Petition for Writ of Certiorari — Air Cargo, Inc. v. Breen Air Freight Ltd.

INDEX

PAGE

Opinions Below ae 2

i naar sadncanindeemnantbeitohibesencann a

Questions Presented .........................- 2

Constitutional and Statutory Provisions Involved ...... 3

Statement of the Case [eee ciciodencatcnnsctuaneeteie 4

Nees cupsacstelatiniteeioe 4

SE IIS TOOT ooo... cccccececcsecccesocenesssosocnneecsocse 4

The Agreements Approved by the Civil Aero-

nautics Board Between 1947 and 1962 ................ 6

The Exemption Granted by the Civil Aeronautics

Board in 1962 8

The 1970 Ryd-Air Agreements .........2...2..2.-..--0--0-00-0 8

Reasons for Granting the Writ .........................- 9

ARGUMENT

A. The Conflict with Carnation Co. v. Pacific

Westbound Conference and Ricci v. Chicago

Merchantile Exchange .........-.-..-.-c--c-er-ec-e--cceceecenees 11

B. The Conflict with Pan American World Air-

ways, Inc. v. United States and Hughes Tool

Company v. Trans World Airlines, Ine. ............ 14

C. The Pre-emption of the Antitrust Field Under

Sections 408 and 412 of the Act .-.......00...0......... 16

D. The Denial of Due Process ............22..-..20-00-----+- 18

TE aianins 21

PAGE

Aprenpix A

Opinion of Circuit Court of Appeals for Second

Circuit la

Order Denying Petition for Rehearing .................... 14a

Order Denying Petition for Rehearing in Banc.. lia

Opinion of Irving Ben Cooper, D. J. -.........2.---20-200-+- 16a

Memorandum by Cooper, D. J. on Reargument .... 20a

Order on Reargument and Granting Certification

of an Interlocutory Appeal 22a

Appenpix B

Constitutional Provisions, Statutes and Regula-

tions Involved 24a

ApPENDIxX C

Agreement 30a

Order, Approving Agreement 34a

TaBLE oF AUTHORITIES

Cases:

Armstrong v. Manzo, 380 U.S. 545 (1965) ..................... 20

Brinkerhoff-Faris Co. v. Hill, 281 U.S. 673 (1930) ........ 20

Carnation Co. v. Pacific Westbound Conference, 383

U.S. 213 (1966) 9, 11, 12, 13

Goldberg v. Kelly, 397 U.S. 254 (1970) 20

Hughes Tool Company v. Trans World Airlines, Inc.,

41 U.S.L.W. 4131 (U.S. Jan. 10, 1973) ............ 6, 10, 13, 14,

15, 16, 17

PAGE

Laveson v. Trans World Airlines, Inc., —— F.2d ——

(3d Cir., No. 71-2156, December 26, 1972, 12 CCH Av.

ERS nse rae? 1 Panos oe Re ea 13

Morgan v. United States, 304 U.S. 1 (1938) ..00.0 20

Pan American World Airways, Inc. v. United States,

371 U.S. 296 (1963) ‘ 10, 16, 17

Ricci v. Chicago Mercantile Exchange, 41 U.S.L.W.

4097 (U.S. Jan. 9, 1973) oeeeccccooo- 10, 11, 13

Trans World Airlines, Inc. v. Hughes, 332 F.2d 602

(2d Cir. 1964), cert. dismissed,

RR ME UNIIND csinccxtihbesbinenconiasictondanunaiiarsaibesstionsl 6, 14, 15

Statutes:

Federal Aviation Act of 1958:

§408(a), 72 Stat. 767, 49 U.S.C. §13878(a) _.....000.2..... 3

§412, 72 Stat. 770, 49 U.S.C. §1382 ........ 3, 8, 9, 10, 15, 16

§414, 72 Stat. 770, 49 U.S.C. §1384 oo.

IE II Sscn2snssAncndrndscehustiansinactimlsoecinnisnonsadlbceaien

RG MEMNIN isha cst dbcrtetenssiciabsinoscnbnenainnasivsisescitinemannisapts

Regulations:

Civil Aeronautics Board:

Gomes, 26 C.F... Part SOD: ...-..-cencsc.ce.s-....--

Other Authorities:

United States Constitution:

SL ELLE TTT TOPE:

Restatement of Agency 2d 144

IN THE

Supreme Court of the United States

Octroser TERM, 1972

Arr Carco, Ino., et al.,

Petitioners,

—agaimsit—

Breen Arm Freicut, Lrp., and

Mercury Arr Freicut, Inc.,

Respondents,

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Petitioners, Air Cargo, Inc., Ryder System, Inc., Ryd-

Air, Inc., Air Canada, Airlift International, Inc., Alle-

gheny Airlines, Inc., American Airlines, Incorporated,

British Overseas Airways Corp., Braniff Airways Incor-

porated, Delta Air Lines, Inc., Eastern Air Lines, Incor-

porated, Mohawk Airlines, Inc., National Airlines, Inc.,

Northwest Airlines, Incorporated, Northeast Airlines, In-

corporated, New York Airways, Inc., Flying Tiger Lines,

Ine., Ozark Air Lines, Inc., Pan American World Airways,

Inc., Piedmont Aviation, Inc., Southern Airways, Inc., Sea-

board World Airlines, Inc., Trans World Airlines, Inc. and

United Air Lines, Inc., pray that a writ of certiorari issue

to review the opinion and order of the United States

Court of Appeals for the Second Circuit entered on No-

vember 10, 1972, which affirmed two orders of Judge Irving

ee —

Ben Cooper of the United States District Court for the

Southern District of New York denying petitioners’ mo-

tion to stay this antitrust action on the ground that

primary jurisdiction over the subject matter resided in

the Civil Aeronautics Board.

Opinions Below

The opinion of the Court of Appeals, review of which is

sought, is not officially reported. A copy of this opinion

and of the two opinions of the District Court are set forth

in Appendix A hereto, infra, pp. 1a-23a,

Jurisdiction

The order of the Court of Appeals for the Second Cir-

cuit was entered on November 10, 1972. A timely peti-

tion for rehearing and suggestion for rehearing en banc

was filed on November 22, 1972 and denied on November

29, and December 7, 1972, respectively. The jurisdiction

of this Court is invoked under 28 U.S.C. §1254(1).

Questions Presented

1. Whether the Civil Aeronautics Board has primary

jurisdiction when an antitrust complaint challenges the con-

duct of a wholly-owned subsidiary of the airlines in enter-

ing into agreements covering the pick-up and delivery of

air freight, when such conduct is at least arguably lawful

under the Federal Aviation Act as constituting the imple-

mentation of an agreement among air carriers previously

approved by the Civil Aeronautics Board?

2. When the Civil Aeronautics Board has approved an

agreement among air carriers to employ their wholly-

owned subsidiary to act as their agent in providing “di-

rectly or by contract” the pick-up and delivery of air

freight at all points within the continental United States

served by the air carriers, is the providing of such ser-

vices “by contract” through a subsidiary of a motor car-

rier, in which subsidiary the air carriers owned a minority

interest, immunized from the operations of the antitrust

laws under Section 414 of the Federal Aviation Act?

3." Does Civil Aeronautics Board jurisdiction under Sec-

tions 408 and 412 of the Federal Aviation Act with re-

spect to the relation of common carriers to air carriers

and contracts between air carriers and other carriers, pre-

empt the antitrust field?

4. Are defendants deprived of property without due

process of law in violation of the Fifth Amendment when

a court denies an evidentiary hearing necessary to deter-

mine the subject matter jurisdiction of the Civil Aero-

nautics Board and the consequent immunization of the de-

fendants under the antitrust laws?

Constitutional and Statutory Provisions Involved

The constitutional and statutory provisions involved are

set forth in Appendix B hereto, infra, pp. 24a-29a. They

include the following:

1. United States Constitution, Amendment V.

2. United States Code, Title 49, Sections 1378(a),

1382 and 1384 (Federal Aviation Act $$ 408(a),

412, 414).

3. The Economic Regulations of the Civil Aeronautics

Board, § 289.3 (14 C.F.R., Part 289).

Layee, ‘i uN

i a ES YEE AS ROI

4

Statement of the Case

The Complaint

On February 10, 1971 the plaintiffs Breen Air Freight,

Ltd. (“Breen”) and Mercury Air Freight, Inc. (“Mer-

cury”), commenced this action against Air Cargo, Ince.

(“ACI”), Ryder System, Inc. (“Ryder”), Ryd-Air, Ine.

(“Ryd-Air”) and the defendant air carriers seeking un-

specified treble damages for alleged violation of the anti-

trust laws and claiming damages for breach of contract in

the amount of $1,000,000 plus attorney’s fees and costs.

The complaint (5a-21a)* alleges that the petitioners have

combined and conspired and have engaged in unfair busi-

ness practices designed to eliminate competition and re-

strain trade among carriers engaged in the pick-up and

delivery of domestic air freight in commerce in the Metro-

politan area of the City of New York by removing plain-

tiffs, among others, from the relevant market involved.

The Proceedings Below

On April 23, 1971 petitioners moved to stay the action

on the ground that primary jurisdiction is vested in the

Civil Aeronautics Board under the Federal Aviation Act

of 1958 (22a-23a).

In an order and opinion dated December 6, 1971 the

District Court denied petitioners’ motion for a stay,

stating:

“The activities at issue are not ‘arguably lawfv”

under the Federal Aviation Act. No party to the Ryd-

Air agreement is an ‘air carrier’ under Section 412 (a)

* References are to the Joint Appendix on appeal to the United

States Court of Appeals for the Second Circuit. Unless otherwise

indicated, emphasis is supplied.

—

5

of the Act, 49 U.S.C. §1382(a); the agreement has not

been submitted to the C.A.B.; without C.A.B. approval

actions pursuant to an agreement are not immune from

the antitrust laws.” (App. A, p. 19a).

On motion for reargument petitioners requested an evi-

dentiary hearing to demonstrate that ACI acted as agent

for the airlines in entering the agreement with Ryder Sys-

tem, Inc. of May 30, 1970 (101a-103a) so that “air car-

riers” were thus parties to such agreement, contrary to the

conclusion of the District Court. In a memorandum opinion

dated February 16, 1972 the District Court denied an evi-

dentiary hearing and adhered to its original decision,

stating :

“The record does not contain factual allegations to

support either the position that Air Cargo, Inc. acted

as agent for the airlines in the ACI-Ryder agreement

or to create the necessity of a hearing on this issue.”

(App. A, p. 20a).

Following certification of an interlocutory appeal pursu-

ant to 28 U.S.C. §1292(b), the Court of Appeals on Novem-

ber 10, 1972 affirmed the orders of the District Court deny-

ing the motion for a stay, holding:

“We rest on the ground that the [Ryd-Air] agree-

ments, viewed as interdependent parts of a single inclu-

sive plan, have not been executed by ‘air carriers’ and

that consequently the Board lacks authority to immu-

nize the contracting parties from liability for antitrust

damages.” (App. A, p. 6a).

Alternatively, the Court of Appeals held:

“Even if we were to find that the Board could im-

munize the agreements under its Section 412 authority,

- a

we would still conclude, on the basis of Carnation Co. v.

Pacific Westbound Conference, 383 U.S. 213 (1966)

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

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

393 U.S. 846 (1968), that the doctrine of primary juris-

diction is inapplicable.” (App. A, p. 10a).

The Court explained this conclusion saying:

“The Board’s 1947 approval of ACI merely author-

izes its establishment and approves its then-contem-

plated activities which flow therefrom. Trans World

Airlines, Inc. v. Hughes, 332 F.2d 602 (2d Cir. 1964).”

(App. A, pp. 12a-13a).

The decision upon which the Court of Appeals thus

rested, Trans World Airlines, Inc. v. Hughes, has since been

reversed by the decision of this Court in Hughes Tool Com-

pany v. Trans World Airlines, Inc., 41 U.S.L.W. 4131 (U.S.

Jan. 10, 1973).

The Agreements Approved by the Civil Aeronautics Board

Between 1947 and 1962

On December 31, 1947 the Civil Aeronautics Board

(“CAB”) approved an agreement under which the US.

scheduled airlines employed their wholly owned subsidiary,

ACI, to act as their agent in providing cartage services for

the ground transportation of air freight at each airport

served in the continental United States (43a-46a).* The

agreement contemplated that ACI would provide such ser-

vices “directly or by contract” (40a).

In 1948 the CAB reaffirmed its approval of this agree-

ment saying:

* Pertinent provisions of this agreement and of CAB Order

Serial No. E-1086 are set forth in Appendix C, infra, pp. 30a-37a.

7

“We are fully in sympathy with all efforts of air

carriers to reduce costs by consolidation of individual

duplicating ground and terminal facilities. These ef-

forts are clearly within the scope of the policy of Sec-

tion 2 of the Civil Aeronautics Act and thus in the

public interest. ... Cooperative efforts of air carriers

to accomplish these results through agreements such

as that establishing Air Cargo receive, and will con-

tinue to receive, our support and encouragement” 9

C.A.B. 468, 469 (1948).

By reason of such approval ACI and the defendant air

carriers were relieved from the operations of the antitrust

laws under Section 414 of the Civil Aeronautics Act of 1938,

52 Stat. 1004, which provided:

“Any person affected by any order made under sec-

tions 408, 409, or 412 of this Act shall be, and is hereby,

relieved from the operations of the ‘antitrust laws,’ as

designated in section 1 of the Act entitled ‘An Act to

supplement existing laws against unlawful restraints

and monopolies, and for other purposes,’ approved

October 15, 1914, and of all other restraints or prohibi-

tions made by, or imposed under, authority of law,

insofar as may be necessary to enable such person to

do anything authorized, approved, or required by such

order.” *

Under the 1947 agreement ACI could have provided such

cartage service “directly,” i.e., by employing its own drivers

and trucks. Initially, however, it was not deemed feasible

for ACI to provide such services “directly.” Instead ACI

provided the service “by contract” (27a).

: * Section 414 of the Civil Aeronautics Act of 1938 is continued

in effect under Section 414 of the Federal Aviation Act of 1958,

72 Stat. 770, 49 U.S.C. §1384.

as NIE PT LOMB TAY SILT NI LEE S

—

8

Save at a few of the larger airports, where it was neces.

sary to contract with more than one trucker, ACI con-

tracted with a single motor carrier in each area to provide

the pick-up and delivery service. The CAB in 1952 de-

scribed such carriers as “the recognized ‘airline cartage

agent’ for the area, a single trucking concern with which

Air Cargo has contracted for pickups and deliveries serving

all the certificated airlines in the area” 15 C.A.B. 850, 851

(1952).

Between 1948 and 1962 each of the contracts between

ACI and the local motor carriers was filed with and ap-

proved by the CAB pursuant to Sections 412 and 414 of

the Federal Aviation Act (49 U.S.C. §§1382 and 1384)*

(27a).

The Exemption Granted by the Civil Aeronautics Board

in 1962

Because the ACI cartage contracts were substantially

identical in form, and because the airline tariffs filed with

the CAB described the services provided and the rates

charged (28a), the CAB, effective March 8, 1962, dispensed

with the requirement that the ACI cartage agreements be

filed under Section 412 of the Act.**

The 1970 Ryd-Air Agreements

For a number of years prior to 1970 ACI had contracted

with the plaintiffs, Breen and Mercury, to provide cart-

age services for the defendant airlines in the New York

Metropolitan area (16a, 18a). By 1970 the services of

* Prior to 1958 such filing and approval was effected under Sec-

tions 412 and 414 of the Civil Aeronautics Act of 1938, 52 Stat.

1004.

** Economic Regulations, Civil Aeronautics Board §289.3 (App.

B, pp. 27a-28a).

—

9

Breen and Mercury had deteriorated to such an extent

that replacement of these carriers became necessary (33a).

The airlines requested ACI to consider providing cartage

service directly, but once again direct service was found

to be impracticable (33a).

As an alternative to direct service, ACI on May 30, 1970

contracted with the defendant Ryder. Ryder agreed to

form a subsidiary to be known as Ryd-Air, Inc. in which

ACI, as agent for the air carriers, would own a 20% minor-

ity interest (10la). The sole purpose of incorporating

Ryd-Air was to permit it to “perform air freight pick-up

and delivery service in New York City Area A” (101a).

Following the formation of Ryd-Air, ACI on June 30,

1970 entered into its standard form of pick-up and delivery

service contract with Ryd-Air under which Ryd-Air agreed

to perform cartage services for the air carriers in New

York City (149a-187a). This cartage agreement, which is

continuing in effect, is substantially identical with all other

cartage agreements between ACI and local motor carriers

throughout the United States, except that Ryd-Air is guar-

anteed its operating costs plus a 5% profit (34a; 153a).

Because of the exemption provided by Section 289.3 of

the CAB’s Economic Regulations, the 1970 Ryd-Air agree-

ments were not filed with the CAB under Section 412 of

the Act (28a).

Reasons for Granting the Writ

The decision of the Court of Appeals is in direct conflict

with the holding of this Court in Carnation Co. v. Pacific

Westbound Conference, 383 U.S. 213, 220 (1966), that courts

must refrain from imposing antitrust sanctions for activi-

ties of “debatable legality” under administrative agency

——

10

jurisdiction. Contrary to this Court’s ruling in Carnation,

the Court of Appeals here would defer to the administrative

agency only when the activities involved had been “ex-

plicitly” approved by the administrative agency.

The decision of the Court of Appeals is also in conflict

with the decision of this Court in Pan American World

Airways, Inc. v. United States, 371 U.S. 296 (1963), and the

very recent decision of this Court in Hughes Tool Company

v. Trans World Airlines, Inc., 41 U.S.L.W. 4131 (U.S. Jan.

10, 1973), decided subsequent to the decision of the Court

of Appeals, that transactions under the control and sur-

veillance of the Civil Aeronautics Board by virtue of the

Federal Aviation Act are not subject to the antitrust laws.

The decision of the Court of Appeals is likewise in con-

flict with the decision of this Court in Ricci v. Chicago

Mercantile Exchange, 41 U.S.L.W. 4097 (U.S. Jan. 9, 1973),

also decided after the decision below, that judicial pro-

ceedings should be stayed to afford opportunity for ad-

ministrative consideration “when conduct seemingly within

the reach of the antitrust laws is also at least arguably

protected or prohibited by another regulatory statute en-

acted by Congress” 41 U.S.L.W. at 4100-01.

The decision of the Court of Appeals entirely ignores the

considerations which led the CAB in 1962 to exempt the

airlines from the requirement that cartage agreements,

such as the one here challenged, be filed with the CAB under

Section 412 of the Act. As a result, the validity of over 400

such cartage agreements throughout the United States may

be subject to challenge.

The decision of the Court of Appeals that the CAB has

no jurisdiction in this case ignores a quarter of a century’s

surveillance by the CAB of the activities of ACI in provid-

_ing cartage services for its air carrier members.

a

In reaching this decision the Court of Appeals and the

District Court have denied the air carrier defendants an

evidentiary hearing which would have demonstrated con-

clusively that the CAB had and has jurisdiction in this

matter.

11

The decision thus violates due process of law, emascu-

lates an important section of the Federal Aviation Act

and invites collision between the CAB and the courts.

As in Ricci v. Chicago Mercantile Exchange, supra at

4100, the problem to which the Court of Appeals ad-

dressed itself in this case “is recurring,” and is of im-

portance in the administration of the antitrust laws and

the Federal Aviation Act.

ARGUMENT

A. The Conflict with Carnation Co. v. Pacific Westbound

Conference and Ricci vy. Chicago Mercantile Exchange.

There is a direct conflict between the holding of the Court

of Appeals in this case and the holding of this Court in

Carnation Co. v. Pacific Westbound Conference, supra. The

holding of this Court in Carnation Co. was specific:

“... courts must refrain from imposing antitrust

sanctions for activities of debatable legality under the

Shipping Act in order to avoid the possibility of con-

flict between the courts and the Commission” 383 U.S.

at 220.

Here the CAB in 1947 had approved an agreement

among the airlines to employ ACI, as their agent, to provide

cartage service for the pickup and delivery of air freight

at every airport in the United States. This agreement ex-

pressly provided that ACI was to provide such cartage

service for the airlines “directly or by contract” (40a).

Ho RAO Sie PELE NY SO Ree Oe NE EOE RE ay ah ra, EE

oe cm

12

In implementation of that agreement, ACI, as the agent

of the airlines, entered into an agreement with Ryder to

form Ryd-Air and a cartage agreement with Ryd-Air for

the pickup and delivery of air freight in the New York

area.®

How then may the airlines’ 1970 conduct be challenged

as a violation of the antitrust laws? Certainly it would ap-

pear that ACI, acting as agent for the airlines, was acting

precisely as the CAB contemplated ACI would act under

the 1947 agreement. ACI was merely providing cartage

services for the airlines in the New York area “by contract”

with Ryd-Air. At the very least, the conduct of ACI and

the defendant air carriers was thus “arguably lawful” and

the Court of Appeals should have stayed this action in the

light of this Court’s decision in Carnation Co., supra.

In order to reach its contrary decision in this case, the

Court of Appeals made a finding that the CAB in 1947

clearly intended “that the future activities of ACI were to

be limited under the Order** to those explicitly set out in

the 1947 agreement” and that these activities did not con-

template an agreement with a cartage agent in which the

airlines owned a minority interest, or the formation of such

a company (App. A, p. 12a).

The Court of Appeals would thus emasculate the holding

of this Court in Carnation Co. that the courts must not

impose antitrust sanctions for activities of “debatable

legality”. If there is “explicit approval”, legality is not

“debatable” and there is no need for the application of

*The cartage agreement with Ryd-Air recites that ACI was

“acting as agent for and on behalf of Air Carriers, who are stock-

holders or associate participants in the Company [ACI]” (149a).

** CAB Order Serial No. E-1086, December 31, 1947, App. C,

pp. 34a-37a.

13

primary jurisdiction ; such a case, in view of the provisions

of Section 414 of the Act, should be dismissed,* not merely

stayed and referred back to the Board.

Even where the administrative agency regime is not

pervasive, as here, this Court has stayed judicial proceed-

ings to provide to the antitrust court the help of a prior

determination by the regulatory agency in arriving “at

the essential accommodation between the antitrust and the

regulatory regime.” Ricci v. Chicago Mercantile Exchange,

supra, 41 U.S.L.W. at 4103. A fortiori the Court of Ap-

peals here should have stayed this action pending refer-

ence to the CAB.**

* Hughes Tool Company v. Trans World Airlines, Inc., supra,

41 U.S.L.W. 4131.

** The decision of the Court of Appeals here is also in direct

conflict with the subsequent decision of the United States Court

of Appeals for the Third Circuit in Laveson v. Trans World

Airlines, Inc., F.2d —— (No. 71-2156, December 26, 1972,

12 CCH Av. Cas. 17,684), where the Court stayed an antitrust

action charging the defendant airlines with conspiring to fix the

price for the rental of headsets used with inflight motion pictures

on the ground that the CAB had primary jurisdiction. In 1967,

12 domestic air carriers, including defendants, had filed with the

CAB for approval under Section 412 of the Act an agreement

providing for a “$2 charge for visual inflight entertainment on

domestic flights.’ The CAB subsequently deferred definitive action

on the filed agreement and stayed effectiveness of an amendment

to its Economic Regulations so as to require the carriers offering

visual inflight entertainment to provide a charge therefor in their

tariffs. Rejecting an argument that courts may not properly defer

to agency jurisdiction when the CAB has not yet expressly ap-

proved the alleged illegal agreement, and expressly following this

Court’s holding in Carnation Co., supra, the Court stated “... re-

gardless of the particular remedy sought, the subject matter of this

action falls within the regulatory jurisdiction of the CAB” 12 CCH

Av. Cas. at 17,689.

NLT REBT ALO ELD TENE NOESY I HIE IRE GRASP REO

a

14

B. The Conflict with Pan American World Airways, Inc. y,

United States and Hughes Tool Company v. Trans World

Airlines, Inc.

When the defendants in this case moved to stay the pres-

ent action and, indeed, when the Court of Appeals handed

down its decision on November 10, 1972, this Court had not

yet rendered its decision in Hughes Tool Company v. Trans

World Airlines, Inc., supra.

In the light of this Court’s holding in Hughes, the com-

plaint herein should be dismissed, not merely stayed.

In concluding that the CAB’s 1947 approval empowering

ACI to provide cartage services for the defendant airlines

“directly or by contract”, did not authorize ACI to contract

for such cartage services with Ryd-Air, the Court of Ap-

peals relied on its 1964 holding in Trans World Airlines,

Inc. v. Hughes, 332 F.2d 602, cert. dismissed, 390 U.S. 248

(1965).*

The 1964 decision of the Court of Appeals has now been

reversed by this Court in Hughes Tool Company v. Trans

World Airlines, Inc., supra,

Here, as in Hughes, the CAB had retained jurisdiction

and exercised surveillance over the activities of ACI for

over a quarter of a century. When it reaffirmed its 1947

order on September 2, 1948 the CAB stated:

“Cooperative efforts of air carriers to accomplish

these results [the consolidation of individual duplicat-

ing ground and terminal facilities] through agreements

*The Court of Appeals stated (App. A, pp. 12a-13a) :

“The Board’s 1947 approval of ACI merely authorizes its

establishment and approves its then-contemplated activities

which flow therefrom. Trans World Airlines, Inc. v. Hughes,

332 F.2d 602 (2 Cir. 1964) ; see Federal Aviation Act 414, 49

U.S.C. § 1384.”

15

such as that establishing Air Cargo receive, and will

continue to receive, our support and encouragement”

9 C.A.B. 468, 469 (1948),

In succeeding years the CAB specifically approved hun-

dreds of ACI cartage agreements filed with it pursuant to

Section 412 of the Act (27a). All of these agreements

granted the local trucker so employed the exclusive right

to serve the airlines. The CAB expressly noted this prac-

tice with approval in 1952, describing such truckers “as

the recognized ‘airline cartage agent’ for the area” 15

C.A.B. 850, 851 (1952).

As above noted,* the ACI cartage agreements were iden-

tical in form and the anticompetitive considerations the

same. Accordingly, after specifically approving hundreds

of ACI cartage agreements, the CAB in 1962 dispensed

with the requirement that such agreements be filed under

§412 of the Act. For that reason the 1970 ACI cartage

agreement with Ryd-Air was not filed with the CAB

(28a). Notwithstanding the absence of filing and specific

approval in 1970, the action of ACI in arranging to have

Ryd-Air provide cartage service for the airlines “by con-

tract” was clearly authorized by the 1947 approval of the

CAB. Thus, as in Hughes, the Court of Appeals here

erred “in construing and applying § 414, which immunizes

from antitrust liability any conduct approved, authorized

or required by any Board ordrer issued under” § 412.°°

Furthermore, the Court of Appeals misapprehended the

significance of the CAB’s surveillance over ACI. Instead,

it followed the approach taken in its 1964 decision in

Trans World Airlines, Inc. v. Hughes, supra, 332 F.2d

602, by ascribing an extremely limited area of jurisdic-

* Supra, p. 8.

** 41 U.S.L.W. at 4138,

—— MATER ESPEN WIRES TORI B CI RN 7 RID CTRL NAT BELEN YE

16

tion for the CAB. Thus, as this Court noted in 1973, the

Court of Appeals had held that “TW4A’s complaint against

Toolco was ‘unrelated to any specific function of the CAB’

and hence was not within the exclusive competence of that

body” 41 U.S.L.W. at 4137. Here the Court of Appeals

took an equally narrow view of the jurisdiction of the

CAB by declaring that “[a’s we interpret the CAB order,

it cannot possibly have comprehended the formation of

Ryd-Air or approved its creation years after the issuance

of the order.” (App. A, p. lla). It was precisely this

overly restrictive view of CAB jurisdiction that was sub-

sequently rejected by this Court in Hughes Tool Company

v. Trans World Airlines, Inc.

The complaint should be dismissed, not merely stayed.

C. The Preemption of the Antitrust Field Under Sections

408 and 412 of the Act.

In Pan American World Airways, Inc. v. United States,

371 U.S. 296 (1963), this Court held that the jurisdiction

of the CAB under §408 of the Act pre-empted the antitrust

field “even though the CAB had taken no action to investi-

gate ... the alleged misfeasance. .. .” Hughes Tool Com-

pany v. Trans World Airlines, Inc., supra at 4138. In

reaching this conclusion as to the scope of the CAB juris-

diction this Court emphasized, 371 U.S. at 305, that “the

relation of common carriers to air carriers” is “basic in

this regulatory scheme” and that “the acts charged in this

civil suit as antitrust violations are precise ingredients

of the Board’s authority . . . in allowing or disallowing

affiliations between common carriers and air carriers.”

Here, as in Pan American, there is present an affiliation

between a common carrier, Ryd-Air, and air carriers act-

ing through their agent, ACI.

Here, as in Hughes, there was CAB control and surveil-

lance over the activities of ACI for 25 years.

x

lh

17

The CAB, in its Order* approving the employment of

ACI by the air carriers to provide “directly or by contract,

pick-up and delivery services at all points within the con-

tinental United States” served by the air carriers (App. C,

p. 32a), made clear its intention to exercise control and

surveillance over the activities of ACI, stating:

“,.. the future development of Air Cargo, Inc. is un-

certain and ... its activities may require future recon-

sideration of the approval granted herein;” (App. C,

p. 36a).

Accordingly, the CAB conditioned its approval of the

employment of ACI by requiring:

“(1) That Air Cargo, Inc. and its member air car-

riers supply to the Board copies of such agreements

and documents and submit such information in rela-

tion to the activities of Air Cargo, Inc. as may be

prescribed or requested by the Economic Bureau of

the Board.” (App. C, p. 35a).

The air carriers and ACI have fully complied with all

requirements prescribed or requested by the CAB’s Eco-

nomic Bureau and the CAB has continued to exercise eon-

trol and surveillance over the activities of ACI.**

Accordingly, pursuant to the decisions of this Court in

Pan American World Airways, Inc. v. United States and

Hughes Tool Company v. Trans World Airlines, Inc., supra,

the complaint herein should be dismissed on the ground

*CAB Order Serial No. E-1086, December 31, 1947, App. C,

pp. 34a-37a.

** See, e.g., 9 C.A.B. 468 (1948) ; 15 C.A.B. 850 (1952) ; Order

No. E-14601 (1959); Order 68-7-40 (1968). Hundreds of ACI’s

cartage agreements were approved by the CAB between 1947 and

1962 when the CAB dispensed with the requirement that such

agreements be filed under Section 412 of the Act (Economic Regula-

tions §289.3, App. B, pp. 27a-28a).

18

that CAB jurisdiction under Sections 408 and 412 of the

Act pre-empts the antitrust field.

D. The Denial of Due Process.

The Court of Appeals held that ACI is not an “air car-

rier” and hence the CAB would have jurisdiction only

when ACI contracts as agent for the airlines, who would

then become parties to the contract as disclosed principals

of their agent, ACI. Restatement of Agency 2d 7144.

The Court of Appeals admits that the cartage agreement

between ACI and Ryd-Air of Jane 30, 1970 (149a-187a)

would clearly fall within the CA®’s jurisdiction, since

that agreement expressly recited that ACI was “acting as

agent for and on behalf of the Air Carriers” (149a).

That admission would seem to dispose of any contention

that the CAB does not have jurisdiction in this case. The

only important agreement here is the agreement to employ

Ryd-Air % perform cartage services for the airlines in the

New York ares, thus ousting plaintiffs from performing

such services.

Nonetheless, the Court of Appeals held that the CAB in

this case “lecks authority to immunize the contracting

parties frem iiebility for antitrust damages.” (App. A, p.

6a).

In order to reach this conclusion the Court of Appeals ig-

noved the ACI-Ryd-Air cartage agreement of June 30, 1970.

Instead it focused solely on “the first of the two agree-

ments, the one by which ACI agreed to participate in the

crea‘ion of Ryd-Air.” (App. A, p. 7a).

The Court of Appeals then found that ACI was not acting

as agent for the airlines in signing this agreement with

Ryder System, Inc. of May 30, 1970. This finding rested

on a negative inference, i.e., “there is no indication on the

B — . ‘ ee eS

—

19

face of the Ryd-Air agreement that ACI signed it as an

agent of the airlines.” (App. A, p. 8a).

Such a finding ignores the fact that ACI is a wholly

owned subsidiary of the airlines. Furthermore, it ignores

the affirmative evidence on the face of this agreement that

ACI was acting as agent for the airlines. The agreement

expressly recited that:

“... the parties have agreed that a subsidiary of Ryder

shall perform air freight pick-up and delivery service

in New York City Area A pursuant to a Pick-up and

Delivery Service contract between Air Cargo and such

subsidiary, .. .” (101a).

As the Court of Appeals stated, the two agreements

were “interdependent” and “inseparable” (App. A, pp. 6a-

7a). Both agreements were “a single inclusive plan” for

pick-up and delivery service in the New York area. Since

ACI was admittedly acting as agent of the airlines in

one of the “inseparable” agreements, it clearly was acting

as such agent in the other.

The Court of Appeals then rejected the airlines’ conten-

tion that they had ratified ACI’s actions by their subsequent

dealings with Ryd-Air under the cartage agreement of June

30, 1970. In rejecting this contention, the Court of Appeals

said ;

“Here there is no evidence in the record that the air-

lines knew the material facts involved in the formation

of Ryd-Air or that they communicated a desire to

ratify its formation.” * (App. A, p. 10a).

In the District Court the airlines had requested an evi-

dentiary hearing to demonstrate in fact that ACI was act-

* As the plaintiffs are fully aware, this finding is contrary to

fact. The April 28, 1970 minutes of the meeting of ACI’s direc-

tors, produced on discovery to plaintiffs, show that (1) vice pres-

idents of seven airlines attended this meeting as ACI directors.

— LR SS, MFR TIER SRI ee

20

ing as their agent in both Ryd-Air agreements and that

they did know “the material facts involved in the formation

of Ryd-Air.”

The District Court denied this request for an eviden-

tiary hearing, saying:

“The record does not contain factual allegations to

support either the position that Air Cargo, Inc. acted

as agent for the airlines in the ACI-Ryder agreement

or to create the necessity of a hearing on this issue.”

(App. A, p. 20a).

Solely because an evidentiary hearing was denied, the

Court of Appeals has determined—contrary to fact—that

ACI was not acting as agent for the airlines when it negoti-

ated and signed “the first of the two agreements, the one

by which ACI agreed to participate in the creation of Ryd-

Air.” (App. A, p. 7a).

Manifestly the refusal to grant a hearing on this all-im-

portant evidentiary fact denied defendants due process of

law—“using that term in its primary sense of an oppor-

tunity to be heard and to defend its substantive right.”

Brinkerhoff-Faris Co. v. Hill, 281 U.S. 673, 678 (1930).

“The right to a hearing embraces . . . the right to present

evidence,” Morgan v. United States, 304 U.S. 1, 18 (1938).

“A fundamental requirement of due process is ‘the oppor-

tunity to be heard.’ Granms v. Ordean, 234 U.S. 385, 394.”

Armstrong v. Manzo, 380 U.S. 545, 552 (1965). The de-

fendants here have been denied “an effective opportunity

to defend .. . by presenting . . . [their] own arguments

and evidence orally.” Goldberg v. Kelly, 397 U.S. 254, 268

(1970).

and (2) the meeting approved the negotiation of the two Ryd-Air

agreements following a request by ACI’s president that there be a

policy determination of this matter at the airlines’ corporate gen-

eral office level.

Re

SARDPSE GAIN RIPEN ERIE NY SER ROS Fa Speen aap yt ata YR SIO CRT

21

CONCLUSION

For the reasons stated, this writ should be granted and

the order of the Court of Appeals for the Second Circuit

reversed.

Respectfully submitted,

Haroitp L. Warner, JR.

25 Broadway

New York, New York 10004

Counsel for Petitioners other than

Ryder System, Inc. and Ryd-Air, Inc.

Of Counsel:

Cart S. Rowe

EpmMunp E. Harvey

ZacHARY SEIMER

CHADBOURNE, ParKE, WHITESIDE & WoLFF

25 Broadway

New York, New York 10004

Georce D. Reycrarr

One Wall Street

New York, New York 10005

Counsel for Petitioners

Ryder System, Inc. and Ryd-Air, Inc.

Of Counsel :

P. Jay Fuocken

CapwaLaDER, WICKERSHAM & Tart

One Wall Street

New York, New York 10005

February 22, 1973

as SRE SHEEN OTC ee RE

eel

Ba ety a)

APPENDIX A

Opinion of Circuit Court of Appeals for Second Circuit

UNITED STATES COURT OF APPEALS

For THE Seconp Circuit

No. 91—September Term, 1972.

(Argued October 19, 1972 Decided November 10, 1972.)

Docket No. 72-1500

Breen Ark Freicut, Lrp., and

Mercury Arr Freicut, Inc.,

Plaintiff s-A ppellees,

—_—V—

Arr Carco, Inc., Ryper System, Inc., Ryp-Am, Inc., Arr

Canapa, Arrtirr INTERNATIONAL, INc., ALLEGHENY AIR-

uinEs, Inc., AMERICAN AIRLINES, INCORPORATED, BRITISH

Overseas ArrwAys Corp., BranirF Arrways IncorpPo-

RATED, Detta Arr Linzs, Inc., Eastern Arr Lines, In-

CORPORATED, MoHAWK AIRLINES, Inc., NaTIONAL AIRLINES,

Inc., NortHwest AIRLINES, INcoRPORATED, NORTHEAST

Arruinss, Iycorporatep, New York Airways, Inc., Fiy-

inc TicEr Liygs, Inc., Ozark Arr Lines, Inc., Pan AMER-

can Worup Arrways, Inc., Prepmont Aviation, Inc.,

SoutHErn Arrways, Inc., Szasoarp Wortp AIRLINES,

Inc., Trans Wornp Arrives, Inc., and Unirep Arr

Lrygs, Inc.,

Defendants-A ppellants.

Before:

WaterMAN, SMITH and KaurMan,

Circuit Judges.

i RN AOE Hm RTL NE OE TAL LINES RELLY LTE II LENT Fe OLLIE PII LETS LN REY

rss : x % vs eer S

——y

2a

Appendiz A

Plaintiffs-appellees brought their action in the United

States District Court for the Southern District of New

York seeking treble damages from defendants-appellants

as violators of the antitrust laws. Defendants’ motion for

a stay on the ground that the Civil Aeronautics Board had

primary jurisdiction over the subject-matter of the com-

plaint was denied, Cooper, J., and defendants appealed.

Order affirmed.

Epwarp Bropsky, Rosert E. Srarrorp, Gold-

stein, Shames & Hyde, New York City, for

Plaintiffs-Appellees.

Harotp L. Warner, ZacHary Sumer, Chad-

bourne, Parke, Whiteside & Wolff, New

York City, for Defendants-Appellants other

than Ryder System, Inc. and Ryd-Air, Inc.

Georce D. Reycrart, P. Jay Fuiocxen, Cad-

walader, Wickersham & Taft, New York

City, for Defendants-Appellants Ryder Sys-

tem, Inc. and Ryd-Air, Inc.

Waterman, Circuit Judge:

This is an interlocutory appeal from two orders in which

Judge Irving Ben Cooper of the Southern District of New

York denied defendant-appellants’ motion to stay this anti-

trust action. Defendants claimed that the facts plaintiffs

allege show that primary jurisdiction over the subject

matter resided in the Civil Aeronautics Board (CAB).

Plaintiffs allege that defendants have committed viola-

tions of the antitrust law through their concerted refusal

to deal with plaintiffs as airfreight cartage agents in met-

tropolitan New York City. Defendants claim that plaintiffs’

—

3a

Appendix A

action should be stayed until such time as the CAB has

had an opportunity to conduct administrative proceedings

on the complaint. After the motion for a stay was denied

Judge Cooper certified an interlocutory appeal on the

ground that an important controlling question of law was

involved in the case and an immediate appeal from his

ruling might materially advance the ultimate termination

of the litigation. Appellants then moved in this court for

leave to appeal pursuant to 28 U.S.C. § 1292(b) and Rule 5

of the Fed. R. App. Pro., and we granted the motion. The

sole issue before us is whether the doctrine of primary

jurisdiction is operative under the circumstances here, so

as initially to deprive the antitrust court of jurisdiction.

For reasons which follow, we hold that the doctrine is

not applicable here and we affirm the orders below denying

the motion for a stay.

Under the Federal Aviation Act of 1958 (72 Stat. 731)

the CAB is given broad authority to regulate certain

aspects of the airline industry throughout the United

States. See Pan American World Airways, Inc. v. United

States, 371 U.S. 296 (1963). Pursuant to this authority the

CAB is empowered to approve agreements among air

carriers and air carriers and common carriers affecting

air transportation. 49 U.S.C. § 1382. All agreements af-

fecting air transportation must be filed prior to their im-

plementation by the air carriers which are party to them,

and, once approved by the CAB, these agreements are

exempt from the operation of the antitrust laws, 49 U.S.C.

§ 1384, and the Board may also enjoin anticompetitive be-

havior among air carriers, 49 U.S.C. § 1381.

Plaintiffs Breen Air Freight, Ltd. and Mercury Air

Freight, Inc. are corporations which formerly were en-

gaged under contract with defendant Air Cargo, Ine.

aa EAMONN ENS MEGA SOR AERO REP ENE

4a

Appendia A

(ACI) in the pickup and delivery of air freight in metro-

politan New York City. Breen had been so engaged since

1967 and Mercury since 1948. In 1970 ACI refused to

renew their contracts and, instead, signed a contract with

defendant Ryd-Air, Inc., whereby Ryd-Air became exclu-

sive cartage agent in New York City. Plaintiffs claim that

this decision not to renew their contracts and the correla-

tive agreement with Ryd-Air constitute a violation of the

antitrust laws, and they seek treble damages.

With the approval of the CAB defendant ACI was first

established in 1941 by seventeen certified air carriers as

a joint research corporation. By 1944 its research had

been completed and ACI became inactive. In 1947 ACI

was reactivated by an agreement among the airlines to

provide, directly or by contract, terminal and cartage

services as agent of the air carriers. This agreement was

filed with the Board and was approved by the Board by its

Memorandum Order of December 31, 1947. The Board

specified that it would require ACI to file such future

ACI contracts and documents as its Economic Bureau

should prescribe needed Board approval. Over 200 cartage

contracts, such as those under which Breen and Mercury

had been operating, were submitted and approved. As of

March 8, 1962, however, the Economic Bureau exempted

cartage contracts from the filing requirements and since

that date ACI has not been required to file and has not

filed with the Board its “pick-up and delivery contracts”

with local agents.

In 1970 ACI executed two agreements with defendants

Ryder System, Inc. and Ryd-Air. These agreements con-

stitute the basis of the antitrust complaint. The first pro-

vided for the formation of Ryd-Air; it was to be a sub-

sidiary of Ryder created for the purpose of providing

5a

Appendia A

cartage services in metropolitan New York City. ACI took

a 20% stock interest in Ryd-Air and two of five seats on

the Board of Directors. Immediately thereafter Ryd-Air

executed a second agreement, a cartage contract with ACI,

by which it became the exclusive airfreight cartage agent

in New York City. These agreements, although embodied

in separate documents, were clearly part of a single inclu-

sive plan wherein Ryd-Air would be formed, and, when

formed, would then become the exclusive cartage agent in

New York. Neither the Ryd-Air incorporation document

nor the cartage contract was filed with or explicitly ap-

proved by the Board.

In opposition to plaintiffs’ antitrust allegations defen-

dants contend that even though these agreements have

neither been filed nor approved by the CAB they have been

immunized from the operation of the antitrust laws. As to

the agreement creating Ryd-Air, they assert that this agree-

ment is nothing more than an implementation of the air

carriers agreement of 1947 which the Board had approved

by its 1947 Order. As to the cartage contract, they assert

that it was, and is, exempt from the filing requirement by

the amended regulation of March 8, 1962 issued by the

Economic Bureau. Alternatively, defendants urge that in-

asmuch as both agreements are at least “arguably lawful”

(i.e., “arguably approved”) the antitrust court must defer

to the CAB under the authority of Carnation Co. v. Pacific

Westbound Conference, 383 U.S. 213 (1966) and Allied Air

Freight, Inc. v. Pan American World Airways, Inc., 393

F.2d 441 (2 Cir. 1968), cert. denied, 393 U.S. 846 (1968).

1 Carnation was a private action for treble damages in which

Plaintiff alleged that a rate increase charged by defendant shipping

corporations was a violation of the antitrust laws. Defendant

Shipping Conference claimed they and their members were totally

immune from the antitrust laws by virtue of the Shipping Act of

<meta ——— TT

6a

Appendix A

This court cannot agree that the agreements have been

immunized, that they are “arguably lawful,” or that the

CAB has jurisdiction, primary or otherwise, to immunize

them. We rest on the ground that the agreements, viewed

as interdependent parts of a single inclusive plan, have

not been executed by “air carriers” and that consequently

the Board lacks authority to immunize the contracting par-

ties from liability for antitrust damages.’ Accordingly,

nothing would be gained by sending the agreements back

to the CAB for preliminary administrative agency action

and we decline to do so. See Silver v. New York Stock

Exchange, 373 U.S. 341 at 357-358; Thill Securities Corp.

v. New York Stock Exchange, 433 F.2d 264 (7 Cir. 1970)

cert. denied, 401 U.S. 994 (1971) (Chief Judge Swygert

concurring at 277).

1916 which, they alleged, repealed all antitrust regulation of the

rate-making activities of the shipping industry. They relied on

the Court's prior decisions in U.S. Navigation Co. v. Cunard Steam-

ship Co., 284 U.S. 474 (1931) and Far East Conference v. U.S,,

342 U.S. 570 (1951). However, the Supreme Court interpreted

these decisions as permitting an antitrust suit for damages if the

activities being attacked are not “arguably lawful” under the regu-

latory statute. Inasmuch as the activities were “arguably lawful”

in Carnation, the Court determined that the judicial proceedings

should be stayed, pending a determination by the Commission of

the legality of the defendants’ activities.

In Allied this court had before it a case “in all respects analogous

to the Carnation case except that the alleged agreement concededly

has not been passed upon by the CAB.” 393 F.2d at 448. The

district court had granted a stay, but our court reversed the dis-

trict court, vacated the stay order, and instructed the district court

to carry forward the proceedings on the antitrust claims.

2 It is clear under Section 412 of the Act (49 U.S.C. §1382) that

the Board can only approve and thereby immunize agreements to

which “air carriers” are parties. Additionally, under Section 411

(49 U.S.C. §1381), the Board can issue cease and desist orders

against air carriers, foreign air carriers, and ticket agents which

are engaged in unfair methods of competition.

es ae ak a a Ae costes

7a

Appendia A

Also, inasmuch as the two agreements are inseparable,

any authority the Board might have to immunize the par-

ties from antitrust proceedings must be a broad enough

authority to encompass the right to administrative control

over the effectuation of both of them. Accordingly, we turn

our attention to the first of the two agreements, the one by

which ACI agreed to participate in the creation of Ryd-Air.

Although we find little assistance in the definitional sec-

tion of the Federal Aviation Act of 1958 to help us define

the phrase “air carrier” (49 U.S.C. § 1301(3) & (10)),? we

think it clear from ACI’s activities that ACI is not an “air

carrier.” ACI was formed as a subsidiary of the airlines

for the limited purpose of acting solely as their agent in

providing terminal and cartage services directly or by

contract. From 1947 until the present ACI has functioned

primarily as a contracting agent of the airlines; it cannot,

and has not, engaged in the transportation of people or of

cargo by air. Similarly, Ryder has never engaged in air

transportation; its business is ground transportation. On

the face of the Ryd-Air agreement it is obvious that neither

of the signatories are “air carriers.”

* Subsections (3) and (10) of Section 101 of the Federal Avia-

tion Act of 1958 (49 U.S.C. §1301) read as follows:

(3) “Air carrier” means any citizen of the United States

who undertakes, whether directly or indirectly or by a lease

or any other arrangement, to engage in air transportation :

Provided, That the Board may by order relieve air carriers

who are not directly engaged in the operation of the aircraft

in air transportation from the provisions of this chapter to

the extent and for such periods as may be in the public

interest.

Sd * * -

(10) “Air transportation” means interstate, Overseas, or

foreign air transportation or the transportation of mail by

aircraft.

m% " PET RMD, LOS Wy Gap ie PO ay aire he TL NT Re nt Pu Nis: NL e en we

on, ade oe eae Ue aN Le aL Ome a ea) a ali piping . vs

8a

Appendix A

Defendants argue, however, that the airlines have be-

come parties to the agreement arranging for the creation

of Ryd-Air because ACI signed the document on behalf of

the airlines as their agent, and thereby, in accord with well-

understood principles of agency law, the airlines, as dis-

closed principals of their agent, became parties to the con-

tract. Restatement of Agency 2d { 144.

Although defendants urge this position in their briefs,

we believe the facts demonstrate the opposite conclusion.

Perhaps most importantly, there is no indication on the

face of the Ryd-Air agreement that ACI signed it as an

agent of the airlines. This is in contrast to the cartage

contract, the second agreement involved here, in which, as

well as in all prior cartage contracts, the language “as

agent for and on behalf of the Air Carriers” appears on

the face of the document. Furthermore, it seems obvious

from the agreement of 1947 that ACI was given no au-

thority to act on behalf of the airlines in a transaction such

as the Ryd-Air agreement.‘ Indeed, the airlines primarily

‘Paragraph §7 of the Agreement defining the responsibilities of

Air Cargo, Inc. reads as follows:

7. Each of the parties hereby confers upon Air Cargo, Inc.

full power and authority, on its behalf, subject only to a limi-

tation upon payment that may be due for services in the

several amounts set forth hereinafter in this paragraph 7, to

negotiate and execute agreements or arrangements (if and only

if any such agreement or arrangement confers the right on

the parties thereto and Air Cargo, Inc. to cancel the agree-

ment er @rrangement on not more than sixty days’ notice),

and to renew, modify, cancel, or terminate in accordance with

the terms hereof, any existing arrangement, by or between

any of the parties hereto and any other party or parties

engaged in performing under contract pick-up and delivery

or other services with respect to the handling of air freight,

uir cargo, or air express (including without limitation, the

Air Express Agreement between the respective parties and

the RGilway Express Agency, Inc.), provided, however, that

RI ER El IO LOE IE LL LT NERA Is Fee tena PRD 8 ar Nec ETC OS Rate

9a

Appendix A

limited ACI to performing the functions of providing cart-

age and terminal services directly or by contract—func-

tions which clearly do not include promoting a new corpo-

ration, owning stock in it, or sitting on its Board of Direc-

tors. Furthermore, there is no merit to defendants’ argu-

ment that the airlines have “ratified” the agreement and

thereby have become parties to it. Under the law of agency

ratification can only occur when the p-incipal, having

insofar as the foregoing delegates authority to cancel or ter-

minate any existing arrangements which have heretofore been

filed with and approved by the Civil Aeronautics Board, the

enereise thereof shail be subject to either (a) approval of

the cancellation or te®mination of such an existing arrange-

went by the Civil Aeronautics Board or (b) the approval of

this agreement by the Civil Aeronautics Board. It is agreed

and understood in this connection that it is the purpose and

intent of this agreement that Air Cargo Ine. should have re-

sponsibility for:

(a) Determining the date upon which each party hereto shall

combine «ud operate as a single air cargo service its air ex-

press and airfreight services (which date shall be the same

for all parties hereto), and shall meke available to all ship-

pers of air cargo, on an optional basis, such special services

as may be practicable to meet shippers’ requirements; and

each of the parties will, on and after such date, take such

action as may be appropriate to effect such objective ;

(b) Providing, directly or by contract, pick-up and delivery

services at all points within the continental United States

served by any party hereto, and tripper services between such

points and the airports through which they are served;

(c) Providing, directly or by contract, terminal facilities

and services incidental to the proper handling of air freight

and air cargo at all such points; and

(d) Providing, directly or by contract, clerical, accounting,

and other services which may be desired by the parties hereto

in the interest of promoting maximum efficiency, eliminating

unnecessary duplication of expense, and coordination of their

respective air freight and air cargo services with one another

and with those rendered by other common carriers of property.

10a

Appendia A

knowledge of the material facts involved in a transaction,

evidences an intention to ratify it. See Restatement of

Agency 2d {// 91, 93-100. Here there is no evidence in the

record that the airlines knew the material facts involved

in the formation of Ryd-Air or that they communicated a

desire to ratify its formation. Though, through their deal-

ings with ACI, they dealt with Ryd-Air from 1970 for-

ward, their dealings with ACI are insufficient as a matter

of law to constitute a ratification of the creation by ACI

and Ryder System of Ryd-Air or of the contract executed

by ACI with Ryd-Air.

In view of our finding that the Ryd-Air agreement cannot

be immunized by the Board because it is not signed by “air

carriers,” we find that there is no need to examine inde-

pendently the cartage contract between Ryd-Air and ACI.

As interdependent parts of an inclusive plan, it is clear

that the fate of the plan rested on the fate of the Ryd-Air

agreement. Accordingly, the district judge was correct in

refusing to grant appellants’ motion for a stay so as to

permit presentation of the issues here to the CAB.

Even if we were to find that the Board could immunize

the agreements under its Section 412 authority, we would

still conclude, on the basis of Carnation Co. v. Pacific West-

bound Conference, 383 U.S. 213 (1966) and Allied Air

Freight, Inc. v. Pan American World Airways, Inc., 393

F.2d 441 (2 Cir. 1968), cert. denied, 393 U.S. 846 (1968),

that the doctrine of primary jurisdiction is inapplicable.

Under these authorities a district court is not required to

defer to the Board except in those cases where the activities

complained of are “lawful” or “arguably lawful” under the

Federal Aviation Act of 1958. Also, when the only relief

a plaintiff seeks in the district court is an award of

damages the district court need not defer to the Board

a

yt i <7 . 9 re

ORE TANT Saisie MOSM NOR APOE TNR RN eo Hg at yy gatas ace er tie.

. < & ’ ed yi i

—

lla

Appendix A

irrespective of whether the activities are continuing ac-

tivities or completed activities.’ See Carnation Co. v.

Pacific Westbound Conference, supra; Allied Air Freight,

Inc. v. Pan American World Airways, Inc., supra at 448.

The agreement forming Ryd-Air has not been submitted

to the Board and has not been explicitly approved by it.

Although the claim is made in defendants’ brief that the

Ryd-Air agreement is “arguably lawful,” the question of

whether the agreement is “arguably lawful” is for the

court to decide. To do so, the court must interpret, at least

in the first instance, the order of 1947, to determine whether

there is a factual basis to support the claim. Surely this

is a task within the court’s competence. See CAB v. M odern

Air Transport, Inc., 179 F.2d 622, 625 (2 Cir. 1950); World

Airways, Inc. v. Northeast Airlines, Inc., 349 F.2d 1007

(1 Cir. 1965) ; cert. denied, 382 U.S. 984 (1966). Compare

Pan American World Airways v. United States, 371 U.S.

296 (1963). As we interpret the CAB order, it cannot

possibly have comprehended the formation of Ryd-Air

or approved its creation years after the issuance of the

order. The carefully phrased “it having been represented”

* Although both Carnation and Allied dealt with activities which

had been discontinued, the clear implication of the opinions is that

the court has jurisdiction if the activities are unlawful under the

regulatory statute and the relief sought is an award of damages.

The rationale is that an award of damages could not interfere with

a later agency decision prospectively to approve the continuance of

the challenged activity, whereas injunctive relief could cause a

conflict between the agency and the court. Thus, the Court in

Carnation laid down the broad principle that courts are only pre-

cluded “from awarding damages when the defendants’ conduct is

arguably lawful... .” 383 U.S. at 222. No distinction is drawn

between continuing conduct and past conduct. Likewise, in Allied,

we noted that a damage award could not interfere with cease and

desist power or with immunization power inasmuch as the damage

award would not have “prospective applicability.” 393 F.2d at 448.

12a

Appendiz A

paragraph® as well as the “future development” clause’

clearly evidence the Board’s intention that the future ac-

tivities of ACI were to be limited under the Order to

those explicitly set out in the 1947 agreement. Manifestly,

there is nothing in the agreement authorizing the pro-

motion by ACI of a new company, the ownership of

a stock interest in it, or the holding of seats by ACI nomi-

nees on a new corporation’s Board of Directors. Defen-

dant ACI suggests that since it can lawfully provide such

services directly certainly it can provide such services by

contracting with an affiliate in which it has a 20% stock

interest. This misses the point. Although defendant has

the authority to provide services directly it does not have

the authority to provide such services indirectly through

an ownership interest in a joint venture which it has not

been authorized to promote or to participate in. The

Board’s 1947 approval of ACI merely authorizes its estab-

lishment and approves its then-contemplated activities

which flow therefrom. Trans World Airlines, Inc. v.

6 This paragraph reads as follows:

.. . It having been represented to the Board that Air Cargo,

Ine. will not have responsibility for nor control over, the rates,

charges, rules, regulations, or practices applicable to air trans-

portation ; that it will not issue or sign any shipping contract

or document except in the name of and as agent for a member

air carrier party to the agreement; that it will not assume any

responsibility to the consignor or consignee of any property

transported by air; and it will not hold itself out to the public

to perform any service or accept any responsibility except as

agent for a member air carrier party to the agreement; ....

7 This clause reads as follows:

The Board further finding that the future development of

Air Cargo, Ine. is uncertain and that its activities may require

future reconsideration of the approval granted herein ....

FO ey eae

nee

adeiad PIP PRE Te DE oe tee ves — . — ee. het

PRE Me i aa ny aes aaa i oy

13a

Appendix A

Hughes, 332 F.2d 602 (2 Cir 1964): see Federal Aviation

Act 414, 49 U.S.C. §1384,

Inasmuch as the two agreements have not been immu-

nized and are not “arguably lawful” we agree with the

district court that it should exercise its jurisdiction over

this antitrust action.

Finally, we see no need to direct the district court to

stay, in its discretion, the proceedings in court pending

administrative action by the CAB. The issues are not tech-

nical in nature, and there is no need to seek uniformity.

Compare Trans World Airlines, Inc. v. Hu ghes, supra, with

Pan American World Airways, Inc. v. United States, supra.

Furthermore, the CAB cannot award damages, the only

relief which the plaintiffs request. Apgar Travel Agency

v. International Air Trans. Association, 107 F.Supp. 706,

711 (SDNY 1952); Slick Airways, Inc. v. American Air-

lines, Inc., 107 F.Supp. 199, 211 (D.N.J. 1952). Whenever

possible courts avoid duplicated or drawn-out proceedings.

The efficient administration of justice demands it. See

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

Inc., supra at 445; Japan Line, Ltd. v. Sabre Shipping

Corporation, 407 F.2d 173 (2 Cir.), cert. denied, 395 U.S.

922 (1969).

Affirmed.

Te aly SERA Gh RY . 3

l4a

Appendia A

Order Denying Petition for Rehearing

UNITED STATES COURT OF APPEALS

Seconp Circuit

At a Stated Term of the United States Court of

Appeals, in and for the Second Circuit, held

at the United States Court House, in the

City of New York, on the twenty-ninth day

of November, one thousand nine hundred

and seventy-two

Present:

Hon. Sterry R. Waterman,

Hon. J. Josep Smita,

Hon. Irvine R. KaurMan,

Circuit Judges.

72-1500

Breen Arr Freicut, Lrp. and Mercury Ar Freicut, Inc.,

Plaintiff s-A ppellees,

—vV.—

Arm Caroo, Inc., Ryper System, Inc., Ryp-Air Inc.,

Arg Canapa, AIRLIFT INTERNATIONAL INc., et al.,

Defendants-A ppellants.

A petition for a rehearing having been filed herein by

counsel for the appellants,

Upon consideration thereof, it is

Ordered that said petition be and it hereby is Denrep.

A. Danret Fvusaro

Clerk

By Vincent A. Carin

Chief Deputy Clerk

ee

Bat <A

PRS RETESET RRR ea etn ang ag. 008 ee:

ERP en OR: Ce ae,

—

15a

Appendix A

Order Denying Petition for Rehearing in Banc

UNITED STATES COURT OF APPEALS

Seconp Circuit

At a Stated Term of the United States Court of

Appeals, in and for the Second Circuit, held

at the United States Court House, in the

City of New York, on the seventh day of

December, one thousand nine hundred and

seventy-two

72-1500

Breen Air Freicut, Lrp. and Mercury AIR Freicut, Ino.,

Plaintiff s-A ppellees,

—vV.—

Arr Carco, Inc., Ryper System, Inc., Ryp-Ar Inc.,

Arm Canapa, AIRLIFT INTERNATIONAL Inc., et al.,

Defendants-A ppellants.

A petition for a rehearing containing a suggestion that

the action be reheard in bane having been filed herein by

counsel for the appellants and no active circuit judge hav-

ing requested that a vote be taken on said suggestion.

Upon consideration thereof, it is

Ordered that said petition be and it hereby is Deniep.

A. Dante Fusaro

Clerk

——— ETE EET PLE ATE IE ITT LP YIM T AT: YF REELS EY aN rs

a,

16a

Appendia A

Opinion of Irving Ben Cooper, D. J.

(Dated December 6, 1971)

UNITED STATES DISTRICT COURT

SouTHERN District or New YorkK

[SAME TITLE]

APPEARANCES:

GoupstEIn, SHaMEs & Hype, Esqs.

655 Madison Avenue

New York, New York 10021

Attorneys for Plaintiffs

Epwarp Bropsxy, Esa.

Ricuarp M. Zarorr, Esq.

Of Counsel

CHADBOURNE, ParkKE, WHITESIDE & Wo rr, Esas.

25 Broadway

New York, New York 10004

Attorneys for Defendants

Haroutp L. Warner, JR., Esq.

LawrENCE Kutz, Esq.

JEROLD OsHINSKY, Esq.

Of Counsel

CADWALADER, WICKERSHAM & Tart, Esgas.

One Wall Street

New York, New York 10005

Attorneys for Defendants

Ryder System, Inc., and Ryd-Air, Inc.

se

itor:

WT BwET hein Rin rep erate — Brot Sieh

EL MEERA cea ELLIS LLL NEL NER RSA LTD ETT. ere ek

17a

Appendix A

Motion for a stay denied.

The complaint alleges: Plaintiffs Breen Air Freight,

Ltd. and Mercury Air Freight, Ltd. are corporations which

at all relevant times were engaged in the business of pick-

| up and delivery of air freight in the Metropolitan area of

| the City of New York. Complaint, 132, 33.

Defendant Air Cargo, Inc. was first established in 1941

by Agreement among seventeen (17) certified air carriers

and is wholly-owned by certified air carriers. The activities

of Air Cargo, Inc. include: perform certain ground ter-

minal operations in connection with the transportation of

air freight such as ground transportation incidental to air-

line hauls; facilitate joint interline movement of air freight

over the lines of its member air carriers; make arrange-

ments for joint interline agreements and services with

other carriers for over-the-road hauls in connection with

transportation of property by surface carriers and aircraft;

make provisions for air freight terminals, 1134, 35.

Defendant Ryder System, Inc. operates, inter alia, a

fleet of vehicles which transport ground freight. 138. Ryd-

Air, Ine. is a corporation wholly owned by Air Cargo,

Inc, and Ryder System, Inc., 140; was formed pursuant to

an agreement between Air Cargo, Inc. and Ryder System,

Inc. on or about June, 1970, 41; and services by ground

transportation domestic air freight handled by the mem-

ber airlines of Air Cargo, Inc. in the Metropolitan area

of the City of New York and other places, 142. In 1970,

Air Cargo, Inc. terminated its employment with plaintiffs

and employed defendant Ryd-Air, Ine. instead.

On several theories, plaintiffs claim this conduct con-

stitutes a violation of the anti-trust laws (claims 1-3) and

breaches of contract (claims 4-5).

. . - _ ° _ o SU ty cee oe

i... EEE TEESE SCN TRIE MLE Ae ete ORNS ten ORS

—,

18a

Appendix A

Defendant airlines and Air Cargo, Inc. contend that

their conduct is insulated from the operation of the anti-

trust laws and that judicial proceedings should be stayed

on the ground that primary jurisdiction is vested in the

Civil Aeronautics Board (C.A.B.).

There is no primary C.A.B. jurisdiction or conferring

of anti-trust immunity over this action. The criteria of

need for uniformity, special knowledge, expertise or specific

congressional delegation to the administrative agency of

the subject of the dispute are not applicable here and the

agency action does not insulate defendants.

Initial C.A.B. approval merely supports the establish-

ment of Air Cargo, Inc. and not all the consequences which

flow from it. Trans World Airlines, Inc. v. Hughes, 332

F.2d 602 (2d Cir. 1964) ; 9 C.A.B. 468 (1948); See Federal

Aviation Act §414, 49 U.S.C. §1384. While an express find-

ing of immunity from the anti-trust laws may not be neces-

sary to confer immunity, the record does not support

blanket approval or continued surveillance of the activities

of Air Cargo, Inc. itself acting on its own—to be dis-

tinguished from broader, over-all scrutiny of such conceded

areas of traditional C.A.B. expertise as tariffs. The rep-

resentations made to the C.A.B. were the basis of its ap-

proval; the activities of Ryd-Air as a subsidiary of Air

Cargo, Inc. are a deviation therefrom; to permit the new

activities to be insulated would achieve indirectly what

could not be done directly. Springer affidavit, April 14,

1971, pp. 10-11 and Ex. 2 (C.A.B. Order E-1086) ; Brodsky

affidavit, July 8, 1971, p. 3 and Ex. 3, 15.

The policies which supported initial establishment of

Air Cargo, Inc.—economies and efficiency—do not extend

to confer categorical immunity over the incidental ac-

tivities here. Specifically, there is no showing that the

a _piatee,

ia a et PRLS ANTI IE PRR ae ¥ Fate ae - ust Sie

19a

Appendix A

activities alleged are “necessary” to comply with the C.A.B.

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

Airways, Inc., 393 F.2d 441 (2d Cir.), cert. denied, 393 U.S.

846 (1968).

The activities at issue are not “arguably lawful” under

the Federal Aviation Act. No party to the Ryd-Air agree-

ment is an “air carrier” under Section 412 (a) of the

Act, 49 U.S.C. §1382(a); the agreement has not been sub-

mitted to the C.A.B.; without C.A.B. approval actions pur-

suant to an agreement are not immune from the anti-trust

laws, Allied Air Freight, supra, at 448. Unlike United

States Navigation Co. v. Cunard Steamship Co., 284 U.S.

474 (1931) and Far East Conference v. United States, 342

U.S. 570 (1951) plaintiff does not seek an injunction but

only treble damages which the Board does not have the

power to give. Carnation Co, y. Pacific Westbound Con-

ference, 383 U.S, 213, 222 ( 1966).

The issue is not the interpretation of an unapproved

agreement or whether the order itself is reasonable but

whether the order has been violated. The courts are compe-

tent to make such an interpretation. C.A.B. v. Modern Air

Transport, Inc. 179 F.2d 622 (2d Cir. 1950); World Air-

ways, Inc. v. Northeast Airlines, Inc., 349 F. 2d 1007 (1st

Cir. 1965), cert. denied, 382 U.S. 984 (1966) ; Compare Pan

American World Airways v. United States, 371 U.S. 296

(1963).

So oRDERED:

New York, N.Y.

December 6, 1971

rm

RIALS POE DES, nBONMINE IEEE HTS KMRL E A ahs BEAM TERT I ONIONS ie ak ENON Ger alten anges SBR CAP ey

Pie: e oer > : La aTE a ery Y

mage

20a

Appendia A

Memorandum by Cooper, D. J. on Reargument

UNITED STATES DISTRICT COURT

SoutrHern District or New York

[SAME TITLE]

Irvine Ben Cooper, D. J.

While the motion to re-argue is granted, upon recon-

sideration we adhere to our original decision. The motion

for certification of an interlocutory appeal is granted. 28

U.S.C. §1292(b).

No party to the ACI-Ryder agreement (not submitted

to the C.A.B.) is an “air carrier” under Section 412(a) of

the Act, 49 U.S.C. §1328(a). Accordingly, the conduct under

the ACI-Ryder agreement cannot be immunized and “argu-

ably lawful” under Section 412 itself and therefore the fact

that the agreement has not terminated does not control.

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

Inc., 393 F.2d 441, 446 (2d Cir.), cert. denied, 393 U.S. 846

(1968); See Trans World Airlines v. Hughes, 332 F.2d 602

(2d Cir. 1964). The record does not contain factual allega-

tions to support either the position that Air Cargo, Inc.

acted as agent for the airlines in the ACI-Ryder agreement

or to create the necessity of a hearing on this issue. Addi-

tionally, such entry does not accord with C.A.B. order

E-1086 which states that ACI shall “not issue or sign any

shipping contract except in the name of and as agent for a

member air carrier party to the agreement” (emphasis

added).

21a

Appendix A

As this and our prior order involve a “controlling” ques-

tion of law as to which there is a substantial ground for

difference of opinion and an immediate appeal therefrom

may materially advance the ultimate termination of the

litigation, we certify an interlocutory appeal.

Settle order on notice.

New York, N.Y.

February 16, 1972

/8/ Irvine Ben Cooper

United States District Judge

22a

Appendix A

Order on Reargument and Granting Certification of an

Interlocutory Appeal

UNITED STATES DISTRICT COURT

SoutTHerN District or New York

[SAME TITLE]

This Court having considered the motion by the air car-

rier defendants and defendant Air Cargo, Inc. for reargu-

ment of their motion for a stay or, in the alternative, for an

amendment of the Court’s decision and order of December

6, 1971, by including therein a certification pursuant to 28

U.S.C. §1292(b), and the Court having granted said motion

to reargue and upon reconsideration having adhered to the

decision and order of December 6, 1971, and having granted

the motion for certification of an interlocutory appeal,

Ir Is Onverep that the motion to reargue is granted and

the Court adheres to its original decision and order of

December 6, 1971; and

Ir Is FurtHer Orperep that the motion for amendment

of said decision and order of December 6, 1971 to include

therein a certification of an interlocutory appeal pursuant

to 28 U.S.C. §1292(b) is granted and said decision and order

is hereby amended to include the following statement:

This order, and the Court’s subsequent memorandum

of law as to which there is a substantial ground for

of February 16, 1972 involve a “controlling” question

difference of opinion and an immediate appeal there-

23a

Appendix A

from may materially advance the ultimate termination

of the litigation. We therefore certify an interlocutory

appeal.

/8/ Irvine Ben Cooper

United States District Judge

Dated: New York, N.Y.

March 10, 1972

24a

APPENDIX B

Constitutional Provisions, Statutes and

Regulations Involved

United States Constitution:

Fifth Amendment:

No person shall be held to answer for a capital, or

otherwise infamous crime, unless on a presentment or

indictment of a Grand Jury, except in cases arising

in the land or naval forces, or in the Militia, when in

actual service in time of War or public danger; nor

shall any person be subject for the same offence to be

twice put in jeopardy of life or limb; nor shall be

compelled in any criminal case to be a witness against

himself, nor be deprived of life, liberty, or property,

without due process of law; nor shall private property

be taken for public use, without just compensation.

Federal Aviation Act of 1958:

§ 408. [72 Stat. 767, as amended by 74 Stat. 901, 83 Stat.

103, 49 U.S.C. 1378] (a) It shall be unlawful unless

approved by order of the Board as provided in this

section—

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

carrier and any other common carrier or any person

engaged in any other phase of aeronautics, to con-

solidate or merge their properties, or any part thereof,

into one person for the ownership, management, or

operation of the properties theretofore in separate

ownerships;

(2) For any air carrier, any person controlling an

air carrier, any other common carrier, or any person

POL

al i a Ne td tee: Po Ey al

-_

25a

Appendix B

engaged in any other phase of aeronautics, to pur-

chase, lease, or contract to operate the properties, or

any substantial part thereof, of any air carrier;

(3) For any air carrier or person-controlling an

air carrier to purchase, lease, or contract to operate

the properties, or any substantial part thereof, of any

person engaged in any phase of aeronautics otherwise

than as an air carrier;

(4) For any foreign air carrier or person controlling

a foreign air carrier to acquire control, in any manner

whatsoever, of any citizen of the United States en-

gaged in any phase of aeronautics;

(5) For any air carrier or person controlling an air

carrier, any other common carrier, any person engaged

in any other phase of aeronautics, or any other person

to acquire control of any air carrier in any manner

whatsoever: Provided, That the Board may by order

exempt any such acquisition of a noncertificated air

carrier from this requirement to the extent and for

such periods as may be in the public interest;

(6) For any air carrier or person controlling an

air carrier to acquire control, in any manner whatso-

ever, of any person engaged in any phase of aeronautics

otherwise than as an air carrier; or

(7) For any person to continue to maintain any

relationship established in violation of any of the fore-

going subdivisions of this subsection.

§412. Pooling and other agreements; filing, approval by

Board

(a) Every air carrier shall file with the Board a

true copy, or, if oral, a true and complete memorandum,

26a

Appendiz B

of every contract or agreement (whether enforceable

by provisions for liquidated damages, penalties, bonds,

or otherwise) affecting air transportation and in force

on the effective date of this section or hereafter entered

into, or any modification or cancellation thereof, be-

tween such air carrier and any other air carrier,

foreign air carrier, or other carrier for pooling or

apportioning earnings, losses, traffic, service, or equip-

ment, or relating to the establishment of transportation

rates, fares, charges, or classifications, or for preserv-

ing and improving safety, economy, and efficiency of

operation, or for controlling, regulating, preventing,

or otherwise eliminating destructive, oppressive, or

wasteful competition, or for regulating stops, sched-

ules, and character of service, or for other cooperative

working arrangements.

(b) The Board shall by order disapprove any such

contract or agreement, whether or not previously ap-

proved by it, that it finds to be adverse to the public

interest, or in violation of this Act, and shall by order

approve any such contract or agreement, or any modifi-

cation or cancellation thereof, that it does not find to

be adverse to the public interest, or in violation of this

Act; except that the Board may not approve any con-

tract or agreement between an air carrier not directly

engaged in the operation of aircraft in air transporta-

tion and a common carrier subject to the Interstate

Commerce Act, as amended, governing the compensa-

tion to be received by such common carrier for trans-

portation services performed by it. (72 Stat. 770, 49

U.S.C. § 1382)

Ne

27a

Appendiz B

§ 414. Legal restraints

Any person affected by any order made under sec-

tions 408, 409, or 412 of this Act shall be, and is hereby,

relieved from the operations of the “antitrust laws’’,

as designated in section 1 of the Act entitled “An Act

to supplement existing laws against unlawful restraints

and monopolies, and for other purposes”, approved

October 15, 1914, and of all other restraints or prohi-

bitions made by, or imposed under, authority of law,

insofar as may be necessary to enable such person to

do anything authorized, approved, or required by such

order. (72 Stat. 770, 49 U.S.C. § 1384)

Other Statute:

28. U.S.C. § 1254. Courts of appeals; certiorari; appeal;

certified questions

Cases in the courts of appeals may be reviewed by the

Supreme Court by the following methods:

(1) By writ of certiorari granted upon the petition

of any party to any civil or criminal case, before or

after rendition of judgment or decree ;

Civil Aeronautics Board Economic Regulations:

| § 289.3. Types of agreements which need not be filed,

(a) Ground services and facilities, Agreements be-

tween certificated route air carriers, or between any

such air carrier(s) and any foreign air carrier(s), for

the furnishing of ground facilities, ground equipment,

ground service, or building or ground space: Provided,

That the fees or charges therefor are known or antici-

——

28a

Appendiz B

pated not to exceed $50,000 during any twelve-month

period: And, provided further, That in case the aggre-

gate annual charge under an agreement believed to

fall within this exemption at the time of execution

thereof exceeds the dollar limitation in any twelve-

month period, the carrier shall (1) report promptly

the total amount paid, and (2) file the agreement with

the Board under section 412(a) of the Act upon request

by the Director of the Board’s Bureau of Economic

Regulation.

(b) Free or reduced-rate transportation. Agree-

ments between certificated route air carriers, or be-

tween supplemental air carriers, or between certif-

icated route carriers and supplemental carriers, or

between any such air carriers and foreign air car-

riers for the issuance or interchange of free or re-

duced-rate transportation: Provided, That such agree-

ments do not provide for the issuance or interchange

of passes for free or reduced-rate transportation other

than as described in documents filed pursuant to

§ 223.6 of Part 223 of this supcharter.

(c) Pick-up and delivery. Agreements between cer-

tificated route air carriers or indirect air carriers on

the one hand and surface motor carriers on the other

hand for pick-up and delivery of property: Provided,

that all of the points named in the agreement and the

rates and charges to the public for such service are

set forth in tariffs filed by the air carriers with the

Board pursuant to Part 221 of this subchapter.

(27 F.R. 1067) |

—

29a

Appendiz B

§ 289.4. Effect of exemption.

The exemption granted by this part shall not be deemed

to constitute an “order made under sections 408, 409, and

412” within the meaning of section 414 of the Act. (27

F.R. 1068)

30a

APPENDIX C

AGREEMENT

Amone Certain Ark CARRIERS

Rexiatine To Ar Carco SERVICES

Wuergas, the parties are air carriers authorized by

certificates of public convenience and necessity issued pur-

suant to the Civil Aeronautics Act of 1938 as amended, to

engage directly in the transportation of property between

various points in the United States; and

Wueneas, the parties desire further to coordinate their

respective services in the continental United States with

respect to the transportation of property, both with one

another and with those rendered by other common carriers,

so as to provide a complete and integrated system for the

transportation of property by air to and from all points

in the United States; and

WHereas, in order to promote maximum efficiency and

to eliminate unnecessary duplication of expense, the par-

ties desire to employ Air Cargo, Inc. to perform, on their

behalf and in their names or as principal, certain services

and to provide certain facilities required in connection

with the handling of air cargo; and

Wueneas, the authorized shares of stock of Air Cargo,

Ine. are 1,000 shares, each of no par value, of which 544

shares are outstanding; and

Wuereas, the stockholders of Air Cargo, Inc. and the

shares of stock respectively held by them are as follows:

RG POA BRIS AY ERDAS Ata MM ASHE NNR EE MAGI MRM Pasa eT

—

3la

Appendiz C

Stockholder Shares Held

All American Aviation, Inc. 4

American Airlines, Ine. 100

Braniff Airways, Inc. 22

Chicago and Southern Air Lines, Inc. 10

Colonial Airlines, Inc. 4

Continental Air Lines, Inc. 6

Delta Air Lines, Inc. 12

Eastern Air Lines, Inc. 100

Inland Air Lines, Inc.

Mid-Continent Airlines, Inc.

National Airlines, Inc.

Northeast Airlines, Inc. 4

Northwest Airlines, Inc. 24

Pennsylvania-Central Airlines Corporation 26

Transcontinental & Western Air, Inc. 100

United Air Lines, Inc. 100

Western Air Lines, Inc. 12

Total 544

Now, Tuererorg, for and in consideration of the prem-

ises and the mutual covenants hereinafter contained, the

parties hereto agree as follows:

— ——_——— BE ESTE MAE US BIR OLS CORTE Low BE

32a

Appendia C

7. Each of the parties hereby confers upon Air Cargo,

Inc. full power and authority, on its behalf, subject only to

a limitation upon payment that may be due for services in

the several amounts set forth hereinafter in this paragraph

7, to negotiate and execute agreements or arrangements

(if and only if any such agreement or arrangement confers

the right on the parties thereto and Air Cargo, Inc. to can-

cel the agreement or arrangement on not more than sixty

days’ notice), and to renew, modify, cancel, or terminate in

accordance with the terms hereof, any existing arrange-

ment, by or between any of the parties hereto and any other

party or parties engaged in performing under contract pick-

up and delivery or other services with respect to the handl-

ing of air freight, air cargo, or air express (including with-

out limitation, the Air Express Agreement between the

respective parties and the Railway Express Agency, Inc.),

provided, however, that insofar as the foregoing delegates

authority to cancel or terminate any existing arrangements

which have heretofore been filed with and approved by the

Civil Aeronautics Board, the exercise thereof shall be sub-

ject to either (a) approval of the cancellation or termina-

tion of such an existing arrangement by the Civil Aero-

nautics Board, or (b) the approval of this agreement by

the Civil Aeronautics Board. It is agreed and understood

in this connection that it is the purpose and intent of this

agreement that Air Cargo, Inc. should have responsibility

for:

(b) Providing, directly or by contract, pick-up and

delivery services at all points within the continental

United States served by any party hereto, and tripper

services between such points and the airports through

which they are served;

TT Le NLT LENE SIL E DLN EC IER EGLO PRE NE EO INE PAE TS a

33a

Appendix C

(c) Providing, directly or by contract, terminal facil-

ities and services incidental to the proper handling of

air freight and air cargo at all such points; and

(d) Providing, directly or by contract, clerical, ac-

counting, and other services which may be desired by

the parties hereto in the interest of promoting max-

imum efficiency, eliminating unnecessary duplication

of expense, and coordination of their respective air

freight and air cargo services with one another and

with those rendered by other common carriers of prop-

erty.

oa

Appendia C

UNITED STATES OF AMERICA

CIVIL AERONAUTICS BOARD

Wasuinoton, D. C.

Adopted by the Civil Aeronautics Board

at its office in Washington, D. C.

on the 31st day of December, 1947

Agreement C.A.B. No. 1041

In the Matter of an Agreement filed pursuant to

section 412(a) of the Act between

Aut American Aviation, Inc.

and

SrxteeEN OtrHer Arr CARRIERS

relating to the establishment of Air Cargo, Inc.

Orper Approvinc AGREEMENT

There having been filed with the Board pursuant to

section 412(a) of the Act and Part 251 of the Economic

Regulations, an agreement between All American Aviation,

Ine. and sixteen other carriers, providing for the estab-

lishment of Air Cargo, Inc., evidenced by Agreement C.A.B.

No. 1041;

The Board finding that the agreement provides that

member air carriers of Air Cargo, Inc. agree to utilize that

corporation in the performance of certain ground terminal

nail

& Resear nets eae mes eee Cit 4

35a

Appendiz C

operations in connection with the transportation of air

cargo such as ground transportation incidental to airline

hauls; the facilitation of joint interline movement of air

cargo over the lines of member air carriers; the arrange-

ment for joint interline agreements and services with other

common carriers for over-the-road hauls in connection with

transportation of property by surface carriers and aircraft;

the provision of cargo terminals; and the performance of

other services and provision of other facilities incidental

to these enumerated matters; and to act as agent for the

member air carriers in certain other related matters; and

It having been represented to the Board that Air Cargo,

Ine. will not have responsibility for nor control over, the

rates, charges, rules, regulations, or practices applicable to

air transportation; that it will not issue or sign any ship-

ping contract or document except in the name of and as

agent for a member air carrier party to the agreement;

that it will not assume any responsibility to the consignor

or consignee of any property transported by air; and it

will not hold itself out to the public to perform any service

or accept any responsibility except as agent for a member

air carrier party to the agreement; and

The Board not finding that the agreement will be adverse

to the public interest or in violation of the Act if approved

upon the basis of the representations and findings set forth

above and subject to the following conditions:

(1) That Air Cargo, Inc. and its member air carriers

supply to the Board copies of such agreements and

documents and submit such information in relation to

the activities of Air Cargo, Inc as may be prescribed

or requested by the Economic Bureau of the Board.

(2) That any holder of a certificate of public con-

venience and necessity issued by the Board authorizing

a

na

36a

Appendiz C

transportation of property by aircraft be authorized to

participate in Air Cargo, Inc. as a matter of right;

The Board further finding that the future development

of Air Cargo, Inc. is uncertain and that its activities may

require future reconsideration of the approval granted

herein; and

The Board further finding that approval of the agree-

ment does not constitute a determination of the reasonable-

ness, for any purpose under the Civil Aeronautics Act, of

payments by member air carriers to or on account of Air

Cargo, Inc.; and

There having been filed with the Board a petition in this

proceeding by the Brotherhood of Railway Clerks request-

ing the Board to impose certain conditions in its order of

approval for the protection of member air carrier em-

ployees affected as a result of the operations of Air Cargo,

Ine. or in the alternative that the matter be assigned for

hearing; and

The Board further finding that the said petition does not

set forth sufficient grounds to warrant the relief requested

therein; and that approval of the agreement shall be re-

considered in the event that at any time a showing is made

that the interests of air carrier employees at a particular

airport or place have been, or are about to be, substantially

adversely affected on account of the extension to said air-

port or place of the terminal operations by Air Cargo, Inc.

IT IS ORDERED THAT:

1. Agreement C.A.B. No. 1041 be and it hereby is ap-

proved subject to the conditions set forth above.

37a

Appendix C

2. The said petition of the Brotherhood of Railway

Clerks, filed in this proceeding on August 22, 1947, be and

it hereby is denied without prejudice.

By the Civil Aeronautics Board:

/8/ M. C. Mutuican

M. C. Mulligan

Secretary

(SEAL)