Petition for Writ of Certiorari — Allegheny Airlines, Inc. v. Pennsylvania Public Utility Commission

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JR..CLERK

Supreme Court of the Unit

October Term, 1972

No 72-855

ALLEGHENY AIRLINES, INC., Petitioner

PENNSYLVANIA PUBLIC UTILITY COMMISSION, and

its Chairman, GEORGE I. BLOOM, and WILLIAM

F. OHARA, JAMES McGIRR KELLY, DANIEL

HUYETT III, and LOUIS J. SPARVERO, Members

of the Commission, Respondents

Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Third Circuit

ROBERT H. YOUNG

EDWIN I. COLODNY

THOMAS M. KITTREDGE ;

Attorneys for Petitioner

Of Counsel:

MORGAN, LEWIS & BOCKIUS

2107 The Fidelity Building

Philadelphia, Pennsylvania 19109

THE LEGAL INTELLIGENCER, 66 NORTH JUNIPER STREET, PHILA., PA. 19107

PS PT SNR TI OF NRT ERRNO Se oe: , Fees a |

oe RR TINLIN ‘ a

INDEX TO PETITION

Page

CN o.oo Oban eur vin scree hecscevavenes 1

CE Chats civ cnuhcnc desde ever ves nue 2

i dnd sedan v4 hide dnnesnhs ss 2

Constitutional and Statutory Provisions Involved .... 2

ee ee 3

Reasons for Granting the Writ .................... 5

1. The decisions of the courts below conflict with

the decisions of this Court in abstention-

I OE ce nen edecccsccnsess 7

2. The decision of the Court of Appeals for the

Third Circuit herein conflicts with the holding

of the Second Circuit that abstention is “pecu-

liarly inappropriate” in preemption cases ... 10

3. Abstention by the federal courts in preemption

cases will not avoid federal-state conflicts, but

rather will prolong and exacerbate them .... 12

IE rn icaath ned onde cua ede see kk 0 c+ «'s 14

INDEX TO APPENDIX

Page

Opinion and Order of the United States District Court la

Opinion of the United States Court of Appeals ...... 13a

Order of the United States Court of Appeals as 29a

Sur Petition for Rehearing ....................... 3la

Pertinent provisions of the Federal Aviation Act of 1958

and the Pennsylvania Public Utility Law ....... 33a

SRO beens

aRpeaety

Sa OMS IY USAR SORE

TABLE OF CITATIONS

Cases:

Alabama Public Service Commission v. Southern Rail- —__

way Company, 341 U.S. 341(1951) ............. 8

Burford v. Sun Oil Company, 319 U.S. 315 (1943) ..... 8

Capital Service, Inc. v. National Labor Relations Board,

ee CD ios oe a ed oe ed ens baw 13

Chemical Specialties Manufacturers Association, Inc.

v. Lowery, 452 F.2d 431 (2d Cir. 1971) ........... 10

City of Chicago v. Atchison, Topeka & Santa Fe Railway

Company, 357 U.S. 77 (1958) ................. 7

Colorado v. United States, 271 U.S. 153 (1926) ....... 6

Northern States Power Company v. The State of Minne-

sota, 447 F.2d 1143 (8th Cir. 1971), aff’d 405 USS.

EEE re ao chek want aes ten eee eee bak 12

Public Utilities Commission of Ohio v. United Fuel Gas

Company, 317 U.S. 456 (1943) ................ 7

Reetz v. Bozanich, 397 U.S. 82(1970) ............... 13

Wisconsin v. Constantineau, 400 U.S. 433 (1971) ..... 1]

Statutes:

Federal Aviation Act of 1958, 49 U.S.C. §1301letseq.... 3

Federal Hazardous Substances Act, 15 U.S.C. §1261

SP Ch.o's oa 04 bea ee ab ae ne ss nneh tensa eeeeen 11

IN THE

Supreme Court of the United States

October Term, 1972

No.

ALLEGHENY AIRLINES, INC., Petitioner

PENNSYLVANIA PUBLIC UTILITY COMMISSION, and its

Chairman, GEORGE I. BLOOM and WILLIAM F.

O'HARA, JAMES McGIRR KELLY, DANIEL HUYETT

III and LOUIS J. SPARVERO, Members of the Com-

mission, Respondents

Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Third Circuit

Allegheny Airlines, Inc. petitions for a writ of certiorari

to review the judgment of the United States Court of

Appeals for the Third Circuit entered in the above case on

July 21, 1972.

OPINIONS BELOW

The opinion of the Court of Appeals (App. 13a) is re-

ported at 465 F.2d 237. The opinion of the United States

District Court for the Eastern District of Pennsylvania

(App. 1a), entered November 10, 1970, is reported at 319

F.Supp. 407.

]

JURISDICTION

The judgment of the Court of Appeals (App. 29a) was

entered on July 21, 1972. A timely petition for rehearing

was denied on September 13, 1972. (App. 31a) The jurisdic.

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

QUESTION PRESENTED

May a federal district court abstain from hearing a

case, admittedly within its jurisdiction, where the only

question presented is whether the Congress of the United

States, by the Federal Aviation Act of 1958, has preempted

the power of the states to regulate the schedules and

patterns of service of federally certificated and subsidized

interstate air carriers?

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The United States Constitution, Article VI, provides,

in pertinent part:

This Constitution, and the Laws of the United

States which shall be made in Pursuance thereof; and

all Treaties made, or which shall be made, under the

Authority of the United States, shall be the supreme

Law of the Land; and the Judges in every State shall

be bound thereby, any Thing in the Constitution or

Laws of any State to the Contrary notwithstanding.

The pertinent provisions of the Federal Aviation Act

of 1958, 49 U.S.C. §1301 et seq. (App. 33a), and the Public

Utility Law of the Commonwealth of Pennsylvania, Act of

May 28, 1937, P.L. 1053, art. I, §1 et seq. (App. 34a), are

set forth in the Appendix.

STATEMENT OF THE CASE

Allegheny Airlines, Inc.' brought this action against

the Pennsylvania Public Utility Commission, on September

12, 1969, secking a judgment declaring that certain of the

Commission’s orders and rules to show cause, relating to

schedules and patterns of service between Pennsylvania

cities on Allegheny’s federally certificated interstate routes,

constituted an unlawful intrusion upon an area of exclusive

federal jurisdiction.

The jurisdiction of the district court was invoked pur-

suant to (a) 28 U.S.C. §1337, in that the action arose under

an Act of Congress regulating commerce, namely, the

Federal Aviation Act of 1958, 49 U.S.C. §1301 et seq., and

(b) 28 U.S.C. §1331, in that the matter in controversy arose

under the Constitution and laws of the United States,

specifically Article VI, Clause 2 of the Constitution of the

United States and the Federal Aviation Act of 1958, 49

U.S.C. §1301 et seq. Additionally, it was averred that peti-

tioner and the respondents were citizens of diverse states

and that the amount in controversy exceeded the sum or

value of $10,000 exclusive of interest and costs.

The offending orders and rules to show cause issued

by the Pennsylvania Commission require Allegheny to

maintain direct service between each pair of Pennsyl-

vania cities on Allegheny’s routes t:n'ees, authorized by the

Pennsylvania Commission to abandon such service.? It

1. Allegheny is the largest local service carrier in the United

States, having carried over 4.5 million passengers in 1968. Alle-

gheny’s route structure as certificated by the CAB, in 1969, covered

17 states, the District of Columbia and Canada, with air service

being provided to some 88 cities through a total of 67 airports, only

13 of which were within Pennsylvania. Allegheny has Pennsylvania

Commission certificates of convenience to carry passengers between

Pennsylvania cities named in its CAB route structure.

2. The context in which Pennsylvania regulation of Allegheny

exists is indicated by the fact that the 1968 revenues from intra-

Pennsylvania passengers amounted to only 2.32% of Allegheny’s

total revenue; and of the 4.5 million passengers carried by Allegheny

in the same year, only 2.7% were intra-Pennsylvania passengers.

LE ne

LIT AN. gt 8 OA IE CN LIE H

is uncontested that the Civil Aeronautics Board (CAB), the

instrumentality of the United States charged with the

regulation of routes and patterns of service provided by

federally certificated air carriers, does not require such

direct service.

The Congress of the United States, by the Federal Avia.

tion Act of 1958, has directed the CAB to promote the

development of an air-transportation system properly

adapted to the present and future needs of the foreign and

domestic commerce of the United States. (App. 33a) Besides

the regulation of rates and service by these carriers, the

Board is also charged with determining the amount of

federal subsidy paid annually to each air carrier. The

amount of the subsidy paid to Allegheny in the years 1959

through 1968, inclusive, totaled more than $85,000,000.

The CAB, by its counsel, appeared before the district

court and advised the court that the Board in certificating

service between points within a state, considers the needs

of both interstate traffic and local traffic between those

points. The Board took the position that Allegheny’s inter-

state operations under its CAB certificate and its operations

between points in Pennsylvania under the Commission’s

certificate were so inextricably intertwined as to preclude

any practical or legal separation, and that the Federal Avia-

tion Act had left no room for the type of regulation imposed

by the Pennsylvania Commission.

On November 10, 1970 the district court denied Alle-

gheny’s motion for summary judgment and granted the

Commission’s motion to the extent that it requested a dis-

missal of the action. Despite the district court’s recognition

(App. 4a) of the nationwide impact of the outcome of this

suit on the federal-state roles in the regulation of air com-

merce, the district court decided to abstain from the exer-

cise of its admitted jurisdiction.

The district court predicated its conclusion that

abstention was proper on grounds of federal-state comity

and the existence of an unclear question of state law, i.e.,

whether the Pennsylvania Commission actually had the

—

authority under state law to issue the orders and rules to

show cause involved.*

Upon appeal by Allegheny, the United States Court

of Appeals for the Third Circuit held that the district court

had properly abstained for the purpose of avoiding federal-

state friction. In so doing the Court found that Allegheny’s

sition created “a serious possibility of disturbing the

orderly state system of agency regulation of transportation

within Pennsylvania.” (App. 23a)

The Court of Appeals found it unnecessary to decide

whether the district court had correctly concluded that

there existed an unclear question of state law. It noted,

however, that “the PUC’s authority to take the measures

described above seems clear. 66 P.S. §1122.” (App. 22a).

REASONS FOR GRANTING THE WRIT

The district court and the Court of Appeals below have

in this case worked a radical extension of the abstention

doctrine. In effect, the courts below have abandoned to

state courts the power to decide the issue of federal pre- q

emption in a regulatory field; i.e., whether the Congress :

intended by legislation to so occupy a field of regulation

as to preclude concurrent state regulation. Such a result ;

conflicts with the prior decisions of this Court; and con- ‘

flicts with a decision of the United States Court of Appeals f

for the Second Circuit, which has held that abstention is ‘

“peculiarly inappropriate” in preemption cases. If permitted

to stand, the decision of the courts below will inevitably

result in an exacerbation of federal-state conflicts relating

to regulatory jurisdiction.

The Circuit Court was apparently led to this astonish-

ing result by an unwarranted deference to state procedures

to the exclusion of the federal regulatory system established

LIOR ae

ea ar

3. This authority was never questioned by the parties.

Si Re i Aaa oe

by Congress. Thus, in response to Allegheny's arguments

that PUC jurisdiction over schedules had been preempted,

the Court says (App. 24a):

“The issue, thus, is not, at this stage, whether

the airline may or may not discontinue the service in

question because federal legislation has preempted the

field. The issue is whether a state certificated public

utility may arbitrarily ignore the procedural rules of

the Commission which require that issues, including

jurisdictional issues, be raised before discontinuance

of service.”

It is respectfully submitted that if Congress has pre-

empted state regulation of scheduling by a federally certifi-

cated interstate carrier, the state has no jurisdiction, by

procedural rules or otherwise, to restrict Allegheny’s sched-

uling changes. Moreover, the issue is not affected by the

fact that the state directs its orders only to Allegheny’s state

certificated routes, where as here they are inextricably

entwined with the federally certificated routes. It is the

impossible burden of contending with regulation by many

states over service inextricably intertwined with interstate

service that brought Allegheny to the federal courts. See

Colorado v. United States, 271 U.S. 153 (1926).4

For the purpose of judging the propriety of abstention

in this case, it must be assumed that Congress intended

to preempt state regulation of scheduling by a federally

certificated air carrier. Under such an assumption, the

decisions of the courts below create a dangerous precedent

4. The Circuit Court decision includes five itemized bases for

its decision, each of which reflects this same concern for local regula-

tion of Allegheny's limited Pennsylvania business to the exclusion

of the federal regulatory system and the potential injury to Alle

gheny s interstate passengers and business which is inseparable from

the treatment of its local business.

COPY PRINT!

SS oe Oe ee ee

neorl

The decisions of the courts below conflict with the

decisions of this Court in abstention-preemption

cases.

The courts below either ignored or denied the applica-

bility of two controlling decisions by this Court; namely,

Public Utilities Commission of Ohio v. United Fuel Gas

Company, 317 U.S. 456 (1943) and City of Chicago v.

Atchison, Topeka & Santa Fe Railway Company, 357 US.

77 (1958).°

In P.U.C. of Ohio, United, an interstate gas pipeline

company, brought. an action to restrain enforcement of the

Ohio Commission's order assuming jurisdiction over its

rates. United argued that the Federal Power Commission

had exclusive jurisdiction over its rates by virtue of the

Natural Gas Act of 1938. This Court held that abstention

was unwarranted, even though there existed a doubtful

question of state law, since the federal question of preemp-

tion would still remain after resolution of the state law issue

and reference to the state court would only further delay

a final determination of the controversy.

City of Chicago involved the validity of an ordinance

requiring a certificate of public convenience and necessity

for the operation of interterminal vehicle services. The rail-

road brought an action in the district court alleging that

the ordinance, if it applied to their transfer service, was

inconsistent with the provisions of the Interstate Com-

merce Act as well as the Commerce Clause of the Constitu-

tion. The district court dismissed the complaint, but the <.<+=

Court affirmed, holding that the case was not a properone *™

for abstention.

5. Although petitioner urged that they were controlling, the

Court of Appeals did not cite or discuss either of these cases.

NTED CLOSE TO EDGE

The district court. in the instant case. distinguished

P.U.C. of Ohio on the theory that the holding in that case

was ascribable to the inordinate delay there involved. (App.

10a) This Court's discussion of the delay, however, was

presented in the context of explaining why. even despite

the presence of an uncertain question of state law, absten.

tion was improper. There is nothing in that decision to

suggest that this Court would even have mentioned the

possibility of abstention had not such an unsettled state

law question existed.

The district court distinguished City of Chicago

on the ground that the state courts in the instant case have

not as yet determined the extent of the Pennsylvania Com

mission's authority to regulate air carriers. (App. 11a). Pre

sumably the district court below believed that there had

been such a determination by the state courts in City of

tatively ruled that the inter-terminal transfer vehicles came

that argument (357 U.S. at 84): “We see no ambiguity in the

section which calls for interpretation by the state courts.

. . . Remission to those courts would involve substantial

delay and expense, and the chance of a result different from

that reached below, on the issue of applicability, would

appear to be slight.”

Both courts below predicated their decisions that

abstention was proper in this case on two cases: Burford

v. Sun Oil Company, 319 U.S. 315 (1943) and Alabama

Public Service Commission v. Southern Railway Company.

341 US. 341 (1951). Neither case is in point.

Burford was a federal action by Sun Oil attacking the

validity of an order by the Texas Railroad Commission

granting Burford a permit to drill four oil wells. Sun Oi

contended that the order denied it due process of law. This

Court noted that. duc to geologic facts, an oil field had to

be regulated as a unit for conservation purposes and that

the federal government had chosen to leave “the principal

responsibility” to the states. (at 319) This Court

out that the State of Texas had a vital interest in

the proper regulation and conservation of Texas oil fields

and that its Commission had acquired a specialized knowl-

edge regarding such regulation. The Court also stated that

the case “raised a number of problems of no general signifi-

prorationing

of Texas policy that equitable discretion should

be exercised to give the Texas courts the first opportunity

to consider them.” (at 332)

Alabama Public Service Commission v. Southern Rail-

way Company involved an application by the railroad to

the Alabama Commission for permission to discontinuc

two intrastate trains on economic grounds. After hearing.

the Commission denied permission. The railroad then

brought an action in the federal court, alleging that the

order denying permission constituted a deprivation of prop-

erty without due process of law. This Court held that

abstention was proper since the problem of balancing

public necessity and any loss to the railroad on the two

trains was essentially a local problem.

It is readily apparent that Burford and Alabama Public

Service Commission, where abstention was found proper.

have common characteristics which distinguish them from

P.U.C. of Ohio and City of Chicago. First, no conflict of fed-

eral and state regulatory authority was presented in Bur-

ford and Alabama P.S.C.; a clear conflict existed in P.U.C.

of Ohio and City of Chicago. Secondly, the only federal

question presented in the first two cases was the relatively

amorphous due process claim; in the latter two a federal

issue of congressional preemption was involved. Thirdly,

the first two cases involved situations where the federal

government's interest in the subject matter (two trains

between points within Alabama, and Texas oil fields) was

remote and minimal in comparison with the

and importance of the states’ interest; whereas, in the

second two cases the federal interest in protecting the integ.

rity and coherence of federal regulatory plans for interstate

commerce from unwarranted interference by the states was

vital and paramount.

The controversy here presented, between Allegheny

Airlines and the Pennsylvania Commission, fits the P.U.C.

of Ohio and City of Chicago mold precisely. First, there is

a direct conflict in federal and state regulatory authority.

Second, a federal preemption question is involved.

namely, whether Congress intended to vest principal

responsibility for the regulation of air commerce in the Civil

Acronautics Board. Finally, the federal interest here is the

protection of the regulatory scheme embodied in the Fed-

eral Aviation Act from interference by the Pennsylvania

Commission. In addition, the federal government has a

pecuniary interest in preventing the drain on the United

States Treasury which will be caused by Allegheny’s

increased subsidy needs arising from the Commission's

interference. It is also fair to say that the CAB has had far

more experience with the effect of local schedules on inter-

state air travel than has the Pennsylvania Commission.

Moreover, Pennsylvania has no unique or special interest

in air travel between Pennsylvania cities on Allegheny's

interstate routes which would override the CAB’s interest

on behalf of interstate passengers. There is therefore no

courte basis in Federal-STre conity For

AbsTenTiow sf Thiet care,

Il. The decision of the Court of Appeals for the Third

Circuit herein conflicts with the holding of the Second

Circuit that abstention is “peculiarly inappropriate”

in preemption cases.

The propriety of abstention in a preemption situation

was examined in Chemical Specialties Manufacturers Asso-

ciation. Inc. v. Lowery, 452 F.2d 431 (2d Cir. 1971). In that

case the plaintiff organization of manufacturers brought

an action for declaratory and injunctive relicf against New

York City and its Fire Commissioner contending that city

regulations relating to the packaging of hazardous sub-

stances constituted an impermissible invasion of a regula-

tory area preempted by the Federal Hazardous Substances

Act. 15 U.S.C. §1261 ct seq. The district court concluded

that it should abstain from exercising jurisdiction and

leave the plaintiff and its members to the appropriate and

competent state courts, in which they might assert all legal

defenses available to them.

Judge Friendly, for the court of appeals, reversed (at

433):

We cannot accept the district court’s suggestion

that this is an appropriate case for invoking the doc-

trine of abstention. The Supreme Court has recently

observed that the “abstention cases have dealt with

unresolved questions of state law which only a state

tribunal could authoritatively construc.” Wisconsin v.

Constantineau, 400 U.S. 433, 438, 91 S.Ct. 507, 511,

97 L.Ed. 2d 515 (1971) (citation omitted). Here there

is no uncertainty with respect to the City Regulations

that would call for construction by the state courts

in the first instance. As will be seen, such difficulties

in statutory construction as exist pertain rather to the

relevant federal laws, and a federal court is better

equipped to deal with these. Indeed, abstention is

peculiarly inappropriate when the federal claim is that

the state has been ousted from jurisdiction .. .

(Emphasis supplied)

Judge Oakes, who dissented from the court of appeals’

result in Chemical Specialties, agreed with Judge Friendly

on the abstention issue (at 440): “Nor, in view of the claim

of federal preemption, is this a case where abstention might

be proper . . .”.

In this case there is no uncertainty about the Pennsyl-

vania Commission's statutory authority to regulate intra-

state air carriage. The only possible issue is whether that

jurisdiction has been preempted by the Federal Aviation

Act. A federal court should not abstain from deciding that

issuc.*

The conflict between the decision of the Third Circuit

in this case and the decision of the Second Circuit in

Chemical Specialties should be resolved by this Court.

Failure to do so will add to the difficulty and com-

plexity attendant on the resolution of federal-state contro.

versics and will cause unnecessary delay in their resolution.

III. Abstention by the federal courts in preemption cases

will not avoid federal-state conflicts, but rather will

prolong and exacerbate them.

The essence of the abstention doctrine is clear: federal

courts, for reasons of federal-state comity, should avoid

needless conflict with state agencies. But in a preemption

situation there is no question of avoiding the federal-state

conflict. That conflict already exists by virtue of the con-

flicting federal and state regulation.

The only question presented in a preemption situation

is where and when the federal-state conflict will be re-

solved. The choice is between an early resolution in the

6. See Northern States Power Company v. The State of Minne-

sota, 447 F.2d 1143 (Sth Cir. 1971), aff'd 405 U.S. 1035 (1972)

wherein an electric utility company brought an action against the

Minnesota Pollution Control Agency for a judgment declaring that

the Atomic Energy Commission's authority to regulate radioactive

releases by nuclear power plants was exclusive so as to preclude state

regulation. The district court entered the declaratory judgment for

the plaintiff, and the Eighth Circuit and this Court affirmed. The

abstention issue was not discussed. Apparently it did not occur to

either the parties or the courts that the question of federal pre-

emption should be left, in the first instance, to the Minnesota state

courts.

federal court and a delayed resolution in the state court.

Since the issue relates to the interpretation of a federal

statute and the intent of Congress in enacting it, the federal

court is certainly the logical forum.

Precisely this rationale was adopted by this Court in

Capital Service, Inc. v. National Labor Relations Board,

347 U.S. 501 (1954). There the Board sought to restrain the

enforcement by a union of a state court injunction on the

grounds that the Board had been vested with exclusive

jurisdiction over the subject matter of the dispute there

involved. The Court held (at 504-05):

In absence of a command of the Congress to the

contrary, the power of the District Court to issue the

injunction is clear. Federal courts seek to avoid need-

less conflict with state agencies and withhold relief

by way of injunction where state remedies are avail-

able and adequate. See Alabama Commission uv.

Southern R. Co., 341 U.S. 341. But where Congress,

acting within its constitutional authority, has vested

a federal agency with exclusive jurisdiction over a

subject matter and the intrusion of a state would result

in conflict of functions, the federal court may enjoin

the state proceeding in order to preserve the federal

right. See Public Utilities Commission v. Gas Co., 317

U.S. 456, 468-470; Bowles v. Willingham, 321 U.S. 503,

510-511.

The fact that the plaintiff in Capital Service was a

federal agency is not a significant distinction, as is clearly

evidenced by this Court's citation of Public Utilities Com-

mission of Ohio v. United Fuel Gas Co., 317 U.S. 456

(1943) wherein the plaintiff was a private party.

The price of abstention, as Professor Wright has noted,

is not cheap. Wright, Federal Courts §52 (2d ed. 1970).

“Abstention certainly involves duplication of effort and

expense and an attendant delay.” Reetz v. Bozanich, 397

U.S. 82, 86 (1970).

NTE TT EN PRR EE ETN AC ORISA IE

Allegheny Airlines does not question the wisdom of

requiring federal courts to refrain from injecting federal

power into a dispute between a state and a private party,

where the federal government otherwise has no interest

in the dispute. But where, as here, the federal interest in

the controversy is not only real, but acute, and the conflict

between federal and state power already exists, abstention

is not only wholly unwarranted but will actually exacerbate

fedcral-state relations by postponing resolution of the exist-

ing federal-state conflict.

CONCLUSION

For the reasons set forth above, this petition should

be granted.

Respectfully submitted,

ROBERT H. YOUNG

EDWIN I. COLODNY

THOMAS M. KITTREDGE

Attorneys for Petitioner

Of Counsel:

MORGAN, LEWIS & BOCKIUS

2107 The Fidelity Building

Philadelphia, Pennsylvania 19109

ALLEGHENY AIRLINES. INC.

Vv.

PENNSYLVANIA PUBLIC UTILITY COMMISSION,

and its Chairman, George |. Bloom, and William F.

O'Hara, James McGirr Kelly, Daniel Huyett, III, and

Louis J. Sparvero, Members of the Commission,

Defendants.

Civ. A. No. 69-2148

United States District Court,

E. D. Pennsylvania.

Nov. 10, 1970.

As Amended Nov. 18, 1970.

OPINION

LUONGO, District Judge.

This is a suit by Allegheny Airlines, Inc. (Allegheny)

to have declared null and void certain actions against it by

the Pennsylvania Public Utilities Commission (PUC), and

to enjoin permanently the PUC and its individual members

from proceeding further against Allegheny or its employees

for violations of the laws of the Commonwealth of Pennsyl-

vania.

The matter is before the court on cross motions for

summary judgment filed by Allegheny and PUC. All the

facts have been stipulated. They will be adverted to in the

course of this opinion only to the extent deemed necessary

to an understanding of the discussion of the legal issues.

prone

van

SSE aneiantD aie

I. Factual Background

Allegheny was originally certificated by the PUC in

1941 to transport property by air in intrastate commerce

within Pennsylvania pursuant to the Pennsylvania “Pub-

lic Utilities Law,” 66 P.S. §1101, et seq. In January,

1949 Allegheny received a certificate from the Civil Aero-

nautics Board (CAB), the federal regulatory agency estab-

lished under the Federal Aviation Act, 49 U.S.C. §1301 et

seq., to provide interstate passenger service over a route

structure covering the District of Columbia and seven

states, including Pennsylvania. In March, 1949 the PUC

approved Allegheny’s application to transport persons and

property by air in intrastate commerce within Pennsyl-

vania. The intrastate routes authorized by the PUC paral-

leled Allegheny’s interstate routes within the boundaries

of Pennsylvania.

Under its CAB certificate, Allegheny is a “local ser-

vice” carrier, i. e., one which provides service between

smaller cities, linking them with larger ones where con-

nections can be made with the “trunk line” carriers (e. g.,

American Airlines, United Air Lines) which primarily pro-

vide long haul service between larger cities. Allegheny is

now the largest “local service” carrier in the United States,

with an interstate route structure covering seventeen

states, the District of Columbia and parts of Canada. Alle-

gheny has intrastate rights in nine of those states, includ-

ing Pennsylvania. For the fiscal year ending September 30,

1969 its gross revenues aggregated almost $113,000,000,

including a federal subsidy! of approximately $3,000,000.

A little more than 2% of Allegheny’s 1969 revenues were

generated by intrastate traffic within Pennsylvania.

1. The federal subsidy received by a local service carrier is

determined by the need of a carrier for funds to make up operating

deficits from unprofitable local, short-haul routes. In order for a car-

rier to be eligible for a federal subsidy, it must prove to the satisfac-

tion of the CAB that the expenditures were those that any efficient

and honest management would make. 49 U.S.C. $1376.

_—

For the efficient operation of its interstate routes,

Allegheny makes frequent changes in its patterns of service

and schedules. Under federal law, Allegheny is permitted

to make such changes without interference from the CAB

so long as it provides adequate service. 49 U.S.C. §§1371(e)

(4), 1374(a). See Capital Airlines, Inc. v. Civil Aeronautics

Bd., 108 U.S.App.D.C. 215, 281 F.2d 48 (1960). The CAB

does not require Allegheny to maintain direct plane service

between intermediate points on its interstate routes, it

being sufficient if Allegheny services each intermediate

int on such routes by two round trips in each direction

each day, regardless of point of origin or destination.

In 1963 Allegheny discontinued single plane direct

service on the 71-mile Williamsport-Harrisburg segment

of its PUC intrastate route No. 5. Since that time it has

discontinued furnishing single plane direct service between

some other pairs of points on its six intrastate routes?

authorized by the PUC. It has also been furnishing service

between some intrastate points not specified in its PUC cer-

tificate. The PUC has taken the position that its certificate

requires Allegheny to maintain single plane direct service

between all pairs of points on authorized intrastate routes

in Pennsylvania, and that Allegheny may not provide intra-

state service between points within Pennsylvania not speci-

fied in the PUC certificate.

After attempts to resolve the matter amicably the PUC

CE LI «OTRO YO OTST

POOR Re PPE to 8 a niet

2. Allegheny’s present intrastate route structure is as follows:

(1) Between Pittsburgh and Bradford.

(2) Between Pittsburgh and Philadelphia via Johnstown,

Altoona, Harrisburg, Lancaster, and Reading.

(3) Between Pittsburgh and Stroudsburg/East Strouds-

burg via Johnstown, Altoona, Bellefonte/State College, Lock :

Haven, Williamsport and Scranton/Wilkes-Barre. 5

(4) Between Harrisburg and Scranton/Wilkes-Barre.

(5) Between Erie and Harrisburg via Bradford and Wil-

liamsport.

(6) Between Pittsburgh and Allentown/Bethlehem/Easton,

via Johnstown, Altoona, Bellefonte/State College, Williamsport,

Harrisburg and Scranton/Wilkes-Barre.

issued rules (at different times) on Allegheny to show cause

why its state certificate should not be cancelled or other

penalties imposed (a) for abandoning direct plane service

between Williamsport and Harrisburg; (b) for abandoning

direct plane service between other pairs of points on its

intrastate routes; and (c) for furnishing intrastate service

not authorized by the PUC. At the hearing on the rule to

show cause on the abandonment of Williamsport-Harris.

burg direct service Allegheny declined to present evidence

and answered only that the PUC lacked jurisdiction over

routes, flight frequency and schedules of intrastate carriage

of persons and property where that service is part of a fed-

erally certificated route operated by a federally certificated

interstate carrier operating under the rules and regulations

of the CAB.

On June 23, 1969 the PUC entered an order making

the rule absolute, imposing a fine of $5000 on Allegheny

and directing Allegheny to reinstitute direct service be-

tween Williamsport and Harrisburg within thirty days or

file a petition with the PUC to abandon such service. After

the time for filing an appeal from the PUC order to the

state courts had passed, Allegheny instituted the instant

suit to enjoin the PUC and the individual members thereof

from taking any actions. against Allegheny or its officers

based upon changes in patterns of service or frequency or

scheduling of service.

Because of the nationwide impact of the outcome of

this suit on the federal-state roles in the economic regula-

tion of air commerce, both the CAB and the National Asso-

ciation of Regulatory Utility Commissioners (NARUC)

sought, and were granted, leave to file briefs amicus curiae.

The CAB also participated in oral argument. The CAB

supported Allegheny’s contentions on the merits but took

“no position with respect to procedural issues or questions

of judicial jurisdiction.” (CAB’s brief, page 6). NARUC’s

3. The rule to show cause on items (b) and (c) has been stayed

by the PUC pending the outcome of these proceedings.

LS AERA MALATE 9 8 AE NI REE MR NEE

—

brief supports the PUC both on the merits and, in partic-

ular, in attacking the propriety of federal intervention in

the absence of exhaustion of state processes.

II. Jurisdiction

It is Allegheny’s position in the instant suit that the

PUC’s attempt to exercise control over it is invalid as a mat-

ter of federal law because (a) the field of economic regu-

lation of interstate air carriers, at least insofar as patterns

of service and scheduling are concerned, has been pre-

empted by the Federal Aviation Act of 1958, 49 U.S.C.

§1301 et seq., particularly §§1302* and 1371(eX4)§

of the Act; (b) the PUC orders conflict with Allegheny’s

rights and obligations under its CAB certificate of public

APO

peri

TORE Nae EP

4. 49 U.S.C. §1302 reads, in pertinent part, as follows:

“In the exercise and performance of its powers and duties

* * * the Board shall consider the following * * * as being

in the public interest, and in accordance with the public con-

venience and necessity:

(a) The encouragement and development of an air-trans-

portation 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 defense;

(b) The regulation of air transportation in such manner

as to recognize and preserve the inherent advantages of, assure

the highest degree of safety in, such transportation, and to

improve the relations between, and coordinate transportation

by, air carriers;

service by air carriers at reasonable charges * * *;

* a” * * te

(f) The promotion, encouragement, and development of

civil aeronautics.”

5. 49 U.S.C. §1371(e) (4) reads, in pertinent part, as follows:

“No term, condition, or limitation of a certificate shall

restrict the right of an air carrier to add to or change sched-

ules, equipment, accommodations, and facilities for perform-

ing the authorized transportation and service as the develop-

ment of the business and the demands of the public shall re-

ee Seer

i Pci isa le alt 8 Nila {PI INROR LD ER IAM WINE BR IRS ot NE IM MIN Pre Ue. |

convenience and necessity; and, (c) the PUC orders at.

have authority to control certain economic aspects* of

intrastate air commerce, they contend that such authority

does not extend to a federally certificated air carrier servic-

ing an interstate-intrastate route. Accordingly, Allegheny

asserts that its dispute with the PUC presents a controversy

arising under the Constitution and laws of the United States

and that this court's jurisdiction’ is properly invoked

under 28 U.S.C. §1331(a).* It asserts further that the fed-

eral courts should decide the federal questions rather than

leave them for determination by state tribunals. I disagree.

In suits in the federal courts arising out of proceed-

ings pending or threatened in state tribunals, the federal

court's jurisdiction may not be predicated upon federal

— defenses to the state proceedings.* See Public

S.Ct. 258, 15 L.Ed.2d 194] (1965); Pennsylvania Public Utility

Comm. v. Pennsylvania R.R. Co., 382 U.S. 281, 86 S.Ct. 423, 15

L.Ed. 2d 324 (1965).

8. 28 U.S.C. $1331(a) reads as follows:

“(a) The district courts shall have original jurisdiction

of all civil actions wherein the matter of controversy exceeds

the sum or value of $10,000, exclusive of interest and costs,

9. There are exceptions to this principle, notably in suits aris-

ing under the Civil Rights Act, 42 U.S.C. $1981 et seg., 28 USC.

$1443. See Dombrowski v. Pfister, 380 U.S. 479, 85 S.Ct. 1116, 14

L.Ed. 2d 22 (1965).

Serv. Comm. of Utah v. Wycoff, 344 U.S. 237, 73 S.Ct. 236,

97 L.Ed. 291 (1952); Public Utilities Comm. of California

y. United Air Lines, Inc., 346 U.S. 402, 74 S.Ct. 151, 98

LEd. 140 (1953); rev'g 109 F. Supp. 13 (N.D.Cal. 1952);

California v. Oroville-Wyandotte Irrigation Dist., 409 F.2d

532 (9th Cir. 1969); Bonanza Air Lines, Inc. v. Public Serv.

Comm. of Nevada, 186 F.Supp. 674 (D. Nev. 1960). It is

only if the state complaint raises federal questions that the

federal court's jurisdiction may be based on federal

question grounds. Public Serv. Comm. of Utah v. Wycoff,

" . in the instant suit, seeks a declaration

that since it is an interstate carrier, it is immune, as a mat-

ter of federal law, from the exercise of control by the PUC.

The proceedings instituted by the PUC against Allegheny,

however, raise only questions of state law, i. e., the extent

§1101 et seq. The PUC’s complaints raise no federal ques-

tions. The federal questions do not enter the picture until

they are injected by Allegheny as a matter of defense to the

state . Under such circumstances, to quote from

Wycoff, supra, 344 U.S. at p. 248, 73 S.Ct. at p. 243:

state courts merely because one, normally a defendant,

goes to federal court to begin his federal-law defense

before the state court begins the case under state law.”

Although this is not properly a federal question

matter, there is nevertheless jurisdiction in this court on

the grounds of diversity of citizenship. 28 U.S.C. §1332(a).'*

10. 28 U.S.C. $1332(a) reads as follows:

“(a) The district courts shall have original jurisdiction

of all civil actions where the matter in controversy exceeds the

sum or value of $10,000, exclusive of interest and costs, and

is between—

It affirmatively appears from Allegheny’s complaint that

it is a Delaware with its principal place of

business in the District of Columbia; that the PUC is

the substantive issues raised by the parties and exercise its

power to grant the relief requested. The relief which Alle

gheny seeks is (1) a declaration that it is not subject to con-

trol by the PUC because it is an interstate carrier, and (2)

Allegheny’ b

brought under the Declaratory Judgment Act, 28 U.S.C.

$2201, the first portion of its prayer for relief is

in nature. The Declaratory Judgment Act provides that in

a case of actual controversy a competent federal court may

declare the rights and other legal relations of any interested

party whether or not further relief is or could be

sought.” But whether to grant declaratory relief in a par-

ticular case is a matter committed to the court's sound dis-

cretion. See A. L. Mechling Barge Lines, Inc. v. United

States, 368 U.S. 324, 82 S.Ct. 337, 7 L.Ed.2d 317 (1961),

Brillhart v. Excess Ins. Co., 316 U.S. 491, 62 S.Ct. 1173,

86 L.Ed. 1620 (1942); California v. Oroville-Wyandotte

Irrigation Dist., supra.

Note 10—Continued

(1) citizens of different States;

(2) citizens of a State, and foreign states or citizens or

subjects thereof, and

(3) citizens of different States and in which foreign states

or citizens or subjects thereof are additional! parties.~

court's sound discretion. Alabama Public Serv. Comm. v.

Southern Ry. Co., 341 U.S. 341, 71 S.Ct. 762, 95 L_Ed. 1002

their powers in the interest of federal-state comity. Public

Supreme Court stating, 344 US. at p. 247, 73 S.Ct. at p.

242:

It is the state courts which have the first and

last word as to the meaning of state statutes and

whether a particular order is within the legislative

terms of reference so as to make it the action of the

State.”

Whenever, therefore, the dispute between a private party

and a state administrative agency concerns an unsettled

question of state law, the federal courts should abstain

Inc. v. Public Serv. Comm. of Nevada, supra.

The doctrine of “equitable abstention” has only

recently developed in the federal court system. See Wright,

Federal Courts §52; Note, Judicial Abstention From the

Exercise of Federal Jurisdiction, 59 Colum. L. Rev. 749

(1958). As it applies to disputes between private parties

and state administrative agencies, the primary thrust of the

Rf.

VO PHSB NTT DY Lh eID,

Td ee

RET RS Peron

10a

doctrine is that where an order of the state agency predom.

inantly affects local matters, if there is available to the

aggrieved party adequate state judicial review, the federal

courts should refuse to exercise their equity powers to re-

strain enforcement of the administrative order, thus avoid-

ing unnecessary federal-state conflict. See Alabama Public

Serv. Comm. v. Southern Ry. Co., supra; Burford v. Sun Oi]

Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943),

Railroad Comm. of Texas v. Rowan & Nichols Oil Co., 310

U.S. 573, 60 S.Ct. 1021, 84 L.Ed. 1368 (1940), as amended,

311 U.S. 570, 61 S.Ct. 343, 85 L.Ed. 358 (1941). Cf. Sayers

v. Forsyth Bldg. Corp., 417 F.2d 65 (5th Cir. 1969); Lerner

v. Town of Islip, 272 F.Supp. 664 (E.D.N.Y.1967); Atlantic

Freight Lines, Inc. v. Pennsylvania Public Utility Comm.,

109 F.Supp. 385 (W.D. Pa. 1952). But see Public Utilities

Comm. of Ohio v. United Fuel Gas Co., 317 U.S. 456, 63

S.Ct. 369, 87 L.Ed. 396 (1943) (where the exercise of fed-

eral court's equity powers was approved because of an in-

ordinate delay in disposing of the matter in dispute). They

should exercise such powers only when they are convinced

that asserted federal rights cannot be preserved except by

the granf of the extraordinary relief of an injunction. Ala-

bama Public Serv. Comm. v. Southern Ry. Co., supra. See

also, Railroad Comm. of Texas v. Pullman Co., 312 US.

496, 61 S.Ct. 643, 85 L.Ed. 971 (1941).

The instant case is clearly one for the application

of the doctrine of federal abstention.

First, the dispute between the PUC and Allegheny pre-

dominantly affects local matters, i. e., intrastate air service

and the scope of authority and procedures of the state

administrative agency.

Second, the dispute involves an unsettled question of

state !aw, i. e., the extent of the PUC’s authority to regulate

intrastate air rights granted to an interstate air carrier. The

parties have cited no Pennsylvania authorities defining the

limits of the PUC’s authority over rights granted to such

_——

lla

carriers.'' Until the state courts speak to the question

we cannot know whether they will interpret the PUC's

authority under the state act narrowly or broadly. In mak-

ing their determination as to the scope of the PUC's au-

thority, the state courts are bound, just as the federal courts

are, to interpret and apply the federal Constitution and

laws, and all of the arguments which Allegheny has sought

to raise here under the interstate commerce and supremacy

clauses of the federal Constitution must be given full con-

sideration by the state courts. See Bonanza Air Lines, Inc.

y. Public Serv. Comm. of Nevada, supra.

Finally, Pennsylvania law provides adequate judicial

review of the actions of the PUC. At the time the PUC’s

order was entered Allegheny could have obtained review

by seeking a preliminary injunction in the Court of Com- 4

mon Pleas of Dauphin County,'? with a full hearing on :

the merits (66 P.S. §1441) and right of appeal to the Su- E

perior and Supreme Courts of Pennsylvania; or it might

have appealed directly to the Superior Court to have the

order of the PUC declared null and void (66 P.S. §1431).

Under either procedure, there was available to Allegheny

process for obtaining a writ of supersedeas to stay enforce-

ment of the order pending judicial disposition. (66 P-S.

§1433). Federal questions raised in any of the state court

proceedings would be reserved for final review, by certio-

rari, to the Supreme Court of the United States, Public

Serv. Comm. of Utah v. Wycoff, supra.

The foregoing are the state procedures which

were available to Allegheny at the time the PUC’s orders

+ SO BOR MO ER PIE sn

11. Since the state courts have not as yet determined the ex-

tent of PUC authority in this field, this decision does not conflict

with City of Chicago v. Atchison, T. & S. F. Ry. Co., 357 U.S. 77, 78

S.Ct. 1063, 2 L.Ed. 2d 1174 (1958).

12. Jurisdiction is now vested in the Commonwealth Court of

Pennsylvania by “The Commonwealth Court Act”, 17 P.S. $211.1

et seq.; 17 P.S. §211.14(a) (55).

OPO MCN WT OR ERC NEMEC Ae

28 1,

12a

were entered. The time for appeal to the state courts has

long since passed. It appears that Allegheny may have de.

liberately permitted the appeal time to pass in order to

obtain a ruling from the federal court as to the extent of the

state administrative agency's authority over it. If

exercising its jurisdiction to consider the substantive issues

sought to be raised by the parties. Allegheny’s motion for

summary judgment will be denied. PUC’s motion for sum-

mary judgment, to the extent that it seeks dismissal of

these proceedings, will be granted.

13a

UNITED STATES COURT OF APPEALS

For THE Tuirp Circuit

No. 71-1057

ALLEGHENY AIRLINES INC., Appellant

PENNSYLVANIA PUBLIC UTILITY COMMISSION,

and its Chairman, GEORGE I. BLOOM and WILLIAM

F. O'HARA, JAMES McGIRR KELLY, DANIEL

HUYETT III and LOUIS J. SPARVERO, Members

of The Commission

(D.C. Civil Action No. 69-2148)

APPEAL From THE UNiTED States District Court

For THE EASTERN DistRICT OF PENNSYLVANIA

Argued January 4, 1972

Before Hastie and Rosenn, Circuit Judges

and McCune, District Judge

OPINION OF THE COURT

(Filed July 21, 1972)

Rosenn, Circuit Judge.

Allegheny Airlines, Inc. (Allegheny) brought suit in

the United States District Court for the Eastern District

of Pennsylvania seeking a declaratory judgment holding

that certain of the Pennsylvania Public Utility Commis-

sion’s (PUC) orders and rules, pertaining to air service

14a

between Pennsylvania cities, constituted an unlawful

intrusion upon an area occupied exclusively by federal

legislation. Allegheny also sought to perpetually enjoin

the PUC from further actions against it.! The district

court decided that the case presented a situation in which it

was compelled to abstain. It therefore dismissed the com-

plaint. Allegheny Airlines, Inc. v. Pennsylvania Pub. Util.

Comm’n., 319 F. Supp. 407 (E.D. Pa. 1970). From this

decision, Allegheny appeals.

I. BACKGROUND

Allegheny received from the PUC an intrastate freight

certificate in 1940, and a passenger certificate in 1949,

Until 1963, one of the services provided by Allegheny, and

for which it was and is certificated by the PUC, was non-

stop service between Williamsport and Harrisburg, a

distance of some 71 miles. ‘

The flight between Harrisburg and Williamsport was

part of a longer flight route designated by the PUC “intra-

state route No. 5.” It appears that intrastate route No. 5

was a segment of a still larger route, certified by the Civil

Aeronautics Board (CAB), which is interstate in nature.

That is to say, planes coming from outside of Pennsylvania

fly through the state, landing along the route designated

intrastate route No. 5.

In 1963, Allegheny unilaterally discontinued the

segment of intrastate route No. 5 which directly connected

Williamsport and Harrisburg. Allegheny did not entirely

eliminate either Harrisburg or Williamsport from all

Allegheny plane service. It was still possible to travel by air

on Allegheny airplanes between Williamsport and Harris-

burg, although such a journey might require flying to

numerous distant points, on a variety of planes, before

eventually reaching the desired destination.

‘1. The Air Transport Association, National Association of

Regulatory Utility Commissioners, and Civil Aeronautics Board

have joined this case as Amicus Curiae.

15a

After Allegheny discontinued the Williamsport-

Harrisburg segment of route No. 5, the PUC and Allegheny

entered into negotiations. In the meantime, Allegheny

discontinued furnishing single plane direct service between

at least six other pairs of points within Pennsylvania. All

these discontinuances were on intrastate routes authorized

and certificated by the PUC. Subsequently, the negotiations

between the airline and the PUC broke down.

The PUC then took official agency action to compel

Allegheny—not to furnish the discontinued plane service—

but to apply to the PUC, in the manner prescribed by the

applicable Pennsylvania law and the regulations of the

PUC, whenever it wished to discontinue single plane direct

service between intra-Pennsylvania points on routes

authorized by the PUC. In the alternative, the PUC sought

restoration of the deleted air service.

On June 10, 1968, the PUC issued a “Rule to Show

Cause,” which noted that Allegheny had abandoned the

air service between Harrisburg and Williamsport without

seeking approval of the Commission. The rule directed

Allegheny to show cause why its certificate of public

convenience should not be canceled, and other appro-

priate penalties imposed, for its discontinuance of service.

Allegheny answered this rule by arguing that under

federal law and the CAB regulations and practice, it was

permitted to make such changes at will. Further, it con-

tended that “both as a practical matter and a matter of

law, its Pennsylvania certificate of public convenience

should be interpreted in a manner which is consistent

with its federal certificate.” It is clear that the thrust of the

airline's answer was that federal law and practice had

preempted the state regulation asserted by the PUC. A

hearing on the Commission's rule was held on September

19, 1968. At this hearing, Allegheny offered no testimony

or other evidence concerning the need to discontinue the

service in question. Again, it was clear that the thrust of the

airline’s position was that federal law had preempted the

‘asserted state action.

— —_—_e eC RN RRRITE AY etry rt oor gy

;

——

16a

On June 23, 1969, the PUC entered an order making

absolute its rule of June 10, 1968, and directed Allegheny

to pay a penalty of $5,000 for its failure to seek approval of

its abandonment of service between Harrisburg and

Williamsport. The PUC also directed Allegheny to rein-

stitute the service within thirty days or, in lieu thereof,

file with the PUC nunc pro tunc an appropriate petition

or application seeking approval for the abandonment of

service.

The June 23rd order was accompanied by an ex.

tensive written opinion, which defined the PUC’s concerns,

and which laid clear the legal foundation for their

decision. The Pennsylvania authority for controlling the

deletion of direct air service between Harrisburg and

Williamsport was 66 P.S. §1122:

Upon the application of any public utility and the

approval of such application by the commission,

evidenced by its certificate of public convenience

first had and obtained, and upon compliance with

existing laws, and not otherwise, it shall be lawful:

* * e

(b) For any public utility to abandon or surrender,

in whole or in part, any service. . . .

And 66 PS. §1171:

—Every public utility shall furnish and maintain

adequate . . . reasonable service. . . . Such service

also shall be reasonably continuous and without un-

reasonable interruptions or delay.

(emphasis supplied.)

The PUC also called attention to its own rule 8(b):

(b) Abandonment of Service—Unless upon ter-

mination of certificate or order of the Commission,

no common carrier shall abandon, in whole or in

part, any operation without first making application

to the Commission for permission to do so. . . .

(emphasis supplied. )

17a

The PUC felt that Allegheny’s discontinuance of service

between Williamsport and Harrisburg clearly came within

these laws and regulations because:

. even if facts had been established to indicate

that air service between Harrisburg and Williamsport

is available via Pittsburgh and or Scranton, this

would not establish substantial compliance with

respondent’s obligation. To reach a point 71 miles

distant by use of several planes, several transfers

and the traveling of several hundred miles during a

period of several hours is not adequate air service

by any standard.

(emphasis supplied.)

However, the PUC made clear that it was making no

finding as to whether or not Allegheny, after a full and

fair hearing, at which evidence was presented, should

or should not be able to discontinue the service:

. we are not attempting to determine whether or

not respondent upon proper application . . . should

be allowed to abandon the segment. . . . We do not

expressly or impliedly, suggest that we may...

require respondent to render unnecessary, unpa-

tronized, unprofitable service. . . .

(emphasis in text.)

Two primary considerations were defined as the

principal motivations for the agency’s action. First, the

agency advanced what was essentially an equitable argu-

ment: Allegheny itself had approached the Commission,

requested certification to fly the delineated intrastate

route. In receiving this state benefit, it had accepted a

corresponding duty to abide by the state regulations. The

Commission thus sought to distinguish this case from one

in which an airline had never sought state certification

and the state agency was itself trying to bring the airline

under its regulation:

;

18a

While . . . prior to its Pennsylvania certifications

for its intrastate services, [Allegheny] was under

no obligation to render intrastate service, once it

sought, and was granted, and accepted state certifi.

cation to render intrastate service between specific

points within the Commonwealth of Pennsylvania, it

accepted the corresponding obligation to do so

under the laws of this state and the Rules and Regu-

lations of this Commission.

(emphasis supplied.)

The second consideration, interrelated with the

first, was the practical effect Allegheny’s refusal to come

before the Commission, with evidence, might have on the

regulatory structure of the PUC. The Commission was

obviously concerned because Allegheny, since it first

sought state certification in 1940, has become entwined

within the state framework for regulating the state’s

various transportation facilities. As the PUC noted:

The thrust of these proceedings is that existing

certificated service has been found, after applica-

tion by the carrier and after opportunity to affected

parties to be heard, to be necessary to the public

interest.

(emphasis supplied.)

The initial state proceeding—that which found that the

service which Allegheny sought to provide was in the

public interest—might have affected numerous other

facets of the state transportation system, aside from its

obvious potential effect upon the plans and patterns of

service of other airlines. Certification of public trans-

portation, under the terms of the state act, can only be

had if in the public interest. The fact that Allegheny had

sought and been granted the route between Harrisburg

and Williamsport might have deterred other service be-

tween these cities from developing. For example, bus

service might have been decreased as a result of the air

service which Allegheny offered to, and did, supply.

19a

Moreover, a decision to abandon the air service might

mean that the state would need to develop alternative

services between these two cities. In any event, the con-

cern of the PUC was that these problems could only be

resolved, highlighted and defined through the normal

regulatory structure, which provided for public hearings

and the presentation of evidence concerning the specific

service in question. Unilateral action on the part of

public utilities—in total disregard of any procedural

requirements—could produce confusion and disruption

throughout the state.

Allegheny did not comply with the order of the PUC,

nor challenge it before any state court. The airline, how-

ever, instituted suit in the district court for the Eastern

District of Pennsylvania requesting a declaratory judgment

against the PUC and a permanent injunction restraining

the PUC from any further action. The district court, on

cross motions for summary judgment dismissed the suit.

The district court did not reach the merits, but predicated

its decision on the abstention doctrine.

II. JURISDICTION

Allegheny pleaded jurisdiction both in terms of

diversity, and 28 U.S.C. §1331(a), which gives jurisdic-

tion over matters arising under the “Constitution, laws, or

treaties of the United States.” The district court did not

believe that jurisdiction could properly be based on

§1331 because:

[iJn suits in the federal courts arising out of

proceedings pending or threatened in state tri-

bunals, the federal court’s jurisdiction may not be

predicated upon federal question defenses to the

state proceedings....It is only if the state

complaint raises federal questions that the federal

court’s jurisdiction may be based on federal question

grounds.

(emphasis in text; citations omitted) Allegheny

Airlines Inc. v. PUC, supra., at 411.

FESS Oe

iii Hal Hil lit if

I aes

i] aif Ale iF

.- = Fes

public :

(citations omitted; emphasis

Oil Co., 319 U.S. 315, 317-8 (1943).

“eo rei” ee“ eaereweens & FS

gadis

ays

system as

in federal

the presence

entered judgment

enjoining the Com.

or any penalty provisions

On appeal the Supreme Court reversed. The crux of

its holding was that:

judge court

seeking

diversity

question. A

holding the Commission order void and

mission from enforcing its order

of the applicable law.

ety Ae ey

nae

ahi

S2Es022¢

ate

than

comity must gov-

equitable jurisdiction by the

the usual rule of

case

State policies

ey op

District Court in this

(emphasis supplied

Citations omitted) Id., at 349-50.

law

take

however, that in our view, the PUC’s authority to

measures described above seems clear 66 PS $1122.

ig fi7Ff i

| it ieetanll it

pletely i

H ri p

ie :

HIBHT ‘ant

tt SHE iF elite

question for which there is no one

into

—

v. Oil

294 US.

aaiyies, tien canted damaattantaen ans eatened

a = Sam bean ene ER ne

rent Appraisal, 49 Texas L. Rev. 247 (1971), Abstention and Certi-

fication in Diversity Suits, 73 Yale L_J. 85 (1964), Consequences of

Federal Abstention, 73 Har. L. Rev. (1960).

Allegheny has contended here that it was not required

re 5 Mee age pate emt peg ma

SS ee

sion for discontinuance of service mnt tem on

presents just such a threat: a serious possibility of disturb

ing the orderly state system of agency regulation of trans-

portation within Pennsylvania.

clearly defined rules, as has the traditional and more com-

dedly pooceduses and rules of state regulatory bodies. See,

eg., Alabama, supra, Burford, supra. The instant case

interstate air carrier. fp ane mae

ie |

24a

corresponding obligation to settle disputes as provided

under state law and the rules and regulations of the Com.

mission. Its primary position is that a certificated carrier

tempt on the part of the PUC to extend its

powers over it, made a written application to the PUC for

a certificate of public convenience as an intrastate carrier

to transport passengers between certain cities in

vania, including Harrisburg and Williamsport. The service

it offered to provide was found by that Commission, after

a hearing and an opportunity for affected parties to be

heard, to be necessary to the public interest. A certificate

of public convenience was granted and it is now held by

Allegheny. Under the rules of the Commission, all or part

of this service may be discontinued upon application by the

carrier to the PUC and that agency's approval. Addition-

ally, matters such as this which go to the jurisdiction of

the PUC may be tested in special proceedings before the

Pennsylvania Commonwealth court. 66 P.S. 1441. The

thrust of these Pennsylvania rules and laws is that, once

certified, a carrier must test these issues before service is

discontinued.

The issue, thus, is not, at this stage, whether the air-

line may or may not discontinue the service in question be-

cause federal legislation has preempted the field. The issue

is whether a state certificated public utility may arbitrarily

ignore the procedural rules of the Commission which re-

quire that issues, including jurisdictional issues, be raised

before discontinuance of service. We note that Allegheny

might have sought federal declaratory relief before discon-

tinuing the air service. In the alternative, of course,

5. This might, perhaps, have been action substantially equiva-

lent to bringing the preemption issue before the Commission or

before the Commonwealth Court under 66 P.S. 1441.

proves otherwise. Hostetter v. PUC, 49 A.2d 862 (Super.

Ct., Pa. 1946).

Secondly, Allegheny has presented no evidence which

suggests that it would have been harmed had it had to

THES eo Ty eae ey

TAS LONE AEE ST SENT ATE RR te

ee ra

26a

resort to the state agency forum, or Commonwealth courts,

appears that all the airline's requests have been granted‘

In any case, Allegheny may be able to raise its preemption

arguments, should the PUC proceed to state court to en.

force the order of June 23. Cf. Jones Motor Co. v.

vania Public Utility Comm’n., 149 A.2d 491 (Super. Ct. Pa.)

reversed on other grounds, 361 U.S. 11 (1959).

Thirdly, if local communities have come to rely upon

the services provided by Allegheny, such reliance would

be reasonable in light of the affirmative action of the air

line itself. Approximately thirty years ago, the airline

sought and was granted, rights to transport property on

ania routes; twenty years

ago, it sought, and was granted the right by the PUC to

transport persons as well as property between points in

Pennsylvania. From that date, until the action delineated

here, the airline has complied with the procedural require.

ments of Pennsylvania law. Thus, this case is significantly

different—and poses a greater danger of

federal state relations—than the case of an airline which

has never approached a state commission, and finds that

a state commission is attempting to regulate it for the first

time on the supposition that it is engaging in intrastate

operations. See e.g., Pub. Util. Comm'n. v. United Air Lines,

346 U.S. 402 (1953).

6. The stipulated statement of facts makes clear that Alleghe-

ny has worked within the framework of the PUC’s regulations for

many years. On many occasions when it wished to eliminate ser-

vice to a Pennsylvania city, it has sought the PUC’s prior approval.

To cite but one example, on May 22, 1968, it petitioned the PUC to

allow it to eliminate Hazleton as a point serviced by Allegheny air-

planes. It also appears from the various changes in Allegheny's

certificate of public convenience that it has approached the PUC

when it wanted to add a stop flight between points which were

being serviced by non-stop direct service. Thus, for example, it re-

quested, on September 12, 1960, to service Reading as an inter-

mediate point on its intrastate route No. 2 between Pittsburgh and

———

27a

Fourthly, the danger of creating federal-state friction

is intensified because of the peculiar nature of the relief re-

quested by the airline. At oral argument, the district court

pointed out that Allegheny was seeking the best of all pos-

sible worlds. It wished to retain its state rights and, at the

same time, to be relieved by federal injunction of its state

duties.? This is precisely what the airline desires. It asks

for a perpetual injunction which would enjoin the PUC

from “any action or proceeding for any violation of the

laws of the Commonwealth of Pennsylvania based upon

action by Allegheny in changing its patterns of service.”

Yet, if this relief be granted, the PUC would be unable to ’

terminate the airline’s state certificates of public con- ;

venience. The airline, while not being subject to state

regulation, would maintain whatever benefits accrue to 7

holders of state public utility certificates. The case there- :

fore is different from that of an interstate carrier whose

routes contain several short intrastate segments, and who

wishes to surrender its state certificate and remove itself ;

totally from the state jurisdiction. |

Finally, we do not believe that there are significant

federal concerns which would override the other factors :

mentioned above. Even if it should be ultimately deter- ;

Philadelphia. Finally, it also appears from the changes in Alleghe- }

ny's certificate of public convenience that it has received PUC ap- i

proval to eliminate non-stop air service between Pennsylvania

cities. Thus, for example, in April of 1953, it sought approval to

eliminate the flight between Johnstown and Dubois, which had

been designated intrastate route No. 5. ;

7. The district court noted: é

. . . you [Allegheny] are at somewhat of a disadvantage in "

that you come before me, having sought and obtained certain A

local rights, having had those local authorities who granted f

you those rights determine that you are not complying, and in é

your having failed to either pay the fine or keep the rights be- :

cause you are dissatisfied with the interpretation, and instead

you are asking me to enjoin them from enforcing their inter-

pretation, of the rights they have granted you and yet at

the same time permit you to retain those rights.

(emphasis supplied).

28a

mined that the state does not have power to regulate the

actions which precipitated this suit, a temporary coex.

istence of federal-state regulation will not frustrate any

immediate goals or policies of the Federal Aviation Act.

At least a residual power to regulate air transportation lies

with the states. The scheme of federal control has not been

hampered, even though some areas exist over which the

states exercise sole or concurrent control.* See, eg,

Colorado Anti-Discrimination Comm'n. v. Continental Air

Lines, Inc., 372 U.S. 714 (1962); Pub. Util. Comm'n. ».

United Air Lines, 346 U.S. 402 (1953); Loma Portal Civic

Club v. American Airlines, Inc., 394 P.2d 548 (Sup. Ct.

Calif. 1964); People v. Western Air Lines, 268 P.2d 723

(Sup. Ct., Cal. 1954).

For the reasons outlined above, we conclude that the

district court did not abuse its discretion in refusing to

exercise its power to intervene.

The judgment will be affirmed.

8. All parties to this suit, including the amicus Civil Aeronau-

tics Board, agree that under current CAB regulations, Allegheny

may, Or may not, at its option, connect Harrisburg and Wiliiams-

port by non-stop flights. Additionally, the CAB has declined to take

a position with respect to the district court's jurisdiction or the

appropriateness of its exercise.

A True Copy:

Teste :

Clerk of the United States Court of Appeals

for the Third Circuit.

29a

United States Court of Appeals

For THE HIRD CircuIT

No. 71-1057

ALLEGHENY AIRLINES, INC., Appellant

PENNSYLVANIA PUBLIC UTILITY COMMISSION,

and its Chairman, GEORGE I. BLOOM and WILLIAM

F. O'HARA, JAMES McGIRR KELLY, DANIEL

HUYETT III and LOUIS J. SPARVERO, Members

of The Commission

(D. C. Civil Action No. 69-2148)

On AppeEAL From THE Unitep States District Court

For THE EasTerRN District OF PENNSYLVANIA

Present: Hastie and Rosenn, Circuit Judges,

and McCune, District Judge

JUDGMENT

This cause came on to be heard on the record from the

United States District Court for the Eastern District of

Pennsylvania and was argued by counsel.

bea

Toren

SI INE LOA EGS PANN

“Yee faye

30a

On consideration whereof, it is now here ordered and

adjudged by this Court that the judgment of the said

District Court, filed November 10, 1979, be, and the same

is hereby affirmed, with costs taxed against the appellant.

ATTEST:

Chief Deputy Clerk

July 21, 1972

Certified as a true copy and issued

in lieu of a formal mandate on

September 21, 1972.

Test: FRANCES R. MATYSIK

Deputy Clerk, United States Court

of Appeals for the Third Circuit

3la

United States Court of Appeals

For THE THIRD CIRCUIT

No. 71-1057

ALLEGHENY AIRLINES, INC.,

Appellant

PENNSYLVANIA PUBLIC UTILITY COMMISSION, and

its Chairman, GEORGE I. BLOOM and WILLIAM

F. O'HARA, JAMES McGIRR KELLY, DANIEL

HUYETT III and LOUIS J. SPARVERO, Members of

The Commission

SUR PETITION FOR REHEARING

Present: Seitz, Chief Judge, Hastie, VAN DuseN, ALDISERT,

Gippons, ROSENN, Rusen and Hunter, Circuit Judges

and McCune, District Judge

The petition for rehearing filed by

Allegheny Airlines, Inc.

in the above entitled case having been submitted to the

judges who participated in the decision of this court and

to all the other available circuit judges of the circuit in

regular active service, and no judge who concurred in the

decision having asked for rehearing, and a majority of the

circuit judges of the circuit in regular active service not

having voted for rehearing by the court in banc, the peti-

tion for rehearing is denied. Judge Van Dusen concurs in

32a

this order because he concurs in the result reached by the

opinion of July 21, 1972 as stated in these words: ”. . . we

conclude that the district court did not abuse its discretion

in refusing to exercise its power to intervene.” (p. 16, slip

opinion)

By the Court,

Dated: September 13, 1972 Circuit Judge

Judge Gibbons dissents from the denial of the petition

for rehearing, on the ground that this is an inappropriate

case for abstention.

33a

FEDERAL AVIATION ACT oF 1958:

§1302. Consideration of matters in public interest by

Board

In the exercise and performance of its powers and

duties under this chapter, 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 defense;

(b) The regulation of air transportation in such

manner as to recognize and preserve the inherent

advantages of, assure the highest degree of safety in,

and foster sound economic conditions in, such trans-

portation, and to improve the relations between, and

coordinate transportation by, air carriers;

efficient service by air carriers at reasonable charges,

without unjust discriminations, undue preferences or

advantages, or unfair or destructive competitive

practices;

(d) Competition to the extent necessary to as-

sure 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;

(e) The promotion of safety in air commerce;

and

(f) The promotion, encouragement and develop-

ment of civil aeronautics. Pub.L. 85-726, Title I, §102,

Aug. 23, 1958, 72 Stat. 740.

SS ROTTER NS cheep ee es NRE LAN NTRS TIRE IEEE II IE IT SOE IGE BE SSE TERE EE A TR

Public Utility Law:

$1102. Definitions

The following words, terms and phrases shall have the

meanings ascribed to them in this section, unless the con.

text clearly indicates otherwise.

(5) ‘Common Carrier” means any and all persons or

corporations holding out, offering, or u directly

or indirectly, service for compensation to the public for the

transportation of passengers or property, or both, or any

class of passengers or property, between points within this

Commonwealth by, through, over, above, or under land,

water, or air, and shall include forwarders, but shall not

include contract carriers by motor vehicles, or brokers, or

any bona fide cooperative association transporting property

exclusively for the members of such association on a

nonprofit basis.

(17) Public Utility” means persons or

now or hereafter owning or operating in this Common-

wealth equipment, or facilities for:

mon Carrier;

§1122. Enumeration of acts requiring certificate

Upon the application of any public utility and the

approval of such application by the commission, evidenced

by its certificate of public convenience first had and ob

tained, and upon compliance with existing laws, and not

otherwise, it shall be lawful:

(a) For any public utility to begin to offer, render,

furnish or supply within this Commonwealth service of a

different nature or to a different territory than that av-

thorized by—

_—

35a

(1) A certificate of public convenience heretofore or

hereafter granted under this act or under The Public

Service Company Law, July 26, 1913 (P.L. 1374), or

(2) A registration certificate granted by the commis-

sion under section 1401 of this act, or

(3) An unregistered right, power or privilege pre-

served by section 1401 of this act.

(b) For any public utility to abandon or surrender, in

whole or in part, any service: Provided, That the provisions

of this paragraph shall not apply to discontinuance of ser-

vice to a patron for nonpayment of a bill, or upon request

of a patron.

covered by this section and involving those railroad carriers

OO RO Lr yt OP ey

[rt

clude in its order of approval the terms and conditions it

deems fair and equitable for the protection of the employes.

(d) The terms and conditions which the commission |

prescribes shall provide that, during the period of four ;

years from the effective date of the order, the employes of ;

—

prior to the effective date of the order. Notwithstanding any

other provision of this section, the commission may accept

as fair and equitable an agreement pertaining to the pro-

tection of the interests of the employes entered into by the

railroad carrier and the duly authorized representatives of

the employes.

(e) For any public utility, except a common carrier

by railroad subject to the Interstate Commerce Act, to

— _—e ETE TY IS NT ENN OE

or Proper-

ty of such public utility; or (4) if the property to be trans.

ferred by such public utility is obsolete, worn out or other-

wise unserviceable.

But exceptions (1), (2), (3), and (4) shall not be appii-

cable, and approval of the commission evidenced by a cer-

tificate of public convenience shall be required, if any such

acquisition or transfer of property involves a transfer of

(f) For any public utility to acquire five per centum

or more of the voting capital stock of any corporation.

(g) For any municipal corporation to acquire, con-

struct, or begin to operate, any plant, equipment, or other

facilities for the rendering or furnishing to the public of

any public utility service beyond its corporate limits.

As amended 1963, Aug. 24, P.L. 1225, §2; 1971, July 14,

P.L. — , No. 44, §1.

$1183. Proper service and facilities established on

complaint

Whenever the commission, after reasonable notice

and hearing, upon its own motion or upon complaint, finds

that the service or facilities of any public utility are unrea-

observed, furnished, enforced, or em-

;

order, the

or facilities to be

CcueRBAéA BReEABwBBBRPeeeBwede tees 6B é-sBef & BRS

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.