Opposition Brief — Ditlow v. Pan American World Airways

No. 75-1603 MAY 28 1976

MICHAEL RODAK, JR.,CLE

IN THE

Supreme Court of the United States

OCTOBER TERM, 1975

CLARENCE M. DITLOW, et al.,

_ Petitioners,

¥.

PAN AMERICAN WORLD AIRWAYS, INC., NORTHWEST AIR-

LINES, INC., TRANS WORLD AIRLINES, INC., AMERICAN

AIRLINES, INC., JAPAN AIRLINES, QANTAS AIRWAYS,

PHILIPPINE AIR LINES, CHINA AIRLINES, BRITISH AIR-

WAYS, AND AIR NEW ZEALAND, LIMITED,

Respondents.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the District of Columbia Circuit

BRIEF FOR RESPONDENTS IN OPPOSITION —

ERWIN N. GRISWOLD

PHILIP A. FLEMING

JOSEPH M. OLIVER, JR.

JONES, DAY, REAVIS & POGUE

1100 Connecticut Avenue, N.W.

Washington, D.C. 20036

Attorneys for Respondents

—

WILSON - EPES PRINTING Co.. INC. - RE 7-6002 - WASHINGTON, D. C. 20001

—————

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TABLE OF CONTENTS

Page

Question Presented ..........s———es—(CsCS<CS<;7273C~SC ~S 1

Statement of the Case 2

I a 4

Reasons for Denying the Writ ss ees—(—s—S 5

‘ A. This Case Arose Out Of A Situation Which

Is Not Likely To Recur, And A Decision By

This Court Would Be Of Little Or No

Precedential Value sis eres 5

B. Since The Fare Charged Petitioner Was Set

Forth In Effective Tariffs On File With The

CAB, This Action Is Barred By The Keogh

i RRC ES ak OT eS SORE oe a 6

C. The Events In Question Were Under The

Continuing Supervision Of The CAB, Thus

en The shinai Of The Antitrust

Laws . igi icbacietibkensbiccubtabteen ns akae 9

Ren Cam SM ett ie, SP 11

Ir

CITATIONS

CASES: Page

Georgia v. Pennsylvania Ry. Co., 324 U.S. 439. 7,8

Hanover Shoe Co. v. United Shoe Mach. Corp.,

I MR A oS a ail 8

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

I a cee ne 9,10

Keogh Vv. Chicago & N.W. Ry. Co., 260 US.

A TREE a LI Re Dil Ie SA PN, 6, 7, 8, 9, 10

Lamb Enterprises, Inc. Vv. Toledo Blade Co., 461

F.2d 506 (6th Cir. 1972), cert. denied, 409

U.S. 1001 .... 8

Pan American World Airways, Inc. v. United

States, 371 U.S. 296 - 9

S.S.W., Ine. v. Air Transport Ass’n of America,

191 F.2d 658 (D.C. Cir. 1951), cert. denied,

Bee Wa Wee oe ’ wearttarsielne 8

STATUTES :

Federal Aviation Act:

Section 403(b), 49 U.S.C. §1873(b) —...— = 4, 6

Section 412, 49 U.S.C. § 1882 3,9

Section 414, 49 U.S.C. § 1884 ___.. 10

Sherman Act, 15 U.S.C. §1 -.................... 1,4

MISCELLANEOUS:

Federal Rules of Civil Procedure:

; ke NLA AALS LMR SEADOO

£ oe eee Ben ee de 5

i IATA Traffic Conference Resolution, 6 CAB 639

; (1946) Ll AEA OE. ERLE TES OM le Ae 2

BLEED THROUGH

IN THE

Supreme Court of the United States

OCTOBER TERM, 1975

No. 75-1603

CLARENCE M. DITLow, et al.,

Petitioners,

- v.

PAN AMERICAN WoRLD AIRWAYS, INC., NORTHWEST AIR-

LINES, INC., TRANS WORLD AIRLINES, INC., AMERICAN

AIRLINES, INC., JAPAN AIRLINES, QANTAS AIRWAYS,

PHILIPPINE AIR LINES, CHINA AIRLINES, BRITISH AIR-

WAYS, AND AIR NEW ZEALAND, LIMITED,

Respondents.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the District of Columbia Circuit

BRIEF FOR RESPONDENTS IN OPPOSITION

QUESTION PRESENTED

Whether an action for damages under section 1 of

the Sherman Act, 15 U.S.C. $1, alleging an unlawful

agreement by air carriers in the setting of fares, can

be maintained where (a) the fares in question were set

forth in, and charged pursuant to, effective tariffs law-

> Sopher Piaeety

0 YAP gyes Ter $n aes

1A)

2

fully on file with the Civil Aeronautics Board, and (b)

where the activities in issue were under the continuing

regulatory control and supervision of the CAB.

STATEMENT OF THE CASE

During the relevant period, the respondent air car-

riers (hereinafter “the carriers”) were members of the

International Air Transport Association ‘hereinafter

“ITATA”).’ One of IATA’s principal functions is to

provide a stable mechanism for ratemaking in interna-

tional air transportation. The IATA ratemaking ma-

chinery has been approved by the CAB since 1946. See

IATA Traffic Conference Resolution, 6 CAB 639

(1946).

In March 1973, the carriers attended an IATA meet-

ing in London for the purpose of negotiations with

respect to the fares to be charged in the transpacific

market following the expiration of the then current

agreement, which was to expire on March 31, 1973.

For reasons not pertinent here, the carriers adopted

“interim” fare agreements to take effect April 1, 1973,

and to expire on April 30, 1973, and “permarent” agree-

ments to take effect May 1, 1973, and to continue in

effect for approximately a year.

The interim agreements increased the then existing

fares by 5 percent in order to avoid revenue losses due

to fluctuations in the values of international currencies.

The permanent agreements contained a number of

changes in the transpacific fare structure, the net effect

of which was to increase the base fares in the trans-

pacific market by approximately 4 percent, and, in ad-

dition, a 5-percent currency fluctuation increase.

1 The facts stated herein are taken from the parties’ joint stipu-

lation of facts (Pet. App., pp. 13-21).

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3 e

On March 29, 1973, as required by section 412 of the

Federal Aviation Act, 49 U.S.C. $1382, the carriers

filed both the interim agrements and the permanent

agreements with the CAB for approval. The carriers

also filed tariffs with the CAB, for effectiveness on April

1, setting forth the 5-percent fare increase resulting

from the interim agreements. These tariffs were not re-

quired to, and did not, contain expiration dates.

On March 30, 1973, the CAB approved the interim

agreements. On April 1, 1973, the carriers began charg-

ing fares for transpacific travel in accordance with the

new tariffs.

The CAB did not act on the permanent agreements

by May 1, 1973, the date when they were to have be-

come effective, and, in fact, did not act until mid-July.

The delay was due to the fact that the CAB directed

the carriers to file economic justifications for the agree-

ments and permitted interested parties to file comments.

Thus, as of May 1, there was no effective IATA agree-

ment on transpacific fares, and the carriers, awaiting

CAB action, had the choice of leaving the existing tariffs

in effect or of filing new tariffs containing different

fares. No carrier filed a new tariff, with the result

that each carrier’s then current tariff (i.e., the tariffs

which became effective April 1) remained in effect dur-

ing the period in issue in this case. Although empowered

to do so, the CAB took no action to suspend those tariffs

during the period in issue, or to require the carriers to

file new tariffs.

On July 12, 1973, the CAB finally acted on the

permanent agreements. It approved the proposed fare

increases for the South Pacific, but withheld approval

with respect to the North/Central Pacific. The carriers

then filed new tariffs reflecting the CAB’s decision.

PL] Mat “RMON TARE MEAT IE NG mag Cr |

Bene eet eerspas one

4

During the post-May 1 period in issue in this case,

the carriers charged fares for transpacific travel in

accordance with the tariffs which became effective on

April 1.

PROCEEDINGS BELOW

The complaint (Pet. App., p. 1) alleges (1) that on

and after May 1, 1973, the carriers implemented an

unlawful agreement to set fares in the transpacific mar-

ket in violation of section 1 of the Sherman Act, and (2)

that on and after May 1, 1973, the carriers charged

fares for travel in the transpacific market in excess of

the fares contained in then currently effective tariffs,

in violation of section 403(b) of the Federal Aviation

Act, 49 U.S.C. $1373(b). The only relief sought by

the complaint is damages, measured by the 5-percent

difference between the pre-April 1 fares and the fares

which were charged during the period in issue.*

Pursuant to the carriers’ motion, the district court,

on August 7, 1973, dismissed the complaint for failure

to state a claim upon which relief could be granted (Pet.

App., p. 9).

The petitioner appealed. The case was fully briefed,

and was argued before the United States Court of

Appeals for the District of Columbia Circuit. On Sep-

tember 19, 1974, the court of appeals entered a judg-

ment vacating the dismissal and remanding the case to

the district court with instructions to retain jurisdiction

and direct the parties to seek the determination of the

CAB with respect to what the court stated was the

“first critical, and perhaps dispositive issue” in the case:

“What fares over the Pacific, those ceasing 31 March

1973 or those to be effective through 30 April, 1973, if

2 Although this action is styled as a class action, petitioner

did not file a motion in the district court for certification of a class

action under Rule 23 of the Federal Rules of Civil Procedure.

BLEED THROUGH

5

any, were in effect during May 1973?” (Pet. App., p.

10).

Following the remand, the parties filed pleadings with

the CAB, and requested that it issue a declaratory or-

der. By order dated March 6, 1975, the CAB held that

the fares which became effective on April 1, 1973, re-

mained effective throughout May 1973, and throughout

the entire period in issue in this case (Pet. App., p. 22).

On the basis of the CAB’s determination of the

critical tariff issue in their favor, the carriers filed a

supplemental motion to dismiss the complaint. Since

matters outside the pleadings had been presented, the

district court ruled that the motion would be treated

as a motion for summary judgment under Rule 56 of

the Federal Rules of Civil Procedure, and the parties

were permitted to supplement the record as appropriate

under that Rule. The parties then filed a joint stipula-

tion of facts for purposes of the carriers’ motion only

(Pet. App., p. 13). By order dated May 29, 1975, the

court granted the carriers’ motion and dismissed the

complaint (Pet. App., p. 29).

Petitioner appealed to the court of appeals once again.

On January 6, 1976, the court of appeals summarily

affirmed the district court’s decision (Pet. App., p. 31).

On February 3, 1976, the court denied petitioner’s re-

quest for rehearing (Pet. App., p. 32).

REASONS FOR DENYING THE WRIT

A. This Case Arose Out Of a Situation Which Is Not

Likely To Recur, And A Decision By This Court Would

Be Of Little Or No Precedential Value

This case arose out of a totally unexpected and tem-

porary delay in the regulatory process pursuant to which

international air fares are normally established. Such

a situation is not likely to recur. If the CAB had acted

PR 8 aR HN

LLL LRP SHA ITE a

Da a

PRIN

6

on the permanent agreements by May 1, 1973, the date

on which they were to have become effective, there

would have been no opportunity to call into question

whether the April 1 tariffs were proper and effective

after May 1, since new tariffs implementing the Board’s

decision would have been filed immediately. Further-

more, the likelihood of recurrence is made even more

remote by the fact that the CAB now routinely requires

that tariffs filed in implementation of IATA agreements

contain expiration dates coinciding with the expiration

dates of the agreements. See Stipulation { 13, Pet. App.,

p. 18. Thus, a decision by the Court in this case would

be of little or no precedential value.

Moreover, as developed in the remainder of this brief,

the decision of the court of appeals is correct.

B. Since The Fare Charged Petitioner Was Set Forth In

Effective Tariffs On File With The CAB, This Action

Is Barred By The Keogh Doctrine

The CAB has specifically held that the carriers’ April

1 tariffs (on which petitioner’s fare was based) were

the effective tariffs in the transpacific market from April

1 through mid-July. The CAB rejected petitioner’s argu-

ment in its entirety. Thus, the carriers were required

to charge fares in accordance with the April 1 tariffs

on and after May 1. If they had not, they would have

violated section 403(b). This disposes of petitioner’s

overcharge claim.

The Board’s determination that the April 1 tariffs

were effective throughout the relevant period also re-

solves the antitrust claim. This case falls squarely with-

in the long-established doctrine of Keogh v. Chicago &

N.W. Ry. Co., 260 U.S. 156. Since the fares in ques-

tion were specified in, and charged pursuant to, effective

tariffs on file with the CAB, the Keogh doctrine does

not permit an action for damages.

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7

In Keogh, the plaintiff, a shipper, alleged that certain

ICC-regulated railroads had formed an association “to

secure agreement in respect to freight rates among the

constituent railroad companies, which would otherwise

be competing carriers.” 260 U.S. at 160. The complaint

alleged further that the rates established by the associa-

tion were unreasonable and higher than those theretofore

charged. The plaintiff sought to recover antitrust dam-

ages measured by the difference between the rates set

by the alleged agreement and the rates previously

charged, “which, but for the conspiracy, would have

remained in effect.” Jd.

The Court held that, even accepting the allegations

of the complaint as true, it did not “follow that Keogh,

a private shipper, may recover damages under § 7 be-

cause he lost the benefit of rates still lower, which, but

for the conspiracy, he would have enjoyed.” Jd. at 162.

The Court made it plain that the effective tariff must

control, saying (260 U.S. at 163)—

Section 7 of the Anti-Trust Act gives a right of

action to one who has been “injured in his busi-

ness or property.” Injury implies violation of a

legal right. The legal rights of shipper as against

carrier in respect to a rate are measured by the

published tariff. Unless and until suspended or set

aside, this rate is made, for all purposes, the legal

rate, as between carrier and shipper. The rights

as defined by the tariff cannot be varied or enlarged

by either contract or tort of the carrier.

As the CAB has found, the fares charged the pe

titioner here, and the purported class, were those set

forth in lawfully filed and effective tariffs. In the words

of the Court in Keogh, “unless and until suspended

or set aside” those fares were, “for all purposes, the

legal rate[s], as between carrier” and passenger.

The Keogh case was applied by this Court in Georgia

v. Pennsylvania Ry. Co., 324 U.S. 439, in terms which

Brervnnes

8

are directly applicable here. The Court there said (324

U.S. at 453): “We think it is clear from the Keogh

case alone that Georgia may not recover damages even

if the conspiracy alleged were shown to exist.” And it

went on to say that Keogh held (id.)—

that for purposes of a suit for damages a rate

was not necessarily illegal because it was the re-

sult of a conspiracy in restraint of trade. The legal!

rights of a shipper against a carrier in respect to

a rate are to be measured by the published tariff.

That rate until suspended or set aside was for all

purposes the legal rate as between shipper and

carrier and may not be varied or enlarged either

by the contract or tort of the carrier.

This language is directly applicable to the situation in

this case.*

In the Keogh opinion, the Court went on to discuss

further the matters on which the petitioner relies here.

In this portion of its opinion, the Court referred to the

impossibility of proof of damages where rates are sub-

ject to the approval of a regulatory agency. It should

be pointed out that these additional considerations‘ do

not in any way impair the basic holding of the Court in

Keogh (and in Georgia) that the legal rights of the

parties “are measured by the published tariff.” 260 U.S.

at 163.

The petitioner contends that there is no problem of

proof of damages in this case such as there was in

3 Keogh and Georgia have been followed by the lower courts.

See, e.g., Lamb Enterprises, Inc. Vv. Toledo Blade Co., 461 F.2d 506

(6th Cir. 1972), cert. denied, 409 U.S. 1001; S.S.W., Ine. v. Air

Transport Ass'n of America, 191 F.2d 658 (D.C. Cir. 1951), cert.

denied, 343 U.S. 955.

*In Hanover Shoe Co. v. United Shoe Mach. Corp., 392 U.S. 481,

491, n.8, the Court referred to these additional arguments as

“dictum”.

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9

Keogh, and asserts that “In the present case, the old

fares [those in effect through March 31, 1973] serve

as the basis for measuring damages.” Pet., p. 15. In

support of this contention, the petitioner points out

that, after the CAB disapproved the permangnt agree-

ments with respect to the North/Central Pacific area,

the carriers refiled tariffs at the pre-April 1 level. There

is no dispute as to any of this. But the question whether,

as of May 1, 1973, the CAB would have approved fares

lower than those contained in the April 1 tariffs, remains

purely hypothetical and speculative.

We know that the Board, through its failure to exer-

cise its power of suspension, accepted the continued use

of the April 1 tariffs on and after May 1. Perhaps

the Board would have accepted a lower fare level, and

perhaps not. It is entirely possible, for example, that the

filing of lower fares would have precipitated complaints

from charter airlines which would have led to the

suspension of the fares. The point is that no one, includ-

ing the CAB, can at this point in time look back to

May 1, 1973, and determine the totally subjective ques-

tion whether the CAB would at that time have accepted

tariffs that were never filed.

C. The Events In Question Were Under The Continuing

Supervision Of The CAB, Thus Preempting The Oper-

ation Of The Antitrust Laws

The petitioner appears to take the position that there

can be no antitrust immunity with respect to air carrier

activities unless those activities have been approved by

the CAB under section 412 of the Federal Aviation Act.

This argument fails to recognize that the statutory

scheme of the Federal Aviation Act creates implicit anti-

trust immunity in certain instances. Such implicit anti-

trust immunity is illustrated by the Court’s decision in

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

371 U.S. 296, and Hughes Tool Co. v. Trans World

4

10

Airlines, Inc., 409 U.S. 363. In those cases, the Court

held that where carrier activities are under the con-

tinuing scrutiny of the CAB, and where the CAB has

the power to investigate and bring to a halt any unfair

practices, the CAB’s jurisdiction preempts the operation

of the antitrust laws. This principle of preemption is

not tied to section 414 of the Federal Aviation Act, 49

U.S.C. § 1384, which grants specific antitrust immunity

to agreements approved by the CAB. Rather, it arises

by implication from the statutory scheme. Thus, in

Hughes Tool, the Court stated that “a statutory scheme

that does not create a total exception from the antitrust

laws may, nonetheless, in particular and discreet in-

stances by implication grant immunity from an antitrust

claim.” 409 U.S. at 385, n. 14.

The activities of the carriers which petitioner chal-

lenges in this action were under constant and close CAB

scrutiny throughout the period in issue. The CAB was

clearly aware of the filing of both the interim and

permanent agreements, and it was also aware that the

carriers’ April 1 tariffs remained in effect on and after

May 1. The CAB could easily have intervened at any

time if it had believed that unreasonable fares were

being charged or that the carriers were engaged in any

unfair practices. In short, the CAB was in command

of the entire situation. Thus, with respect to the actions

here in question the operation of the antitrust laws was

preempted by the regulatory scheme of the Federal

Aviation Act.

The Keogh doctrine and the preemption rule are neither

harsh nor unjust. They recognize that in a regulated

industry questions as to the reasonableness of fares, as

well as other matters, must of necessity be left to the

regulatory process and the agency charged with its

administration. Had the CAB believed that the carriers’

tariffs contained rates which were unjust or unreason-

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11

able during the period in question, it could have sus-

pended them. The CAB did not suspend the tariffs,

however, and petitioner cannot complain.

CONCLUSION

For the foregoing reasons, the petition should be

denied.

Respectfully submitted,

ERWIN N. GRISWOLD

PHILIP A. FLEMING

JOSEPH M. OLIVER, JR.

JONES, DAy, REAVIS & POGUE

1100 Connecticut Avenue, N.W.

Washington, D.C. 20036

Attorneys for Respondents

May 1976

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