Petition for Writ of Certiorari — International Photographers of the Motion Picture Industries, Local 659 v. National Labor Relations Board

Supreme Court brief1974

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MICHAEL RODAK, JR..CLE

Iu the Supreme Court

OF THE

Anited States

OcrosBerR TERM 1973

No. 73-1607

Hawauan Arruines, Inc., Petitioner,

vs.

Atoua Arruines, Inc., Respondent.

PETITION FOR A WRIT OF CERTIORARI

to the United States Court of Appeals

for the Ninth Circuit

Law OFFices oF JosEPH L. ALIOTO

JosEPH L. ALioTo

JosePH M. ALIoro

PETER J. DoNNICTI

111 Sutter Street - Suite 2100

San Francisco, California 94104

Telephone: (415) 434-2100

Caspr, Stack, Kay, Cronin & CLAusE

Danrku H. Case

Tep GaMBLE CLaUsé,

Post Office Box 494

Honolulu, Hawaii 96809

Attorneys for Petitioner

abies SSS Snnnsneeeeneeeeneeeseeeeneeeeeenee

NAU- WALSH PRINTING CO. - S62 MISSION STREET - SAN FRANCISCO, CA 94105

Subject Index

Page

Opinions below .........cececcccccecececsescsceeccsccees 1

ik nne beeeES AR FLEA RGN RKSShNERAN CR EK RO ONS SS 2

Questions presented .......... ccc cece cece cece ececeeeences 2

kn ce csc ak acadtnines ss tases souenenes 4

EE OE GO GID oc vv cdccaviccscnsscnecevsceecdeesesoe 8

(A) Nature of the case and disposition by the court below... 8

(BB) Gtatemamt of facts 2... ccs cccccsccsscccsccsccccsess 10

i aie k Geren cceececatsgasaednconnnens.s 10

2. The nature of the proceedings before the civil aero-

nautics Board as such relate to the present antitrust

BEE Wed cdubivddavdccvecksiesvanes 4cceakeees 11

Reasons for granting the Writ ...........csceccecccsceeees 15

I. The rulings of the courts below misconstrue this court’s

mandate in Pan American World Airways, Ine. v.

United States and Hughes Tool Co. v. Trans World

Airlines, Ine., concerning the exclusive jurisdiction of

the Civil Aeronautics Board as to disputes between

Air Carriers. As such, the rulings below threaten to

jeopardize regulatory policies concerning Intra-

Hawaiian Air Transportation ..............seeeeees 15

A. The charges of anti-competitive conduct made by

Aloha against HAL involve matters over which

the CAB has jurisdiction. Indeed the CAB has

exercised and continues to exercise its jurisdiction

over the parties with respect to the specific dis-

pute and contentions herein ................... 15

B. Aloha has elected to pursue its remedies before the

CAB thus further precluding its attempt to seek

antitrust remedies in the court below .......... 34

C. HAL’s appearances before and participation in

CAB proceedings cannot be the basis for an

SE SE dood SC ba ddncs adeukepieee< ends 37

II. The rulings below undermine this court’s often stated

rule of primary jurisdiction and reliance upon the

expertise of relevant administrative agencies to resolve

disputes arising between parties in a regulated in-

EN wcbnhandneasecarasssnpecespsestnnucsas canes 39

PD Sen cvepawtancnenseceedunk tanes¥theveesee sous 43

cag

Table of Authorities Cited

Cases Pages

Aloha Airlines, Inc. v. Hawaiian Airlines, Inc., 58 F.R.D.

ee ee ee Ni cus Chane penne kee eka ainssees 2,10

Aloha Airlines, Ine. v. Hawaiian Airlines, Inc., 349 F.Supp.

ED Sb ins sccne ss Osea we ackeun bauauas 2,10

Aloha Airlines, Inc. v. Hawaiian Airlines, Inc., 489 F.2d 203

Se Sk SEE NAG ka cnke chee ecenan ban Pen beEe ee ens 2

California Motor Transport Co. v. Trucking Unlimited, 404

Ua GUS, BE BCE, GED CURIE) onc ccccccccacccnccccs 4, 37, 38

Carnation Co. v. Pacific Westbound Conference, 383 U.S.

ee SE “Vaio cankseeeieseadedsaaneesaeecusasaees 4, 36

Eastern Railroad Conference v. Noerr Motor Freight, 365

Week MU CUMEED, Sac tines dh oaeawaeenshesdeaesqabeuesas 4, 37

Far East Conference v. United States, 342 U.S. 570 (1952) 42

Flood v. Kuhn, 407 U.S. 258 (1972) ............ccceeees 9

Hawaiian Airlines, Inc. v. King., Mise. No. 73-1822 (9th

i EEE AR ear anie dt Abe wales cneusseuaedeadeue dines 18

Hughes Tool Co. v. Trans World Airlines, Inc., 409 U.S.

363, 93 S.Ct. 647 (1973) . .3, 10, 16, 17, 24, 27, 28, 30, 31, 32, 33, 37

Pan American World Airways, Inc. v. United States, 371

We ee GED 3b 6ndn pasa canavneeseeannn 3, 15, 16, 20, 30, 37

Ricci v. Chicago Mercantile Exchange, 409 U.S. 289, 93 S.Ct.

ee MEE Niv'5% SCRE RO RULE Eh Aaah RRaANOST ae banas 4, 10, 42

Trans World Airlines, Ine. v. Hughes, 332 F.2d 602 (2nd

SBE. x wee nceshewenecesas 646 ¢ Rites Oeastiekcedss 27

Statutes

Clayton Act, Section 4 (15 U.S.C. §15) .................. 8,9

Federal Aviation Act:

Section 401 (49 U.S.C. §1871) ......... ccc cc cece ees 5

Seetion 406 (49 U.S.C. §1376) ........... cece ewes 24

Section 406(b) (49 U.S.C. §1376(b)) .........-...08. 19, 36

TaBLe oF AUTHORITIES CITED lil

Pages

Moston GOR CGD UG. GPT) nn cc ccnvcccccvccccccce 25, 26

estes GER COD TERT, GIT) onic ccecccsccccsccsces

PU ee REM She Fda ye 6, 11, 12, 17, 19, 20, 21, 23, 24, 30

Section 412 (49 U.S.C. §1382) ..........cccccccccces 7

Section 412(b) (49 U.S.C. §1382(b)) ................ 14

Section 414 (49 U.S.C. §1884)) ......... eee eee 8, 26

Hawaii Revised Statutes:

Py iach ahead anmsen es bhaseeesuwhebaceenn 9

DTN < 11 ahbs ccd ahubnaaekbadsteab eee aaeenke 9

Public Law 85-726, Title IV, See. 412, Aug. 23, 1958, 72

DTM Vici en acencrabhaaehabinseneeakaad den iedees 8

Sherman Act, Section 2 (15 U.S.C. §2) ........ 4, 9, 10, 12, 20, 42

28 U.S.C.:

Ee a eee eee ee EEG uname nen 2

—,

Iu the Supreme Court

OF THE

Ruited States

Octoser Term, 1973

No.

Hawauan Aruines, Inc., Petitioner,

vs.

Auowa Aruings, Inc., Respondent.

PETITION FOR A WRIT OF CERTIORARI

to the United States Court of Appeals

for the Ninth Circuit

Petitioner Hawaiian Airlines, Inc. prays that a Writ of

Certiorari issue to review the judgment of the United

States Court of Appeals for the Ninth Circuit (Court

of Appeals No. 73-1557) entered in the above entitled

case on November 29, 1973. A petition for rehearing and

suggestion for rehearing in bance was denied in this case

by the Court of Appeals on January 29, 1974.

OPINIONS BELOW

The opinions of the District Court for the District of

Hawaii denying petitioner-defendant Hawaiian Airlines,

Inc.’s (hereinafter ‘‘HAL” or ‘‘Hawaiian”) motions for

summary judgment were filed on October 11, 1972 and

February 16, 1973 and are reported as follows: Aloha

Airlines, Inc. v. Hawaiian Airlines, Inc., 349 F.Supp. 1064

(D. Haw. 1972); Aloha Airlines, Inc. v. Hawaiian Air-

lines, Inc., 58 F.R.D. 429 (D. Haw. 1973). A copy of each

opinion is attached as Appendix A to this petition.

Thereafter, HAL’s petition for interlocutory appeal was

granted by the United States Court of Appeals for the

Ninth Cireuit. On November 29, 1973, the Court of Ap-

peals affirmed the rulings of the District Court. That

opinion is reported as follows: Aloha Airlines, Inc. v.

Hawaiian Airlines, Inc., 489 F.2d 203 (9th Cir. 1973). A

copy of the Court of Appeals’ opinion is attached as Ap-

pendix B to this petition.

JURISDICTION

The judgment of the Court of Appeals was entered

on November 29, 1973. Petitioner HAL filed a petition for

rehearing and suggestion for rehearing in bane which

was denied by the Court of Appeals on January 29,

1974. (A copy of order denying rehearing is attached as

Appendix C to this petition.)

The jurisdiction of this Court is invoked pursuant to

28 U.S.C. $1254.

QUESTIONS PRESENTED

The ruling of the Court of Appeals below is directly

contrary to this Court’s decisions concerning the exclu-

sive jurisdiction of the Civil Aeronautics Board (herein-

° —

after “‘CAB”). See Pan American World Airways, Inc.

v. United States, 371 U.S. 296 (1963) and, more recently,

Hughes Tool Co. v. Trans World Airlines, Inc., 409 U.S.

363, 93 S.Ct. 647 (1973). Specifically, the issues presented

herein are:

1. Given the broad and plenary regulatory authority

of the CAB over the airline industry, and given the

comprehensive supervision and control which has been

and continues to be exercised by the CAB with respect

to the specific allegations of the present antitrust com-

plaint filed by Aloha against HAL, does the CAB have

exclusive jurisdiction, subject to judicial review, inasmuch

as the case concerns matters which, like scheduling and

mergers, are in the ‘‘mainstream” of the CAB’s author-

ity, have been ‘‘extensively dealt” with by the CAB, and

are not ‘‘unrelated to any function of the CAB”?

9. Where the CAB has authorized both Aloha and

HAL to schedule flights and compete over identical air

routes—a situation which is unique in the airline indus-

try—are Aloha’s antitrust claims, which relate to HAL’s

flight schedules over the CAB authorized routes, mat-

ters which are exclusively within the CAB’s expertise

and under that Board’s exclusive jurisdiction?

3 Did the CAB approved scheduling agreement be-

tween Aloha and HAL, and the CAB’s continuing jurisdic-

tion, control and surveillance over that agreement and

the current practices of the parties preclude the District

Court from exercising antitrust jurisdiction which may

conflict with or frustrate the prospective competitive rela-

tionship of the two airlines? Hughes Tool Co. v. Trans

World Airlines, Inc., supra.

4. Did Aloha’s initiation and pursuit of its adminis.

trative remedies before the CAB—including the receipt

of a monetary subsidy award—constitute an election of

remedies which precludes this present antitrust action?

Carnation Co. v. Pacific Westbound Conference, 383 U.S,

213, 224 (1966).

5. Is Aloha precluded from basing its claim of at-

tempting to monopolize against HAL on HAL’s appear-

ance and participation in CAB subsidy proceedings? Kast-

ern Railroad Conference v. Noerr Motor Freight, 365 US.

127 (1961); California Trnasport Co. v. Trucking Unlim-

ited, 404 U.S. 508 (1972).

6. In an action involving claims of unfair competitive

practices between two airlines, does the CAB have pri-

mary jurisdiction which should be utilized, by reason of

the Board’s expertise, in aid of the federal court’s de-

termination of jurisdiction and the merits of the dispute?

Ricci v. Chicago Mercantile Exchange, 409 U.S. 289, 93

S.Ct. 573 (1973).

STATUTES INVOLVED

(1) Sherman Act, Section 2 (15 U.S.C. §2) provides:

‘*Every person who shall monopolize, or attempt to

monopolize, or combine or conspire with any other

person or persons, to monopolize any part of the trade

or commerce among the several States, or with foreign

nations, shall be deemed guilty of a misdemeanor,

and, on conviction thereof, shall be punished by fine

not exceeding fifty thousand dollars, or by imprison-

ment not exceeding one year or by both said pun-

ishments, in the discretion of the court.”

(2) Federal Aviation Act, Section 401, (49 U.S.C.

§1371) provides in pertinent part:

(a) No air carrier shall engage in any air trans-

portation unless there is in force a certificate issued

by the Board authorizing such air carrier to engage

in such transportation.

Application

(b) Application for a certificate shall be made in

writing to the Board and shall be so verified, shall

be in such form and contain such information, and

shall be accompanied by such proof of service upon

such interested persons, as the Board shall by regu-

lation require.

Notice Of Application; Filing Of Protest Or

Memorandum; Hearing

Board shall give due notice thereof to the public by

posting a notice of such application in the office of

the secretary of the Board and to such other persons

as the Board may by regulation determine. Any in-

terested person may file with the Board a protest or

memorandum of opposition to or in support of the

issuance of a certificate. Such application shall be set

for public hearing, and the Board shall dispose of

such application as speedily as possible.

Issuance

(d) (1) The Board shall issue a certificate au-

thorizing the whole or any part of the transportation

covered by the application, if it finds that the appli-

cant is fit, willing, and able to perform such trans-

portation properly, and to conform to the provisions

of this chapter and the rules, regulations, and require.

ments of the Board hereunder, and that such trans-

portation is required by the public convenience and

necessity; otherwise such application shall be denied.

Terms, Conditions, And Limitations

(e) (1) Each certificate issued under this section

shall specify the terminal points and intermediate

points, if any, between which the air carrier is au-

thorized to engage in air transportation and the serv-

ice to be rendered; and there shall be attached to the

exercise of the privileges granted by the certificate, or

amendment thereto, such reasonable terms, conditions,

and limitations as the public interest may require.

(3) Federal Aviation Act, Section 411 (49 U.S.C.

$1381) :

Methods Of Competition

The Board may, upon its own initiative or upon

complaint by any air carrier, foreign air carrier, or

ticket agent, if it considers that such action by it

would be in the interest of the public, investigate

and determine whether any air carrier, foreign air

carrier, or ticket agent has been or is engaged in

unfair or deceptive practices or unfair methods of

competition in air transportation or the sale thereof.

If the Board shall find, after notice and hearing, that

such air carrier, foreign air carrier, or ticket agent

is engaged in such unfair or deceptive practices or

unfair methods of competition, it shall order such air

carrier, foreign air carrier, or ticket agent to cease

and desist from such practices or methods of compe-

tition. Pub.L. 85-726, Title IV, §411, Aug. 23, 1958,

72 Stat. 769.

a —————

_—

(4) Federal Aviation Act, Section 412 (49 U.S.C.

$1382) :

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 memoran-

dum, of every contract or agreement (whether en-

forceable by provisions for liquidated damages, pen-

alties, bonds, or otherwise) affecting air transporta-

tion and in force on the effective date of this section

or hereafter entered into, or any modification or can-

cellation thereof, between such air carrier and any

other air carrier, foreign air carrier, or other carrier

for pooling or apportioning earnings, losses, traffic,

service, or equipment, or relating to the establish-

ment of transportation rates, fares, charges, or classi-

fications, or for preserving and improving safety,

economy, and efficiency of operation, or for control-

ling, regulating, preventing, or otherwise eliminating

destructive, oppressive, or wasteful competition, or

for regulating stops, schedules, and character of serv-

ice, 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 chapter, and shall by

order approve any such contract or agreement, or any

modification or cancellation thereof, that it does not

find to be adverse to the public interest, or in viola-

tion of this chapter; except that the Board may not

approve any contract or agreement between an air

carrier not directly engaged in the operation of air-

craft in air transportation and a common carrier sub-

ject to the Interstate Commerce Act, as amended,

governing the compensation to be received by such

ecm

common carrier for transportation services per-

formed by it. Pub.L. 85-726, Title IV, $412, Aug. 23,

1958, 72 Stat. 770.

(5) Federal Aviation Act, Section 414 (49 U.S.C.

§1384:

Legal Restraints

Any person affected by any order made under sec-

tions 1378, 1379, or 1382 of this title shall be, and is

hereby, relieved from the operations of the ‘‘anti-

trust laws”, as designated in section 12 of Title 15,

and of all other restraints or prohibitions 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. Pub.

L. 85-726, Title IV, $414, Aug. 23, 1958, 72 Stat. 770.

STATEMENT OF THE CASE

(A) Nature of the Case and Disposition By the Court Below

This is a private treble damage antitrust action initiated

by Aloha against HAL pursuant to Section 4 of the Clay-

ton Act. (15 U.S.C. $15.) Aloha and HAL are competing

air carriers incorporated under the laws of the State of

Hawaii with their principal offices located in Honolulu,

Hawaii. As air carriers, both operate under certificates

of public convenience and necessity granted by the CAB

and are subject to comprehensive federal statutory and

regulatory provisions promulgated by Congress and the

CAB. (R. 84.)

In its original and first amended complaints, Aloha

alleged that, beginning in 1968, defendant HAL attempted

to monopolize the inter-island air transportation market

in violation of Section 2 of the Sherman Act (15 U.S.C.

§2) and related statutes of the State of Hawaii (Hawaii

Revised Statute, §§480-2 and 9).1 (R. 4-6; 21.) Aloha

listed seven acts which defendant allegedly undertook

‘‘with the predatory intent and purpose.” These are:

(1) excessive flight schedules; (2) excessive purchasing,

ordering, leasing (or agreeing to lease) of aircraft, (3)

misrepresenting its schedule to the public; (4) providing

below cost servicing to interstate air carriers between

stops; (5 and 6) publicizing the fact that plaintiff and

defendant should merge while renouncing, allegedly in

bad faith, merger plans in which the parties had entered;

and (7) opposing before the CAB plaintiff’s request for a

subsidy. (R. 21-23.) As a result of these alleged practices,

Aloha claims that it was damaged in the amount of

$7,700,000.00 and prayed for treble damages under Sec-

tion 4 of the Clayton Act. (15 U.S.C. $15.) (R. 23-24;

89-90.)

Aloha, in its second amended complaint, also alleged

violations of Section 1 of the Sherman Act, adding to its

original complaint only that HAI had engaged in the

above activity with the consent and advice of the Chase

Manhattan Bank of New York. (R. 86.) Aloha’s motion

to add Chase as a party defendant in the action was de-

nied. (R. 64-66, 104.)

1]f, as appellant Hawaiian here contends, the CAB has exclusive

jurisdiction over the present dispute, the immunity from judicial

antitrust sanctions would apply to state as well as federal anti-

trust and unfair competition provisions. In effect, the state anti-

trust laws’ application to the airline industry would be preempted

by federal statutory policy and constitute an undue burden on

(i973) commerce in that industry. Flood v. Kuhn, 407 U. S. 258

HAL moved to dismiss and for summary judgment on

the grounds that the CAB had exclusive or at least pri-

mary jurisdiction over the case. The District Court

denied petitioner HAL’s motions to dismiss and for sum-

mary judgment (349 F.Supp. 1064) and also denied HAL’s

motion for reconsideration (58 F.R.D. 429) which peti-

tioner filed in light of this Court’s recent rulings in Hughes

Tool, supra, and Ricci, supra. (R. 61, et seq.)* The District

Court, however, did certify the question to the Court of

Appeals and permission for interlocutory appeal pursuant

to 28 U.S.C. $1292 (b) was granted. (R. 105.)

(B) Statement of Facts

1. The Parties

Aloha Airlines, Inc. and Hawaiian Airlines, Inc. are air

carriers incorporated under the laws of the State of

Hawaii with their principal offices located in Honolulu,

Hawaii. (R. 83-84.) As air carriers, both parties operate

subject to comprehensive federal statutory and regulatory

provisions promulgated by Congress and the Civil Aero-

nautics Board. (Hereinafter ‘‘CAB”.) Both parties, op-

erating by virtue of certificates of public convenience and

2A number of other pre-trial motions and orders are also impor-

tant to a full understanding of the present posture of this case in

the District Court. HAL here contends that the CAB has exclusive

(or, at least, primary) jurisdiction over the matters alleged in

Aloha’s antitrust complaint. After the denial of HAL’s motions to

dismiss the complaint and for summary judgment, HAL filed its

answers and counterclaim. (R. 38-56.) HAL contended, inter alia,

that Aloha had also attempted to monopolize the relevant inter-

island market in violation of Section 2 of the Sherman Act (15

U. S. C. §2.) On March 30, 1973, Aloha’s motion to dismiss third

and fourth counterclaims was granted, with the District Court

ruling that such counterclaims were within the exclusive jurisdic-

tion of the CAB and hence immune from judicial antitrust sanc-

tions under Hughes Tool Co., supra. (R. 105.)

. _ ————

——

necessity issued to them by the CAB, provide nearly all

air transportation of persons, property and mail between

the various islands of the State of Hawaii. (R. 84.) In

providing such transportation, the two airlines are closely

regulated and supervised by the CAB. Indeed, the CAB

has jurisdiction as to any disputes which arise between

the parties concerning allegations of unfair practices or

anticompetitive conduct by one air carrier as against

another.

As will be shown below, the CAB has jurisdiction over

the very matters of which plaintiff Aloha complains in

this antitrust proceeding. 49 U.S.C. $1381. Moreover, all

or most of the matters complained of herein by Aloha

have been brought for consideration and/or resolution

before the CAB and many of such issues are still pending

before that agency. (R. 27-29; 61.)

9. The Nature of the Proceedings Before the Civil Aeronautics

Board as Such Relate to the Present Antitrust Action.

Initially, it must be recognized that Aloha’s principal

antitrust claim against HAL relates to scheduling prac-

tices. The competitive impact of the two airlines sched-

uling of flights, however, relates directly to the judgment

of the CAB in its original decision to authorize both

Aloha and HAL to schedule flights over identical routes.

This is the only instance known to petitioner in which the

CAB has authorized identical routes for two airlines.

Moreover, Aloha and HAL have been constantly super-

vised and under the scrutiny and direction of the CAB

in a number of other proceedings, including subsidy re-

quests, a merger proposal, and an unfair competition en-

forcement proceedings concerning scheduling practices.

Petitioner HAL has filed with the Court of Appeals a sep-

arate Appendix which contains various orders, decisions

and opinions of the CAB which are relevant to the anti-

trust claims herein. [The Appendix will be referred to

in this petition as ‘‘App., p. —..””]

The CAB has repeatedly and constantly supervised and

controlled the two air carriers’ scheduling practices to

ascertain the continuing wisdom of its decision authorizing

identical routes for the two carriers. The CAB has ex-

pressed its judgment that its decision authorizing identical

route authority (an anomaly existing only in Hawaii) may

have ‘‘set in motion competitive forces which have led to

a destructive level of competition.” (App. p. 286.)

As a result of the identical routes since September

1967, the two carriers have been embroiled in fierce com-

petition which has led the CAB (1) to consider route

investigations, (2) to authorize the two airlines to discuss

the possibilities of merging, and (3) to approve a sched-

uling agreement between the two airlines in settlement

of the two carriers’ complaints against each other for un-

fair competition. (The unfair competition cases were

never determined, and the CAB dismissed these proceed-

ings without prejudice and specifically retained ‘‘continu-

ing jurisdiction” over the competitive relationship of the

two carriers.) (App. p. 201.)

Aloha’s complaint before the CAB alleged that HAL

was attempting and had attempted to monopolize air trans-

portation between the Hawaiian Islands in violation of

Section 411 of the Federal Aviation Act of 1958, as

amended, and Section 2 of the Sherman Antitrust Act.

The complaint duplicated many of the charges in the

——

present antitrust proceeding, including the scheduling of

excess flights, the operation of an excessive number of

aircraft, and the misrepresentation of schedules to the

public.

The CAB Bureau of Enforcement filed with the Board

on April 10 its Petition for Enforcement based on the

charges of the two airlines against each other. On April

16, 1970, the CAB on its own motion ordered ‘a com-

prehensive review of the route structures of the two cer-

tifcated air carriers ....” (Docket 22118, Order 70-4-81.)

(App., pp, 190, 285, et seq.)

Subsequently, Aloha and HAL entered into negotiations

concerning the possible merger of the two carriers. The

proposed merger was recommended for approval by a

CAB Hearing Examiner, supported by the finding that

Aloha was a ‘‘failing business.” (CAB Docket No. 22435.)

In light of this, the complaints filed by both parties re-

garding the other’s scheduling practices were dismissed.

(R. 28.)

On April 21, 1971, merger discussions were terminated

by the parties. (R. 28.) On April 22, 1971, Aloha filed a

motion to re-open the proceedings regarding unfair meth-

ods of competition and violations of the antitrust laws, in

which both parties alleged that the other had oversched-

uled flights. Aloha further alleged before the CAB that

the merger negotiations were conducted in bad faith. On

May 10, 1971, after plans for such a merger failed to

materialize, the CAB set aside its dismissal as to the over-

scheduling complaints in Docket Nos. 21604 and 21695

and reactivated the Aloha and HAL complaints. (App.,

pp. 190-191.)

On July 15, 1971, the two airlines submitted joint

applications to the CAB for approval of a scheduling

agreement. As part of the joint application, the parties

agreed that the scheduling agreement ‘‘shall be of no

effect unless .... (b) the agreement is acceptable to the

Board as constituting a settlement or dismissal of the

enforcement cases covered by Dockets 21604 and 21695

[the unfair competition and antitrust complaints].” (App.,

p. 196.)

On August 12, 1971, the CAB approved the agreement,

retained continuing jurisdiction, but deferred approval of

whether the agreement should constitute settlement of the

enforcement cases on Dockets 21604 and 21695. (App., pp.

195, et seq.)

On December 30, 1971, the CAB approved the amend-

ments to the scheduling agreement and dismissed the un-

fair competition complaints filed by both of the parties

and covered by Dockets 21604 and 21695. (App., p. 201.)

The agreement covers scheduling practices by both air-

lines from July 15, 1971 to July 15, 1973. The CAB’s ap-

proval of the agreement was prompted by the ‘‘unique

circumstances .. . affecting the operations of Aloha and

Hawaiian [Air Lines], and the necessity for extraordinary

measures to preserve completion in intra-Hawaiian ser-

vice.” (App., p. 201; emphasis added.) Moreover, pur-

suant to 49 U.S.C. §1382 (b), the CAB retained continuing

jurisdiction over the agreement and reserved the authority

to take whatever action which may be deemed appropriate

regarding the scheduling practices problem. (App., Pp.

201.) Aloha and HAIL then operated pursuant to the

scheduling agreement.

— |

——

An amended agreement was approved by Order 71-12-

143 of the CAB dated December 30, 1971. The Board

further authorized Aloha and Hawaiian to continue sched-

uling discussions in implementation of the agreement until

July 15, 1973. Finally, the CAB dismissed the enforce-

ment proceedings in Dockets 21604 and 21695 without

prejudice. (R. 29.)

It is against this background that, on July 3, 1972, a

mere six months after the CAB’s approval of the sched-

uling agreement, plaintiff Aloha filed the present anti-

trust action, alleging all the various claims and contentions

already submitted to and under consideration by the CAB.

REASONS FOR GRANTING THE WRIT

I THE RULINGS OF THE COURTS BELOW MISCONSTRUE

THIS COURT’S MANDATE IN PAN AMERICAN WORLD AIR-

WAYS, INC. v. UNITED STATES AND HUGHES TOOL CO. v.

TRANS WORLD AIRLINES, INC., CONCERNING THE EXCLU-

SIVE JURISDICTION OF THE CIVIL AERONAUTICS BOARD

AS TO DISPUTES BETWEEN AIR CARRIERS. AS SUCH, THE

RULINGS BELOW THREATEN TO JEOPARDIZE REGULA-

TORY POLICIES CONCERNING INTRA-HAWAIIAN AIR

TRANSPORTATION.

A. The charges of anti-competitive conduct made by Aloha

against HAL involve matters over which the CAB has juris-

diction. Indeed the CAB has exercised and continues to ex-

ercise its jurisdiction over the parties with respect to the

specific dispute and contentions herein.

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

371 U.S. 296 (1963), this Court established that the CAB

should have exclusive jurisdiction over acts which are

‘,. basic to the regulatory scheme of the Federal Avi-

}

ation Act...” and ‘‘... the precise ingredients of the

Board’s authority ...” (371 U.S. at p. 305.) As to such

activities, a federal District Court is precluded from ex-

ercising antitrust jurisdiction.

Petitioner HAL will show that the allegations in Aloha’s

complaint concern activities by and between the two air-

lines which are clearly under the CAB’s jurisdiction. The

CAB has authorized the two airlines to schedule compet-

ing flights over identical routes. The CAB has held exten-

sive hearings and made findings and orders relating to

the very facts and matters covered in Aloha’s present

complaint. Indeed, the CAB continues to exercise juris-

diction, surveillance and control over the matters com-

plained of by Aloha in this case.

In Hughes Tool Co. v. Trans World Airlines, Inc.,

supra, the Court elaborated on its earlier Pan Am ruling

where a District Court had concluded that Pan Am had

violated the Sheman Act in interfering with Panagra’s

possible route extension:

**(In Pan Am) this Court held that the complaint

should have been dismissed because §411 of the act

gave the CAB broad power to imvestigate and bring

to a halt unfair practices and unfair methods of com-

petition, including those alleged in the complaint, and

because if the courts were to intrude independently

with their own construction of the anti-trust laws the

two regimes might collide. Hence, relief against the

alleged division of territories, allocation of routes and

conspiracy to monopolize was a matter exclusively for

the Board.” Hughes Tool Co. v. Trans World Air-

lines, Inc., supra, 93 S.Ct. at p. 657. (Emphasis

added. )

—

—_

This language from the recent Hughes decision is clearly

applicable to our present case. As will be shown, all of

the matters raised by Aloha in charging HAL with an

attempt to monopolize concern alleged unfair practices

and unfair methods of competition which, by virtue of

4411 of the Federal Aviation Act, are under the exclu-

sive jurisdiction of the CAB.

As the Supreme Court observed in Hughes:

“The point is that the conduct of Tooleo with which

the Board so extensively dealt in 1950 is the same

kind of conduct charged to Toolco in the 1950’s and

alleged by TWA in its complaint to violate the anti-

trust laws. It is, therefore, difficult to understand

how the Court of Appeals could conclude that the acts

of Toolco in controlling, allegedly to the injury of

TWA, the timing, the financing, and the flow of new

equipment to TWA was unrelated to any function of

the Board under the Act.” Hughes Tool Co. v. Trans

World Airlines, Inc., 93 S.Ct. at p. 658. (Emphasis

added.)

| The basic allegations in the present antitrust case in-

volve (1) the number of flights by HAL on the routes

granted to it by the CAB, and (2) the manner in which

HAL conducted merger negotiations with Aloha after the

CAB authorized the two airlines to enter into merger

negotiations and discussions. Because the airline industry

is fraught with vital and complicated considerations, not

the least of which is safety, it is a question of exceptional

importance as to whether the CAB, with its specialized

expertise in the airline industry, or lay juries, with no

reasonable opportunity to become intimately knowledge-

able as to all the congeries involved, should decide the

allegations by one airline that another airline had too many

flights over its CAB approved routes or did not negotiate

properly in the CAB approved merger negotiations. Thus,

the real issue which Aloha seeks to present to the court is

the wisdom of the CAB in authorizing certain activity. If

Aloha prevails here, parties will be encouraged to circum-

vent CAB remedies in order to immediately sue, under the

antitrust laws, for treble damages for past injuries.

(1) Aloha’s Claims Concerning HAL’s Scheduling

Practices. An examination of the extent and nature of

CAB supervision over the Aloha-HAL scheduling dispute

leaves little doubt that the present antitrust action is

improper. In the subsidy request filed before the CAB by

Aloha, Aloha raised the very contentions and issues which

have been raised in the present antitrust complaint. Of

the subsidy proceedings, Aloha has stated that the CAB,

in its hearing and determination, was ‘‘. . . almost totally

concerned with excessive flight schedules .. .” Further,

Aloha suggested that the subsidy requests and the sched-

uling dispute considered therein presented ‘‘. . . factual

contentions (which) were peculiarly within the expertise

of the CAB.. .”8

3See Aloha’s response to Hawaiian’s petition for Writs of Man-

damus and/or Prohibition, filed before the Court of Appeals. Ha-

watian Airlines, Inc. v. King., Mise. No. 73-1822. (9th Cir. 1973.)

Aloha seeks to have alleged findings in the subsidy proceeding

held binding on the parties in the antitrust case. Thus, Aloha con-

cedes the close relationship between the CAB subsidy hearing and

our present antitrust case. HAL, while recognizing the relationship

of the CAB subsidy and judicial proceedings, vigorously opposes

according collateral estoppel effect to the alleged findings in the

CAB subsidy matter. The finding in the subsidy proceedings had

nothing to do with unfair activity. Thus, there was no “finding” of

“uneconomical competition” by HAL. Indeed, on June 24, 1971,

the CAB Examiner who presided over the subsidy proceeding and

————

An analysis of the Examiner’s Initial Decision and the

opinion of the CAB in subsidy proceeding makes it clear

that the Board addressed itself to the issue which is upper-

most in Aloha’s antitrust complaint, the scheduling prac-

tices of HAL. While a subsidy proceeding before the CAB

is in the nature of an ex parte application by an air carrier

for government funds,‘ the request by Aloha was joined

by HAL’s application for an equal subsidy grant. In con-

nection with determining the propriety of awarding sub-

the § 411 action refused to accord collateral estoppel effect to the

subsidy findings because the subsidy proceeding, unlike the enforce-

ment action, was not adversary in nature nor accompanied by

roper quasi-judicial procedures (CAB Docket Nos. 21604 and

21695). Aloha is thus using the subsidy findings in the court

below in a way which the CAB itself refused to use them.

4Subsidy requests are made pursuant to §406(b) of the Act, 49

U.S.C. §1376(b) which provides:

“(b) In fixing and determining fair and reasonable rates of

compensation under this section, the Board, considering the

conditions peculiar to transportation by aircraft and to the

particular air carrier or class of air carriers, may fix different

rates for different air carriers or classes of air carriers, and

different classes of service. In determining the rate in each

ease, the Board shall take into consideration, among other

factors, (1) the condition that such air carriers may hold and

operate under certificates authorizing the carriage of mail only

by providing necessary and adequate facilities and service for

the transportation of mail; (2) such standards respecting the

character and quality of service to be rendered by air carriers

as may be prescribed by or pursuant to law; and (3) the need

of each such air carrier (other than a supplemental air car-

rier) for compensation for the transportation of mail sufficient

to insure the performance of such service, and, together with

all other revenue of the air carrier, to enable such air currier

under honest, economical, and efficient management, to main-

tain and continue the development of air transportation to the

extent and of the character and quality required for the com-

merce of the United States, the Postal Service, and the na-

tional defense. In applying clause (3) of this subsection, the

Board shall take into consideration any standards and criteria

prescribed by the Secretary of Transportation, for determin-

ing the character and quality of transportation required for

the commerce of the United States and the national defense,”

(Emphasis added. )

sidies, the CAB comprehensively reviewed the scheduling

practices of Aloha and HAL.

Of special significance, insofar as this appeal is con-

cerned, is the fact that Aloha filed a complaint against

HAL before the CAB pursuant to $411 of the Federal

Aviation Act. Section 411 permits a carrier or the CAB

on its own initiative to file a complaint charging another

party with unfair or deceptive practices or unfair meth-

ods of competition in air transportation. In such a

proceeding, the CAB conducts an investigation and deter-

mines, in the context of an adversary hearing (with ap-

propriate procedural safeguards)® whether unfair prac-

tices or unfair methods of competition have been perpe-

trated. If such a finding is made, the CAB has the av-

thority to order the offending party to cease and desist

from such practices; moreover, the CAB retains continu-

ing and plenary jurisdiction to insure that the airlines

involved conform their practices to the needs and interest

of the public and the general air transport policy of the

United States. Indeed, the power of the CAB under $411

has been compared to that of an antitrust court. Pan

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

at p. 312, note 17.

The §411 complaint filed by Aloha against HAL was

docketed by the CAB on April 10, 1970. Aloha alleged

that HAL had violated and was violating section 2 of the

Sherman Act and section 411 of the Federal Aviation

5Aloha’s position below concerning the collateral estoppel effect

of CAB findings, if appropriate at all, should be limited to admin-

istrative determinations made in the context of a proceeding such

as in §411 enforcement proceeding.

» a

Act. Aloha based its claim on HAL’s capacity and sched-

uling practices since 1968, after the introduction of jet

aircraft, and on alleged unfair publicity regarding its

schedules and misrepresentation of schedule times. These

same practices are the basis of Aloha’s present complaint

in the antitrust court. Aloha claimed that HAL’s sched-

ules were in excess of those required by the public con-

venience and the volume of traffic. Aloha alleged that

HAL’s practices caused both carriers to suffer large losses

and prevented both of them from attaining ‘‘economic load

factors.” It said that the severity of the financial injury to

Aloha caused it to request subsidy payments. Finally,

Aloha claimed that HAL’s purpose in such practices was

to restore a monopoly which would be harmful to the pub-

lic interest. Aloha requested that the Board require HAL

to cease operating excessive schedules and operate only

those reasonably required by the volume of inter-island

traffic.

The interim history of this proceeding was described in

CAB Order 71-5-40. On June 7, 1971 Aloha filed a mo-

tion to ‘establish procedures.” The motion contemplated

discussions with HAL leading to a scheduling agreement.

(The Board eventually approved an agreement and dis-

missed the proceedings.) However, the CAB Bureau of

Enforcement opposed Aloha’s motion in an ‘‘answer”

dated June 16, 1971:

‘In the first place, the Bureau believes that Aloha

has failed to establish a legal basis for imposing the

proposed special procedures without affiording Ha-

waiian a hearing. Secondly, [the] Bureau objects to

Aloha’s motion because, in our view, the special pro-

cedures which Aloha advocates as a remedy to

[HAL’s] unfair methods of competition appear woe-

fully inadequate, especially in light of the severity of

offense with which [HAL] is charged.

‘“‘THAL] is charged, inter alia, with an attempt to

monopolize in violation of section 2 of the Sherman

Act (Aloha Complaint, p. 9). Such a violation, if

proven, would constitute a per se violation of section

411 of the Federal Aviation Act. Of course, a Sher-

man Act violation, or even the tendency towards one,

is not essential for the Board to find a section 411

violation.

‘‘The Bureau is presently considering the question

of appropriate remedies to be applied should a sec-

tion 411 unfair competitive practice be established.

The Board’s power to fashion appropriate relief in

section 411 cases has been analogized ‘to the power

of courts to fashion Sherman Act decrees,’ and in-

cludes at least the power to order divestiture. The

Court will interfere with the Board’s chosen remedy

‘only where there is no reasonable relation between

the remedy and the violation.’

‘“‘The major fault that we find with Aloha’s proposal

is that it may not go far enough, ie., the proposal

would accept the present positions of the carriers in

terms of flights scheduled and market share as a base

from which to proceed. If, as Aloha alleges, [HAL]

engaged in unfair methods of competition, Aloha’s

proposed remedy may be deficient in that it allows

[HAL] to continue to enjoy the fruits of its past

illegal actions. We believe that some changes in the

present schedules will be required, and that it will

not be sufficient for the Board to passively monitor

changes proposed by the parties.” [CAB Dockets

21604, 21605, Answer of the Bureau of Enforcement,

June 16, 1971, pp. 1-3.]

——

Thus the CAB and Aloha were on notice that the Board

had before it the question of what it should do about the

fruits of any past activity of HAL which it found illegal

under §411. The fruits of that activity are the very dam-

ages which Aloha seeks as compensation from the anti-

trust Court. But, over the objections expressed in the

Bureau’s answer, the Board authorized Aloha to proceed

with framing a scheduling agreement. The Board finally

approved the agreement the two carriers worked out. In

the approval order the Board expressly noted that the

agreement was understood by the parties as a ‘‘settlement

or dismissal of the cases covered by Dockets 21604 and

21605 (the scheduling cases).’’ Order 71-12-143, note 1.

(App., p. 196.) It also expressly noted that

“*. . . absent this agreement, and failing alternative

Board action, Aloha’s chances of survival would be

significantly lessened. Should Aloha fail, the public

would, at least initially, be deprived of the signifiicant

benefits of competitive intra-Hawaiian service. Thus

we believe that the approval of the amended agree-

ment is required by an important transportation

need.’’ (App., p. 200.)

Further, the Board said

“In view of the foregoing, we find that agreement

C.A.B. 22539, and Amendment 1 thereto, will not be

adverse to the public interest or in violation of the

Act, and should be approved. We reiterate our prior

finding that our action approving this amended agree-

ment is predicated upon the unique circumstances

surrounding the agreement and affecting the opera-

tions of Aloha and Hawaiian, and the necessity for

extraordinary measures to preserve competitive intra-

Hawaiian service.’’ (App., p. 201.) (Emphasis added.)

Accordingly, the Board ordered the enforcement proceed-

ings dismissed without prejudice, and retained jurisdiction

over the agreement to ‘‘take whatever action may be

deemed appropriate.’’ (App., p. 201.)

It certainly cannot be said that the Board, in disposing

of the scheduling case, was not exercising its jurisdic

tional and remedial powers over the past competitive

practices between the two carriers. Indeed, the Board

emphasized that in its judgment the circumstances were

unique, that competitive intra-Hawaiian service should

be preserved, and that extraordinary measures were re.

quired to do so.

The present antitrust case thus involves the very issues,

considerations and inter-relationships between Aloha and

HAL which have been and still are under the juris-

diction, control and surveillance of the CAB. See Hughes

Tool Co. v. Trans World Airlines, Inc., supra, 93 S.Ct.

at pp. 657-661. It is also important to note that both the

§406 subsidy request and the §411 enforcement proceed-

ing before the CAB were initiated by Aloha. The CAB

carefully and comprehensively considered the scheduling

practices of Aloha and HAL in the context of the market

considerations and the over-riding federal interest in the

maintenance of a well-regulated, safe, efficient, and eco-

nomically healthy air transport system. After hearings,

the CAB determined that injuries and losses suffered by

Aloha were not the result of HAL’s scheduling practices,

except for losses during five and one-half months of the

damage period alleged in this antitrust case. Based on

this finding, Aloha was granted a subsidy award of

$789,000.00. (App., p. 104.) In the Enforcement Proceed-

ing, the entire dispute concerning over-scheduling as be-

tween the two airlines was resolved by an agreement

which was approved by the CAB, and under which the

CAB expressly retains jurisdiction. (App., p. 201.)

For a court to now enter the scene and award antitrust

damages—as Aloha presently urges—would upset the deli-

cate balance achieved by virtue of the proceedings before

the CAB and the resolutions of the dispute made and

approved by that regulatory agency. Any antitrust dam-

age award will introduce a new element that may well

undo several years of regulatory activity and perhaps

require new subsidy awards, amendments to the schedul-

ing agreements and other measures which cannot be pres-

ently anticipated.

This antitrust case would, therefore, truly interfere

with CAB regulatory practices concerning Aloha and

HAL. This proposition cannot be denied in light of the

CAB’s recognition of ‘‘. .. the necessity for extraordinary

measures to preserve competitive intra-Hawaiian service’’

and the Board’s retention of continuing jurisdiction for

the purpose of supervising the Aloha-HAL competitive

relationship and implementing the necessary extraordinary

measures.

(2) Aloha’s Antitrust Claims Arising Out of Merger

Negotiations with HAL. Aloha is similarly precluded

from basing its antitrust complaint on alleged acts con-

cerning the proposed merger between the two air carriers.

Under 49 U.S.C. Section 1378, the CAB has explicit Con-

gressional authority to approve mergers of the type which

was attempted in our case. Moreover, any person affected

by a CAB order concerning a merger is expressly granted

immunity from the operation of the antitrust laws ‘‘* * *

insofar as may be necessary to enable such person to do

anything authorized, approved or required by such order.”’

49 U.S.C. §1384.

Clearly, the public interest in maintaining a sound and

efficient system of air transportation may often require

the merger of air carriers. The statutes above cited in-

sure that, in such appropriate instances, mergers may be

effectuated without fear of antitrust sanctions. In our

present case, Aloha and HAL entered into merger nego-

tiations. The proposed merger was recommended for ap-

proval by a CAB Hearing Examiner. (CAB Docket No.

22435; See also App., pp. 202, et seq.) Subsequently,

problems involving respective creditors of the two air-

lines frustrated the merger plans. Now Aloha seeks to

base its antitrust claim on these merger discussions and

negotiations. If such is allowed, other air carriers may,

in the future, avoid merger negotiations—even though

such a merger may be in the public interest—simply out

of fear that the merger discussions may subject them to

subsequent antitrust suits.

The merger negotiations pursued in the present case

were conducted under the auspices of the CAB. A pre-

liminary recommendation of approval had been made by

a CAB Examiner. The negotiations were thus within the

ambit of CAB jurisdiction. Moreover, such merger nego-

tiations were necessarily within the purview of 49 U.S.C.

Sections 1378 and 1384 and hence immune from antitrust

sanctions.

In summary then, the basic allegations in Aloha’s anti-

trust complaint are that Hawaiian overscheduled its

————

flights and engaged in merger negotiations in bad faith.

Regardless of whether that kind of activity states a claim

under the antitrust laws, both activities were ‘‘extensively

dealt’? with and supervised by the CAB and were not

‘‘ynrelated to any function of the Board under the Act.’’

The matter of scheduling practices was extensively con-

sidered in the subsidy proceeding. Competition in sched-

uling flights was inevitably and necessarily anticipated by

the CAB’s grant of identical route authority to the two

airlines. Both the scheduling dispute and the abortive

merger were the subject of Aloha’s unfair competition

complaint before the CAB which was settled and dis-

missed by virtue of the CAB approved scheduling agree-

ment between the two airlines in July, 1971. In addition,

the CAB conducted special hearings on the merger

(Docket 22435), and specifically held a hearing on the

reasons for the termination of the merger.

Our present case is thus a stronger one for antitrust

immunity than was Hughes. The Hughes antitrust com-

plaint was based on activity which was not specifically

the subject of CAB orders. (See dissent, Chief Justice

Burger, n. 18, 93 S.Ct. at pp. 669-670, which demonstrates

that the alleged misconduct by Toolco although in the

‘‘mainstream’’ of CAB proceedings, was not specifically

approved, and indeed involved activity ‘“‘without Board

approval of knowledge.”) Among the items of damage

shown by TWA was the diversion of jets from TWA to

Northeast Airlines ‘‘while the proposed merger plan was

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

602, 605, 606 (2nd Cir. 1964) between TWA and North-

east, which was controlled by the co-conspirator Atlas

nom

Corporation. As in the instant case, a merger was never

consummated, and damages were alleged to have flown

from activity pending merger negotiations. The anti-

trust immunity recognized in Hughes is clearly applicable

here.

Moreover, in its order instituting an investigation of

the route structures of Aloha and HAL (Order 70-4-81,

April 16, 1970), the Board called attention to the ‘‘per-

sistently low average load factors—considerably below

the ‘break-even’ level—which they have been reporting

for some time. This raises the question of whether the

carriers have been consciously scheduling more flights

than the available traffic will support, and if so, what

forces have induced them to act in this manner.’’ (CAB

Order 70-4-81, App., p. 286.)

The investigation arose out of the CAB’s continuing

concern for over-capacity in the Hawaiian market and

the two carriers scheduling beyond the needs of the public.

‘¢. . . Our aim is to explore possible changes in the

operating authority of Hawaiian and Aloha in order

to determine whether any such changes could restore

these carriers to a state of financial health without

substantial diminution in needed air service to the

traveling public. We do not intend to consider the

total cancellation of either carrier’s certificate, nor

will we consider applications by other persons for

authority to provide air service in Hawaii. Rather,

the focus of the proceeding will be on whether the

overall public convenience and necessity will be better

served by some reduction in the present all-enveloping

level of competition between the two existing car-

riers.’’ (App., p. 285.)

———

‘6... There is currently pending before the Board an

investigation to determine whether federal subsidy

again should be awarded to either or both of these

carriers, and also whether they should be permitted

to raise their fares. From the pleadings filed by the

carriers in this and other proceedings presently pend-

ing, it appears that the financial situation of the

carriers is approaching the acute stage. We cannot

safely assume that the subsidy and fare case will

supply the answer to the carriers’ financial problems,

and we would be derelict in our responsibilities under

the Act if we failed to explore other possible avenues

to a resolution of these problems.’’ (App., p. 286.)

The investigation was dismissed on March 1, 1973.

(CAB Order 73-3-2.) Aloha, however, objected to the dis-

missal on the ground that HAL had consistently argued

that the Hawaiian market could not support competition

by two carriers and that the Board’s purpose in ordering

the investigation had not been achieved.

Whether the Hawaiian market could support competi-

tion by two carriers has been the great issue throughout

the history of that market. The Board chose to make that

market a competitive one when it certified Aloha. It did

so because it believed that such would best serve the

policies of the Federal Aviation Act. It well knew what

trade-offs might be required. But the CAB’s orders in

the matter make it clear that the CAB’s view was that

until the Board itself decided that the market could not

support two carriers, it could, through its own regulatory

: and remedial powers, assure that the policies of the Act

would not suffer from those competitive trade-offs. One

CAB policy was assurance of the sound financial condi-

cag

tion of the carriers. Another was competition which was

not unfair or destructive. Thus the CAB took upon itself

the task of balancing the relationships of the two parties.

The present litigation is another event in that history.

The great issue remains the same. The question presented

here is whether the antitrust court has any business

making a determination which inevitably will affect the

balance and may well frustrate the CAB’s extensive con-

sideration of the inter-relationship between the two

carriers.

It was established in Pan American and reaffirmed in

Hughes that what must be honored is the CAB’s regu-

latory power, not just its past orders. And it must be

kept clearly in mind that that CAB regulatory power is

pervasive. It reaches every corner of the industry that

touches the public interest. The Board’s power to pro-

tect the public interest is the common thread that weaves

an integrated regime of supervision. The Board has con-

sidered the conduct of HAL that Aloha complains about

here, especially the scheduling practices, in a number of

proceedings under different sections of the Act. The

Board has had HAL’s conduct before it in subsidy pro-

ceedings, a merger proceeding, a $411 proceeding, in

the approval of a scheduling agreement, and a route

investigation. By its orders in each of these, the CAB

has created a single integrated pattern of regulatory

supervision. That pattern, however, is composed of far

more than the specific matters contained in those orders.

Rather that pattern is described by the very state of the

industry, itself. And that pattern is the Board’s state-

ment of what best serves the public interest in Hawaii.

_———

It is not for the antitrust court to even supervise the

composition of that pattern, let alone to remake it.

Prior to the Supreme Court’s reversal in Hughes, a

plausible argument was made that since the CAB cannot

award damages, an antitrust action would lie to recover

for past acts. The District Court relied heavily upon

this consideration in denying HAL’s initial motion to

dismiss the complaint. (R. 30-31.) After the Supreme

Court’s ruling in Hughes, it is clear that Aloha’s posi-

tion is no longer an accurate characterization of the law.

The mere fact that an antitrust plaintiff in an airlines

industry dispute seeks money damages does not divest

the CAB of its exclusive jurisdiction over the dispute.

In Hughes, the antitrust plaintiff sought and was awarded

damages of more than $145,000,000.00. The Supreme Court,

while recognizing that the CAB could not grant such

damages, nevertheless ruled that CAB jurisdiction was

exclusive. As Mr. Justice Douglas stated for the Court

(93 S. Ct. at p. 659) :

“Tt is therefore no answer to say that our Pan

American decision does not cover the alleged anti-

trust violations involved in the Tooleco-TWA trans-

actions for which treble damages were sought. As

noted, §408(b) states that the Board shall not ap-

prove any ‘acquisition of control’ which would result

‘in creating a monopoly or monopolies and thereby

restrain competition or jeopardize another air car-

rier.’ Moreover, the Board in granting permission to

‘eontrol’ an air carrier must consider the standards

of the public interest as defined in $102 of the Act.

Subsection (c) of §102 provides:

‘The promotion of adequate, economical, and effi-

cient service by air carriers at reasonable charges,

without unjust discriminations, undue preferences

or advantages, or unfair or destructive competitive

practices.’ ’’

It is no answer in this case to state, as the Courts

below ruled (R. 68), that the acts complained of were not

expressly and specifically authorized, approved, or re-

quired by CAB order.

For in the present case, just as in Hughes, the anti-

trust claims flow directly from activities by HAL which

were authorized by the CAB. The Court of Appeals

below, in its opinion, recognized an example of immunized

conduct which is identical to our situation. (489 F.2d at

p. 206):

‘‘For example, if the CAB granted a certificate to

carrier A for service between two terminal points, a

competing carrier could not bring an antitrust charge

against carrier A that the mere granting of the cer-

tificate and the competition flowing from it was in

violation of the antitrust laws, no matter how the new

carrier was motivated or how destructive its competi-

tion. Such conduct was immunized from ‘‘antitrust

action by section 414, supra 49 U.S.C.A. $1384.”

Opinion, pp. 4, 5. (Emphasis added.)

There is no difference between the example of the Court

of Appeals and the allegation here that HAL had too

many flights over its approved routes. In addition, and of

particular importance, is the fact that the Hawaiian

market alone is the only area where the CAB in its wis-

dom has authorized and determined that the competing

carriers should cover the same routes. (App., p. 286

Orders E-25649/50, September 7, 1967 and 70-4-81.)

————

Thus, HAL’s scheduling practices pursuant to prior

route authority granted by the CAB and HAL’s merger

discussions pursuant to prior approval of such negotia-

tions by the CAB are just as immune from antitrust

sanctions as was Toolco’s conduct pursuant to CAB ap-

proval in the Hughes ruling.

It is no more doubtful in our case that the authority of

the Board, either on complaint or its own initiative, ex-

tended to forbidding any scheduling practice by HAL

which was not consistent with the public interest standards

of the Act. This seems the clear import of the Act and the

Board’s 1968-1973 proceedings.

In examining the competitive situation in the relevant

market, the CAB—as recently as March 1, 1973—stated

(concerning the present scheduling practices and agree-

ment between Aloha and HAL) [App., p. 289]:

‘*We found in Order 71-12-143 that ‘. . . the agree-

ment is making a substantial contribution to viable

competition in the intra-Hawaiian markets, . . . repre-

sents progress toward alleviating over-capacity prob-

lems and holds promise of continuing to insure the

survival of Aloha while allowing Hawaiian to operate

at a profit.’”

‘*At the same time, however, we are mindful that

our continuing review of the carriers’ scheduling

practices and their operating experience may disclose

a subsequent need to renew the investigation. There-

fore, as recommended by the Bureau, we find that

this proceeding should be dismissed without prejudice

to the institution of new proceedings should condi-

tions hereafter so require.”

Thus, the CAB is closely supervising and controlling

the activities of the parties herein. The CAB is satisfied

with the current and past competitive relationships be-

tween Aloha and HAL and the Board is prepared to take

whatever action that is necessary in the future to maintain

the present competitive balance. The intrusion by the

antitrust court—as permitted in the rulings below could

well engender a collision between regulatory and antitrust

policies. The mere possibility of such a collision requires

that the CAB—not the antitrust court—be entrusted with

exclusive jurisdiction over the present Aloha-HAL dis-

pute.

B. Aloha has elected to pursue its remedies before the CAB

thus further precluding its attempt to seek antitrust reme-

dies in the Court below.

As pointed out above, not only has Aloha initiated

proceedings before the CAB concerning the scheduling

dispute, but the Board has extensively analyzed the entire

matter, made findings and taken action on the basis of its

findings.

After having urged its case before the CAB in both

a subsidy proceeding and an enforcement action, Aloha

reversed its position and suggested to the courts below

that: (1) the CAB does not have jurisdiction insofar as

the matter of scheduling is concerned; and (2) the subsidy

award is completely independent of the scheduling con-

troversy.

The erroneousness of the former contention has already

been established. As to the direct relationship between the

subsidy award to Aloha and its claim that it suffered

losses as a result of HAL’s scheduling practices, a read-

—

ing of the opinion of the CAB examiner and the decision

of the CAB resolves all doubt.

Aloha’s request for a subsidy was based on operational

losses incurred during much of the relevant damage

period alleged in the present complaint. Aloha alleged,

before the CAB, that these losses were due to various

industry conditions. Aloha further contended:

‘ss . . the factor which compelled the filing of its

petition [for subsidy before the CAB] was Hawaiian

[Air Lines’] scheduling practices throughout 1968 and

1969 which prevented Aloha from realizing an eco-

nomic operation.” (Initial Decision, App., p. 11.)

The CAB fully considered the scheduling dispute

(bringing its expertise in the air transport industry to

bear on the matter) and determined that all losses suf-

fered by Aloha and HAL were due to their own respective

overscheduling practices except for a 514 month period

during which Aloha’s losses were due to HAL’s schedul-

ing practices. Based on this finding, Aloha was awarded

a subsidy for the 54 month period.

Thus, the grant of the subsidy was the direct conse-

quence of the CAB’s findings regarding the scheduling

practices of the parties herein. While it is true that the

subsidy award does not entail the payment of damages

or reparations by HAL to Aloha, that subsidy is never-

theless awarded to compensate Aloha for the losses it

allegedly suffered as a result of HAL’s scheduling prac-

tices.* The CAB determined that but for this 544 month

Ps Pee ee -

®As pointed out above, this finding while relevant to the sched-

uling dispute between the two parties, does not constitute a deter-

mination that HAL engaged in unfair methods of competition.

oe ag

period, Aloha’s losses were due to its own uneconomic

or inefficient management.

The subsidy award—as Aloha conceded below—was

granted by the CAB to ‘‘. . . maintain and continue the

development of air transportation to the extent and of the

character and quality required for the commerce of the

United States, the Postal Service and the national de-

fense.” (49 U.S.C. §1376(b).) Thus the CAB’s ruling

concerning the award in relation to the scheduling con-

troversy was intended to promote these important national

policies, Drawing upon its expertise, and considering the

competitive situation between Aloha and HAL, the CAB’s

subsidy award to Aloha established the necessary balance

between these two air carriers insofar as inter-island

competition was concerned. Any antitrust damage award

which flows from this case could well upset that balance

and injure the economic well-being and efficiency of inter-

island air transportation.

Aloha has had its administrative hearing and an award

deemed appropriate by the CAB has been granted. Aloha

must not be allowed to eat its cake and have it too. As

Chief Justice Warren suggested in Carnation Co. v.

Pacific Westbound Conference, 383 U.S. 213, 224 (1966),

plaintiffs should not be able to seek recovery under both

administrative and antitrust remedies, Aloha has already

made its election.

From the foregoing analysis, it is clear that the lower

courts’ rulings in favor of antitrust jurisdiction in our

present case brings about the danger of a collision between

antitrust enforcement and federal regulatory policies in

the airline industry. A resolution of the antitrust case

could destroy the competitive balance achieved between

Aloha and HAL by the CAB through its extensive in-

quiry, scrutiny and regulation of the relationships between

the two airlines. In such a situation, the law is clear; the

antitrust court must defer to the exclusive jurisdiction of

the CAB. Hughes Tool Co. v. Trans World Airlines, Inc.,

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

supra.

C. HAL’s appearances before and participation in CAB proceed-

ings cannot be the basis for an antitrust claim.

The extent to which Aloha seeks to utilize the present

antitrust action as a means of interfering with the CAB’s

authority and jurisdiction over the parties is further

evidenced by Aloha’s claim that HAL attempted to

monopolize by its allegedly ‘‘predatory” appearance before

the CAB in the subsidy award proceedings. (R. 88.) The

District Court ruled that the Aloha allegations fall within

a the ‘‘sham” exception to the Noerr rule. (R. 32.) The

‘ lower courts’ handling of this issue raises numerous

questions which may be crucial to the outcome of this

| litigation.

; It is clear from a reading of the relevant CAB opinions

that HAL appeared in the various CAB proceedings to

defend itself against the charges by Aloha concerning

scheduling practices. HAL also sought a subsidy award

4 for itself as compensation for losses suffered as a result

of Aloha’s overscheduling practices. Under Supreme Court

rulings in Eastern Railroad Conference v. Noerr Motor

Freight, 365 U.S. 127 (1961) and—more recently—Cali-

fornia Motor Transport Co. v. Trucking Unlimited, 404

U.S. 508, 92 S.Ct. 609 (1972), an appearance before a

amy

government agency cannot be the basis of an antitrust

claim unless it is ‘‘. .. a mere sham to cover up... an

attempt to interfere directly . . .” with a competitor. By

no stretch of the imagination could HAL’s appearances

before the CAB be so considered. The CAB opinions be-

fore the Court leave no doubt that HAL’s appearances

before the Board were in response to actions initiated by

Aloha and for the purpose of protecting its own interests,

Indeed, HAL’s position in the CAB subsidy proceeding

was that it receive a subsidy award equal to that granted

to Aloha. This was almost identical to the position taken

by the CAB Bureau of Economics in that proceeding.

(Initial Decision, App., pp. 14-15.)

Important First Amendment principles and policies pre-

clude the use of HAL’s participation before the CAB as

a basis for alleged antitrust violations. As stated by the

Supreme Court in the California Motor Transport case

(92 S.Ct. at p. 612):

‘“We conclude that it would be destructive of rights

of association and of petition to hold that groups with

common interests may not, without violating the

antitrust laws, use the channels and procedures of

state and federal agencies and courts to advocate their

causes and points of view respecting resolution of

their business and economic interests vis-a-vis their

competitors.”

‘“ .

I. THE RULINGS BELOW UNDERMINE THIS COURT’S OFTEN

STATED RULE OF PRIMARY JURISDICTION AND RE-

LIANCE UPON THE EXPERTISE OF RELEVANT ADMINIS-

TRATIVE AGENCIES TO RESOLVE DISPUTES ARISING

BETWEEN PARTIES IN A REGULATED INDUSTRY.

It is petitioner’s position herein that in the interests

of uniform national regulation of air transportation and

protection of the efficiency and economic stability of air

carriers such as HAL and Aloha, the CAB has exclusive

jurisdiction over the matters raised by Aloha in this

litigation. At the very least, however, in light of the com-

plexity of the issues raised in this litigation and their

relationship to the regulatory policies of the CAB, the

doctrine of primary jurisdiction is applicable.

A brief perusal of the lengthy CAB opinions previously

alluded to herein, and the factual discussion above

demonstrates beyond question the complexity of the

multiple and variable factors involved in the scheduling

dispute and the need for administrative expertise in order

to reach an intelligent decision and one which accommo-

dates the important regulatory policies entrusted to the

CAB.

In the Court below, Aloha criticized any application of

primary jurisdiction which would stay this proceeding

‘‘for some indefinite period . . . to await some unidentified

decision from the CAB .. .”. Yet it was Aloha itself

which filed a petition for reconsideration before the CAB

thus re-opening the entire scheduling controversy and re-

submitting it to the Board.

More importantly, the CAB has yet to decide the merits

of the unfair competition complaints which have been

filed by Aloha and HAL against each other. These com-

—

plaints were dismissed without prejudice by order of the

CAB when Aloha and HAL entered into their current

scheduling agreement. (See App., p. 201.) From the CAB

order dated December 30, 1971, it is clear that the

scheduling agreement approved by the Board was deemed

by all parties—as well as the CAB itself—to constitute a

resolution and settlement of the charges and counter.

charges made in the unfair competition complaints. (App.,

pp. 199, 201.) These same charges have now been revived

in the context of this present antitrust complaint. In its

order approving the scheduling agreement and dismissing

the unfair competition complaints, the Board stated (App.,

p. 201):

‘‘We reiterate our prior finding that our action ap-

proving this amended agreement is predicated upon

the unique circumstances surrounding the agreement

and affecting the operations of Aloha and Hawaiian,

and the necessity for extraordinary measures to pre-

serve competitive intra-Hawaiian service.”

The CAB further retained continuing jurisdiction over

the agreement with the authority to take ‘‘. . . whatever

action may be appropriate .. .” with respect thereto.

(App., p. 201.)

The present antitrust complaint revives the very con-

tentions, arguments and considerations which were at issue

before the CAB in the unfair competition proceeding. The

CAB has jurisdiction to examine and resolve the charges

of unfair competition. If this jurisdiction is not exclusive,

it is, at least, primary. The CAB must be given the

opportunity to bring its expertise to bear on the charges

of unfair competition and on the type of relief which may

be appropriate in light of the “. . . necessity for extraor-

dinary measures .. .’’ to preserve competitive balance.

A court—in resolving antitrust claims—cannot and should

not substitute its judgment for that of the CAB.

The CAB dismissed the unfair competition complaints

because it believed that the dispute between Aloha and

HAL had been resolved through the scheduling agreement.

Aloha has attempted to circumvent the CAB’s jurisdiction

by re-filing its same unfair competition claims in the form

of an antitrust suit, This Court must not permit such

an avoidance of CAB jurisdiction. These parties must be

remanded to the CAB for a full hearing and specific

decision on the issues here presented. Only then will the

Court be sure that further judicial action concerning the

competitive relationship between Aloha and HAL will not

interfere with the policies and purposes of the Federal

Aviation Act as enforced and applied by the CAB.

The courts below took the view that primary jurisdic-

tion was not appropriate here since its only function

would be to determine whether HAL’s conduct was or was

not approved, authorized or required by the CAB. ‘‘If so,

no damage action lies. If not, the damage action does

lie.” (R. 69.)

Such a view of primary jurisdiction is far too narrow

and limited. As this Court has consistently recognized,

decisions concerning parties within the regulated in-

dustries (such as Aloha and HAL) involve

“@ * * questions of an exceptional character, the

solution of which may call for the exercise of a high

degree of expert and technical knowledge. Whether

a given agreement among such carriers should be

held to contravene the act may depend upon a con-

sideration of economic relations, of facts peculiar to

the business or its history, of competitive conditions

in respect of the shipping of foreign countries, and of

other relevant circumstances, generally unfamiliar to

a judicial tribunal, but well understood by an admin-

istrative body especially trained and experienced in

the intricate and technical facts and usages of the

shipping trade, and with which that body, conse-

quently, is better able to deal. Compare Chicago

Board of Trade v. United States, 246 U.S. 231, 238”.

Far East Conference v. United States, 342 U.S. 570

(1952) at pp. 573-574.

More recently, in Ricci v. Chicago Mercantile Exchange,

supra, this Court ruled that administrative remedies must

be utilized and the expertise of the relevant board must

be exercised before a court can intelligently resolve the

claims presented. Any other approach would maximize

the danger of an antitrust court making a decision which

would frustrate the regulatory policies entrusted to ad-

ministrative enforcement.

The CAB is authorized to appraise Sherman Act

claims, such as those presented by Aloha in this case,

in the context of an enforcement proceeding. Indeed, in

its unfair competition complaint Aloha alleged that HAL’s

conduct was in violation of Section 2 of the Sherman

Act. The CAB has not yet been given an opportunity to

resolve this issue.

As already shown, the CAB has recognized the delicate

competitive relationship between these two airlines and

the need for extraordinary measures to maintain safe

and efficient competitive air transportation service to the

—

intra-Hawaiian market. These considerations necessitate

that the Court below defer to the judgment of the CAB

with respect to the present dispute.

CONCLUSION

For the reasons presented above, this Court should

grant HAL’s petition for Writ of Certiorari.

Dated, April 19, 1974.

Respectfully submitted,

Law Orrices or JosePxH L. ALIoTo

JosEPH L. ALI0To

JosePH M. ALioTo

Peter J. Donnict1

Casg, Stack, Kay, Cronin & Cuause

Dani&év H. Case

Trep GaMBLE CLaUsE,

Attorneys for Petitioner

(Appendices Follow)

Appendix A

s United States District Court,

ng ‘ D. Ha’ ee

Civ. A. No. 72-3594.

Aloha Airlines, Inc., Plaintiff,

Vv.

Hawaiian Airlines, Inc.,

Defendant.

a Oct. 11, 1972.

| Sucont P. Kine, District Judge.

| © Plaintiff Aloha Airlines, Inc. (Aloha) and defendant

| Hawaiian Airlines, Inc. (HAL) are both air carriers in-

» gates of public convenience and necessity issued to them

4 by the Civil Aeronautics Board (CAB), they provide

' nearly all air transportation of persons, property and

» mail among the several islands of the State of Hawaii.

| — In the original complaint of July 3, 1972, plaintiff al-

4 leged that defendant beginning as early as 1968 engaged

4 in an attempt to monopolize this inter-island air trans-

| portation system in violation of §2 of the Sherman Act

| (15 U.S.C. §2). Plaintiff listed seven acts which defendant

q allegedly undertook ‘‘with the predatory intent and pur-

_ pose of eliminating plaintiff as a viable competitor” ({] 11

es ges

of the Complaint) and ‘‘with full knowledge of its impact

on plaintiff and with the intent of injuring or destroying

plaintiff” (12 of the Complaint). These are: (1) exces.

Sive (vis-a-vis the needs of the public) flight schedules;

(2) excessive purchasing, ordering, leasing (or agreeing

to lease) of aircraft; (3) misrepresenting its schedule to

the public, (4) providing below cost servicing to interstate

air carriers between stops; (5 & 6) publicizing the fact

that plaintiff and defendant should merge, while twice in

bad faith renouncing merger agreements into which de-

fendant had entered; and (7) opposing before the CAB

plaintiff’s request for a subsidy. As a result of these al-

leged practices, plaintiff claims it was damaged in the

amount of $7,700,000 and prays for treble damages under

Section 4 of the Clayton Act (15 U.S.C. $15).

Pursuant to F.R.Civ.P. 12(c), defendant now moves for

an order dismissing plaintiff’s complaint on the grounds

that (1) it fails to state a claim upon which relief can

be granted and/or (2) this court lacks jurisdiction over

the subject matter and parties. Alternatively, on the same

basis, defendant moves under F.R.Civ.P. 56 for an order

of summary judgment as to all the claims alleged in the

complaint. If neither of the above are granted, the de-

fendant then requests that certain allegations in the com-

plaint be stricken pursuant to F.R.Civ.P. 12(f).

Defendant’s motions are based on four alternative con-

tentions. First, the CAB has exclusive jurisdiction over

the subject matter of this action. Second, the CAB has

primary jurisdiction and this Court should await further

proceedings by the Board. Third, plaintiff’s complaint

fails to allege the necessary elements for an attempt to

—

iii

monopolize which is prohibited by §2 of the Sherman

Act. Fourth, Eastern Railroad Presidents Conference v.

Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5

L.Ed.2d 464 (1961) forbids any antitrust claim based on

defendant’s opposition to Aloha’s subsidy request before

the CAB.

This Court finds none of these arguments convincing.

Exclusive Jurisdiction of the CAB

Relying on Pan American World Airways, Inc. v. United

States, 371 U.S. 296, 83 S.Ct. 476, 9 L.Ed.2d 325 (1963)

(Pan Am.), HAL argues that all seven acts alleged in

the complaint are within the exclusive authority of the

CAB and therefore this Court is precluded from exercis-

ing its normal antitrust jurisdiction. HAL contends that

its position is supported by the Board’s past participa-

tion in the disputes between the parties. A brief back-

ground history of this dispute follows.

On Sept. 16, 1968, Aloha filed before the CAB a petition

for subsidy award under 49 U.S.C. §1376(b) (3), request-

ing that it be given an annual award of $1,784,784. This

request was based on substantial recent losses by Aloha

which it contended were in part caused by HAL’s sched-

uling policy. On May 16, 1972, the CAB awarded Aloha

a subsidy of $789,000 for losses sustained from Sept. 16,

1968 through Feb. 29, 1969, specifically finding that Aloha’s

losses during this period were attributable to the uneco-

nomic competition of HAL. Concerning Aloha’s subse-

quent losses, the Board concluded that Aloha failed to

satisfy the two requirements of § 1376(b) (3), i.e., (1) that

its own management was neither ‘‘honest, economical nor

efficient” and (2) that the operations for which the sub-

sidy was requested were not in the public interest. There.

fore, the remainder of Aloha’s request was denied. On

June 27, 1972, Aloha filed a Petition for Reconsideration

before the Board.

In addition to the above Aloha filed on Nov. 12, 1969,

a complaint against HAL alleging a violation of 49 U.S.C.

§ 1381 due to the latter’s scheduling practices. On Dee. 12,

1969, HAL filed a complaint against Aloha based on the

same allegations. After a CAB hearing examiner recom-

mended approval of a proposed merger between the two

parties, both complaints were dismissed, only to be reacti-

vated on May 10, 1971 because the merger plans failed

to materialize. Finally, on July 16, 1971, the parties

reached an agreement regarding their scheduling practices

for a period running from July 15, 1971 to July 15, 1973,

the Board giving its approval and retaining jurisdiction

as required under 49 U.S.C. $1382. The overscheduling

complaints were then dismissed again.

As Chief Judge Lumbard stated in Trans World Air-

lines, Inc. v. Hughes, 332 F.2d 602 at 606 (2nd Circuit

1964) (TWA), to be decided by the Supreme Court this

term, 405 U.S. 915, 92 S.Ct. 960, 30 L.Ed.2d 785:

‘‘The proposition has so often been stated that it

has become hornbook law that immunity from the

operation of the antitrust laws is not lightly to be

inferred from the enactment of a regulatory statute,

see Georgia v. Pennsylvania R. Co., 324 U.S. 439, 65

S.Ct. 716, 89 L.Ed. 1051.”

Justice Douglas in Pan Am echoed the same idea, spe-

cifically referring to the Aeronautics Act:

La: |

—

‘‘No mention is made of the Department of Justice

and its role in the enforcement of the antitrust laws,

yet we hesitate here as in comparable situations, to

hold that the new regulatory scheme adopted in 1938

was designed completely to displace the antitrust

laws—absent an unequivocally declared congressional

purpose so to do. While the Board is empowered to

deal with numerous aspects of what are normally

thought of as antitrust problems, those expressly en-

trusted to it encompass only a fraction of the total.

Apart from orders which give immunity from the

antitrust laws by reason of 4 414, the whole criminal

law enforcement problem remains unaffected by the

Act. Cf. United States v. Pacific & Arctic Railway &

Navigation Co., 228 U.S. 87, 105, 33 S.Ct. 443, 57

L.Ed. 742. Moreover, on the civil side violations of

antitrust laws other than those enumerated in the

Act might be imagined. We, therefore, refuse to

hold that there are no antitrust violations left to the

Department of Justice to enforce.” 371 U.S. 296 at

304-305, 83 S.Ct. 476 at 482.

This general principle is further reflected in the Act’s

own saving clause, 49 U.S.C. 41506, which states:

‘Nothing contained in this chapter shall in any way

abridge or alter the remedies now existing at common

law or by statute, but the provisions of this chapter

are in addition to such remedies.”

This Court believes that HAL’s reliance on Pan Am

as applied to the facts in this case is misplaced.

Pan Am held that in an injunctive action by the Justice

Department, disputes involving certain specific matters

(division of territories, allocation of routes and combina-

tions between common carriers and air carriers) are

within the CAB’s exclusive jurisdiction. In Pan Am,

money damages were not sought. Indeed it is impossible

for the CAB to award damages under the Act.' Therefore,

while Aloha could have brought an action under 4§ 1381

based on HAL’s overscheduling (similar to its earlier ac-

tion of Nov. 12, 1969), its sole relief against HAL would

be completely prospective.? It would not obtain from the

CAB the treble damage remedy for which it prays in this

complaint.

The validity and applicability of the following state-

ment in S.S.W., Inc. v. Air Transport Assoc. of America,

89 U.S.App.D.C. 273, 191 F.2d 658 at 663 (1952) has not

been changed by the subsequent Pan Am decision:

‘‘The prayer for treble damages under the anti-

trust laws raises a different problem. The Civil Aero-

nautics Act, unlike the Interstate Commerce Act and

the Shipping Act, does not authorize the award of

damages by the Board for violation of its provisions.

Where specific damage provisions are contained in

regulatory statutes, it has been held that there may

be no recovery of treble damages under the antitrust

laws. And this even in a statute such as the Inter-

state Commerce Act which contains a clause saving

1HAL argues that the subsidy award was the equivalent to

damages and should be so regarded. This ignores the procedure

under which the subsidy is given and the requirements which must

be satisfied under 49 U.S.C. § 1376(b) (3). In short, plaintiff's

ability to recover in an antitrust claim, and the extent of that

recovery, involve different questions than those considered in a

subsidy award under § 1376(b) (3).

2It should be noted that the parties’ agreement of July 16, 1971

regarding their scheduling difficulties, and the CAB’s subsequent

approval of it under § 1382, precludes any antitrust claim based

on HAL’s past July 15, 1971 scheduling which was in conformity

with that agreement. See 49 U.S.C. § 1384. Aloha’s complaint,

however, recognizes this fact when it admits that HAL’s alleged

overscheduling lasted only “until late 1970”.

vil

all preexisting remedies at common law or by statute.

Here, however, we have both a saving clause, which

provides that ‘Nothing contained in this Act shall in

any way abridge or alter the remedies now existing

at common law or by statute, but the provisions of

this Act are in addition to such remedies’ and a stat-

ute which conspicuously makes no provisions for dam-

ages. Reading the saving clause in the light of con-

gressional failure to provide a remedy for damages

in the Civil Aeronautics Act, we conclude that Con-

gress did not intend to deprive an air carrier of its

right to seek treble damages for violations of the anti-

trust laws. This accords with the Supreme Court’s

determination that it could grant injunctive relief

under the antitrust laws against a combination of

railroads under circumstances where the Interstate

Commerce Commission was not authorized to grant

comparable relief.”

See also, TWA, supra, 332 F.2d at 609; and Pan Am,

supra, 871 U.S. at 310-311 and 321, 83 S.Ct. at 476.

Moreover, the seven acts alleged in plaintiff’s complaint

are clearly distinguishable from the acts involved in the

Pan Am case; none can be considered basic to the regula-

tory scheme of the Act. See, ¢.g., TWA, supra, 332 F.2d

at 608-609. Indeed, the CAB is specifically forbidden to

regulate scheduling, under 49 U.S.C. § 1371(e) (4). In this

regard, this Court rejects HAL’s argument that because

a CAB approved merger under 49 U.S.C. $1378 is ex-

pressly immune from antitrust attack under § 1384, any

acts preceding that merger cannot be the basis of an anti-

trust suit. See, e.g., TWA, supra at 610 (its analysis re-

garding post-merger acts is just as applicable to pre-mer-

ger ones). Moreover, we have no merger in this case;

§ 1384 is not activated and there are no policy reasons

for allowing HAL to negotiate for a merger, as Aloha

contends, in bad faith. This Court is not saying that Alo-

ha’s allegations in this regard are true, but only that they

are sufficient, if true, to state a cause of action.

Primary Jurisdiction of the CAB

As already mentioned, the CAB has no power to award

damages for past unfair competitive practices; it is limited

under $1381 to issuing cease and desist orders against

prospective conduct only. However, Aloha’s contentions

are based on past conduct by HAL, especially oversched-

uling, which plaintiff admits is no longer a problem. More-

over, the standards and issues involved in awarding a

subsidy under § 1376(b)(3) are different from those in-

volved in awarding damages in an antitrust case. There-

fore, this Court cannot, and should not, apply the doctrine

of primary jurisdiction. See Allied Air Freight, Inc. v.

Pan American World Airways, Inc., 393 F.2d 441 (2nd

Circuit, 1968).

Plaintiff’s Complaint Fails to State a Cause of Action

On its face, Aloha’s complaint is adequate. See Walker

Distributing Co. v. Lucky Lager Brewing Co., 323 F.2d 1

(9th Circuit, 1963).

Noerr Issue

Although most of HAL’s contentions in its motion to

strike have already been rejected, nothing has yet been

said of its argument that 11(g) of Aloha’s complaint,

relating to HAL’s alleged opposition to Aloha’s subsidy

——

request before the CAB, should be stricken because HAL’s

conduct before the CAB is immune from an antitrust ac-

tion, citing the Noerr case, supra.

Aloha’s allegations fall within the Noerr ‘‘sham” ex-

ception as interpreted most recently in California Motor

Transport v. Trucking Unlimited, 404 U.S. 508, 92 S.Ct.

609, 30 L.Ed.2d 642 (1972). If plaintiff can prove that

HAL opposed its subsidy with ‘‘the predatory intent and

purpose of eliminating plaintiff as a viable competitor”

(11 of the Complaint) and ‘‘with full knowledge of its

impact on plaintiff and with the intent of injuring or

destroying plaintiff” (12 of the Complaint), then the

Noerr protections do not apply.

Summary Judgment

Summary judgment is not appropriate on the present

state of the record.

Conclusion

For the reasons stated above, defendant’s motions will

be denied. An appropriate order to that effect will be

signed upon presentation by either counsel through op-

posing counsel.

United States District Court,

D. Hawaii.

Civ. No. 72-3594.

Aloha Airlines, Inc., Plaintiff and

Counterdefendant,

Vv.

Hawaiian Airlines, Inc., Defendant

and Counterclaimant.

Feb. 16, 1973

DECISION and ORDERS

Samvet P. Kine, District Judge.

Motion to add a national bank

as a party defendant

Plaintiff (hereinafter Aloha) has moved (1) to add

‘Chase Manhattan Bank” as a party defendant and (2)

to file a second amended complaint.' Defendant (herein-

after Hawaiian) does not object to the filing of the second

amended complaint but does object to the addition of

‘‘Chase Manhattan Bank” as a party defendant.

Counsel for The Chase Manhattan Bank, N.A. (herein-

after Chase)?, have advised court and counsel by letter®

1The second amended complaint adds a claim under Section 1 of

the Sherman Act (alleging a combination or conspiracy between

Hawaiian and Chase) and under Hawaii Revised Statutes Sections

480-2 and 9. The original complaint alleged offenses only under

Section 2 of the Sherman Act.

2Chase’s official name is “The Chase Manhattan Bank, N.A.”

3Andrew J. Connick, Esq., of Milbank, Tweed, Hadley & McCloy,

by letter dated February 1, 1973, set forth Chase’s position in this

regard. Under the circumstances, no purpose would be served to

insist upon a more formal pleading.

that, while they acknowledge that Chase does not have any

clear right to be heard on the motion as it affects Chase,

if the motion is granted, Chase will move for dismissal on

the grounds, among others, that venue is improper under

12 U.S.C. § 94.4 For purposes of this motion, the parties

have agreed that the court may take judicial notice that

Chase is a national bank whose principal place of business

is New York City.

Aloha suggests that the relationship between venue

under 12 U.S.C. 4 94 and venue under 15 U.S.C. §$§ 15 and

225 has not yet been clarified, and cites Levin v. Great W.

Sugar Co., 274 F.Supp. 974 (D.N.J.1967) (hereinafter

Levin) for the proposition that a specific venue statute®

4894. Venue of suits. Actions and proceedings against any

association under this chapter may be had in any district or Terri-

torial court of the United States held within the district in which

such association may be established, or in any State, county, or

municipal court in the county or city in which said association is

located having jurisdiction in similar cases.” Enacted June 3, 1864.

See also 28 U.S.C. § 1348, providing that national banking associa-

tions shall be deemed to be citizens of the States in which they are

respectively “located”.

5“§ 15. Suits by persons injured; amount of recovery. Any per-

son who shall be injured in his business or property by reason of

anything forbidden in the antitrust laws may sue therefor in any

district court of the United States in the district in which the

defendant resides or is found or has an agent, without respect to

the amount in controversy, and shall recover threefold the damages

by him sustained, and the cost of suit, including a reasonable

attorney’s fee.” Enacted October 15, 1914.

“§22. District in which to sue corporation. Any suit, action, or

proceeding under the antitrust laws against a corporation may be

brought not only in the judicial district whereof it is an inhabitant,

but also in any district wherein it may be found or transacts bus-

iness; and all process in such cases may be served in the district of

which it is an inhabitant, or wherever it may be found.” Enacted

October 15, 1914.

615 U.S.C. § 78aa, enacted June 6, 1934, relating to suits violative

of the Securities Exchange Act of 1934, and specifically providing

for venue “in the district wherein any act or transaction con-

stituting the violation occurred” or “in the district wherein the

may be interpreted as having impliedly amended 12 U.S.C.

§94 for the special purposes of such statute.? Whatever

the rule may be in the Third Circuit, the Ninth Circuit

has taken the opposite view with respect to the same stat-

ute considered in Levin. United States Nationai Bank vy.

Hill, 434 F.2d 1019 (9th Circuit 1970) (hereinafter Hill).

Thus, it is likely that Chase would prevail on this question

of venue.

Aloha points out that venue may be waived, submits that

Aloha is entitled to have the claim of improper venue

asserted and briefed, and argues that policy considera-

tions in the antitrust field should lead to a different result

from Hill. These do not appear to me to be reasonable

expectations under the circumstances.

Hawaiian, while not attempting to represent Chase, em-

braces the probability of improper venue as further sup-

defendant is found or is an inhabitant or transacts business,” and

that “process in such cases may be served in any other district of

which the defendant is an inhabitant or wherever the defendant

may be found.”

7The Levin court cited an earlier case which had reached the

opposite conclusion, but decided not to follow that case, although

acknowledging that the general venue statute, 28 U.S.C. § 1391,

did not repeal 12 U.S.C. § 94.

8The court had before it claims of venue under both 15 U.S.C.

§ 78aa (of the Securities Exchange Act of 1934) and 15 U.S.C.

§ 77v (of the Securities Act of 1933). The provisions of these stat-

utes are quite similar. The court reaffirmed an earlier holding that

a national bank is “located” for the purposes of 28 U.S.C. § 1348

only in the state wherein it maintained its principal place of bus-

iness, even though it has branch offices in other states, and cited a

Supreme Court case for the proposition that a national bank can be

sued only in the district in which it is “established or located”. In

Hill the suit was brought in the Central District of California where

the national bank had a branch office, but the national bank’s

principal place of business was in the Southern District of Cali-

fornia. The court granted a writ of mandamus requiring transfer

of the entire case to the Southern District or dismissal of the

national bank as a defendant. See also Helco, Ine. v. First National

City Bank, 470 F.2d 883 (3rd Circuit 1972).

——

port for the argument that the addition of Chase as a

party defendant at this time would unduly and unneces-

sarily delay and confuse the proceedings to Hawaiian’s

prejudice. I agree.

Aside from the venue complication, there would be the

expense and delay involved in discovery by Chase.® The

allegations involving Chase all include Hawaiian, so that

Aloha is not deprived of an issue upon which to go to the

jury.’° On the other hand, Aloha is attempting to associate

Chase with all of the offenses and acts charged against

Hawaiian, which invites extensive discovery by Chase cov-

ering not only ground already gone over in depositions

taken by Aloha and Hawaiian to date but also matters

taken up in CAB hearings to which both Aloha and Ha-

waiian were parties but Chase was not.!! In pre-trial con-

ferences, Aloha made the point that preparation for trial

has been expedited by evidence adduced before the CAB,

and both parties felt that substantial portions of the CAB

record could be stipulated into evidence here. There is also

the possibility of the application of the doctrine of col-

lateral estoppel or of res judicata to certain factual issues

determined by the CAB as between Aloha and Hawaiian,

a possibility that does not exist in relation to Chase.’2

®Not to mention the time required to dispose of predictable

counter-pleadings by Chase.

Aloha may proceed with its Sherman Act Section 1 claims

naming Chase as a co-wrongdoer if not as a co-defendant. Aloha

may also file a separate action against Chase in New York.

Regarding depositions already taken, see Rule 32, F.R.Civ.P.

12See Paramount Transport Sys. v. Chauffeurs, etc., Local 436

F.2d 1064 (9th Cireuit 1971). I assume that Chase and Hawaiian

do not have the same interest and motive in cross-examining wit-

hesses or deponents.

xiv

There is a reasonable expectation that this action, with-

out Chase, will be disposed of this coming autumn. With

Chase, there is a reasonable expectation that the action

would extend well into next year. Some of the argument

has indicated that both Aloha and Hawaiian have major

financial problems.'* The sooner this suit is tried the better

it will be for both parties.

[1] The motion to add Chase as a party defendant is

denied. The motion to file a second amended complaint is

granted, except to the extent that the complaint adds

Chase as a party defendant.

Motion for reconsideration

of alternate motions

Hawaiian has moved for reconsideration of the denial

of its alternate motions of August 15, 1972, to dismiss the

complaint or for summary judgment."*

The motion is based upon recent decisions filed subse-

quent to my earlier decision.

Hawaiian argues that Hughes Tool Co. v. Trans World

Airlines, Inc., 409 U.S. 363, 93 S.Ct. 647, 34 L.Ed.2d 577

(1973) (hereinafter Hughes Tool Co.),!> makes it clear

that the CAB has exclusive jurisdiction over the matters

18Qne of Aloha’s arguments for adding Chase is that Hawaiian

had “admitted it may not have the resources to respond in damages

should plaintiff be successful at trial.” Aloha’s financial difficulties

are a matter of public record.

14Aloha Airlines, Inc. v. Hawaiian Airlines, Inc., 349 F.Supp.

1064 (D.Hawaii 1972), decision filed October 11, 1972.

15Hawaiian contends that Hughes Tool Co. is “on all fours” with

the pending case in that each case involves allegations of bad faith

merger negotiations to the complainant’s damages. The suggested

comparison does not bear closer analysis.

_ — |

—

alleged by Aloha in its second amended complaint ;'* and

if not, that the principles enunciated in Ricci v. Chicago

Mercantile Exchange, 409 U.S. 289, 93 S.Ct. 573, 34 L.Ed.

2d 525 (1973) (hereinafter Ricci)'? and Laveson v. Trans

World Airlines, Inc., 471 F.2d 76 (3rd Circuit 1972) (here-

inafter Laveson)'*® require a stay of these proceedings

16The CAB’s authority over certain matters, and specifically over

scheduling is restricted by 49 U.S.C. § 1371 (e) (4).

17Ricct held that an antitrust suit for damages alleging violations

of the rules of the Chicago Mercantile Exchange and of the Com-

modity Exchange Act should be stayed until the Commodity

Exchange Commission could pass on the validity of the challenged

conduct under the Commodity Exchange Act. Justice White said,

= . We make no claim that the Commission has authority to

decide either the question of immunity as such or that

any rule of the Exchange takes precedence over antitrust

policies. Rather, we simply recognize that Congress has

established a specialized agency that would determine

either that a membership rule of the Exchange has been

violated or that it has been followed. Either judgment

would require determination of facts and the interpre-

tation and application of the Act and exchange rules. And

either determination will be of great help to the antitrust court

in arriving at the essential accommodation between the anti-

trust and the regulator regime: The problem disappears en-

tirely if it is found that there has been a violation of the rule;

on the other hand, if it is found that the Exchange has merely

followed and enforced its own rules, the antitrust court will

be in a position to make a more intelligent and sensitive judg-

ment as to whether the antitrust laws will punish what an

apparently valid rule of the Exchange permita” (409 U.S. at

page 307, 93 S.Ct. at page 583).

18Laveson held that an antitrust suit against three airlines for

damages alleging a conspiracy to fix the price to coach passengers

for the rental of headsets used with inflight motion pictures should

be stayed pending determination by the CAB whether the alleged

agreement was approved and whether the CAB had the power to

immunize retroactively pre-approval conduct, on the ground that

the issues raised by the suit came within the primary jurisdiction

of the CAB, as provided specifically by 49 U.S.C. § 1382. The court

stated that the primary jurisdiction doctrine applied to an agree-

ment within the jurisdiction of the CAB even if the agreement had

not yet been filed with the board, and even though the plaintiffs

in the antitrust action were seeking a remedy (treble damages)

—

xvi

pending a decision by the CAB as to whether Hawaiian’s

alleged activities constituted unfair or deceptive practices

or unfair methods of competition.’®

On both points, I adhere to my earlier decision.

At that time, Trans World Airlines, Inc. v. Hughes, 332

F.2d 602 (2nd Circuit 1964 (hereinafter TWA) was cited

for certain propositions. Hughes Tool Co. reversed TWA.

Upon reexamination of my earlier decision, I conclude

that the references to TWA were not crucial to the result

reached.?°

that the CAB could not grant. The alleged illegal agreement had

in fact been filed with the CAB which had considered and was

holding in abeyance certain proposed actions relative thereto.

19Aloha did file a complaint with the CAB pursuant to 49

U.S.C. § 1381 against Hawaiian based on Hawaiian’s scheduling

practices. CAB Docket 21604. Hawaiian countered with a similar

complaint against Aloha. CAB Docket 21695. Both “enforcement

P ” were “dismissed without prejudice” by order adopted

December 30, 1971, which also approved a scheduling agreement

(agreement CAB 22539 and Amendment 1 thereto), between Aloha

and Hawaiian, looking to the future (to July 15, 1973). The order

of December 30, 1971, further provides: “4. Pursuant to 49 U.S.C.

1382(b), the Board will retain continuing jurisdiction over this

agreement and may modify its approval of, or disapprove the

agreement at any time without hearing, or take whatever action

may be deemed appropria

20Firstly, Chief Judge Lumbard was quoted as saying in TWA:

“The proposition has so often been stated that it has become

hornbook law that immunity from the operation of the anti-

trust laws is not lightly to be inferred from the enactment of

regulatory statute. See Georgia v. Pennsylvania R. Co., 324

ps 439, [65 S.Ct. 716, 89 L.Ed. 1051].” (332 F.2d at page

Justice Douglas shifts the emphasis but not the result when he

says in Hughes Tool Co.:

“We repeat .. . what we said in the Pan American case that

the Federal Aviation Act does not completely displace the

antitrust laws.

“ ‘While the Board is impowered to deal with numerous as-

pects of what are normally thought of as antitrust problems,

those expressly entrusted to it encompass only a fraction of

xvil

ROT

Yor Saas

Hawaiian reads Hughes Tool Co. as holding that all acts

j that could be the subject of a CAB order are immunized

from the operation of the antitrust laws.?! Aloha reads

the total.’ 371 U.S. [296], at 305 [83 S.Ct. 476, at 482, 9

L.Ed.2d 325].

“One of the most conspicuous exceptions would be the com-

bination or agreement between two air carriers involving trade

restraints, See Timken Co. v. United States, 341 U.S. 593, 598

[71 S.Ct. 971, 974, 95 L.Ed. 1199].

“There may be other exceptions. . . .” (409 U.S. at page 387,

93 S.Ct. at page 661).

Secondly, 7 WA was cited, along with Pan American World Air-

ways, Inc. v. U. S., 371 U.S. 296, 83 S.Ct. 476, 9 L.Ed.2d 325

(1963) (hereinafter Pan Am), as additional support for a quote

r: from 8.S.W., Ine. v. Air Transport Assoc. of America, 86 U.S.App.

D.C. 273, 191 F.2d 658 (1952) (hereinafter SSW) at page 663, to

P. the effect that Congress did not intend to deprive an air carrier of

; its right to seek treble damages for violations of the antitrust laws.

This quote may have suggested more than it should if it is taken

i to imply that an action for treble damages would lie for conduct

= subject to CAB jurisdiction which would have been subject to the

S operation of the antitrust laws but for CAB approval. It is clear

from Hughes, and was clear before Hughes, that § 414 of the Fed-

eral Aviation Act (49 U.S.C. § 1384) immunizes from antitrust

liability any conduct approved, authorized, or required by any

A CAB order under § 408 (49 U.S.C. § 1378), § 409 (49 U.S.C.

i § 1379,) or § 412 (49 U.S.C. § 1382) of the Act.

# Thirdly, TWA was cited in support of the proposition that the

CAB does not have exclusive jurisdiction because the seven acts

alleged by Aloha are not “basic to the regulatory scheme” of the

# Federal Aviation Act. The quoted phrase orginated in Pan Am.

= Nothing in Hughes Tool Co. suggests that this posits an improper

: test of CAB jurisdiction, although the Supreme Court did disagree

ni with the Circuit Court’s application thereof.

Fourthly, TWA was cited for the proposition by analogy that

acts preceding a CAB-approved merger may be the basis of an

antitrust suit for damages. The analysis in 7WA regarding anti-

trust liability for post-merger acts was rejected in Hughes Tool Co.,

and the Supreme Court’s reasoning suggests that pre-merger acts

may be immunized from antitrust liability by a CAB order. In any

: event, here there is no CAB-approved merger, no CAB order ap-

$ proving, authorizing, or requiring any of Hawaiian’s alleged acts,

nor any proceeding in relation thereto pending before the CAB.

21Hawaiian renews its argument that because Aloha could have

proceeded against Hawaiian before the CAB under 49 U.S.C.

§ 1382, such a proceeding is Aloha’s only remedy. But see Ricci

and Laveson and the discussion below.

7 ii

Hughes Tool Co. as holding that only acts which have been

approved, authorized or required by a valid CAB order

are so immunized.”

[2] I agree with Aloha’s interpretation of the case.

In discussing the CAB’s involvement in the challenged

transactions, Justice Douglas said:

‘One difficulty with the conclusion of the Court of

Appeals [in TWA] that these transactions, unlike

those involved in the Pan American case, were trans-

actions on which the Board might take action but did

not do so is that it misconstrues the record.” Hughes

Tool Co., 409 U.S. at page 379, 93 S.Ct. at page 657.

“Tt is too clear for argument that in entering the

1950 order the Board fully realized that Toolco had

determined and would determine when and how much

new equipment would be purchased, from whom it

would be acquired and how it would be financed. It

was precisely this type of association that it contem-

plated when it approved the additional control ob-

tained by Tooleo in 1947. And it was precisely this

same conclusion that the Board was implementing

each time during the 1950’s that it approved a sale or

lease of an airplane from Toolco to TWA which, with-

out its approval, would have violated the Board’s on-

going limitation on the size of inter-company trans-

actions.” Hughes Tool Co., 409 U.S. at page 386, 93

S.Ct. at page 660.

22Hughes Tool Co. and Laveson give a CAB order both retro-

spective and prospective effect. A CAB order approving, author-

izing, or requiring certain conduct necessarily includes some prior

acts associated with such conduct, and not only future acts con-

sistent with the order.

| ——

xix

There is no claim here that any of Hawaiian’s acts of

which Aloha complains were done pursuant to a valid

CAB order.?*

[3] In my earlier decision, I held that this court can-

not and should not apply the doctrine of primary jurisdic-

tion to stay these proceedings pending CAB action. I do

not read Hughes, Ricci, or Laveson as requiring a differ-

ent result.

[4] I understand Ricci and Laveson as holding that an

antitrust action for treble damages based on conduct which

could be approved, authorized, or required by the valid

order of an administrative agency should be stayed pend-

ing a decision by that agency as to whether the conduct

in question is or is not approved, authorized, or required.?4

If so, no damage action lies.?° If not, the damage action

does lie.7¢

23 Aloha contends that “the CAB has already held that Hawaiian’s

over-scheduling was the sole cause of Aloha’s inability to attain a

load factor of 55.1% in the period indicated and that as a result

of that conduct Aloha lost substantial revenues.”’ Motion for Partial

Summary Judgment under Rule 56 or, in the Alternative, for a

Pre-Trial Order Under Rule 16, filed January 24, 1973.

24See footnotes 17, 18, 20, and 22, supra.

25The validity and scope of the order are subject to court review.

See Ricci.

26By order adopted February 7, 1973, the CAB entered its Sup-

plemental Opinion on Reconsideration and Order Denying Motion,

saying in part:

“Finally, the Board is cognizant of the antitrust suit which

has been filed by Aloha against Hawaiian in... Hawaii...

We believe it appropriate to include a provision in the rate

whereby Aloha’s subsidy award will be reduced by the amount

of any recovery in the litigation, or in a settlement thereof, to

—_—_

——

Here the acts by Hawaiian of which Aloha complains

could not now be approved, authorized, or required by the

CAB.2" There is therefore nothing to refer to the CAB.

the extent that such recovery relates to damages sustained

during the 514-month subsidy period .

The Board noted specifically that it was not expressing any view

concerning the merits of Aloha’s complaint.

a subsidy period is September 16, 1968 through February 28,

The period during which the offenses set forth in the complaint

are alleged to have taken place is “Beginning as early as 1968 and

continuing to the date of the filing of this Complaint [July 3,

1972]” except for the alleged “predatory, excessive scheduling”

which continued until the CAB-approved scheduling agreement of

December 8, 1970.

27The proposed second amended complaint details these acts and

their effects as follows:

“TV: OFFENSES CHARGED

11. Beginning at least as early as 1968 and continuing up

to the date of the filing of this Complaint, defendant HA-

WAIIAN, acting in concert with defendant CHASE, has been

engaged in a plan, program, and attempt to restrain and to

monopolize trade and commerce in inter-island air transporta-

tion in the State of Hawaii in violation of Sections 1 and 2 of

the Sherman Act (15 U.S.C. 1, 2) and Sections 480-2 and 9 of

the Hawaii Revised Statutes.

12. The aforesaid plan, program and attempt to monopolize

consisted of the following acts, all undertaken with the preda-

tory intent and purpose of eliminating as a viable competitor:

(a) Defendant HAWAIIAN, acting in active concert with

defendant CHASE, scheduled excessive flights over and beyond

pon Sa and anticipated needs and requirements of the

ic.

“4 i) In August, 1966, ALOHA scheduled 399 weekly flights

on the four major route segments while HAWAIIAN had only

339; by August, 1968, HAWAIIAN increased the number of

its scheduled flights to 486 while ALOHA actually reduced the

number of its flights to 368; using 1966 as a base of 100,

ALOHA’s frequency of scheduled weekly flights on the four

major route segments decreased in 1968 to 92, while HA-

WAIIAN’s increased to 143; by 1969, HAWAITIAN’s fre

queney had increased to 189% of the 1966 level, while

ALOHA’s had increased to 123% of the 1966 level.

(ii) During the period 1966-1968, ALOHA’s passenger load

factor declined from 59.5% to 44. 1%.

(iii) The foresaid predatory, excessive scheduling continued

until late 1970, when, at the urging and under the auspices

——————

Th ales i

The motion for reconsideration is denied.

of the Civil Aeronautics Board, HAWAIIAN and ALOHA

reached agreement on flight schedules pursuant to which each

company secured a share of the passenger market closely re-

lated to each company’s historic position.

(b) Defendant HAWAIIAN, with the active participation

of defendant CHASE, and with its advice, permission and

consent, purchased, ordered, leased or agreed to lease an ex-

cessive number of aircraft;

the public in order to induce members of the public to obtain

discount flights;

(d) Defendant HAWAIIAN attempted to undereut and

provide services below cost to interstate air carriers in the area

of servicing aircraft between stops;

(e) Defendant HAWAIIAN has repeatedly publicized the

fact that the two airlines should merge, with HAWAIIAN

being in control, thereby undermining the confidence of the

public, the travel industry, stockholders, creditors and em-

ployees of plaintiff;

28See note 28 on page 436.

xxii

Appendix B

United States Court of Appeals,

Ninth Circuit.

No. 73-1557.

Aloha Airlines, Inc., Plaintiff-

Appellee, \

Vv.

Hawaiian Airlines, Inc.,

Defendant-Appellant.

Nov. 29, 1973.

Before Tuttiz,* HurstepLer and

Kitxenny, Circuit Judges.

Turriez, Circuit Judge:

This appeal from an interlocutory order denying the

defendant-appellant’s motion to dismiss D.C., 349 F.Supp.

1064, is here by order of this court allowing interlocu-

tory appeal under 28 U.S.C.A. §1292(b).

The issue is a narrow one, but one that is important

and timely for interlocutory consideration because of the

decision of the Supreme Court in Hughes Tool Company

*Of the Fifth Circuit, sitting by designation pursuant to 28

U.S.C. § 294(d) (1970).

— =— |

—_

eee

v. Trans World Airlines, Inc., 409 U.S. 363, 93 S.Ct. 647,

34 L.Ed.2d 577 (1973).

The significance of the Hughes case here is plain when

we note that this, like Hughes, is a case of alleged anti-

trust violations of section 2 of the Sherman Act, 15 U.S.

C.A. §2, which alleged violations had previously been

the subject of certain proceedings before the Civil Aero-

nautics Board. In Hughes the Court, reversing the de-

cision of the Court of Appeals for the Second Circuit,

332 F.2d 602 (2d Cir. 1964), held that the principal acts

alleged as the grounds of an antitrust suit had all been

the subject of express orders approving them, previously

entered by the CAB in the proper exercise of its statutory

duties, and that, therefore, all of these acts, as well as

other conduct which ‘‘was no more than the kind of con-

duct the CAB .. . had approved” were immunized from

antitrust laws. We must, therefore, determine whether

the acts of HAL which Aloha alleged as the basis of its

antitrust suit and the actions of the CAB relative to them

here fit the pattern of those found by the Court in Hughes

to immunize them from the antitrust laws.

The following undisputed history of the case is taken

largely from the decision of the trial court, preliminary

to its order denying HAL’s motion to dismiss:

Aloha and defendant HAL are both air carriers in-

corporated in the State of Hawaii. By virtue of certifi-

eates of public convenience and necessity issued to them

by the Civil Aeronautics Board, they provide nearly all

air transportation of persons, property and mail among

the several islands of the State of Hawaii.

xxiv

In the original complaint of July 3, 1972, plaintiff al.

leged that defendant, beginning as early as 1968 and

continuing through 1970, engaged in an attempt to mo-

nopolize this inter-island air transportation system in

violation of section 2 of the Sherman Act, 15 U.S.C.A,

§2. Plaintiff listed seven acts which defendant allegedly

undertook “with the predatory intent and purpose of

eliminating plaintiff as a viable competitor” and with

full knowledge of its impact on plaintiff and with the in-

tent of injuring or destroying plaintiff.” These are:

(1) excessive (vis-a-vis the needs of the public) flight

schedules; (2) excessive purchasing, ordering, leasing (or

agreeing to lease) of aircraft; (3) misrepresenting its

schedules to the public; (4) providing below cost serv-

icing to interstate air carriers between stops; (5 & 6) pub-

licizing the fact that plaintiff and defendant should merge,

while twice in bad faith renouncing merger agreements

into which defendant had entered; and (7) opposing be-

fore the CAB plaintiff’s request for a subsidy. As a result

of these alleged practices, plaintiff claims it was damaged

in the amount of $7,700,000 and prays for treble damages

under section 4 of the Clayton Act, 15 U.S.C.A. 4$ 15.

Pursuant to Fed.R.Civ.P. 12(c), defendant moved for

an order dismissing plaintiff’s complaint on the grounds

that (1) it fails to state a claim upon which relief can be

granted and/or (2) the trial court lacked jurisdiction over

the subject matter and parties. Alternatively, on the same

basis, defendant moved under Fed.R.Civ.P. 56 for an

order of summary judgment as to all the claims alleged

in the complaint.

Defendant’s motions were based on four contentions.

First, the CAB has exclusive jurisdiction over the sub-

ai “

Er ON SPR AT Mahe BLT a) fo in Og BB

ject matter of this action. Second, the CAB has primary

jurisdiction and the Court should await further proceed-

ings by the Board. Third, plaintiff's complaint fails to

allege the necessary elements for an attempt to monopo-

lize which is prohibited by section 2 of the Sherman Act.

Fourth, Eastern Railroad Conference v. Noerr Motor

Freight, 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961)

forbids any antitrust claim based on defendant’s opposi-

tion to Aloha’s subsidy request before the CAB.

The trial court found none of HAL’s arguments con-

vincing and denied the motion to dismiss. Subsequently,

the Supreme Court decided the Hughes case, and HAL

renewed its motions, which were again denied. This Court

granted interlocutory appeal. We affirm.

The position of HAL urged upon the trial court is es-

sentially that all of the actions alleged in the complaint

deal with problems that are within the exclusive authority

of the CAB, and, therefore, the trial court was precluded

from exercising its normal antitrust jurisdiction. In ef-

fect, the argument runs that since section 411 of the Fed-

eral Aviation Act, 49 U.S.C.A. $ 1381,! gives to the CAB

power and authority to investigate ‘unfair or deceptive

practices or unfair methods of competition in air trans-

1“The Board may, upon its own initiative or upon complaint by

any air carrier, foreign air carrier, or ticket agent, if it considers

that such action by it would be in the interest of the public, inves-

tigate and determine whether any air carrier, foreign air carrier,

or ticket agent has been or is engaged in unfair or deceptive prac-

tices or unfair methods of competition in air transportation or the

sale thereof. If the Board shall find, after notice and hearing, that

such air carrier, foreign air carrier, or ticket agent is engaged in

such unfair or deceptive practices or unfair methods of competi-

tion, it shall order such air carrier, foreign air carrier, or ticket

agent to cease and desist from such practices or methods of com-

petition. Pub.L. 85-726, Title IV, § 411, Aug. 23, 1958, 72 Stat.”

oma

xxvi

portation,” (Emphasis added) this is an explicit commit-

ment to the CAB of sole jurisdiction to deal with any

such acts as may be charged to air carriers. They, of

course, point to no provision of the statute which ex-

pressly immunizes such conduct from charges of Sherman

Act violation.

To the contrary, there is a section of the Act, section

414, 49 U.S.C.A. § 1384? which does immunize certain ac-

tions authorized, approved or required by other sections

of the Act from the antitrust laws.

There is nothing in the Hughes opinion that modifies

the established rule enunciated in the Hughes case when

decided in the Court of Appeals that:

‘‘The proposition has so often been stated that it

has become hornbook law that immunity from the

operation of the antitrust laws is not lightly to be in-

ferred from the enactment of a regulatory statute,

see Georgia v. Pennsylvania R. Co., 324 U.S. 439

[65 S.Ct. 716, 89 L.Ed. 1051].’’ 332 F.2d 602, 606.

In fact the author of the Court’s opinion in Hughes

while writing for the Court earlier, stressed the fact that

only those matters ‘‘normally thought of as antitrust

problems’’ (Emphasis added) that are ‘‘expressly en-

trusted to the CAB are withdrawn from consideration by

the Courts.’? See Pan American World Airways, Inc. v.

2“ Any person affected by any order made under sections 1378,

1379, or 1382 of this title shall be, and is hereby, relieved from the

operations of the ‘antitrust laws’ as designated in section 12 of

Title 15, and of all other restraints or prohibitions made by, or

imposed under, authority of law, insofar as may be necessary to

enable such person to do anything authorized, approved, or re-

quired by such order. Pub.L. 85-726, Title IV, § 414, Aug. 23,

1958, 72 Stat. 770.”

———

es eS SHR ee ha OS he

al -

United States, 371 U.S. 296 at 304, 305, 83 S.Ct. 476, 9

L.Ed.2d 325 (1963).

The jurisprudence, therefore, seems to have been, prior

to the Court’s decision in Hughes, that in those areas of

air carrier operations as to which the CAB was given

autonomy to issue orders dealing with the certification,

supervision of tariffs, mergers, borrowings, and _ inter-

locking interests of air carriers, the CAB had exclusive

jurisdiction to the extent that the courts would not sec-

ond guess what the Board in its expertise had author-

ized by order. For example, if the CAB granted a cer-

tificate to carrier A for service between two terminal

points, a competing carrier could not bring an antitrust

charge against carrier A that the mere granting of the

certificate and the competition flowing from it was in vio-

lation of the antitrust laws, no matter how the new

carrier was motivated or how destructive its competi-

tion. Such conduct was immunized from ‘‘antitrust’’ ac-

tion by section 414, supra, 49 U.S.C.A. § 1384.

Moreover, the Supreme Court had held that the Board’s

jurisdiction under section 411 to investigate and put an

end to unfair practices alleged to have resulted from

orders lawfully entered under authority of sections 408

and 409 gave the CAB exclusive jurisdiction to put a

stop to such conduct. The Court said in Pan American

World Airways v. United States, 371 U.S. 296, 83 S.Ct.

476, 9 L.Ed.2d 325:

“It seems to us, therefore, that the Act leaves to

the Board under § 411 all questions of injunctive re-

lief against the division of territories or the allo-

cation of routes or against combinations between

common carriers and air carriers.’’ (footnote omit-

eee

ted) (Emphasis added). 371 U.S. at 310, 83 S.Ct. at

485.

In the Hughes case, Trans World Airlines had filed an

antitrust suit against Hughes Tool Company. A default

judgment of $145,000,000 with 714% interest was affirmed

by the Court of Appeals for the Second Circuit. 449 F.2d

51 (1971). As stated by the Court in its opinion ‘‘The

crux of TWA’s complaint was the use by Toolco of its

control over TWA to control and dictate the manner

and method by which TWA acquired aircraft and the

necessary financing thereof.’? 409 U.S. 366, 93 S.Ct.

650.

The Court then stated the issue:

‘‘Another defense of Tooleo was that those transac-

tions were under the control and surveillance of the

Civil Aeronautics Board and by virtue of the Federal

Aviation Act of 1958 these transactions have immunity

from the antitrust laws.

“It is our view that the Court of Appeals erro-

neously rejected that defense. This result, we think,

is required by sections 408 and 414 of the Federal

Aviation Act and by our prior decision in Pan

‘American World Airways v. United States, 371 US.

296 [83 S.Ct. 476, 9 L.Ed.2d 325] (1963).’’

The Court’s opinion then recited the facts that had

occurred during the period 1944-1960: Tooleo had by

1944 obtained practical control of TWA by acquiring

45 6/10% of the outstanding stock of the airline; it had

obtained subsequent authorizations, including Board ap-

proval of the acquisition of up to 80% of the TWA stock

by Toolco in 1950. During this time many purchases and

—

_ “A

financial arrangements were expressly authorized by the

Board under section 408. The Court stressed the fact

that each of these Board orders was subject to the re-

quirement contained in the original order of the Board

that specific orders of the Board would be required with

respect to each transaction dealing with the acquisition

of additional aircraft and the financing thereof. Follow-

ing the placing by Toolco of the stock in a voting trust

in 1950, at the insistence of the financial institutions in-

volved in the program, TWA, now no longer under the

control of Toolco, filed suit against the latter alleging

violations of the antitrust laws, which violations the Su-

preme Court describes as follows:

‘‘As analyzed by the Court of Appeals in its opin-

ions filed in. this case, the complaint rested principally

on Tooleo’s conduct as controlling stockholder during

the years 1955-1960...

‘As respects its defense that CAB control and sur-

veillance gave it immunity from the antitrust suit,

Tooleo relies on Pan American World Airways v.

United States, 371 U.S. 296 [83 S.Ct. 476, 9 L.Ed.2d

325]. The Court of Appeals distinguished that case,

saying that there the unlawful division of territories

and allocation of routes were directly ‘within the

ambit of powers explicitly granted the Board by the

Congress,’ 332 F.2d at 608. The Court of Appeals said

that the present case was different because, in its

view, the continuing supervision of the Board over

to Toolco-TWA relationship was general and not re-

lated to a specific conduct that gave rise to violations

of the antitrust laws.’’ Id. at 372-378, 93 S.Ct. at 656.

The Court then made it plain that the facts in Hughes

were not to be distinguished from those in Pan American

so far as their being matters that were explicitly commit-

ted to the CAB was concerned. The Court said:

‘*One difficulty with the conclusion of the Court of

Appeals that these transactions, unlike those involved

in the Pan American case, were transactions on which

the Board might take action but did not do so, is that

it misconstrues the record. As noted, from 1944

through 1960 every acquisition or lease of aircraft

by TWA from Tooleo and each financing of TWA

by Tooleo required Board approval. Each transac-

tion was approved by the Board and each approval

was an order under section 408, for the Board re-

garded its transactional orders as modifications or in-

terpretations of its antecedent control order. Each of

the modification orders recited the finding of the

Board that the transactions were ‘just and reason-

able and in the public interest.’ ’’ Id. at 379, 93 S.Ct.

at 657.

The Court then for the second time stated that the

Federal Aviation Act does not completely displace the

antitrust laws. The Court said ‘‘We by no means hold

that the Federal Aviation Act completely displaces the

antitrust laws. Pan American, 371 U.S. at 305 [83 S.Ct.

476].” The Court then, it seems to us made clear the

thrust of its holdings as to the extent to which the anti-

trust laws were displaced in the circumstances of that

case.

‘*But where, as here, the CAB authorizes control of

an air carrier to be acquired by another person or

corporation, and where the CAB specifically authorizes

as in the public interest specific transactions between

the parent and the subsidiary, the way in which that

control is exercised in those precise situations is under

seal sineensninanantineeeneeitiillall

al -

the surveillance of CAB, not in the hands of those

who can invoke the sanctions of the antitrust laws.

As noted, the parent company which controls an air

carrier is subject to pervasive control by the CAB.

The control which CAB is authorized to grant or to

deny under § 408 involves an appraisal of the impact

of that control in terms of monopoly and competition ;

and the ongoing supervision entrusted to the CAB by

§ 415 is broad enough to put all transactions between

parent and subsidiary—as originally conceived or

subsequently exercised—under CAB supervision.’ /d.

at 387-388, 93 S.Ct. at 662.

In the case before us there is no order of the CAB

authorizing the conduct which has been made the basis

of the antitrust complaint filed by Aloha. HAL takes the

position, however, that the fact that section 411 of the

Act provides that the Board may, upon its own initiative

or upon complaint by any air carrier, investigate and de-

termine whether any air carrier has been or is engaged

in unfair or deceptive practices or unfair methods of

competition in air transportation and if it should find the

existence of such practices, it shall issue a cease and de-

| sist order amounts to an explicit commitment of exclusive

authority to the Board to deal in all aspects with charges

of unfair competition.

To be sure, Pan American held that the CAB had ex-

elusive jurisdiction to halt certain alleged anticompetitive

practices, but the alleged practices in that case had been

the subject of specific orders of the CAB dealing with

“the division of territories or the allocation of routes or

... combinations between common carriers and air car-

= “’

riers’’—all matters within the Board’s primary juris-

diction under section 408 or section 409. In contrast, the

CAB has not issued any orders authorizing or restraining

HAL’s past conduct of which Aloha complains.

The Court made it plain in Pan American that such

jurisdiction was restricted to prospective relief since the

Court said ‘‘[t]he Board has no power to award dan-

ages or to bring criminal prosecutions.’’ This was noted

at the point in which the Court was recognizing limita-

tion on the kinds of relief that were committed to the

Board. The dissenting opinion by Mr. Justice Brennan

was based largely upon the distinction made by the Court

between the granting of exclusive jurisdiction to the

Board as to injunctive matters while leaving to the anti-

trust court the handling of damage claims.

We conclude, therefore, that the grant of authority to

the Board by section 411 does not withdraw from the an-

titrust litigants the right to proceed for damages alleged

to have occurred by reason of antitrust violations of the

kind with which the Board has authority to deal only

by issuing a cease and desist order.

HAL has a further prong to its attack on the judg-

ment of the trial court. It says that the same issue now

before the antitrust court has already been litigated and

resolved partially in favor of Aloha and partially against

it. This contention is based upon the fact that on Sep-

tember 16, 1968, Aloha filed a petition with the CAB

seeking subsidies for the period beginning on that date be-

cause it apprehended a continuation of already existing

alleged unfair competitive practices by Hawaiian—princi-

pally excessive uneconomical overscheduling of flights.

—=_7"

eee

Such a subsidy procedure is authorized under 49 U.S.C.A.

§1376(a) and (b).®

The petitioner requested a subsidy award of $1,784,784.00

for the year beginning September 16, 1968, and a like

amount for each year thereafter. Thereafter Hawaiian

Airlines filed a similar petition on October 7, 1968. In

its presentation to the CAB Aloha alleged that HAL

had engaged in uneconomic scheduling practices through-

out 1968 and 1969. On May 16, 1972, the CAB awarded

Aloha a subsidy of $789,000.00 for losses which is sus-

tained during the period September 16, 1968, through

February 29, 1969. This subsidy was awarded on the

finding that for the five and one-half month period Alo-

ha’s losses were due to ‘‘. . . the uneconomic competition

of Hawaiian Airlines].’’ As to the rest of the period

for which Aloha’s claim for subsidies was being consid-

3Subparagraph (b) dealing with “rate-making elements” pro-

vides as follows:

“(b) In fixing and determining fair and reasonable rates

of compensation under this section, the Board, considering the

conditions peculiar to transportation by aircraft and to the

particular air carrier or class of air carriers, may fix dif-

ferent rates for different air carriers or classes of air

carriers, and different classes of service. In determining the

rate in each case, the Board shall take into consideration,

among other factors, (1) the condition that such air carriers

may hold and operate under certificates authorizing the car-

raige of mail only by providing necessary and adequate facili-

ties and service for the transportation of mail; (2) such

standards respecting the character and quality of service to

be rendered by air carriers as may be prescribed by or pur-

suant to law; and (3) the need of each such air carrier

(other than a supplemental air carrier) for compensation for

the transportation of mail sufficient to insure the performance

of such service, and together with all other revenue of the air

carrier, to enable such air carrier under honest, economical,

and efficient management, to maintain and continue the devel-

opment of air transportation to the extent and of the char-

acter and quality required for the commerce of the United

States, the Postal Service, and the national defense.”

—

XXXxiv

ered by the Board it was decided that ‘‘Quite apart

from the wisdom or unwisdom of Aloha’s action from a

competitive standpoint, it was clearly not ‘economical and

efficient’ within the meaning of the first standard of the

Act.’’ The Board, in its opinion stressed the fact ‘‘[t]hat

the standards for the award of subsidy are somewhat

more stringent than the standards governing generally

the sound management of a carrier has long been clear,”

citing Transatlantic Final Mail Rate case, 19 CAB 464,

520 (1954).

The contention by HAL as to this subsidy is two-

fold. In the first place it claims that Aloha has re-

ceived compensation for any actions that would nor-

mally be considered as relevant to an antitrust suit

arising from excessive scheduling of flights when it re-

ceived the subsidy award for the five and one-half month

period. In the second place it contends that the provi-

sions for subsidy awards is an adequate substitute for

the failure elsewhere in the Act to provide for the award-

ing of damages for conduct that would normally justify

the bringing of an antitrust complaint.

The treatment of this claim by the Board in this case,

together with a careful reading of the Act itself, makes

it plain that the awarding of a subsidy is in no sense

intended to compensate one competing carrier for losses

inflicted upon it by unfair trade practices committed by

another. The subsidy provisions are merely a stopgap

to assist a carrier, whose continued existence is recog-

nized to be in the public interest by the Board, to keep

its head above water so long as its failure to do so is

not the result of its own dishonest, uneconomical or in-

efficient management. It is to be noted that it has nothing

——

- -

to do with the reimbursement of lost profits which might

otherwise have been legally earned by the injured carrier

which, under the antitrust laws is not held to the strict

accountability of stringent economy and competence of

management required of applicants for subsidies.

In the case before the Board it not only disallowed a

substantial amount of the requested subsidy represent-

ing items which may very well normally have been in-

cludable in the operating expenses of a plaintiff in an

antitrust damage suit,‘ but the Board itself drew atten-

tion to the fact that the standards for the award of

subsidy are somewhat more stringent than the standards

governing generally the sound management of a carrier.

The Board said in the Transatlantic Final Mail Rate

case, supra:

‘‘We are of the firm conviction that every carrier

which requires subsidy support must make its man-

agement decisions after careful consideration of the

effect they will have on the carrier’s subsidy re-

quirements. Factors of airline prestige or competi-

tive advantage which may be of primary concern in

management decisions in other industries must give

way to the effect on required subsidy where the

government is called upon to furnish a substantial

portion of the total costs of operation.’’

So, too, the Court of Appeals for the District of Co-

lumbia Circuit said in Trans World Airlines, Ine. v.

Civil Aeronautics Board, 128 U.S.App.D.C. 126, 385 F.2d

648 at 657, cert. denied, 390 U.S. 944, 88 S.Ct. 1029, 19

L.Ed.2d 1133 (1968) :

‘Two items of expense claimed by the carrier but disallowed by

the Board were “promotion and sales expenses” of $177,133.00 and

= write-off of $44,976 for a Viscount aircraft after a ground acci-

—

XXXVi

‘‘A subsidy agency may realistically stress diligence

to avoid excessive advertising and selling expense

since restraints that normally operate on corporate

management may be subdued in the case of a subsi-

dized operation, where the managers may be influenced

by the possibility if not the prospect that current sub-

sidized advertising expenditures would attract cus-

tomers who would remain, in good measure, as pa-

trons in the later subsidy free period. The danger of

spiraling selling costs is manifest where subsidies are

payable to carriers who compete with each other.”

Under Aloha’s certificate to operate in the State of

Hawaii it would, in fact, be remiss if it did not apply

for a subsidy to see it through a period of such losses

as would threaten its viability as a carrier. Since such

subsidies are measured by the amount which is neces-

sary when added to ‘‘all other revenue of the air car-

rier . . . to maintain air transportation to the extent

and the character and quality required for the com-

merce of the United States, the Postal Service, and the

national defense,’’ it is clear that such subsidy is no

measure of anticipated profits which might be recover-

able in an antitrust action. Neither, therefore, can the

provision of subsidies be considered as a substitute for

damages that may be owed to a carrier either for the

period of the subsidy itself or the presubsidy or post-

subsidy periods included within an antitrust action.

Little need be said of the other argument of HAL

to the effect that the filing of a petition by Aloha against

HAL under section 411 complaining of the same over-

scheduling and other conduct by HAL was either a bind-

ing recognition by Aloha that the CAB had exclusive

jurisdiction over the matters there at issue or that it

“

re A, Ae Bok

amounted to an election of remedies which would bar

a subsequent action for damages in the antitrust court.

As has already been indicated, there is no way in which

the CAB can award damages for Sherman Act viola-

tions. To the extent that the Supreme Court has recog-

nized that certain problems dealing with prospective con-

duct are exclusively confined to the CAB by section 411,

the recognition of such jurisdiction does not exclude the

right of a complaining carrier to resort to the courts

in matters which do not fall within such jurisdiction. A

claim for past damages is such a matter. In this case

the complaint alleges damages from a conspiracy begin-

ning in 1968 and running through 1970, after which time

the parties had made an agreement with respect to

scheduling that caused a dismissal of the section 411

complaint filed by Aloha and a counter-complaint filed by

HAL. It is apparent that the parties concluded that

they had obtained all that they could reasonably hope to

get before the Board under a section 411 type hearing

when they agreed by stipulation to a reduction in the

overscheduling complained of by Aloha and bound them-

selves by stipulation to a scheduling program to be ef-

fective until July, 1973. Aloha could not, and does not

now, contend that the overscheduling practices of the

earlier period continued beyond the effective date of the

new agreement. It does not claim damages in the anti-

trust suit for any conduct subsequent to December 31,

1970. We conclude, therefore, that the commencement

and termination of the section 411 proceedings do not

bar an antitrust action seeking damages only for conduct

alleged to continue from 1968 through 1970, merely be-

cause this overscheduling produced a subsidy for part

—

eee

of the period for Aloha and resulted in a compromise

solution for the future scheduling of the two airlines in

a section 411 proceeding.

We still have for consideration the contention by HAL

that even though the CAB may not have had exclusive

jurisdiction over all matters dealing with the actions

alleged by it as a basis for its antitrust action, it nev-

ertheless had primary jurisdiction. As stated in appel-

lant’s brief, ‘‘[a]t the very least, the antitrust action in

the district court below must be stayed pending exercise

by the CAB of its primary jurisdiction to resolve Alo-

ha’s claims of unfair competition.’’

In light of the proceedings that have already been

held by the CAB in the subsidy matter and the section

411 hearings, it is difficult to understand precisely what

the appellant considers should now be remanded to the

Board for further consideration before the unfair com-

petition claims are ripe for court action. It is significant

that there is not now, nor has there ever been, any

authority in the Board under section 411 or elsewhere

to make a factual determination as to the existence vel

non of all the ingredients of an antitrust suit under the

Sherman Act. While there are questions of the applica-

tion of the doctrine of collateral estoppel to be resolved

by the trial court when it considers what effect is to be

given to the determinations made by the CAB in the

subsidy proceedings that there was uneconomical sched-

uling by HAI causing the right to a subsidy by Aloha,

the elements to be proved as to the existence of Sherman

Act violations would under no circumstances be a mat-

ter for the Board to decide. It is difficult, therefore, to

may |

xxxix

see how the court should defer to the Board to permit

the parties to seek findings of fact there which would not

obviate the necessity for the antitrust court to litigate

other issues.

As pointed out by the Supreme Court in Ricci v. Chi-

cago Mercantile Exchange, 409 U.S. 289, 93 S.Ct. 573,

34 L.Ed.2d 525 (1973), the court should stay an antitrust

action for prior administrative proceedings under the

doctrine of primary jurisdiction if it is likely that a

prior agency adjudication of the matters before it will

be a material aid to the court in disposing of the anti-

trust suit. See 409 U.S. at 304, 305, 93 S.Ct. 573. In the

case before us, it appears that the CAB has done its

full task with respect to the matters that are now being

urged in the antitrust action. It was requested to, and

it did, grant a subsidy for conduct occurring during a

period of five and one-half months midway between the

start and the conclusion of the alleged antitrust con-

spiracy, based upon ‘‘uneconomical scheduling.’’ It is

to be noted that this is all that it need find in order

to grant subsidy. It was not requested to, and it did

not, find the other ingredients present which would be

required in the bringing of an antitrust action. It also

held hearings under the section 411 proceedings until

the parties, by agreement, obtained by stipulation, the

relief they sought for the future, which is all the relief

the CAB could have given them in any event.

As pointed out by the trial court the CAB could in no

event have authorized by order the conduct which has

here been made the basis of the antitrust action. It

goes without saying that the CAB could not, by any

—

order entered by it, authorize overscheduling (which it

found to exist) with ‘‘the predatory intent and purpose

of eliminating plaintiff as a viable competitor’’ and

‘‘with full knowledge of its impact on plaintiff and

with the intent of injuring or destroying plaintiff.’’

Subsequent to oral argument counsel has called at-

tention to the case Price v. Trans World Airlines, Inc,

481 F.2d 844 (9th Cir. 1973). In the Price case a plaintiff

suing on behalf of a class of non-first class passengers

brought an action under sections 1 and 2 of the Sherman

Act, 15 U.S.C.A. §§15 and 22, alleging an unlawful

combination and conspiracy based on the allegation that

first class passengers were given headsets to be used

in conjunction with inflight movies without charge, but

that coach passengers were required to pay a charge

for the use of such headsets. The plaintiff appealed to

this Court a dismissal of the suit below and this Court

modified the order of dismissal and directed that the

case be remanded to the trial court with directions ‘‘to

stay all proceedings in accordance with the views ex-

pressed’’ in the opinion. The views expressed by the

Court were to the effect that the charge for the use

of headsets was a matter of tariff-making for the Board,

a function expressly committed to the B-+rd under sec-

tion 406 of its expertise. The Court found that since,

therefore, a determination by the Board that the $2.00

charge would be a proper rate to be fixed for this in-

flight service this would eliminate any issue to be tried

in the antitrust action. Thus, this Court applied ‘the

same standard as did the Supreme Court in Ricci, supra.

It felt it appropriate to defer to the expertise of the

————

xli

CAB fact findings that were confided explicitly to the

Board for its final determination, as is the case with

respect to the making of tariffs.

Moreover, we find nothing inconsistent between our

views here and the Price case, even though we here

should consider that this was a matter as to which the

Board was expressly charged to exercise its primary

jurisdiction. As we have pointed out, the CAB here

has already dealt to the full extent of its ability with

the matters at issue and there is nothing further to be

remanded to it even though the principle of primary

jurisdiction were to apply. It has already determined

that Aloha was injured by uneconomical overscheduling

by HAL. It has no authority under section 411 to make

any inquiry or find any facts with respect to the exis-

tence of “predatory intent’’ or purpose to eliminate or

destroy Aloha. Nothing else the Board could do would

make unnecessary the fact finding in an antitrust suit

by the district court.

The other matters raised by appellant need not now

be dealt with since the interlocutory appeal was merely

from the denial by the trial court of motions to dismiss

the complaint or for summary judgment or judgment

on the pleadings urged by the defendant. All other mat-

ters with which the trial court dealt are still at an

interlocutory stage, and will be subject to further orders

of that court as the record may develop. We hold

merely that the trial court did not err in denying the

motions.

The judgment is affirmed.

: ~~

Appendix C

United States Court of Appeals

For the Nin‘ Cireuit

No. 73-1557

DC# 72-3594 (SPK)

Aloha Airlines, Inc., :

Plaintiff-Appellee,

vs. ,

Hawaiian Airlines, Inc.,

Defendant-Appellant. ;

[January 29, 1974]

Before: Turrie*, Hurstepter and Kitkenny, Circuit

Judges.

The panel as constituted in the above case has voted to

deny the petition for rehearing and to reject the suggestion

for a rehearing en banc.

The full court has been advised of the suggestion for

an en banc hearing, and no judge of the court has re-

quested a vote on the suggestion for rehearing en banc.

Fed. R. App. P. 35(b).

The petition for rehearing is denied and the suggestion

for a rehearing en banc is rejected.

*Of the Fifth Circuit, sitting by designation pursuant to 28

U.S.C. §294(d) (1970).

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.