b) and

—404(b). of the Act. Zs

The Board refused to: suspend ateatény? s tariff

(R. 43). It regarded the power to suspend as useful

principally in maintaining the status quo while a tariff

. --was being investigated in'a formal ‘proceeding. As .

_ Allegheny’s military standby tariff had been in effect

for some time, the’ Board did not consider suspension |

appropriate. It deferred decision on whether to .

- institute an investigation.

Shortly thereafter, nineteen other air carriers sought

extensions of their military standby tariffs. Petitioners

filed complaints against all of these proposals. (R. 63-

107, 135-173, 197-241, 277-334, 358-409, 497-554)... a

Board dismissed all of ‘the . complaints (R.

' Appendix B, p. 45a, infra). It found that the iad

fares had proved economically beneficial to the airline

industry and valuable as tools in competing ‘with

surface transportation, as well as helpful to the morale

9

of the armed services. Thesé considerations, in the

Board’s judgment, sufficiently mitigated the discrim-

inatory character of the tariffs to remove them from

the area of forbidden, unjustly. discriminatory fares.

It also found that the standby nature of the service

. distinguished it sufficiently from regular fare service

avoid any unjust discrimination or undue prejudice

against regular fare passengers” (Appendix B, p. 51a,

infra.) :

_, Petitioners requested judicial review of the Board’s

orders denying suspension and investigation in eleven

United States Courts of Appeals. Jurisdiction of these

courts rested on Section 1006 of the Federal Aviation

Act of 1958, as amended (72 Stat. 795, 49 U.S.C. 1486).

These cases were consolidated for decision in the Court

of -Appeals for the Fifth Circuit. (Case No. 2297 1,

etal.)

‘That court also consclidated Petitioners’ us for

review of the Board’s refusal to investigate discount

. air fares for ‘*vouths’”’ between} 12 and 22 years of age.

- ‘hese latter fares were the subject of separate com-

plaints filed with the Civil Aeronautics Board and were

also before the Court of Appeals for the Fifth Circuit

on separate petitions for review. —

The court affirmed the Board’s dismissal of Peti-

tioners’ complaints against the military standby fares, —

and reversed and remanded its dismissal of Petitioners’

complaints ‘against the ‘‘youth” fares for further

proceedings (Case Nos. 23410, 23411). The court °

found- that the Board-did not abuse its discretion in

14 Since that ruling most airlines, have published military furlough

tariffs which permit advance reservations. These tariffs provide

. for fare discounts ranging’ from 3374% to 507% of a applicable

coach fares. .

10

i finding’ that the military standby. fares were not un- |

' justly discriminatory, because the circumstances and

conditions surrounding the transportaticn of military .

‘standby traffic were substantially dissimilar from those

obtaining in the casé of nonmilitary traffic.to which

the ‘reduced standby fares were not available. The

dissimilar conditions and circumstances were found to

~ be (1) competition, i.e, the need to compete with .

* “ogurface carriers for military’ business ; and (2) con- .;

siderations of national defense, i. e., sidiensd rates to ~

_ ° servicemen traveling on furlough or lees enable them ©

to spend less time in transit; thereby increasing the

morale of the armed forces and contributing to the

national defense (Appendix A, p. 36a, infra). The

court cited no judicial precedent: in support of this

conclusion.* In the ease of the ‘‘youth” fares, the

court found that the promotional and social: policy

factors which the Board cited in justifying their. dis-

‘eriminatory aspects ‘were not appropriate considera-

tions under Section 102 of the Act.

Qn the issue of reasonableness of the diet the

court affirmed the Board.* -It accepted the Board’ s

finding that military standby traffic used otherwise

‘unoccupied seats. and,that the air carriers were not

scheduling service to accommodate this traffic. Accord-

ingly, it held that the Board’s conclusion that these

fares were compensatory .and, therefore, reasonable,

did not constitute an abuse of discretion (Appendix A,

pp. 430-440, infra). | »

a

. 15 The.competitive and national defense considerations were cited i

by the court as proper factors under Seetion, 102 of the Federal -.

. Aviation Act in testing fares alleged to be unjustly discriminatory

- under Section 404(b). .

16 Tt did not reach that issue in the youth fare cases,

“a 11 . : S

REASONS FOR GRANTING THE WRIT

| eae Big

‘The important question before this Court is whether. -

the ‘“‘rule of equality” in ratemaking is to prevail in

the regulation of air transportation as’ it lias in the

related area of surface transportation. The need for I

equality prompted enactment. of the Interstate Com- -. |

merce Act of 1887..° New York, N.H. & H.R.R. v. |

Interstate Commerce Commission, 200 U.S. 361, 391-

92, 50: L. ed. 515, 521 (1906). The rule, as embodied

_ in‘that statute requires equivalent rates where: (1) the

~ services are like and contemporaneous; (2) the traffic

is similar; and (3) the. circumstances. and conditions

under which the services are rendered are similar. —

. Wight v. United States, 167 U.S. 512, 42 L: ed. 258

(1897) ; Interstate Commerce Commission v. Delaware

LW.RR., 220 U.S, 235, 55 . ed. 448 (1911).

This Court has insisted that common carriers offer |

-* equal rates and equal services to all persons irrespective - 3° |

-o.. Of age, mission, business or status. Wight v. United

States, supra; Interstate Commerce Commission v.

. Alabama Midland Railway Co., 168 U.S. 144, 168, 42°

‘L. ed. 414, 423 (1897) ; Interstate Commerce Commis-

2 gion VY. Baltimore & Ohio R.R: Coz, 225, U.S. 326, 342, -

. 66 L. ed. 1107,.1112 (1912) ; Louisville & Nashville R.R.

.. Vv. United. States, 282 U.S. 740, 75 L. ed. 672 (1931);

Baltimore & Ohio R.R. Co. v. United States, 305 U.S.

507, 83°L. ed. 318 (1938); United States v. Chicago

Heights Trucking Co., 310 U.S. 344, 8 L. ed. 1243

~ (1940); American Trucking Association, Ine, v.

Atchison, Topeka & Santa Fe Ry. Co.; 387 US. 397.

(1967). The issue is whether . theac’ precedertts,

governing seventy years of —— freight rate a

"24 Stat. 379, 49 U.S.C. 1,

B. ;

tion, shouldbe ee to the regulation of air trans-

portation passenger rates. om,

This Court has never passed upon a controversy

involving the lawfulness of passenger fares offered by

surface or air carriers.’ It has never had occasion to

review any airline rates or charges. Indeed, during -

the thirty years since air transportation. became subject

to federal regulation, the-tnited States Courts of

Appeals have reviewed the legality of allegedly unjustly

discriminatory airline rates*in only one previous

instance.. Flying Tiger Inne, Ine. v. Anas Acronaaties

Board, 350 F, 2d 462 (D. C. Cir.; 1965).

‘The national significance of the issue is directly tied |

to the emergence of air travel as the principal mode of —

domestic, common carrier transportation. During 1966,

over 60 percent of domestic, inter-<ity revenue pas-

senger miles were generated by air carriers.**

e.g. servicemen, youths, families. Every certificated

air carrier offers system-wide discount fares. Cur-

rently, over 150 discount fariffs are in effect. . Each

carrier publishes approximately 12 such tariffs _appli-

aX cable to all markets served.

: These discounts are charactérized . varyi "s Pane Ry

y fares |

st discrimination. For example, the fami

published by all carriers offer ’discounts: to certain

family members traveling together. A discount rang-

ing from 25 percent to 50 percent, depending: =e the _

18 Address by. the Hondrable Robert T. Murphy, Vice. liaise

Civil Aeronautics Board, before the National Airports’ Conference

of the American ‘Association of Airport Executives. Norman,

Oklahoma, October 11, 1967.

»

A large |

| portion of this air travel was performed at fares which —

were available only to particular classes of persons, ©

>)

a)

ee ee ros

13

| carrier, is given to. the wife when taveling with her

- husband.” If the couple is accompanied by a child

12 through 21 years of age, that child and all other

children are charged 25 percent to. 50 percent of the

regular fare. The family fare discount is solely geared

to the status of the traffic, a status wholly unrelated to _

any transportation considerations:. Even within the —

immediate family discrimination is ‘practiced, because

_-the-discounts are not available to siblings traveling

together, or’ to children over 21 years old when

traveling with parents. Another example of these

discount fares is the ‘‘First Rider’? tariff of Trans-

Texas Airways, which offers passengers over 21 years

_. old, who have never flown on a certificated air carrier,

a round-trip between any two points on i system’

ata flat rate of $25.00.”

. The Board has generally ‘aoa: shal. to

develop so-called promotional discodtnts on the theory

that the improved carrier earnings realized therefrom

contribute to the lowering, or at least the stabilization,

of the average fare level for all passengers. Chairfhan

Charles E. Murphy of the Civil Aeronautics ‘Board ; |

testified on this theory as follows: 7

“Senator Monroney:

lhe: you monitor the so-called sciatica fares ?

Mr. Charles Murphy: 7

> ‘Senator, we do monitor them in this sense: -that

we have approved every one of them. At least we.

. «19 Reuben H. Donnelley, Official Airline Guide — Reference

' Edition).

_ 2 Tid.

“2 Hearings before the Subcommittee of the Senate Chnieattnes

‘on Fadia tae 90th — .» Ist Sess. on H.R. 9960, PP. 886-887.

°&

14

did not disapprove any of them, and we could have.

We could have disapproved any of them. And we

looked at.all of them. I suppose I should say that

by and large, not in every case, but by and large, -

we have encouraged the air carriers to experiment

with these promotional fares. I am convinced in

my own mind that it is possible for the basic fare

to be lower because they have these promotional

fares. If we do not have these promotional fares,

instead of being able to reduce the basic fare for

everybody, we would have to increase it for every-

body. And for those who don’t want to-fool with

.the ‘scmaitaniletia pedis can always go and buy a

regular fare ticket. .

Senator Meirwey:

“But the basic fares haven’t been lowered, I don’t

think. “ You had a 10-percent surcharge that was

‘put on when the jets came in because they thought

jets would be expensive to operate. They proved

to be less expensive to operate. They run at full

capacity all thetime. And it seems to me that the.

regular travelers are entitled: to some considera-

tion, and not have it on the gimmicks. We have

' got so many crazy. rates that nobody can possibly ©

take advantage of them. And there’should be

something to encourage the regular travelers who

might use this vital means of transportation.’ se

Mr. Charles Murphy:

‘The basic fares have ,been lowered in some cases,:

but genérally there has not been_a great deal of

that. That is certainly true. And I will ‘agree,

, everyone at the Board will agree, that the regular . -

” traveler is entitled, I wouldsay, to primary con-—

sideration. But I would say, again, that it seems

to me, at least, that the regular traveler, although

his fare has not been reduced, his fare is not as

‘high as it would have to be if ‘it ‘were not for the

fact that these promotional fares carry part of the

15

. cost. We do not have a staff study that supports

the statement that I have just made. So far as I

know, the staff wouldn’t disagree with me; we

just haven’t had the opportunity to make a study

to see whether it is true or not. I believe it is true.

2?

Thus, the premise is that ions who are denied at

treatment are advantaged by the preferences accorded

others, because the former would be worse off if the

- preferred class did not exist.” On this basis, prefer-

ential discounts which profit the proponent carrier are

not deemed by the Board unjustly. discriminatory to

the excluded class because they sucmmaeed benefit that

» class.

This philosophy, in large part, underlay the oan’

decision to approve without investigation the military _

discounts which are the subject of this Petition. The

original proponent of these discounts, American Air-

lines, urged Board approval because the air carriers

had historically participated only to a relatively small

extent in military furlough traffic. It estimated the

potential air travel market for military furlough

traffic. at_ $200,000,000 annually (Order E-19376, p. 2,

March 14, 1963). The Board found that the ability of

surface carriers to offer reduced rates toa the military

\ pursuant to specific statutory authority constituted a

|. * This view appears to be at variance with the teng-tern historic

trend. In 1957, the year prior to introduction of highly economic

jet aircraft i in domestic transportation, the average fare per revenue

passenger mile was 5.29¢. In 1966, when the overwhelming volume

of. air service was performed with jets, the average fare was 5.83¢

per revenue passenger mile. This 10.2% increase in the fare level

_ was experienced despite the existence of a large number and wide

variety of discount fares in 1966. During the same span, ex- .

penses per available ton mile rose by only 1.7%. C.A.B. Air

Carrier Traffic Statistics; C. A. B. Air Carrier Financial Statistics.

‘ /»

ie | |

competitive factor which justified the discriminatory

fare proposed by American Airlines (Id. at p.3). This — |

conclusion was affirmed by the court below (R. 123).

It is clear that the competitive concept which the

Board employed to justify the inherently discrimina- —

“tory military discounts is markedly different from the

traditional concept: se discounts were not offered

to protect the historic traffic of the airlines, .To the

contrary, they were offered to divert the historic traffic

of the surface carriers. The siz¢ of the discount

confirms this objective. Whereas surface carrier

military discounts had generally ranged between 10

- percent and\15 percent of the regular fares (R. 16),

- the airlines were proposing 50 percent discounts. —

Consequently, the airline discounts were prompted by

promotional aspirations rather than competitive neces-

sities. This reality suggests that Board approval of

the military discounts was motivated by the belief.that

discriminatory fares are justified where they are

_ promotional and . S saaeerandl profitable to me air

Carriers.

This approach points up the Board ” need. for

guidance in the development of a rational fare policy

consistent with sound ratemaking law. This court can

- provide that guidance by setting forth the standards

. which the Board must employ in determining whether

‘discriminatory fares exceed the permissible bounds of

the Féderal Aviation Act. :

The case at bar has great prospective importance.

The court below affirmed the Board’s reliance upon

3 Tn this connesticn, pete Airlines pee that air carriers .

———— only 10% of military furlough walle ) ‘469).

17 *

competition a: as‘a justification for approving the ware

. discount fares (Appendix A, p. 53a, infra). Under

the competitive theory espoused by the Board, no...

potentially profitable fare discount; irrespective of its

discriminatory characteristics, would be barred. For

example, the youth fare discounts which the. court

below found unlawful (Jd. at 48a-52a), might be sub-

sequently ‘Justified by the same type of competitive

' theory which was applied to the military discounts.

The court remanded to the Board its dismissal of

_ Petitioners’ complaints against the youth fare dis- ©

counts (Appendix A, pp. 53a-54a, infra), because the

Board attempted to justify the discriminatory dis-

counts on the basis of broad social policies favoring

youths and the promotional aspirations of the pro-

ponent airlines. Should the Board find competitive

- justifications for these discounts, as it did in the case ©

- of the military discounts, presumably it could continue

' their effectivness. The same rationale might sustain

_rediieed fares for the elderly, an historically significant

market for bus service.™ |

. 3

Thus, if the competitive justification £ for military

discounts i is to prevail, the airlines can, with the Board’s

encouragement, selectively divert those markets com- |

prising the principal sources of Petitioners’ —-

24 Aloha Airlines par" Hawaiian Airlines publish reduced fares

for persons over 65 years of age traveling on a space available

basis between points in Hawaii. Ozark Air. Lines, Mohawk Airlines

and Trans Caribbean Airways have published similar fares which

were either suspended by the Board or withdrawn after an investi-

gation was ordered by the Board. -Mohawk Airlines Golden Age.

Excursion Tariff, Order E-17111, July 6, 1961; Ozark Air TAnes

Senior Citizen Excursion Tariff: (Order E-21973, March 31, 1965;

' Trans Caribbean Airways Individual Senior Citizens Ezeursion

Tarif, Order E-23370, March 19, 1966. ;

&

—- Ces

18

revenues. Of equal, if not greater importance, the

public at large has a strong interest in this issue. .

Vice-Chairman Robert 'T. Murphy of’ the Civil Aero-

awe nautics Board expressed this interest in an opinion

dissenting from approval of preferential fares to

federal officials traveling by air on ‘‘government travel —

requests’’: . ‘

‘| . . At stake is the essence of the reasonableness

and the justice of the basic rates and charges

assessed against the general public whose interest

.we are specially obligated by statute to protect.

Once established as'a matter of exception to the

general anti-discrimination provisions of the Act,

it is difficult to perceive any sound method of con-

taining the spread of discounted fares to other

bulk users of air travel. As one complainant

states: ‘. . . we cannot see any basis in. logic or

law upon which similar discounts could be denied -

to the numerous corporations and other concerns

aud organizations, including the United Nations,

which have adopted bona fide policies identical to

that. cited by Frontier regarding the Federal

Government.’* Hence, the problem raised by this

special] tariff transcends the narrow confines in -

which it is presented to us. It is particularly.

‘vexing for one who has long supported a policy

of maintaining fair and reasonable rates for the

— public, including Government agencies.

ome might regard this proposal as merely high- .

lighting the fact that the rates charged by loeal

service carriers are not necessarily commensurate

with the grade or quality of their particular —~

5 Complaint of Trans World Airlines, Inc., D. 16608, pp. .

3-4, :

19

service vis-a-vis the trunk carriers.‘ For present

purposes it is not necessary to treat the matter in

these terms. As I see it, continued discounts or

reduced fares for special categories of bulk users

of air travel, such as Federal Government em-

ployees and others, can: ultimately lead to the

unhappy day when only the lonely, the un- ~

organized, or the disaffiliated will be saddled with a

‘full’ fare. In my view, the carriers should be -

encouraged to seek ways and means of achieving

general across-the-board reductions benefitting the

general public, including Government agencies,

' rather than pursue courses of action designed to

grant special privilege to Government officials in

the use of public facilities—a concept alien to our

system of democratic self-government.”’

C.A.B. Order No. E-22929,'November 24, 1965.

*For example, Western alleges: ‘‘Thus Frontier may be

. hinting that its Convair 580 service is in fact a coach service

- for which it should be permitted to charge a coach fare to

passengers travelling on government transportation requests.

If this be the case, the first class fares which Frontier charges:

* the remainder of the traveling public for’the same service

are not only discriminatory, but are unreasonably high and

thus unlawful.’”’ Complaint of Western Air Lines, Inc., D.

16597, pg. 2. — hb

il ;

Thi* case also presents an important issue of statu-_

_ tory interpretation, namely, the scope of Section 404(b)

of the Federal Aviation Act and its relationship with

Sections 102 and 403(b) of thta Act.* Section 404(b)

sets forth the anti-discrimination provision of the

statute as follows: ? : ech

‘“‘No air carrier or foreign air carrier shall make,

give or cause any undue or unreasonable preference

The full text of these sections is quoted in Appendix C, p. 58a

et seq., infra, -

ee ee

.

i

or sine. to any particular. person, port,

— locality, or description of traffic in air transporta-

tion in any respect. whatsoever or subject any

particular person, port, locality, or description of

traffic in air transportation to any unjus} dis-

crimination or any undue or unreasonable prej-

udice or disadvantage i in any’ respect whatsoever. "

This section expresses the _Board’s reupenstbliity ool

observe the ‘ule of equality’? in air transportation

ratemaking.: It was modeled after Section 2 of the

Interstate Commerce Act (Appendix C, Pp. 67a, infra)

and, accordingly, \is to be interpreted in conformity

with judicial decisions construing that section. Inter-

' state Commerce Commission v. Delaware L. & W. R.R. .

Co., 220 U.S. 235, 243, 55 L. ed. 448 (1911); American

Airlines v. North American Airlines, Inc., 351 U. S. 79,

82, 100 L. ed. 953, 960 (1956).

This court has consistently ‘snnkieid Section 2 of |

the Interstate Commerce Act as precluding dis-

¢riminatory prices geared to the identity, mission or

status of the preferred or prejudiced class of traffic.

Thus, in Wight v. United States, 167 U.S. 512, 42 L. ed.

258 (1897), a lower rate to one shipper than to another

for like and contemporaneous service was deemed un-

justly discriminatory. I nterstate Commerce Commis-

sion v. Baltimore & Ohio R.R. Qo., 220 US. 326, 56

Led. 1107 (1912), held that lower rail rates for coal

- used by railroads than for other coal transported under

similar circumstances and conditions: were unjustly

discriminatory. The free carriage by a railroad of . ‘

private cars for some persons and not for others was

deemed unjustly discriminatory, Louisville and Nash-

ville R.R. vy. United States, 282 U.S. 740, 75 L. ed. 672

- (1981), as was the provision of below cost warehousing

21.

to some shippers and not.to others, Baltimore & Ohio

R.R. Co. v. United States, 305 U.S. 507, 83 L. ed: 318 :

(1988). . lg

All discriminatory ratemaking is- not barred by

Section 2 of the Interstate Commerce Act or by Section _

404(b) of the Federal. Ayiation Act. Discriminatory

Yates specifically sanctioned by Congress pursuant. to

its sound appraisal of public néeds are allowable.

Section 22 of the Interstate Commerce Act” sets

forth an extensive list of persons who Congress deter-

mined could qualify for préferential rates should

surface carriers opt to offer them.” The Federal

Aviation Act’s counterpart is Section 403(b). That

‘Section lists those persons and class of persons who

_ are excepted from the ‘‘rule of equality” in that they |

may be offered free or reduced air transportation by

virtue of their identity, mission or status.” These

special categories are generally limited to persons

connected with the air transportation industry: In >

this respect, Section 403(b) differs substantially. from

Section 22 of the Interstate Commerce Act which

makes frée or reduced transportation available to an

extensive list of persons unconnected with the surface

_ % To some effect see United States v. Chicago Heights Trucking

Co., 310 U.S. 344, 84 L.-ed. 1243 (1940); Interstate Commerce .

Commission v. Mechling, 330 U.S. 567, 91 L. ed. 1102 (1947). -

-™ The text of Section 22 is set forth in Appendix C, pp. 67a-68a,

infra. ety ; : of ae

225 Stat..862 (gs amended by 25 Stat.’ 862, 28 Stat. 643, 83.

Stat.'827, 44 Stat. 1247, 44 Stat. 1446, 48 Stat. 1264, 49 Stat, 543

50 Stat. 475, 50 Stat. 809, 54 Stat. 900, 901, 58 Stat. 751,70 Stat.

».102, 71 Stat. 564, 72 Stat. 1264),49 U.S.C.22. a

* Section 403(b) is quoted in its entirety in Appendix ©, pp. 59a-

60a, infra. | iy bar ;

é

°° 99

transportation industry, ineluding servicemen traveling °

on furlough or leave. .

‘The Board has had occasion to ‘note the distinction

between Section 22 of the. Interstate Commerce .Act

and Section 403(b) of the Civil Aeronautics Act”

when it rejected a tariff which proposed reduced fares

for students. ‘It stated its view as. follows:

‘‘The Congress, however, in writing the Civil

Aeronautics Act showed uo inclination to prefer

students over the general public. The Interstate

Commerce Act from which the Civil Aeronautics

_ Act was derived, contains .broad provisions in -

Section 1 (7) and 22 permitting free and reduced

transportation to several categories of - persons

such as ministers of religion, inmates of hospitals

- and charitable or eleemosynary institutions,

_ indigents and others.

‘‘In passing the Civil Aeronautics Act, the Con-

gress in Section 403(b) which provides for free

and reduced-rate. transportation, substantially

narrowed the categori whom such transporta- —

tion could be offered’~ Neither. statute includes

students in the categories to be provided such .

services and both the Interstate Commerce Com-

mission and the Civil Aeronatuics Board have held

that granting reduced-rate .transportation . to

students is unjustly discriminatory.’’ [Footnote

omitted]. Capital —— Student Fares, 25.

C.A.B. 280, 285 (1957).

The Board pinpointed the limits of Section 403 (b)

_ In the Matter of an A.T.C.A. Resolution, Order

- E-14349,. August 17, 1959, stating:

“It is worth noting that in the field of domestic

air transportation,: as distinct from overseas and

=) Section 403(b) of the Civil Aeronautics Act of 1938 was re-

enacted without change as Section 403(b) of the Federal Aviation

Act of 1958.

5 \

on . \

2 Sea Sa a . . & '

foreign air transportation, the Congregs has’ not

giveh the Board discretion with respect to the

granting of free and reduced rate privileges.

Thus, under the terms of Section 403(b), the

Board has been given authority to authorize free |

and reduced. rates for domestic, overseas and,

_ foreign air transportation for specified categories

of persons and, -with respect to’.overseas and

foreign air transportation alone ‘to such other /

persons and under such other circumstances as the: :

sen may by regulation prescribe.’ .When it

etermined that categories of persons not “a...

» ° eally named in Section 403(b) should be provided :

with: reduced rate transportation domestically, it

was deemed necessary to obtain statutory modifica-

tion from the Congress. PEs

2 Section 403(b) of the Act specifically authorizes the Board.)

by regulation, to permit free or reduced rate transportation

to others than those enumerated in the Act with respect to

overseas or; foreign air transportation, but does not. grant __

similar authority with respect to interstate air transportation’ |

Joint Application of Pan American World Airways and |

United Air Lines, Order E-25757, September.29, 1967.. y

‘ In 1959, the Board sought an amendment to. Section

403(b) to authorize air carriers to offer servicemen

free or reduced rates in interstate air transportation.

The Board regarded such legislation as a’ condition

precedent to the granting of a fares to

81 As recently as September 29, 1967, a the decision of the.

Court of Appeals in this case, the Board again commentéd on the —

restrictive nature of Section 403(b) ‘‘. . . while as indicated in

the joint application,. free transportation could be provided to

passengers participating in inaugural flights in overseas or foreign

air transportation pursuant to the Board’s regulations, these reg-

ulations: reflect distinctions created in Section 403(b) of the Act,?

' and similar provision has not been made to permit free or reduced

. rate transportation in. interestate air transportation .

a

ad

a ae:

-servieémen.” The Senate also believed that the Board

lacked power to authorize carriers to permit reduced

rate transportation to ser¥Vicemen travéling in inter-

state commerce.* However, .the proposed législation

was rejected. 7 ‘

¢

The court below did. not sili this ‘Seid

history or thegearlier pronouncements of the Board .

as determination of the issue of Board statutory

authority. It looked to the ‘Declaration of Policy”?

of the Federal Aviation Act to" ascertain whether the .

> Board possessed the requisite power to permit reduced

transportation for servicemen.

aad Hearings bétere the Aviation, inubeceninitio’ of the Senate

Committee on Interstate and ‘Foreign Commetes, 86th Cong., 2d

Sess., pp. 3, 20.

88‘‘In regard to amendment (4) prea the CAB- sponifially~

requested such addition to the bill for the purpose of allowing: air

earriers to offer reduced rates for furlough travel of military per-

~ sonnel. stationed in the States of Alaska or Hawaii in accordance, ~

with a practice which the Board has permitted in the years prior

to their admission té the Union, .Specifically, the Board advised

‘that when Alaska and Hawaii were Territories, air ‘transportation

: between, the States and. Alaska or Hawaii.was ‘ovérseas air trans-

‘portation’ as defined in the Federal.Aviation Act, and consequently,

the Board had. authority. under existing law, to permit air carriers ~

' to grant reduéed rates. to ‘militafy personnel traveling at their own

expense on furlough .between the: States and_ these. Territories.

With their admission to the Union, such transportation ean no

. longer be regarded as_‘overseas air transportation’ and authority

to grant reduced rates under section 403(b) is lacking. ‘Your

committee. adopted the recommendation of ‘the Board but has

limited the privilege to travel only between a place in Alaska or

Hawaii on the one hand and a place.in any of the other States, on .

’ the other hand. This amendment would not permit or authorize

_ the carriage of military furlough traffic at reduced rates to or _

from any other place in the United States.”’ Senate Report No.

1281, 86th Cong., 2d. Sess., p. 3;‘U. 8S: Code Congressional and

Administrative News, 86th Cong., 2d. Sess., p. 3060.

‘ *

= Pas

. The Declaration of Policy, in pertinent part, states :* ae

‘‘In the exercise and performance of. its powers

' and duties under this Act, the Board shall consider _-

the following, among other’ things, as being®in the

public interest, and in accordance with the public -

convenience and necessity : |

‘“‘(a) The encouragement and development of an *

_air transportation system properly adapted to the

_present and future needs of the foreign and-

domestic commerce of the United States, of the

Postal Service, and of the national ara’, ;

* * -@

" (ec) The promotion of adequate, onesie: and

efficient service by air carriers at reasonable

‘charges, without unjust’ discriminations, undue

preferences or advantages, or unfair or destructive

competitive practices; - —~

be (d) Competition to the extent riecessary to lene

the sound development of an ‘air-transportation -

system properly adapted to the needs of the foreign

- and domestic commerce of the United States, of.

~ the Postal Service, and of the national ‘defense ; ??

” - 8 on &

Y The court cmos that the Board wine ie

requisite authority under Section 102 of the Act where

the grounds for granting reduced rates to servicemen

were, first, the competition of reduced, rate travel

offered :by surface carriers and, second, the national

. defense would be served by such reduced-airline rates,

in that the morale of the servicemen would be improved

or sustained thereby. Thus, the court below. imported

- the policy provisions of the Statute into the substantive

provisions to arrive at the cohelusion i in issue here. This

"Section 102 of the Féderal Aviation Act, ‘as ease, (72

~ Stat. 740, 49 U.S.0. 1302). °

_ -

~

26 |

conclusion -appears'to be in conflict, with a line of

) Supreme Court cases.

Thus in Civil Aeronautics Hive v. Summerfield, 347

US. 74, 98.L. ed. 518 (1954), this Court reversed a

Board rate determination based upon Section 102 policy

considerations. Justice Douglas, writing for a unan-

imous Court stated as follows:

‘*It' [the Board] maintains that maximum operat-

. ing efficiency .on.the part of air carriers and the

development of air transportation — prominent

. objectives of the Act [footnote quoting Section 102

_of the Act omitted]—will. be better served by

setting subsidy rates on a divisional rather than on

a system basis. -But that is a matter of policy for

Congress to decide. As we read Section 406(b)

Congress adopted in the present Act a rate formula

based on ‘the need’ of the carrier as measured by

its entire operations, even when a rate was being

fixed for a class of service.”

347 U.S. 74, 79-80, 98 L. ed. 513, 519-520 (1954).

This Court has*also ruled on the issue of whether -

competition or the needs of the national defense are

appropriate considerations in determining the legality

of allegedly unjustly discriminatory rates.

Since 1897, competition between carriers has not -

been regarded as a condition or circumstance justifying |

discriminatory rates. Wight v. United States, supra;

Interstate Commerce Commission v: Alabama Midland

Ry. Co., 168 U.S. 144, 167-168, 12 L. ed. 414, 423 (1897) ;

Eastern-Central Motor Carriers Association v. United

States, 321 U.S. 194, 205-206, 88 L. ed. 668, 676-677

(1944). The only exception’ is where the regulatory

- agency is responsible for regulating competition

lam | 27

between modes of transportation subject *% its juris-

dictior® In such cases, the agencies responsibility to

balance intermodal competition is paramount. Eastern-

Central Motor Carriers Association v. United States,

- supra; American Trucking Association v. Atchison,

Topeka & Santa Fe R.R. Co., supra.

_ -The Civil Aeronautics Board, however, is limited to :

regulating the air transportation industry. In this

connection, the statutory admonition that the Board

consider as being in the public interest ‘‘competition

to the, extent necessary to assure the sound develop-

ment of an air-transportation system .. .’’* clearly ,

relates to competition among air carriers, rather

competition with surface carriers not subject to its —

regulation. To interpret this Section otherwise would

impose upon the Board the positive responsibility to

encourage competition between air carriers and surface

carriers by means such as ‘permitting discriminatory

rate cutting practices, inter alia. : |

The alternative policy justification for the discrim-

inatory fares at issue here, are the alleged needs of the

national defense. Recently, this Court dealt directly

with the question of whether.the needs of the national —

defense are appropriate considerations in assessing the

lawfulness of discriminatory rates under the Interstate

Commerce Act. Interstate Commerce Commission v.

New York, N.H.& H.R.R. Co., 312 U.S. 744; 10 L.ed 2d,

108 (1963) It held that the Interstate Commerce Com-

Iission had the power in establishing rates to consider

¥

Section 102(d) of the Federal Aviation Act of 1958, as

amended. ' (72 Stat. 740, 49 U.S.C. 1302)

; 28

the needs of the national deleion only under the ere

_ extraordinary circumstances, stating:

‘On the other hand, by recognizing the relevance .

of such considerations as:national defense, we do —

not imply that these broad policy factots:-may be

_ applied so freely as to nullify either the more

particularized mandates of the National Trans-

portation Policy or the clear congressional design

embodied in Section 15a(3) Normally, it is these

- more specific considerations that should be given

the lawfulness of proposed rates in a case involving

intermodal competition. Only under extraordinary

circumstances may the Commission properly per-

mit them to be outweighed. To justify such-a

result, we believe it must be demonstrated that the

proposed rates in themselves genuinely threaten

- the continued existence of transportation service

that is uniquely capable of filling a. transcendent

national defense policy or other public heed .

372 U.S. 763-764, 10 L. ed. 2d 108° (1963).

~ This Court appears to have carved out a narrow. excep-

tion to the rule that policy considerations may not be .

imported to overcome the specific statutory provisions -

_ governing ratemaking. That exception by its terms

- does not seem to apply to the instant ¢ase. However,

“to the extent that the New York, New Haven & Hart-

ford Case is not regarded as limited to its particular

factual context, it isin conflict-with this Court’s decision

in Civil Aeronautics Board v. Summerfield, supra.

The distinction between these cases should be affirmed

or, if they are indistinguishable, the conflict should be

resolved.

IV G

his case also poses the increagingly important issue

of the role of the regulatory agehey/vis-a-vis the Con-

is)

-@

“

%

29 .

gress. Petitioners do not question that the Civil

Aeronautics Board has the power, indeed, the respon- -

sibility to formulate certain national air transportation

‘policies. However, where the Congress has traditionally

reserved to itself the determination of who may receive

preferential fares or rates,** it does not appear appro-

priate for the Board to assume this power in an ad hoc

Situation, merely to meet the exigencies of the moment.

Petitioners do not question that the availability of

air transportation to ‘servicemen at a cost within their

means contributes to morale. However, the weight to —

be accorded this consideration in establishing rates is.

a matter for Congress, as is the matter of whether

. Official military travel should be atcorded preferential

rates in the interest of national defense. Congress has ©

acted on both issues in the field of surface trans-

Portation, by amending Section 22 of the Interstate

Commerce Act to provide for reduced rates for

*° Every draft of the Civil Aeronautics Act contained rigid re-

strictions on the grant of free or reduced transportation. ‘Hearings

on Airline Pass Privileges before the House Subcommittee on Inter-

State‘ and Foreign-Commerce, 86th Cong., 1st Sess., p. 17. The

Senate expressed its views on the matter as follows: ‘‘Ufider

law, air carriers are strictly prohibited from granting free or

reduced-rate: transportation to any person other than those listed

in Section 403(b) of the Civil Aeronautics Act * * Ff ‘Senate

Report No. 1585, 82d Cong., 2d Sess., p. 1. When. reduced rate

air transportation for the clergy was deemed desirable, the matter

was submitted to Congress, which amended Section 403(b) of the’

Act to permit such reduced rates. Hearings on Airlines Fares for

Ministers, before a Subcommittee of the House Committee on

Interstate and Foreign Commerce, 84th Cong., 2d Sess., pp. 2, 24

’ (April 20, 1956). Beet, es,

57 Section 22 of the Interstate Commerce Act, 25 Stat. 862 (as

amended by 25 Stat. 862, 28 Stat. 643, 43 Stat. 1264, 49 Stat. 543,

50 Stat. 475, 50 Stat. 809, 54 Stat. 900, 901, 58 Stat. 751, 70 Stat.

702, 71 Stat. 564, 72 Stat. 1264) 49 U.S.C. 22. The text of this Sec. .

tion is set forth in itg entirety in Appendix C, Pp. 67a-69a, infra.

30.

official military travel, as well as for unofficial furlough

travel by servicemen. It has not seen fit to do so here-

tofore in the field of air transportation.

The precise issue was focused upon recently in a legal

periodical... The author concluded as follows: ©

“The article has focused primarily upon sections —

. 404 and 403 in order to clarify the framework

within which Congress intended the Board to

operate in the exercise of its economic regulatory

powers. orrect application of sections 404 and

403 will enable the CAB to comply with the con-

gressional‘intent and to move away from its ad hoc

decisions of late. The Board is without power to

liberalize the Federal Aviation Act to suit tran-

sitory policies but, rather, is responsible for en-

ate of the act in accord ines congressional.

inten

“Public sentiment is quite eiedatte with the

servicemen, but it was likewise with the clergy.

Nevertheless, i in the latter case the CAB enforced

the act as-written and the result was an amendment

' ‘to section 403(b) permitting the clergy rate reduc-

tions.. Therefore, it is submitted that Congress |

should authorize an amendment permitting mili-

tary discounts on a standby basis in. order to

prevent the Board from compromising its statute

in favor . of public sentiment and promotion.’’

Id. at p. 585.°

a MeGuire, Federal Aviation Act—Interworkings of Section 403°

and 404—Military Standby Fares. 32 Journal of Air Law and

Commerce, 571 (1966).

8° This same view was expressed in Be Parte Kohler, 31. F. 315

(Cir. Ct., D. Oregon, 1887), where the issue was whether railroad

passes could lawfully be-issued to the immedistg families of rail-

poad employees where Section 22 of the Inter ate Commerce Act

did not list such persons as entitled to free .« "educed-rate trans-

portation. The Circuit Court declared such vv ses to be violative

31

- CONCLUSION

For the reasons stated this petition for a writ. of |

certiorari should be granted. nor ot oes.

Respectfully submitted,

Howarp 8. Boros

RosBert C, LESTER

Boros & Lester a

1120 Connecticut Avenue, N. W. .

Washington, D. C, 20036.

Warren A.GOFF -—s_—-

_ 315 Continental Avenue :

Dallas,Texas eae

Attorneys for Petitioners

November 14, 1967 | | |

-of the unjust discrimination, provisions of that Act. It concluded:

“*, . - Doubtless it would be expedient to- include the immediate

family—the wife and minor children—of the employee in this

exception. By this means the corporation might, without material -

cost to itself, or prejudice or injustice to any one, augment in a

_ graceful way the compensation and convenience of faithful servants.

But the remedy, if any, is with congress and not the courts.” (Id.,

at 321-322). : *

ee ee

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.

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