Transcript of Record — Transcontinental & Western Air, Inc. v. Civil Aeronautics Board

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‘BUPREMG COURT.U.S >

| Supreme Court of the United States, :

OovonER, TERM, 1948 Seer

No, 387°

eon tise 2

"TRANSCONTINENTAL & WESTERN AIR, INC, oo

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Bare sees PRS

CIVIL ce See BOARD’.

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& writ OF eajeraeetinhiioy UNITED srat&s court oF APPEALS

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_" PETITION FOR CERTIORARI FILED OCTOBER 3, 1st 1948...

“CARTIORARI GRANTED DECEMBER 6, 1048 foge

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SSPE ian voter eee

| : SINDEX TOSOLN NT AP PENDIN.

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Petition’ for Revi iew Order of the ¢ ‘evil Aeronautics.

a od

Page

ON PR RAs eae se ‘pe eee beanie

Petition for Order Fi xing Rate of € ompe usation. for

~'Frausportation of Mail by-Aireraft’ 2........... 8

- & Nation of Public ¢ ‘ounsel to Dismiss P etition for Ret- .

roactive Rate .........4+ ee ee eeu ined wae 13

Answer of Petitioner to Motion of Public ( ‘ounaei: a

Amendment to Motion of Public Counsel to Dismiss7—

Petition for Retroactive on a nee. 38

a PUOEEOG GEA PTMS AURUMORE ooo ooo. ce ee ees cian Dey 2g

_ Service List of Notice of Oral ie bee aka ts Pees 40

Answer of the ts oo General i in’ Support ee ae

lic Counsel’s Motion to Dismiss ! CARR NS ese hn co 40

Excerpts from Hearing of July 16, 1947... ae ceca rad 41

a ; Oral Argument by Gerald Brophy on behalf of TWA 41

B Oral Argument of Roy C. Frank on behalf of the <

Post Office Department ....... Sens eee ee. Ge

Opinion of the A Sarre Been canes ee gy 60

° _Order Dismissing Petition in Parts..... a Rakes ran” eS

Dissenting Opinion of Lee, Member of the Board. Peay 2

Service of Order and: Opinion Wikied se Ap acaee oe .. 109

Proceedings in ih: S.C. A, ‘leet’ of Columbia...

Po) Civenit. | m

Opinion, Prettvman, I. 111.

| ihe and decree 116

: Designation oft record 117.

E Clerk's certificate ; 11s

F Order allowing @ eertinnart————— : ‘ 118

: ‘ ee - IN THE: :

"United States Court of Appeals

(Distric TOF ¢ ol. UMBIA

€ .

- - No. 9763.° 9 :

TRANS ‘ONTINEN ‘TAL & WESTERN AIR, INC, -

Petitioner, ner S

Mr, ray fae

CIVIL AKRONAUTICS BOARD, Respondent.

° - i

JOINT APPENDIX.

Petition of Transcontinental & Western Air, Inc:, for

Review of Order of the Civil Aeronautics Board

To the Honorable the Judges,vof the United States

, cone Appeals for. the District. of Columbia:

Petitioner, Transcontinental & W estern Air, Ine., rez

speetfully shows:

1. Petitioner is and at all times -hereinafter mentioned

wassa corporation duly organized and ‘existing under the

laws of the State of Delaware, having its principal office in

the State of Missouri. Pefitioner is anair carrier engaged

in the transportation: of persons, property and mail by air-

eraft ithe United States and elsewhere parstiant 10 ce

° tifieates of public convenience and necessity iKstied fo it

under the Civil Aeronauties Act of 1938 (hereinafter soine-

tings referred to as the Acts’).

* 2. This petition is filed-under, and the jurisdietion of this

Court is based on, Section TO06 of the Civil) Aeronautics

Act of 1938, 52 Stat. 1024-49 U.S.C. Sea 646, providing

for review by thisMourt of orders of the Civil Aeronau-

tics’ Board, (lies inafter sometimes referred to as the .

“ Board’ *").: Fe jtioner secks review of an order, Serial

Number E-1033, \y Docket No. 2849, issued atid entered by,

the, Board on Dec&nuber 2, 1947, in a proceeding described

in paragraph 3 hereof, au served on petitioner On Decem- — °

ber 5, 1947. ~ = + 6 ef! .

- The nature of the proceedings hefore-the ( Civil’ Ner ‘1O-

auc Board which resulted i in the order sought to be re-

viewed was as follows:

(a) By petition filed March 4, 1947, pareniint to Section

406 of the Aet, petitioner applied to. the Board for an order

fixing all ‘deterniining fair and reasonable rates of ¢om-

pensation, effective January 1, 1986, for transportation of

mail by aircraft, the facilities used and useful therefor, and

the services connectéd therewith, over certain routes oper

‘ited by it wholly within the United States and designated

as Routes No. 2, 38, 44 and 58. Petitioner stated thereim,

atone other things, that costs of providing air trausport

services had during the preceding year continued to rise

at an unprecedented rate whitetoad factors, including mail

. loads, had’ declined materially; that it had suffered snb-

stantial loss through extraordinary events, including the-

erounding by Government order of airerafta known ds

Constellations and the suspension. of all operations as a re-

suit .of a pilots’ strike, which had affected it alone aynone

all United. States domestic airlines; and that -the reeord

of the preceding vear and\all reasonable forecasts of the

results of dyiture #perations established the need for an

immediate adjustment of air mail Compe nsatiqn to prov ide

the -relief Sntemplated..| hy the Act. Petitioner alleged

therein, among other things, that the rate-of et

then apolieable was. not, “and. from and wer January 1,.

I946- bad not bee My a fainand reasonable rate of compensa:

>. tion fot the transportation of mail by aincratt, the tacili-

ties /ased and useful there ‘for, and the services connected

ee with on said, routes within the meaning of Section 406

‘the Act. The. proceeding : upon that -yetition iS the

Poa: x Docket No. IS49, ; ts iy i SN

(by By motion dated. May 27, 1947, Public Counsel of the

Board moved the Board to enter an order: ddiying. sard.

petition, without adicaring on the faets, in-so far as it re ct

questedcan increase in mail rate from Janu: ry 1, 1946 to .

Mare +h 14, 1947, on the eround, among others, that such ad-

justinent should trot be nade as a matter of sounc Sopa

policy... Petitioner filed an answer, dated June 11, I47, t

<aid motion of Publie Counsel. . Therostiec. by cehmidaeit

dated June 25, . 1947, Pubhie Counsel amended their motion

to dismiss by adding as a ground therefor. that the Board _

hind HO. authority to grant said petition-in-se-far “as it_re=—

lated to a period pr ior to the filing thereof,

(e) Oral argument was held hefore the Board. « on aay

16, 1947. x ;

(d) On December 2, 1947, the Board (‘Shoncbes Lae dis-

senting) caused to be,entered the order sought to be re:

‘viewed herein, dismissing the petition in so far as it’ re-

quested the fixing of a mail rate fora period prior to March

14, 1947. a eee 3

~ 4. On January 20, 1948,2 within the time prov tind hy the

‘yeeulations of the Board 4 as extended by stipulation, peti-

tioner filed with the Board a petition for reconsideration

and reargument of its snid order. Said petition has not vet

heen aeted upon. Thiy. petition for review by, this € ourt is

filed within. sixty days: after the entry of the order sought

‘to he revie awed, in accordance with: Section 1006 of the Civil >’

\eronantics Net of 1988 and Section 10 of the Administra-

tive Procedure Aef, 60 Stat, 243, 5 0S. C. See. 1009,

e, y ie

. The order sought to be-revi iéwed ts a final adjudics ition

a determination of petitioner's application to the Board

.to fix fair and reasonable rates ‘for, the period frony Janu-+

ary 1,146 t6 March 14, 1947 and of its right to additional

compensation therefor, Petitioner has a substantial inter-

est-in said order, within the meaning of Section, 1006 of the

Civil Aeronauti¢s Act of 1938, as is shown by the facts*set

‘forth herein and particularly since it is depriv ed therely

of the, difference between the air ‘mail compensation paid ,

it forthe period from January 1, 1946 to Mareh 14, 1947

and the fair and reasonable.compensation for the trans- —

’portation of mail by aircraft, the facilities used and useful

therefor, and the services snenented therewith as furnished °

by petitioner during said period. Petitioner’ has suffered —

irreparable injury ‘and will continue to suffer irreparable

es: unless the order sought to be reviewed is set aside,

}. Petitioner prays for review of said order by this Court

and that, upon said review, this Court set aside said order

_and direct further proceedings in accordance with the Civil

ae ‘onauties Act of 1938.

. By the order songht to be.reviewed a ma jority of the

‘ies member s of the Board erroneously held that the Board

has no power to fix fair and reasonable ‘rates of compensa-

tion for any Le iod prior, to the date of. the filing of a peti-

tion therefor.’ Said order is, to the prejudice of petitéorer,’

arbitrary, capricious and. contréty to law. Without Timit-_

ing the generality of the foregoing, ‘petitioner assigns the

following errors: ” Soc,

(a) The Board’s conclusion as a matter ef law that i

doés not have authority to fix a retroactive rate Th this case

(p. Sof its opinion, made a part of said order ) is-contrary

to the Civil Aeronanuties ,Act of 1938, and particularly to

Section 406(a) thereof empowering and directing it upon

the petition of an aiy carrier, to ‘fix and determine from

time to time’’ reasonable rates of coripensation and ‘‘to.

make sueh rates efective from suc h dates as it shall deter-

mine to be proper.

ev.

————

2 ” “a te.

‘ a, :

(b) The Pat Sera a hearing ayd not based .

on any evidence on which it could deterniine whether the

rate in effect from January 1, 1946 to March 14, 1947 was

Pair and reas conadle, is contrary to: Section 406(a) of the

Act, fails to. take into\consideration rate- waking elements

ats required liy Section 406(b) Of the Act And the declara-:

> tion of policy and statement of public interest contained in

‘Seetion 2of the Act, and is in vigkition of the dae process _

clause of the Fifth Amenduient to the’ 'onstitution of the

United States, 4 Y

(¢)- The Board’s power ‘to ix rates ‘‘from such date as

it shall determine to be proper?’ being clear under thé Act,

its inquiry whether Section 406(a) wae not intended to

have a somewhat narrower meaning” ’ (py 9) is improper,

unwarranted and contrary to law. ~ © ;

.(d) The Board's conclusion that ‘¢the Act.was never in--

tended to west in the Board the retroactive pertonsgss

he _retroa

power”? (pp. 9-10) -is erroneous and without support 1

‘law or fact.

(ce) The Board? . otk adie: to the Act of provisions of,»

and decisions under, public utility regulatory anid other

statutes: (pp. 10- T4), in disregard of the particular provi-

sions of the Ast, is improper, unwarranted and contrary to

law; ;and the provisions of, and decisions under, such ubli

utility ‘regulatory and other_ statutes to not support ihe

Serer gia’ eonctuston concerifing the intent or me: ining of thre

Act or its power thereunder. |

(1) Thy Board erred iti considering as ev idénee of begis-

Jative intent ambiguous statements -made by a private in-

dividual before Congressional Committees (pp. 17-19), and

such statements do not support the. Board's conclusion that

‘no retroactive rate-making autho ity was in fret in-

tended** by the statutory provision auNiorizing it to make

rates effec tivt ‘from such @ite as it shall determine to be

proner , (p. 19). . ’

(x) The Board er red in holding that it has no- power, un-

der the Net to exercise disetetion, after hearing the facts

ne o “3

of each ease, and in disregarding its prev ious exercise ani

revognition of. this power. 9,

(h) The Board's fefusal to award 1 etitioner the fair snl

reasonable compensation for the period: from January 1;

1946 to March 14, 1947 is a depriv¥ation of property without

olue process of law and a taking. of private property for

public use without just compensation in violation of the

*« Vifth Amendment to the Constitution of the United Sfates.

-8. No previous application for the relief f sought herein

has been made to any other court or judge.

Wuererore, petitioner respectfully prays that this ¢ onrt .

review the said 6 rer of the Board, . issued on December 2

‘1947; thit a copy 0° this petition be forthwith. triaamittted

to the Board ‘and that a transeript of the record upon which —

tos said order was entered be thereupor certified and filed: by

_the Board in this Court, in accordance -with the Act; that

upon such review by this Court, the said order be set aside:

and further proceedings by the Board, ordered; ‘and that

petitioner have such other, further and different relief ns ——

‘to this Cc ourt may seem just’ and proper. a

Dated: January 30; 1948. ;

e—

a . Petitio voner

| By GeraLp B. Broruy,

8 oe ; James K. CrimMins,

*." Office & P. O. Address:

25 Broadway, |

‘ New York 4, N. .

C mAnnon RNE, Ww ALLAC F, Parke & W HITESIDE,

25 Broadway, on Ba

“New York 4, N: Y. eae

of Counsel, ry ee :

Attorneys for Petitioner;

ae :

“TRANSCONTINENTAL. & WESTERN An, Isc,

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“STATE OF New York, NG: ae

oe eianly of New York, Sst hes, Shope Sey Bar :

“JAMES KK, Urim MINS _ being ‘duly sworn, de ‘POses amutl say

that he-is one of, the attorneys, for petitioner her@yn ; that

he has read the foregoing petition and knows the contents

thereog, and-that the xame is true to his knowledge except -

us to the matters’ therein stated to be alleved 1 on informa. - fps

tion and belief and as to thosd matters te believ Cs it tobe 7

true, and that the rei ‘asom-why this: verification is not made,

by the petitioner: is “that the : said petitioner is a foreign -

corporation, Si Pes ease - 7 Sel ee

: eS James K. Crrfurss. -:

oF | : : Be reas

Sworn to and subscrib fore mie | pines ie

this 30th day of January, Wes et Ft Es

Donornesa A. O'Brien’ ore oes ie ete

Dorothea A. O’Brien + a 7

Notary Public i in the State of New York

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Residing in Kitigs Connty Lf ys

“.Niftgs Co. Clk’s No. 111, Reg. No. 101-0-9 ie S |

N. Y.-Co. Clk’s No. 41, Reg. No. 173-0-9 Ae ie:

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hii pene ; &.

Doe ket NO. 2849

oo ae tlie Matter of. the Petition ot

Ty RANSC ON TINENTASS & W ESTERN “Air, Ince

for an order fixing: and determininy fair and’ reasonable -

_. rates of compensation: for. transportation of mail by

e uircraft, the facilities;used and uséfnl therefor, and

the services. connected thergwith, over Routes No. 2,_

28, 44 and D8, purgnant . to’ Section 406; of. the Civil,

Aeronautics ‘Act Of 1938 1 ee | .

‘Petition for an: Order Fixing Rates. of Gaiiganagitinn for the

“Transportation $ Mail. by Aircraft on Routes No. 2,

38, 44 and 58°

To 6 tite Hoxopant, E, THE Crvin ArronAv Ties Boarp:

Transe ONTINENTAL. @ Western Arn, IScr (hereinafter |

called “TWA’’) respectfully states: 3

Ae During tlie past year, costs of providing air transport

services have continued to-rise at an unprecedented rate.

At the same time, load fagtors have declined materially.

This has been particnlarly true of mail loads, which have

fallen off even more drastically than other traffic since the

cessation of hostilities. :

These factors of ‘rising costs and declining loads ‘have

affected TWA and every other air carrier. In‘addition,

: cater suffered substantial Joss through thre@ events of

~ eafastrophie proportioris, which affected TWA alone apne

“all United States domestic airlines. a -

_ .The new four-engine ‘Constellation airerpft, detiveri ies of

which to TWA began in September 1945,

Air Line Pilots Association, as’ to rates of* pay, rules and

2 - - working - conditions applicable to such aircraft.

ne . d rs pt

= . . . ‘ “Hy

| yemained on the .

wround for months as the.result of co froyersies with the

, ia “Scheduled. service with this —— Lanier

could - not be: inaugurated, eyen of a: lipiited — scale;

*untit, February, 1946, and could be increased only: very

-eradually thereafter; "Notwithstanding this event aid the

-resilting.. losses, TWA reported, a net profit from opera:

fions for the moith of June 1946, and. antic ijwtegrprofituble

operations during, the following mouths.

Low: ever, on July 11, 1946, all Constellation aireraft we re

«rounded "hyeonder ofathe Administrator of Civil Aero-

‘nautics.” As a> consequence, all the Constellations: owned

by TWA were out of revenue service until the middle of

Septeniber, and many: considerably lotiger, while required

modifications were ‘being made. Virtually all of TWA’s_

eosts continued: throughout this period. Phe anticipated

protitable summer operations Ww ere thus cont efted into serj-

ous losses. TWA-was at that ‘time the only domestic air

carrier operating Constellation aircragt within the United

States. : ; *

TWA w Was only beginning tia recover froin’ the grounding

‘and its’ ‘consequences when oper ations throughout its entire

system were complet tely shut down on Octobér 21, 1946 by

a strike i the agrline pilots: This strike followed a 30-hour

ultime atu for wage demands substantially in exeess of the

rates recommended by. the Fact Finding Board “ippointed

by Presjdent Truman‘which TWA -had placed into effeet.

The union demands, if grantéd, would have meant. still

more drasti¢ inéreases in the. cost of air transpertation to

TWA ‘and’ to the entire air transport industry. The shut-

down continued for almost four weeks, and resulted in

further severe losses to TWA. These losses are continuing

and w ill continue for some time in the future as efforts are

made to rebuild traffic volume and .restore servieé to the

required, levels. coast | :

— The record of the past year, and all reasonable forecasts

of the results of future operations, establish the need for

: -an immediate adjustment of: air mail compensation

4 to provide the relief saeco areal by the Civ il Aero.

nauties Act. :

0. -.: ° ‘ae

dipgly TWA submits his petition under See

tion 406 of the Civil Aeronautics Act for the determination,

of fair ‘al redsonable rates of compensation for the -trans

‘portation of mail by aircraft, the faciliti€és ysed and useful’

‘therefor, anel the services connectéd therefith, over Routes

No, 2, 38, 44 and 58,* and¢in compliance with the Board's’

regulations’ alleges the following: ~-

1 TWA is a corporation duly organized and existing

under the laws of the State of Delaware with its principal

‘office located at No, 101 West llth Street, Kansas City 5,

Missouri.

2. TWA. holds. certificates of waht conrenience tnd

ecessity issued by the Civil Aeronauties Board -authoriz-

ing it to engage in scheduled air transportation with respect

to persons; property and niail on Routes ‘No. 2, 38,44 and

58. TWA also holds a certifieafé of publie convenience and

necessity for foreign air transportation approved by the

President July 5, 1945, as amended.

The rate of compensation currently applic ‘able to the

rampaging of mail by aireraft én Routes No. 2, 38, “44

_ and 8 is’45 cents per ton-mile, or fraction, thereof, of mail

carried. This rgte became effective on January 1, 1945.as~

‘the result of fitial order of the.Board in Docket No. 1700,

dated, October 26, 1945 (Order Serial No. 4151).

ao Said rate of compensation to TWA is not, and from

and after January 1, 1946 has not been a fair and reason-

able rate of compensation for the transportatign of mail

-by aireraft, the facilities us¢d and useful therefor, and the

services connected therewith on Reutes No. 2, 38, 44

5 = -and 58, within the meaning of Section 406 of the

~ Civil Aeronauties Act of 1938. : , ee

: paeumad to subdivision (c): of Section 406 of the ¢ vil’

: Peetd shes Act of 1938, TW Aestates that it believes that

from and after January 1,-1946, the fair and. reasonable

rate of compensation- to it for the transportation of mail

é. gee.

. w herever. Rouite No. 2 is referred to ih this Petition it shall be deemail to

inehrt® Routes No. 2, 36, 37, 61 an® 67, which were’ consolidated .into the

single Route Ne. 2 by the Board's order of September 23, 1946, Nos 5200,

~ >

ly aireratt, the facafities used and useful therel asf ned the *

services connec ted therewith, over. Routes No: 2, wer anele

COs, is at least the following: a base rate of phivty cont.

(30¢) per airplane mile to be-paid fer a base potnedage ot

300 pounds of mail or less, plus an-exee ‘Ss gg me rate

of 0.03 cents per airplane mile for each pond, & frac tien

thereof, of mail in’ exeess of thie base poundagy, saa ¢

. monthly on- direct ‘Rixrport- -to-airport mileage; saitl rate ta?

he appropriately reduced in respect of future pe sriods, iy

conditions may warrant.

Vurrerore, the Petitioner prays that in vie w of the

irgency of the. situation, the Board ex xpedite: this petition

by utilizing its show cause procedure based ey information

available to the Board; and that the Board issue an order

vranting the relief herein requested, or-snch otter and fur

ther relief as it may determine tebe proper, —— «

The Petitioner has served a copy of this petition on the

Postmaster General by. sending the same to him by reg.

istered nail post- paid prior to the filing of the ‘eters

with the Board.

Respectfully sabmitied,

“Tranxscox TINENTAL &-Westr uN Air, Exc.

By Joun A. CoLuincs

- Viee President

eM Frank F. Buse

Director ¢f Overations

‘ ‘ = ae

car Leo R. Git ren

iene at _ Controller

Crapnov RNE, W aLLace, Parke & Winresive,

Attorneys for Petitioner, — | ‘

-_ and Post Office ABdéess, : ats .

* 25 Broadway, a, Sat

New York 4, N, Y. | Seek :

; - 4 ¢ :

“ —_ $

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A ee ee ere

4) "STATE .OF Missouri, COUN PY OF JACKSON, SS.

Jous A. CoLiines, ‘being duly sworn, deposes and’ says

that: lie is Vice President and, in the ¢ absegice of the Presi-

dent and Executive Vice President, the Chief Executive of

TRAN SPONTINENTAL Kk. WestERN Air, Inc.,'the Petitioner in-

the above entitled Petition: that le has read and is familiax ;

with the contents of the Petition; that he intends and de-

sires that in ranting or denyi ing the: relief applied for, the

joard shall place ‘tull and coniplete reliange on the accu-

racy ofeach and every, statement thereify contained; that

“he is familiar with the facts therein set forth and that to

athe best ef his information and belief, every ‘statement con-

misle: (ding. : | ie ; . can

tained in the Petition is true and no suc h: statement is.

. ~

JOHN A. ConniNcs

Subseri ‘hed and sworn to. before ne by ‘the affiant above

— this 1: 2th day. of Mar®h,, A947.

ey! °

Winery. Barker “es j

Reahiry Pbhie 5 eae is .

My € ommission Expires Oct. 20, 1948 , ’

/ (Seal)

7 STATE OF pes ri, C ouNTY or J ACKSON, SS.?

Frank Ex ‘Buseu, being duly sworn, deposes and says

that he 4s Director of. Operations of TraxscontTInentaL &

Westrrn Air, INc., the Petitioner fu the ibove-entitled Peti-

tion; that he- has read and is. famifiar with the contents of

Per

the Petition; that he intends and desires-that in granting,

or denying the relief applied for, the Board shall place

full and complete reliance on the accuracy of each and every

- statement therem contained ; that he is familiar with the

facts therein set‘forth; and that to the best of his informa-

tion and. belief, every. sti itement contained in the Petition

“js true and ne sueh statement is misleading:

< : : 2

FRANK I. Buseu.

-Subseribed and sworh to before. me. by sa: affiant above

named, this 12th day of March, 1947,

EB. Winey. BaRKER cal

Notary Public et ek ‘ oi ne '

“My Commission Expires et. es

(Seal) eG fe aan

8. State or Missgurg County or JACKSON, ss.:

‘Leo’ R. -GitLeran, being’ duly sworn, _leposes and says

that he is the ¢ ‘ontroller and, in the absence: of the s ichscsil

urer, chief financial officer of Tr ANGCON TINENTAL & WESTERN

Air, Ixc., the Petitioner in the above- entitled Petition:

that he ies read and is familiar with the contents of the |

~ Petition; that he intends and desires that in eranting or

denying the relief f applied: for, the: Board shall place full

and cenplete reliance on dhe accuracy of each and: eyery

ering en ato contained ; ‘that he is familiar with the

facts the#ein set forth; and that to the best of his informa-

tion esjesinis every stateme nt- Sevres in the ie eae

-yathed, i this 12th day - of — ‘1947.

E. Winey Barker * *

Notary Public ~ . nate as ee °

My C ommission i xpires Oct. 20, 1948

(Seal) : : :

* ee of . * . és. : *- a

9.2 °° "\ . May OF. 1h me 2 *

Motion ‘of Public Counsel to Dismiss Petition for

Retroactive Rate . 4

Public ( Sane! mov e the Board ‘to enter an ep deny

ing the petition filed herein on Mareh 14, 1947. liv ‘Trans. ;

continental and= Western Air, ‘Ine. (hereinafter called:

aie

° ™

PW.) auiiae. us such petition” requests an inerease in

TWA‘s domestic. inail rate, prior to the date of the filing

of the petition by T WA (from January 1, 1946 to Mareh.

14, 1947) sin the amount of $11,157,358, nae in support of

pois motion allege and oy cebantene the following:

. That the Board, by opinion! and order (Order Sucial

sto #151) issued October 26, T}40, fin fixed and: deterfnined

for TWA-a mail raie effective on and after January 1,

1945 of 5 cents per ton mile over its entire domestic

‘syste including all of the routes cov ered by the petition

filed by TWA on March 14, 1947, Which rate is still in.

effect.

’. That TWA, on March 14, 1947, filed a petition request-

‘ ing the cata idaeal of a mail rate of 30 ce nts per

10 ainplane niile to be effective on and after January ty

1946 over Routes Nos. 2,2 38, 44 and 58, and that this

petition requested” the retroactive adjustinent of mail rates

prior.to the date of filing the petition. for the pe riod Janu-

ary 1, 1946 tos “Mareh. 14, 1947, which if ranted, would result

in TWASs receiving an amount of $11,1- 97,358 in- retroactive

maik pay, in addition to the $3,541,000 which TWA has.

already received for this period. . This would result in total

mail pay of $14,698,358, or 415 per cent of “as previously

fixed by the Board, ©

be hat there Has beer no mail rate proceeding ‘atfe oleae

‘hese routes sineé the Board fixed TWA's present mail rate -

‘on October 26, 1945 until the present petition on M: arch 14,

1947, vet petitioner is asking for a rate retMactive to Jan-

uary 1, 1946, barely two months after .the Board render “ed |

its decision. .

_4. That the Board should not increase TWA’s mail pay.

-prior to the filing date of its petition for the following

reasons: Capea orale : =k : .

1Trs neccutinental & Western Air, Ine., Mail Rates, 6 CAB 595 (1945).

2 Route No. 2 in. this proceeding includes Routes Nas. 36, 37, 61 and 67

which were consciidated into said Route No, 2 by Beard Order Xo. 5200

issued September 23, 1946.

3 Actual mail pay received by TWA pas the 14 days | in March is ) estimated.

(a) The. Board has consiste ie hie Idas a matter of sound

general policy that no ad pustments should be made om mail

rates during pe riods w hen rate pracecdings are not pending,

The Board has enunctited its position as follows :

eof 8 Aside from the que stion of whether it has the

statutory power to review a rate prior to the date-of the

institution of the proceeding, it seems. desirable as a matter

of policy that the rate for any given ‘pe riod become

lt finally ‘fixed at some point. in time and that such *

- . point be that at which the rate is first challenged or

questioned by the institution of a rate proceeding either by

. the carrier or by'the Board? Sueh a policy appears to he

fair sinee it permits every rate order to be final for any

-period during which it is net oe by a proceeding

looking toward its revision.’

wre 4 onee fixed should remain final at least until “

-* such time as the rate is first publicly challenged or ques-—

tioned by the institution of acrate proceeding, either upon .

petition of the carrier or on the Board’s initiative.’’

* ~ eet € * * ° * - a

‘CAll-f “gtors considered, we are of the opinion that as a

niatter of sound general. policy’ there should be no-adjust-

nents in mail rates during periods wheu a rate case is not

pending, We believe that the interest in ce rtainty and final-

‘ity of administrative proceedings will be served by a policy

which will provide for an adjustment of rates only when*

ancissue has heen raised with respect thereto by the insti-

fution of a proceeding, thereby putting all interested per-

sons on-notice that the rate may be adjusted and that con-

995

duet should be determined in such light. °

- 4 Continental Air Lines, Ine., Mail Rates, 3: CAB 395, 401 (1942). - eS

5 Braniff Airways, Inc.,.Mail Rates, 3. CAB 633, 635.637. (1942), Aecord:

Continental Airlines, Int., Mail Rates, 2 CAB 683, 688 (1941); Mid Con:

tinent Airlines, Ine., Mail Rates, 3 CAB 464, 466 (1942); Transcontinental &

Western Air; Ine., Mail Rates. 4 CAB 129, 143 (1943); All American Aviation,

_ Mail Rates, 4 AB 254, 357 (1943); Pan Ameriean Airways, Inc., Alaska

~ Mail Rates, 6. CAB 61, 69 (1044). i

it, 16

The above policy of the Board permits eV very rate aus

to be fina! de ide at perigd i in WIfch it is not in question by

a progeeding relative to its revision. The principle of

finality has long been recognized not only by’ the Board,

but by. courts and other’ administrative agees as being

supported by-the strongest consider ‘ations of public interest

and essential to the proper fixing ef rates. [It eneourages

éfficleney’ and ore not only by requiring a carrier to

live within-a ratg until time has established the

12 <> necessity of chafle neing the rate, but also,-by assur-

. . Ine the carrier that any profits, @arned during a

périod when no proceeding is pending, may be retained,

The TWA petition if granted would, by destroying the

finality principle, discourage efficiency and economy. The

‘jneentive to live within ar: aty finally fixed by the” Board

would be destroyed. . Se es

Moreover, if the Board grants increases in mail pay for

extradrdinary losse& incurred in a period prior to the filing

of the petition it could rot, consistent - With its obligations

to the public treasury, ffuse-to re ‘capture extraordinary

profits earned in such retroactiy e periods. Thus, nieimage-

rial incentives to. accomplish increased economies th oper:

ation would be substantially reduced, and by writing: a

question mark across any carrier's financial staten@its the

carrier’s ability to attract capital would be serigusly

inpaired, Spt :

(b) The. Board has never. adjustéd ai final wail rat

effective ‘prior to the date of the petition because of

unusual circumstances.

Tn a number of cases carriers have requested that adjust-

ments invmail pay be made effective prior to the date of

fline of petition on the, ground of unusual circumstances

0 .. -

vor e Bi oe

but in every case the Board has denied such requ oh ie

Transconfine ntl and Western Air, lne., Wait Rates, .

Bo 4 CAB 139 (1943), the present petitioner itself filed

_*> a petition on March 1 31 1941 seeking a retroactive

adjustment of its mail rate for Toute No. 2, effective as of

October. 1, 1940 on the cround that its rate had been based

on the cost and revenue figures of Douglas equipment, and

did not take into account the effect of TWA’S new Boeing

307 equipment on its costs and- revenues.” TWA contended

that its rate should be adjusted prior to the petition to

October 1, 1940 because since that date it had gained’ suffi-

cient experience in operating the Boeings so that the effect —

of the Boeing operations on TWA’s mail rate should be

considered, Petitioner also contended that its rate over

Route No. 2 was inadequate, This case was consolidated

with another rate proceeding involving Routes No. 36, 37,

o8 and 44. The Board rejected TWA’s. contentions and

refused to deviate from-its ‘4... poley. of not reviewing

rates prior to the institution of a _proceeding by petition

or by order. oo

The W esters. cas e*-repres@nts no departure from this

policy. In that ease the carrier petitioned on December, 8

1041 Tor a system rate to be effective from the date of the

petition for Routes 13 and 19, and to be effective from June

72, 1941, for Route 52. The rates on Routes 13 and 19 had

been in effect singe October 28, 1938, while mail service on

Route 52 had first commenced 6n. June: 12,1941, and no

6 (a) In All Ameriean Aviation, Ine., Mail Rates, supra, “All Amofieshn peti-

tiened for-a retroactive increase of its mail rate on the ground that it was

merely an adjunet of the post office and that the Board in fixing its present

rate had erred with respect to All American’s anticipated revenues and costs.

All Ameriean contended that it conld never regain its losses unless the Board

looked past the date of the | aeepe. and adjusted its rate. “The Board would -

not deviate from its policy of not retrosetively adjusting a mail rate. Aegord:

Braniff Airways, Inc., Mail Rates, supra. :

(b) In-Pan American Airways, Inc., Alaska Mail Rates, svpra, Pan Amer-

ican petitioned for W retroactive increase of its mail rite on the ground that -

it had delayed in filing its petition because 6f doubts as to the legal status of *

. certain of its routes. ~ Again, the Board adhered to its policy of not retro

actively adjusting’ a mail rate.

7 Western Airlines, Ine... Mail Rates, 4 CAB.441 (1943).

tuail rate had, ever ‘been fixed for that route. ~ Obs iousd,

since no dail rate had heen fixed ‘for the curr ve oF tritil

ou Route d2, the Teoord was ebligated to cor side rethe need

of fhe carrier for eon pensation because of the earris of

omalt over this route, As the. Board stated, p. 444:

ss Althoug hore spondent transported midiil on Roftre

i4 No, o2 at all times subsequent. to dune 12, D1, no

rate proc ‘eoding: Was pending during: the period from |

June 12, 141, to Deceniher 3, 1941, at Which time the car-

rier filed ‘its petition, Under the circuisstances a. review

é E°ot respondent’s need.for iuail compensation poping to

June 12, 1941, is in order. The Board has reviewed 1

spondent’ s need for mail compensatjon during the’ nutive 7

period: from June 12, 1941, to December 31, 1942, and hav-

ing found the? (nail compensation already paid respondent

vas adequate to-meet all of its need’ has not undertaken to

attribute that compensation to particular routes by pre-

scribing the rates to. be applicable to. the several routes of

the carrier throughout the period under review, since ‘the

total compensation of the respondent would not Wealfected.

This, it should be emphasized, arises out’ of the. unusual

ciréumsiances surrounding this case, where even theneh Ho

proceeding was: pending, a review of-réspondent’s mail

compensation Was necessitated by the operation of a rout

for whiel. no rate of mail compe nsation had been fixed. tn

the alisence of dike unnsual cirenuis stances. the Board, will

adhere to its policy Vv not. to review rates pr lor to the insti

tution of a pPoceeding hy pe tion or order, ** (Ttalies SH,

plied) | *

‘p Dona review of ie entire svsten operations, jnetudine

thesnew route, from. dune Py, 14) on; which showed that

the carrier hal already received safieteut mail pay to viel i}

an anni” return of 1602 per a? after federal taxe# on.

it~ avernve dvs trett, the Bommel Tornmd that no sdditionsadl

. tiistl compensation should be patiel, . :

The We: fern cise does nat stand for any prtneiple that

retrowe “tive Hits iil. july” nel gusty ent WET dee tenele tee eases ul

. . . ° on al

op - * . “.*

unustal eireumstatices, but oily that such adjustivent aes

be considered under ‘like’. ciremmstanices, The case is

brian ly i PTeCOLM ROT, Hi the fpoarad that Gonsider: ation. will

De gavel lo a “carrier's possible necd’ for additionza! ried —

pues because of the operation ota LiesW route for which he .

mail pay bes previously beevdined. The present Proce.

ing raises uO such question, The granting of TWA ‘s petice

: lion would consiituie a uiajor change in Board poliey

which, if flowed to-its logical result, and in fairies. to

- ad) carriérs and the public treasury, would undoubt-

1) : edly Open tlie door to aun inde ‘finite nuarher of retro-

petive rate cases involving cither the underwriting of |” +

extraordinary losses or the r@capture of extraordinary |

profits. 0) : ag?

ic) The allegations in the TWA petithopy do not justify

the fixing of a rate clfective prior to the «ate of the

1 tition. *

TWA ap parestly inked aes positions that bécanse of the————

—

oa materialization of ‘certain tsi we Visks (abhor disputes.

mid the eronndine of the Constell: ities ) whieh resufted ti

: :

losses, the Board stiould take into account these alleged

“Unusual ciremustances’’ and adjust its present rate re-

troadtive le, AS. has been pointed out above the Board has

never adopted any general poliey of mifking re reactive’

mal pay adjustments because’ of “‘tunusual cireum-

stances." Every Dusiness including the air transport in-

dustry Is Sah jose fo risks, the exact nature and extent of

vbich cannot he antieipated or computed in fixing a pros-

pective rate. Phe’ possibility of grounding of planes or of

Tnhor disputes are adimonge norimral.risks to which all air

riers are subject. In fixing the mail rate of 45 ci ints per:

ufite new in effeet for TWA, the Board specifiently

fecognized the poxthiit® of abnormal risks involved in

the transitional postwar period, Voreover, nithoneh

CN was oa service rate carriers the Board made addi

° ; ‘ e j

fiona! provision therefer bw cane ng linner the shaw enpse

arder and-tnercasing the tentative mail ri ate from 32 to 45

au ‘ . i i).

oe i |

cents per ton ahr an increase of 40.6 per cent... The rate

fixed therein wa designed to.provide TWA with an éver

all rate of return on total investment’ of Li.o7) per cent

vatter taxes and obviously constituted a rate .of earnings

which can only be jnstitied on the ebvieus basis that it is

intended to cover losses or reduced earbings which —

16° could not be! anticipated, but which might oeeur.

While the Board because of the unpredictable nature

‘of post-war operations did not allecate cost’and investment

tothe mail service, the application of the Board's standard —~

allocation formula to the basie figures enployed in fixing

the rate as set forth in-Appendices Nos. 2 and. 3 attac ‘hed

to the Opinion, indicates a rate“en the. investivent in, the

"nail service of 46.74 per cent afterctuxes.

The recovery of-losses s resulting from events not speci-

fically foreseeable, but of a type which constitute usual

~ business risks must be made out of earnings for periods

both before and after the outeome of such events.. TWA’s

-. rate of return, as are alf rates fixed by the Board, was de-

termined with this principle in mind: Its rate for the future

will be based on this same principle. For this reason the.

rate making technique contemplates that Idsses incurred

asa result of such risks shall be met out.of rate of return.

The rate of return‘ allowed is materially higher, therefore

than it would be if it. were contemplated that: reimburse-

ment could be had retroactively for actual. losses which ;

have.in effect materialized.

This principle wag ecognized i in National Airlines, Tne.,

Mail Rates, CAB Docket No. 824 decided September 19,

~. 1946, in which the carrie® had suffered losses arising from

"a series of accidents, the direct effect of whieh was to eur-

tail severely its vole of scheduled operations. In -addi-

tio®, its operations were curtailed by a restriction to visual

_ contact flying as ordered by the Civil Acronanticgy;Admin-

: istration. “The Board. held that:

‘The - costs attributable to the aecide nts pe the losses

eitahead through the curtailment of service im-

IIIS SS ss ss

¥ posed because Of the petitioner’. rathare to miuitetain

CAA oPerating standards, are vot appropriate costs

S f / allowe lf mide a this Le h. for. Kerde waking peer press ~ -

ss 3s ° : : 2 O° ;

i Ltiachies Supplied). .

The Piearad petuse if 4) canistebed ‘These To > usealp propriate

;

Cogls. to be allowed undet the Net for rape making youn pwses

even though such losses Were incurred during the pendency .

of af rate procecling. The ali&ed unustial losses in this Ee ee

1 proceeding are of Uhessame type as those-in thé Natienat— "+ |

ease and the Board should not considers them ‘either ‘etro-

actively or prospectively as proper costs for rate-nmaking :

PULDOSES, - ete ‘ fee ; a | y | ee

CONCLUSION.. 3 ates tN

The strongest cfgisiderations of rate making policy -re-

“quire ‘the dismissal of that-part of TWA‘Y petition which

requests $11,157,358 retreactive mail pay for the period —

rier to the filing of the petitions Wherefore, Public

Cornsel respectfully move the Board for the entry of an

order dismissing the petition filed herein insofar as such

petition: requfres the establishment of a mail rate reted-

aytively effective to January 1, 1946. .°

Witiam (. Bert :

Jerome J. Dick ;

, : . Public Counsel. -

Washington, D. c. ;

May 27, 1947 Gi xiget Pee ”

Is CERTIFICATE OF SERVICE.

| hereby certify that | have this day served the

thsi heed li elion Liber all parties appearing. oft reeord in: ‘

tis proceeding by reailife.te each said party a copy of

vial nation iM a property addressed, tranked envelope

. Jrnome J. Dien ;

So Public Cownset.

Washimeton, DCL. | an

Main 27, 147: se | ° -

. ° . "e nae . . * a e

{19° Received Docket Section Jun 13 11.45 AM “47

. Civil ‘Aeronautics Board

200 - Answer of Petitioner to Motion of Public inset:

Meme

To THE Ilox ABLE, THE CIVIL AEKONAU Tes Boar:

_—— The petition for inc reducd mail compensation filed by

TWA on March 14, 1947 seeks to’ recoup part of the losses

puifered by TWA since January 1, 1946 as the result of a.

series of dixastrois events which affected TWA alone of all |

domestic airlines. The petition atso asks for expedited

action because of the urgency of the situation. .After waif-

-ing two anda half months, Publie ¢ ‘ounsel have noswsfiled

a anotion to dismiss the pe titioid insofar ascit req ues Og re-

view of rates prior to the date the petition was filed, which

was the period duri ing-which the disastrous events occurred.

* The motion, strangely enough; does not even discuss either

» the Board’s obligation under the law to grant the relief re-

quested by TWA or the fairness of the claim for relief that

has been made by TWA,. On the contrary, Public Counsel's

motion: rests wholly on. what. they conceive to be a matter of

‘, the Board'*s ‘*general policy’’ based on dicta appearing, in)

‘previous cases unrelated to the present proceeding.

/ It should be madg plain at the outset? ‘that the only

_21. ° issue properly rafsed-dy Public ¢ ‘ounsel’s motion is

~ whether or not. the Board will hear. TWA’s petition

fora reyiew of. rates prior to the date the petition was filed.

No issue has been raised as to what, if any, relief the Board.

would accord in the event such a hearing is held. . As to the’ .

. first point, it seems obvious that TWA is enititled as a mat-

ter of Jaw to have a hearing en the facets without pre-judg-

ment of arfy of the issnes raised by the eanpyertes allega-

tions of Public Counsel.

dT. Estvsursiuen Proxcipues or Apminisrririve Law Re-

guink .A Review or TWA’s Rates as° Requestrep tN [ts-

PETITION, | °¢

The watt on of * ul lic Counsel is fetvalnsin since thre Board

is **not at liberty to decline to exercise its jurisdietion.’

Alton Railroad Co. v. United States 287 U.S. 229)at 236.

(1952). There is a bs line of Supreme Court east hold-

ing that an administr: atave aveney must accept jurisdiction

of appligations falling within the statutory authority of the

agency, “If it refuses to do so the federal courts will compel.

ethe agency. to assrme- jurisdiction *® “WP hus, without first

holding # hear ing on the facts, the Board me ay not deny re-

a " ° v,

hef whie h it has the power to grant. On this basis alone. the

qnotion must be denied forthwith. .

Iw Kansas City So, Ry. v. Luterstate Commerce Commis-.:

'. sion252 UL S. 178°(1920) the railrofid brought suit for a

mandamus to compel the Commission to hear proof on the

‘nresent costs of condemnation and damages or of pur- ©

Earnie excehe gf orixtnal cost of. present value’’ of the

railroad’s property under a valuation statute. The Cor-

mission alleged (1) that such items were purely speculative

aud (2) that the Supreme Court had decided in the Minne-

sota Rate Cases that the caleulation of such items would. in-

} volvé unjustifiable assumptions, Nevertheless, the-

22: ¢ Supreme Court licld without dissent that the Com-

: ; wide must proceed with a hearing utider the stat-

ute, even though the Commission might be correct -In its

interpretation of the Minne sota Rabe Cases, saving further:

* (p; 188): | gins ary &

, .

2. since, as Congress indisprt tably had. the authority to

ipose upon the onmnission the duty in “Guestion, it is, im-

possikle to conceive how the Minnesota Rate ruling could.

“furnish eround for refusing to carry out the conmands .of

° ‘Manic City’ So. “Py: NX. Interstate Commerce Commission, 252 UL 8. 17°

Interstate Commerer Commession Vi Hemboldt Steamship Co, 224 VS. 474

at 484, 5 (1912 > See ales IL RL Grace & Co. ve. Civil Aeronautics Rg’. 4

Fed. 24 271 281, 2 (1946). °

o .

i question.

ae.

Congress, the @¢ogency of whic " seniutetation is tone the.

less manifest though it be borne in ‘mind that the Mtunr-

sota, Rate Cases were decided after the passage of the Tact

‘Binaly, even if Sit he further GO IC ‘oded that tie subject-

matter-of. the v alui itions in question Which the act of € one

Tess expressig” directed to be made necessarily opened a

wide range. of proof. and called for Adie exercise of close

serutiny, afd of scrupulous analysis in its consideration and

application, such-assumption, we are of opinion, affords no

“basis Foapa'e ‘fusing to enforce the Act of Congress, or whatis

equimailent: thereto, of exerting} dhe veneral power which the:

act of, Congress eave, and at the same time disregarding

the essential conditions imposed by C ongress Upolu its” CXCE-

cise.” ae Syst: : 2

The Supreme | Court direc ted the erant of a writ - nan

damus. A similar conclusion, regarding the Civil Nona.

* thes Board itself, was reached in W. R: Grace & Cory. Civil

| feronautics Board, 154 Fed. 2d 271 at 281, 2 (1946).

Public Counsel raise no ? vestion reehrding the power of

ihe Board #o hear TWA’s petition, and clearly no such ques- .

tion exists.” ¢ ‘onsequently, even if tlié Board shonld agree:

with everything that Public Counsel allege, the Board can-

“not refuse to hear TWA’s petition in full and inay not dis-

miss any part. This rule is so well established that it needs

“no ‘further elaboration andi answers complet tely. the\issues

raised by Public Counsel’s motion. -Howev, ay the niotinn éf

Publie\Counsel displays such a substantial miscone eption -

_ofsthe provisions of the:Civil Aeronauti¢s Act, and of the

position taken by the Board wnder that Act, that the states

ments of Public Counsel, even, though irr relevant to the mo-

“tion, should not be permitted to stand une ‘hallenged.

To repeat, ‘the arguments which follow : Areqpot necessary | ° |

to'a determination of Public Connsel’s motion. | Publie

Counsel's motion ens he dismissed because it seeks

23) Ato deny TWA the hearing ‘which is guaranteed by

our iaws The purpose of ine Juding the material set

25 |

<% ‘s oe, Te i aie

“forth below is’ to correct: the- erroneous assumptions and”

ae iY 1, 1946. G3. . a

- fm pressions, implicit in Public Cagh sels motion itself.

oe TICS ho Cox:

WA Rares ro JANU- |

Il. Tue Provisions. or THE CIVIL

TEMPLATE a Retroac rIVE INcres tse IN

A. The ‘statute. Oe ede

Not only does the Board haye an ‘absolute ingal chlteation’-

to review TWAS rates fer 1946, but in additton the Civil

mandatory.

Acronautics Act-contemplates that such a review shall re-

— sult in a retroactive adjustinent inf an instance of this type.

Under section 406 (a) of the Act the Board. is not just _:

“empowered”? to fix fair and reasonable rates -of compen-

sation, but, ii°addition, -it, is specifically “direeted”? to do

so. The language is net permissiye, it is mandatory. Un-

der section _406() of the Act Mongress did not give the

Board permission to consider or not, as it may choose, the -

need of the carrier, but specified that the Board ‘shall take

into consideration” the need of the éarriey. This too is

I" inally, section 406(a) of the Act implements bis stat.

tory mandates by ditecting. the Board'‘to make such rates

(i. e., ‘fair and reasonable rates’) effective from such. date

as it shall determine to be proper.”’ ¢ a”

T his last quoted language is for the purpose of carrying

out the expressed intent of Congress. It cannot-be Piter-

preted, as Public Counsel seem. to imply, as authorizing

the Boathto evade the obligation imposed _ hy Congress to

fix fair and reasenable rates’ of compensation. If an air

carrier,s mail vases are unfair ind ubréasonable today, the

Board cannot disregard its obligation te fix fair and reason-

able rates Ly determining that it is “proper”? that the new

stale shall not hecome effeetive until some date next: vear,

atu viving the Board the administrative discretion to make

“rates * ‘effective from such date as it shall datermine to be

proper’? Congress did not give the Board the power to dis

regard its: Inandate. thitt. the rate shall he: fair and reason-

able.

* : i's !

26 . ; fe '

F . . . ~ . . ;

2 ae Sunilarly, if TWA‘s rates were unfair and unrea+

“sonable during 1946, the Board niust so find. In such -

event ghee yard must, under’the Act, fix tair and reason.

able ratesfor 1946 and make them effective for that period.

The Board cannot as Publie Counsel apparently argue, re

fuse to examine the rates for 1946; or upon examination and

on a finding that considering an extended period the rates

are unfair and tinreasonable during 1946,-refuse to do any-

thing about then. While Public Counsel do not nfention the -

statute in their motion, the interpretafidn they necessarily

put on the. Act wotld make a farce of the language. Con-2

eress did not i: hy down a direetiv e in one breath, and in. the

next. give the Board a free hand to: defeat the directive.”

The statute does not say that fair and reasonable rates shall

‘be paid only for the period that ¢ the Board arbitrarily selects,

and that for other periods the rates may be unfair and an.

reasonable, It says that the rates shall be fair and reason-

able for all periods, and that the Board shall make vew

rates effective on-such date as will insure that the muounts

' yeceiyed by the carrier will be fair and reasonable. This

discretion is. vested in the Board to implenrent the mandate

of Congress, not defeat it.

B. The alleged “general policy’’ of the Board, : 0

ET 2 ublic Counsel} quote from a decision of the Board in ~

1942 in which tlie. Board stated, ‘‘ All factors considered, we _

are of the opinion that as a matter of sound. general. policy

there should be no adjustments i in mail rates during per iods

When a rate case'is Not pending. * Byaniff. Airways, Tue,

Mail Rates, 3 C. A. B. 638,637 (1942). Based on this and .

similar language used by\the Byrd in other cases,, Public

Counsel contend that TW Aq las no right*to a’ retroactivers

“adjustment.* — | | bie g x “a

‘ .

* One basic diffienlty in Public Counsel's ‘position stenis “from ‘their inter

pretation of the phrase ‘4 general poliey’’. Pubtie Counsel apparently" believe

that ** gene ral policy ’’ means something that appties.to eyery instance. THlow-

ever, this is not the usual me aning of the word ‘‘yeneral’’ in this context,

which properly means ‘‘ pertaining to the majority ; sommon to the«greater

number but not to all; true te a large number or’ propertion; widespread. or

prevalent as distinguished from universal; as a general practice; general rain

fall.'* Funk § Wagnalls New Standard Dictionary, 1935,

23° - Yet even according ty» Public Counsel, all the Bo ord

has ever decitted oy this questfon | is that-it will not.

usually adjust rates for periods prior to the date of the fil:

ing of a petition for increased mail compensation, An ex.

amination of the facts involved in the cases considered by

the Board establishes exactly that point, and nothing niere.:

One of the excepted situations was that involved in the —

Western Air Lines Wail Rate ease Which Public Counsel cite

with approval. That case seems Very much in point because

it involved, as this ease does, the inauguration of service on

anew route. In the Western CASC, the catrier commenced

service over route 52 on. June 12, 1941. before a mail rate

“had been fixed for the route; in the present situation TWA

commenced scheduled service on February 5, 1946 over a

new. route, its international operation, before a judil rate’

was fixed for that route. In the Western case the Board

rev iw wed: the rdte s for We este rus € utire syste mH Ope radions,

including the new route, from June 12. 141 on, seying:

‘**In the absence of like unusual circamebadice s the Board

will adlere +o its policy not to review riites prior to the

institution of a proceeding: by’ petition qr orde 7? “(Italics

supplied)

This language seeins clear enough. The Board indieated

that it would review rates prior to the filing of 2 petition.

in any case where’ “like unusual circuimstances** exist, or

to rephrase the words: int any case where unusual eiretm-,

stances ‘likewise’ sh exist. However, for some unexplained ~

reason, Publie Counsel Attempt to establish that when the

Board said: “like unusual ciréumstances’*’ it meant the

‘same circumstance’’; namely, a case where a carrier has

initiated service on a new route prior te the ‘date ® mail peti-.

tion is filed. Thus on page 6 of their motion P ublic Counsed

styte: ** The Western case ddes not stand: for any: pr inciple

that retroactive mail’ pay adjustment will be made in cases

of unusual. cireumstaneées, but only that stich adjustment

may be.considered under.‘ tike® ¢ircumstances.*? The Board

will. recognize that this misquotation by P ublic (‘oun-

26° sel of thet: inguage of the Board deals high- handedly

with the grammar of: the phrase. Ouniittitre the word.

‘inusual’? has the effect of Changing ‘like’ from an ad-

¢ i VOtD: modifyjns ‘unusual’? to an adjective niodifying *‘eir-

cumstances ; and constitutes an unjustified distortion of

& the plain re: idling of the phrase. It is submitted that if the

~ Board bad feant to say ‘like cireums tanees”’, it would,

“shave done so, but the Board did not; it said under ‘like un-

“usual circumstances’. The TWA situation, ‘like’? that in-

volved. in the Western case, is one of unusual: cireunstances,

‘und retroz active é adjustment shotud be authorized.

However, even if the Board in the W estern Air Lines Mail

Rate-Case had used the. words Yhe scme circumstances’,

or had otherwise specHically said that it would review rates

prior to the filing of a petition’ only i In’ a-case where a car-

rier has initiated service on a new route prior to sueh filitne,

* the TWA. petition mects that test also. As stated above,

ve TWA commeneed operations under its new international |

certificate on February 5, 1946. Consequently even under

a os ihe theory of the Western die! ta as most strictly interprete d

~ by Public Counsel the Board would be required: to review

the rate for TWA’s entire system, including its domestic

division, as far back as February 5, 1946. To repeat, in

‘the Western case, the Board reviewed its. rates for thé en-

tire system beginning with the date-service commenced ‘on

the one new route. In view of the fact that from this point

: of view the PWA situation presents exactly the same cir-

/. eanistances as inthe Western case, cited by Publie Counsel

- with approval, we are unable to make any sense out of Pub-

lie Counsel's rietion. :

There are still other instances in which the Board without

even ab discussion of the point, has made rates of compensa-

hisvti Tetro: wtive toca date prior to the filing of a petition.

Tia recent ease involving Northeast Airlines the Board set

anew rate for route 27 beginning May 1, 1945, although a

|) rroceeding ‘relative to: the rate for. route 27 Was not

2 initia ated untit June 20, 1945.

— yor 4 ~ F

ul) ; é

. . : ay ro |

o* «)

Th the’ Northeast ease the effective “date fixed:

the Board for the revised pate on route 27 (May 1, 1945)

was the ‘date Northeast inaueurated services on its new

route 63. Lf the retroactive feature in the Northeast case.

turns-on that point, then we remind the Board of the fact.

that any such theory applicable to, the ? Northeast case re-

quires the Board to adjust the rate for TW A's domestic

routes at least as far back as February 5, 1946, the date

TWA: commenced se heduled. service on its Hew interna-’

tional. route”. >

In attempting to prey e the point they urge, P ublic*Coun-

sel have-relied wholly on the seven cases in w lich the Board»

has refused to inake iner eased: iail Compensation effective ,

prior to the date of filingof the appheation, quoting at:

dength from two of them. Unfortunately,’ however, tley

‘ ps . . , . ~ ‘ B

have failed to include in these quotations the portions of the

sadrd’s decisions explaining the reason. for applying this

rule in-the ordinary case. Immediately preceding the two _

full paragraphs quoted by P ublic Counsel at the-top of page

3 of their motion, ini Board in its decisiowr in the Branitt

Mail Rate Case (3. CG. A. BL 635 at 636) stated:

“The Board has ees recognized that the Act-places

upon it a duty to maintain air mail rates at such level’ of

fairness and reasonableness as will provide earnings, which,

4 whe naveraged overa reasonably exrtended time, will. permit

the fulfillment of the statutory objectives, especially those.

stated in sections 2 and 406(b). This does not mean, how:

ever, that the earnings contemplated by the statute shall

he reasonable during every particular period of time in

Which they are in@ffeet.. The fluctuations of traffic and rev-

enue which characterize the airline industry strongly sug-

gest the contrary. The earnings may in a dimifed period

insets more er less than a reasonable’ aecad ; neverthe-

. is Transcontinental & Western Air, Fae. Mai? Ral es, 40. A.B. 139, the

Boafd reviewed TW A rate’ for its*entire system beginning Mareh 1, 1941, even

though the carrier’s petition filed on Mareh 1S, 1941 resested: that a rate he

fixed on only one of TWA's routes, and inquiry: us te the other four ‘youtes: wits

het opened by Board aetion until Aug: ist J3, 2941.

Jess, the rates may still’be reasonable if the average Cari

‘ings over a reasonably extended period reach a fair lyvel.

Tn fixing a rate for the future, however, we must

28°. necessarily consider the results under existing rates

during the past, and whether there be a deficiency, a

just profit, or an excess profit, we look at the: results for

enidance in redetermining the rate. But, ever so, we imist

necessarily look at @ sufficiently long period to reach a judg-

ment ds to @ reasonable rate for the future.’ (Italies*sup-

plied) - |

It is clear from this language that the Board recognized

that in the usual situation, losses incurred prior to the date

of filing a petition can be offset by the profits resulting from

future rates. Ordinarily, the -condition- complained of is o¢-

‘asioned by a minor fall-off in thé carrier’s earings as a

result of ordinary operating conditions. Each of the seven

‘ases*relied on by Publie Counsel is exactly this type. All

but one of these involved the period. immediately prior to

- Pearl Hi: arbor, when a toderate recession was encountered,

whereas the opinions of thesBoard in these cases denving

retroactive adjustinent, were rendered some months later

when all of the air carriers were exper iencing a definite ini-

provement in earnings.”

| ‘onsequently all the B ans has so far decided is that inl

thre ordinary case the Board .will not adjust the carrier's

losses prior to the filing of the petition because in the ordi-

nary case losses in such periods can be easily recouped out.

of profits in later periods or out of. other operations. In

such a situation, rates over an extended period, looked at as

an average,.ean be fair and reasonable and the Board will

thereby have met its obligations under the Civil Aeronautics

Act and the € ‘onstitution. : ‘

The instant proce eeding, however, ; does not represent a

ase of that type. During 1946-TWA was struek-with a

The gcvrenth case involved mail co mpensation on Pan Anie riean'’s Alaskan

eparationg for a period during which the Board specifically found large profits:

on othe r ‘Pan American divisions, 6 CLA, B. Ol (1944).

_ y

series of disasters: that seriously crippled the Company.

They were not of the usual type and they-were of.such mag-

nitude as to make it impossible for the carrier to recoup the

_. losses out of future earnings. The Civil Aeronautics

29 Board has followed the policy of providing uniform

rates for the larger carriers, and since conmpetition

for mail between these ¢arriers exists-at all major points,

uniform, rates are highly desirable. Thus there is no possi-

bility that any future rate set for the transportation of mail

by TWA. would provide fair and reasonable compensation

over any reasonable period which includes the year 1946.

Section 406 (b) of the Act provides that in fixing fair and

reasonable rates ‘of compensation the Board shal] consider

conditions peculiar ‘*to the particular air carrier or Class of

air carriers’? involved. Obviously in the present instance

the Board considered conditions peculiar to the classes of

air carriers involved by providing the uniform rate of 45

cents a ton mile for all of the major carriers. Just as ob-

viously, the Board did: not consider éonditions peculiar to

this **particular air carrier’? because it did not know at the

time the rate was fixed that TWA, unlike every other do-:

inestic air carrier, was going to have its planes grounded

and its operations closed down by a pilots’ strike. There -

are two possible ways of handling a situation of this kind.

One is hy a reeggnition of obligations imposed by statute

in the public interest and the other is to follow Publie Coun-

sel’s mechanical rule regardless of the effect that it has on

the air transportation system of the United States. In this

case there is no choice. |

es) Pein? 7

. HT. Preiser es or Justice ReQuine anv Increase IN TWAS

: Rates Since January 1, 1946. ; |

Kven if we should assume for the sake-of argument that

the Civil Aeronautics Act and applicable conistitutional

provisions give the Board, complete discretion to adjust

TWA rates for 1946 or to-deny such an adjustment, as the

Board might deem appropriate, a denial would be dontrary

to rood conscience, A holeline that the mere act of filing a

formal-petition shall determine the right to a fair

30 and reasonable rateof compensation, is not anly in-

equitable, but is also unsound as a matter of ad-

ministrative procedure. home : ;

Under the rule as the Public/Counsel would have it, the.

Board would prefer the carrier who runs whining to the

soard with a mail rate petition at the first sign of possible

injury. Such a carrier would be assured. of his right of

adjustinent. But by the same token, any carrier: that tried:

to work out its troubles and defer red filing a Hetition in the

hope that Government relief would be obviated bys self-help,

would be severely penalized. A policy of absolutely refus-

ing any retroactive adjustir ents under ay cireumstances

whether unusual or net, plac és a premium on seeking Govy-

.vermnent assistance at the first opportunity. It would make

it essential that every ¢arrier file an application with the

Board on the happening or prediction of every unfavorable .

‘event, and more probably, the maintenance of pe titions | On

file at all times as a safety measure. x"

Furthermore, two carriers affected by exactly the same

circumstance and to exactly the same extent would: be:

treated differently under the’ policy espoused: by Public

Counsel if one hada petition on file at the time while the.

other did not; yet both are operating under the same statute

which provides that both shall have ‘fair and reasonable

compensation”!

The unfairness of any such discrimination is obvious.” It

is equally’ apparent that the position urged by Publie Coun-

sel would tend te make carriers less likely to struggle”

against t adversity hefore seeking Gov ernment aid and there:

fore it is unsound «administrativ ély,

The facts underiying TWA’s losses also support the posi

tion that equity demands a review of TWA’s rates for 1946.

The erounding of the Constellations Was sccasioned

31 by events bevond the control of TWA, and seriousty

injured TWA alone of all domestic airlines. In a

recent statement to the House Interstate and Foreign Com-

merece Committee Mr. William A. M. Burden, Assistant

Secretary of Commerce, stated:

“2 The grounding action took place ‘after.a fire which

occurred in one ef the three aircraft during a training flight

—-not one carrving passengers. A number of engine (indue-

‘tion system) ‘fires had ocenrred in Constellations many

months previously and although we had taken corrective

action which we believed had climinated. the eause of fires,

we took the dramatic action of grounding the airplane petid-

ing assurance that an engine fire was not involved in the

(‘onstellation training accident.

‘Tnvestigation revealed that the source. of the trouble.

ie wa not ‘an engine fire but a short circuit that caused over-

héating of an eleetrieal fitting. Incidentally in the final acci-

dent report the CAB eniticized the CAA’ Inspection service

for not ascertaining the. defects -of this fitting earlier—

clear indication that the Board does not hesitate to criticize

‘the CAA in its reports despite thie fact that no independent

safety Board exists.’’* |

The Sees in which the foregoing appeared went on

to Say 4

‘Burden said. he felt it was only fair to say that the

grounding action and resultant. publicity has worked an ;

undue hardship ow the Constellation, without question one.

of Ine world’s outstanding transports. Modifications made

“as | result of grounding undoubtedly have made the, Con--

stellation the most advanced airplane of its claswin service

with respect. to safety, and the principles developed from

-thes¢ modifications are now required for all comparable -

] 99%

four-eneine aircraft, Burden stated.

Certainly it would be unéenscionable to suggest that TWA

should be called upon to bear alone the cost of this incident

and of the resulting modifie: lions that benefitted the entire

industry

American Aviation. Daily, February 11, 1947

Following the Constellation grotmding, TWA was hit by.

_a strike of all its pilots. The strik@resnlted directly froin

the adoption by FWA of a pay scale reeomimendid by an

Emergency Board of three outstanding men appointed by

. President Truman under section 10 of the Railway Labor

«Act. There i is no higher authority under that Pian for the

deter mination of labor disputes,

Thus, in essence, the two principal unusual trouble

32-. TWA encountered diiring. 1946 were the result of i

| reliance on Government action. It is hardly on

table that the same Government. should deny TW A some Pe,

lief from the losses sO oce asioned.

‘Iv. Winec: ELLANEOUS ARGUMENTS OF PusLic CoUNSEL.

Publi¢ Cowiselhave discussed neither. the applicable prin-

-e¢iples of administrative law nor the particular statutory

provision relating to their ~yiotion, but have conjured up all,

sorts of theoretical arguments against the principle of retro-

active adjustments. One of these is tliat it would cause

‘arriers to become ine ‘ficient and uneconomical. Why this

is so, Public Counsel-do not fully explain, nor do they ex.

piain why the act of filing a petition, Public Counsel's sine

qu ton of ratemmaking, should not stimulate cirriers to. be

even more inefficient and’ uneconomical thereafter on the

assurance that they’ then are surely.taken care of even un- |

- der Publie Counsel’s theories. The answer, of cours¢, is

that under seétion 406(b) the Board would disaliow items

attributable to inefficieney or uneconomy regardless of when

they occur. .

Publie Counsel also- throw i n the usual Pandora's Box

argument—if the Board should grant TWA’s petition; it

would be. flooded with countless others, all of which it would

have to grant. Yet it is perfectly obvious that no one’

urges that rétroactive adjustments are justifiable.in every

case, but only in those unusual circumstances where adjust-

went Is necessary to make rates fair and reasonable over tii

extended pertod. The TWA- situation has come up only > -

¢ se

‘onee since the € ivi] Ae ‘romnauties “Aet was passed, ‘indeed,

only once in the entire. historyeot air transport ition in “this

country.-it is hard to conggive that fat ‘treatment in this

Cause will Henn a flood of other petiti Ols, ae

As another argument, P ublic Counselarge tliat TWA i

entitled toeno, relief: heeause the Bow rd denied N; abel

Airlines relief for losses due to its accidents and fail-,

oo. ure to maintain CAA standards. The t facts-are ob-

‘viously different, but this ‘argument “of Publie C ‘oun-

‘el serves to highlight the-vicious nature of their motion—

they insist that TWA be denied the right. to a hearing to

esteblish facts on which the Beard can rule. Publie Coun-

~cl could hardly je less defe ‘rential to the right of fair trial.

In essence, the position urged by Pubhe Counsel would

‘ean that the Board will always have to fix a rate by guess-

work hoping that it will be able to anticipate unusual future

occurrences during the period the rate is in effeet in order

to carry out its obligation*under the statute te provide a

‘fair and reasonable rate adequate ‘‘to enable sueh air ear-

rier under honest, economical, and efficient management, to

. yaintain and continue the development of air transporta-~

tion to the extent and of the character and quality required

for the comuneree of the United States, the Postal Servic e,

and the national defense.’’

In other words, Public Counsel contend that in fixing

the rate for the.transportation of mail over the TWA routes

in Docket No, 1790, in October 1945 the, Board should have -

<ificipated that on July 11,°1946 the Constellations were

voing to be grounded; that for a period of two months they. -

would’ be wholly out of service; and that for several months

‘thereafter they would be retur ned to service only eradually:

as Jnodifications were completed. - Furthermore, Public

Counsel would require the Board to have anticipated that

hefore all of the Constellations got back into service the

entire operations of TWA would be shut down by.a pilots’

Strike | heginning on October 21, 1946 and ending on Novem-

her 16, 1946. - The rate-making process urged by Pubtie

’

Counsel means that the Board would be powerless to pro

tect an air carrier against unforeseen, catastrophes. Here

tofore, everyone in the air transportation industry has been

entitled to believe tliat. with “honest, oconomieat-

34 and efficient nandgenient’’ it Ww ill have the hacking of

the Civil Aeronauties Board whose obligation Yt. is ,

to maintain air transportation in the interest of the cor

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

‘tional defense. Public. Counsel maintain, however, that

the commerce of the United States, the Postal Service and

the national defense: have nothing to do with the question.

Principles of rate-making all depe ‘nd on-what time a partic-

ular paper called a petition is filed” in a certain office. of ,

the Civil Aeronautics Board.* :

~ Section 406(¢) requires that ary petition for fixing fair

and reasonable rates shall include a statement of the rate

the petitioner believes to be fair.and reasonable. This has

some meaning.. Suppose TWA, as Public Counsel would,

require it to do, actually filed a petition for an increase: in

‘rates shortly after midnight on July 11, 1946 in order-that

the. Board might properly consider the ferr ific losses result-

‘ing from the grounding of the Constellations. What pos-

sible reasonable basis could ‘there fave been to formulate

such a rate? If as-arestitof guesswork some rate was in-

serted in such a petition, should it have included provision

for the pilots’ strike which came thrée months later? Tf

not, what rate should TWA have inserted*in a petition

which it should have -filed, according to Publie Counsel, .

shortly after 5:00 A.M. on the morning of October 21, 1946

when-the pilots went-out on strike? The whole subject of

. Certainly the Board ‘cia never followed any such narrow lega! istic approach.

On the eontrary, in’ Chicago and Southern Air Lines-Mail Rates, 3 C. A. B.

161, the Board, in expressed recognition of ‘‘the peramount national needs, not

only of the postal service .but also of our commeree and our national defense’

gave the carrier increased mail pay on its route. ‘No. & to cover the carrier's

losses for the first three and a half nronths of operations on route No. 53 dur

ing which period the Post Office Departnie * had neither dispatched mail nor -

designated mail schedules 6 route No. 53. To the same effect, see also Delta

Air Corporation Mail Rates, 3. CA. Be 261; Pe nnsylvania Central Airline C orp.

Mail Rates, 4 C. A. B. 22. - . x :

fate-making, according to Publie Counsel, is pure:

You should neverthave actual facts

be fore vou; i ae according te Public raeeenin if :

by ‘oil@sswork

O00. <rcicemeeen

th le ( nited: States, ‘thie P ostal “Serv rice se oo atten de:

+ fense to pernit the assets of a company to be dixsipated .

; ‘until final collapse rather the in to retreat from their prin-

ciple that: the “time stamp’? on acrate application circum ©

scribes the power of the Board to ‘perform Its obligations

4 under the Act. aor ———e

V. Conciusion. ;

[n summary, we direct the Board's attention to the fact

that the motion-of Public Counsel raises only one issue to

he decided at this time; namely, whether the Board will hear

or refuse to hear TWA’s petition. There is novissue at this

time concerning the amount of additional compensation, if

any, to be paid to TWA in respect of prior periods; such

a deterniination can be made only after the hearing pro-

vided for by the Civil Aeronautics Act. However, the ab-

solute right to sueh a hearing is well established by a long

line of Supreme Court cases, and the motion-of Public Coun-

scl must be dismissed as frivolous.

In the event’ the Board dhas any. quest! on concerning

TWA's right to the review requested in its petition, oral’

i argument before the’ Board is respectfully requested.

Ciappourne, WaLLacr, Parke & Wurtresipe,

Attorneys for Transcontinental &.

Western Air, Ine.

‘Geratp B. Broriry,

Gronée AJ Sparen, __ One”

Of Counsel.

‘ * - + * * * e - WEN e «. @-*

BT + — Endorsenient? Received Docket Section Jun 23

i > 3236 PM ‘47 Civil Acronauties Board.

_ Amendment to Motion of Public Counsel to Dismiss —

Petition for Retroactive Rate 3

Public Counsel hereby amerid: their motion to dismiss the

petition filed herein on March 14, 1947 by Transcontinental

and Western Air, Inc. (hereinafter called TWA)’ insofar

-as such petition requests an increase:-in TWA’s domestic

mail rate prior to the date of the filing of the petition by

TWA by adding to the aforesaid motion as paragraph (5)

the following : | :

(5) Once the Board has fixed a final tate tise a par ticular

operation, which rate was accepted and has been in effect

and unchallenged during a particular period of time, it has —

no authority te retroagtively fix a different rate for the

same operation during the same period of time. The Board,

therefore, has no authority to grant the petition of

38 TWA, insofar as ‘such petition requests a different

final rate effective prior to the date of institution of

the proceeding.

"Respectfully submitted >

Wituam C. Burt,

JEROME J. Dick,

. Public Counsel.

Washington, D.C.

June 23, 1947

39 °C: C ERTIF ICATE OF SERVICE.

I here by certify that I have this day served the attached

~amendinent of motion upon all parties appearing of record

in this proceeding by-mailing to each said party a copy of

; ° a

said ame ndiment of motion ina proyierly addressed, franked

envelope.

Jerome J. Diek,

: Public Counsel,

Washington, D.C.

June 23, 1947-

‘ . 2 . ea eas * _“@ /@ *-

40 } _ Notice of Oral Argument ene ty

Tn the matter of the motion of Public Counsel for

denial of the petition of Transcontinental & West-.

ern Air, Ine., under section 406 of the Civil Atro-

nautics Act of 138, as amended.

“Transcontinental & Western Air, Inc . havi ing hy petition

filed March 14, 1947, requested the Board to fix and de-

termine-the fair and reasonable rate of compensition - for

the transportation ef mailby aireraft, \the 1 facilities used.

and useful therefor, and the services connected therewith:

over route 2, 38, 44, and 58; and | es

— Publie Counsel, by motion filed May 27,. 1947, having

moved to dismiss the petition, to which motion Transcon-

tinental & Western’ Air, Inc., on June 13, 1947, filed an an-

swer requesting oral argument before the Board;

Notice is hereby given, pursuant to the Civil Aeronautics

Act of 1938, as amended, that oral argument in the above

proceeding, with respect to the pleadings above referred ~

‘to, is assigned to be held on July 16, 1947, 10 a.m., daylight —

saving time, in Room 5042 Commerce. Bldg.) 14th St. and

Constitution Av e., N. W., Washington, D.C, before the

Board. : |

Dated at Washington, DOC., June 3 30, 1947,

By the Civil Aeronautics Board:

6 Sy M. C. Menuican,

YGed): 2 ' . Seeretary.

eee Se * ° * « o ° °

| Pages tie

: % ° f bs . : 40 \ 3 . |

“41 Service. of: Notice of Oral ‘Argument

-Revistere d: : \

i ae Att: See retary, 0} W. 11th St., Katisas City 6,

. Mo... a \ : oe, ¥

Regular: ; | ae

. E: Fleming, ¢ oT. W. “A, Hanger: =, Washington

National Airport, W ashington, D.C. s

~ George A. Spater, Chadbourne, Wellace, Parke, White.

~ side, 25 Broadway, New York, N. Y. -

4 James K? Crimmins, ¢ hadhourne, W cs ae ete., 25 Broal

~ way, New York, N. Y. ‘3 \ C

Robert Sullivan, 1 1209 Tower Bldg., W ashineton, D.C.

* Special Messenger : peer ; role

Burgess} e \

Delany: “Oe POD “ee

Sulletin Board —

~ Docket Section pie hea era

Stough |

*Leasure “i

No special mail cards’«

: Inter-office distribution |

* mac ire ; * * * * Baia ape a”

42 Endorsement: Received’ Docket Section Jul 11

4:29. PM “47 Civil Aeronautics Board.

~ Answer of the Postmaster General in Support of Publics

“Counsel’s Motion to Dismiss Petition aa

To The € ivil ‘Aeronauties Board:

She Postmaster Genéral answers and supports the motion

off public eounsel which seeks the dismissal of that part of

the petition of Transcontinental and Western Air, due.¢

whieh requests aii increase‘in its mail: compensation nf c-

five as of January.1, 1946. “In support of public. counsel's:

motion the Postmaster General states as follows: :

a - @ .% etary *. * * e °

: : 41

1. The Civil Neronauties Board i Is tt authorized hy the

Civil Aeronautics Act of TOSS, as aie ded, to fix a retro-

wactive rate.

‘That it is contrary to the fou and well ont iblished

alice of the Civil Aeronautics Board to adjust. or fix rates

of compensation for the transportation of mail for a period

"during which no rate proceeding is pending.

433 Frank J. Delany, Solicitor of the Post Office’ De-

partment, or his representative, will present the ar-

euments of the Postmaster Geueral in support of the rea-

sons, above specified at the time public counsel’s motion is

argued. The time to be constimed in oral argument. will be

governed by the extent to-which pubheé counsel covers ade-

quately the law with respect to the above reasons for dis-

missing petitioner’ s petition. | ;

Respeetfully, submitted,

Ss Frank J. Devany,

Solicitor of the Post Office De partme nt,

W ‘ashington, ; | i +e

EXCERPTS FROM ORAL ARGUMENT BEFORE CIVIL.

AERONAUTICS BOARD, JULY 16, 1947.

83 | - Oral Argument by Gerald Brophy on Behalf — -

of TWA. ore te .

Mr. Brophy: Mr. ‘Chairman: and members of the Board.|

On Mareli 14, 1947, TWA filed two petitions for a review

of the mail rates applic: ible to its entire system. The first

of these is a petition for an order seeking an inerease in

the temporary rate of-compensation for the transportation

of mail on its foreign routes, effective February 5, 1946,

the date of commencement of service over _ the foreign

routes. . :

The second petition Feauesty an inerease in the rate of

compensation for. transporting \the mail on all of its do-

inestie Foutes, effective Jaiuary* J, 1946, the date as of

which the rate currently being paid to, the company allegedly

became unfair and unreasonable. aS

2 re) aT

In both petitions the earrier ple: ded. for expedited action

because of matters of urgency, peculiar te it, of which the

members of the Board and everyone ¢ onnected With the air,

transport industry are well aware.

By motion dated Mity 27, 1947, Mr. Burt sought an and 1

denying the petition relating. to the domestie routes,:insofar

as it iciiiedl an increase in the rate of compensation

S$ as of a date prior to the date of the. filing of the peti-

~ tion by. TWA. The grounds for .the motion were

based. solely on questions of broad general policy. That,

motion was wholly defective. We pointed out in our: an-

swer to the motion, dated June 11, 1947, that where an ad-

ininistrative agency has jurisdiction over a partictilar mat-

fer, upon which a party is entitled to notice and hearing, it

cannot: refuse to-assume jurisdiction and dismiss or reject

a petition without hearing the facts and arriving at a deci-.:

sion basetl thereon. That, of course, is fundamental and

we cited in gur answer Supreme Court cases to which many

more could be added.

3 U pdaunted, Mr. Burt after ten or eleven days of reflec-

tion.filed ‘an amendment to his motion, this time requesting

dismissal of TWA’s petition insofar as it requests an in:

crease on. the domestic routes, prior to thé date of filing,

on the ground that the Board does not have the authority

‘to erant a different rate from ‘that currently being paid,

effective prior to the date of the institution of the pro-

ceeding. “eae ;

Thus the onty-reason why we are here today is polnuas

your power.is contested. We are not here to deterniine

whether the Board should, as a matter of policy, authorize

ii. change in rates effective prior to the filing of a petition

by the carrier, That is a question upon which all parties

in interest are entitled to produce evidence at a hearing,

on the basis of which you may make your. policy decisionZ

But we cammot be denied a hearing on this and all other -

—-relevat facts if you have jurisdiétion over the sub-

Sb. ject matter of this petition.

A 453 Sate

“It is of no Consequence whether you choose to solve

this question by looking merely at the speci fe latipuage ol

Section 406 of the Act or whether you choose to Considler

it in ‘the light‘of the Act as a whole and your responsibili

ties thereunder to the air transport industry and to the.

country: , The answer is the same-no matter which coursé

- You take. in resolving this problem.»

I believe it is-a fair observation that Mr, Burt ——

‘this as an academic question based purely: on the languag

¢ . of Section 406 and for that matter only on Section 406 (a)

of the Act without regard to your obligations under ‘Se TION

406 (b) or your responsibilities i in i stg the | mblic in-

terest aS “defined in Section 2...

I wauld like to show-first how vou cannot possibly per-

form} your funetions under the. Act if- vou accept this narrow

view.

Chaired Landis: Before you go into that, Mr. petite, 2

may I ‘get this position clear immmy mind. Thatis in the

" nature really of a demurrer to your petition and conse

~ quently as a matter of pleading,., we Should. take as true

‘your statements, Your allegatidiis that arecontained in tliat.

petition, that the rate existing rate owas unfair and unrea-

sonable from January 1, 1946 on, and that is the’way we

should approach this ease, s

* Mr. ‘Brophy: Yes, fronr a pirsahietin pleading stand

pointyyves. : | ea

Mr. Ryan:- This then fully satiafted your: point as to the

~ hearing—this oral argument upon the motion.

86 Mr. Brophy: Oh, no, not by any-nreans.

Mr. Ryan: That is what I wanted to wet. - -

‘Chairman Landis: T tinder stood. vou whittled it down to

the pure Tegal question and if is a.pure legal question and

it Is ineffect a motion to dismiss because of the—

Mr. Brophy: But we are entitled to a hearing on the

whole petition.

Chairman Landis: T just wanted to get vour position.

Mr. Brophy: For the last nine Years bvérvene in the.

country has believed that the Civil Meron: mtic « Board has

been pene with all of the meaus necessary, in the public

interest, for the encouragement and development of an air

transportation system properly , adapted | to the present and

~ future needs of the foreign ayd. domestic commerce of the

nited States, of the ‘Postal Service and of the national

defense... That is your mandate from the Congress. .

In-order to discharge this responsibility you have been

_siven the power to administer the subsidy provided by the .

Act if-subsidy becomes necessary ta achieve the: objectives

of the Act. - More than that, you hive been told in Section |

‘$06 (b) that in determining the rate of anail compensation

. in each case you shall take into consideration the need of

each carrier for canrpensation for the transportation of the.

nail snfficient to insure the performance of service, ‘and, -

together with all other revenue of the air carrier, to enable

it *tunder honest, ec onomicy il and efficient mani aemen ’ to

maintain and,continue the development’ of air transporta-

‘+. tion to ‘he extent and of the character and quality

87 required ‘for the commerce of the United States, the

Postal Service and the national defense,

~Theré is not a single word of limitation en your: power

in Section 406 either aSto the amount of mail compensation’

or the period for which it Inay ‘fe paid. In fact, there is no

liftitation of awy kind on your powers, exe ept that you must

only give to the carrier a rate which will enable him to oper-

ute si under ‘chonest, ecqnompieal and efficient man-_

ae ment? ‘Therefore, we must not lose sight of the faet

, ‘hat we are dealing with wv subsidy sti rate. not a rate mak-

ng statute.: , es

: fee ~ 3

+ * + * * * et * as . *

WwW The sole question invo ved bene today roletag to

power and not. policy or discretion.” You are not.

called upon to degidé today whether TWA should have filed

arate petition e atlior than it did or whether the items for -

which they seek reignbursement are just or not. These are

“qqnestions which will: be res@ved at the hearing: on

116 the full petition and vou eannot decide as-a matter

ra%

Toe

ee ae

Pe 45

“of policy whether you. sheuld exercise your power

until the last bit of evidence in the entire case has been.

submitted and the’ last words of argument have bee

presented before you. “You cannot. segregate: issues in ow

matter such as this’and saysin advance that the evidence

which would be material on this question can be delimited

on circuniseribed, :

Yow cannot adopt a hard and fast rule of policy Fai will

he applicable to all cases because the facts have varied in

ile past and will continue to vary in a world of changing

conditions. ;

Just as you found it proper, as a matter of “policy, to

pee retroactive. pay to the date of comunencement of

operations on a single new route, just as you found it

proper, as a matter of policy, to award retroactive pay:

"on old routes fo the date of Inauguration of service on a

new route which came into a particular system,. so also

way Vou find that votir discretion should likewise be exer-

cised in a case involving an unforesee and-unpredictable

Catastrophe the duratfon, and effeet of which could? never’

be Known until it had run its full course. So also may you

‘find that a host of other cireumstances merit the exercise

“of your discretion. The important thing is that you are —

drasters of vour diseretion and the mere recoguition of

. Your power does not require you to exercise it exeopt in

Proper “Cases.

The rate of comper nsation for the transportation ot the

email on TWA’s domestic routes was fixed by. order

117 ~—s of the Board in Docket No. 1700, dated October 26,

Sa 1945, effective January a 1f M45. a

In N vovenber 1945, the first full moitith following the de-

cision, TWA lost money. Tam at a loss to find the profits |

what Mr. Burt referred 1 ‘to that accrued to ee after the

dee ‘Lsjon, fe ae:

lin December 1945, TWA lost More MoneyY., Nevertheless,

in justice to any mail rate, it should be tried out ‘6ver a

sificient period of time to be able to tell whether it results

46 yee

in fair and reasonable compensation under honest, eco-

nomickh and efficient management or whether it is: wholly

unreasonabie, Therefore, I don't think they should have

filed anapplication for a revision of the rate because of the

losses in November and December, nor do 1 think it was in-

cumbent upon the Board tor that matter, under Section

406 upon its own initiative or upon the Postmaster General

also under’ Section 406 ta ask for a review of the rates

which thus far were nevertheless inadequate to provide

over-all compensation which Section 406 contemplates.

Mr. Lee: If the carrier is guilty of being too slow on

the uptake, does the Board then have the duty of opening:

the ease on its own initiativ e and fixing a fair and -reason-

able rate? EA

Mr. Brophy: The Board has the power to do it. . The

Board,1 don’t think has the duty.

Mr. Lee: It would have vue 8 duty if it was inipairing the.

‘arrier, wouldn't it?

Mr. Brophy: Most certainly. It would. also have the

duty any time the Board. wants to look at the finan-

118° -cial condition or the rates being paid to a particular

‘arrier, they-would have the power to open it up

Mr. Lee: They have the power under your Re an

nounced a while ago, the Board has the duty also to use its

power of-iniftiating rate, a new rate in order ‘to carry’ out

Nhe purposes of the Acteas set forth i in Section 2

Mr. Brophy: 1 think there are situations when the

Board might have that- obligation in order to perform tts

responsibilities under the Act, Mr. Lee. All Tam say-

Me, 1s: that you are certainly not precluded from doing it

whether you want. rates to be increased or decreased. — |

don’t think vou ean sit back and Tet a carrier dissipate its

operations to the point where the development of air trans-

portation svstem contemplated by the Act may be retarded:

In those situations [think it would be your duty, but the -

point again that Tam emphasizing is what wour power is,

how You exercise it based on all the facts.

nag y

“ya

47.

Mr, Lee: Wouldn't any substantial less 1 impair the car-

cs rier.in performing its duty and service?»

Mr.. Brophy: It depends on its overall financial situa-

tion, Merely a loss over a given period of time would not

necessarily mean that the carrier or the Board or the Post:

‘ “amaster General must: become alarmed and initiate a raté

proceeding.

Chairman Landis: But on the basis of the Western and

the Northeast cases what you’ are really arguing is that.

the category of the grounding of Constellations is at least.

‘comparable; to the category of: opening up a new

110 route. |

Mr. Brophy? Exactly.

Mr. Ryan: At any rate, the question whether the preti-

tioner here has been gnilty in no way affects the Board's

legal power. ”

Mr. Brophy: None whatsoever. | a

Mr. Ryan: T take it you were discussing it not beca use it

‘was relevant but some of us raised the question 3 as to. why -

the carrier hadn't filed suit.

*- Mr. Brophy: That is right. In January.1946 TWA lost

even more money and this is when all of the airlines.in the

country were becoming seriously invelved,- iy:

Then on February 5, 19467 operations were started on

the newest addition to the TWA system, the foreign routes..

On that date, asa result-of everything the Board has ever

said before or since, the rates appligable to the entire TWA

<Vstem, domestic and foreign, were open to review. . °°:

There has not yet been a formal review of TW A's interna-

tional, operations.” The company. has only. a temporary

rate set in October 1946 which did not take into account the

propriety of the allocation of expenses between the domes-

tie and foreign Youtes of. TWA but was merely a device,

Which is still in effect, for providing some money to the in-

lernational carriers pending the establishment of a per-

ranent rate. :

“5 : 4s ‘ .

Nevertheless, despite the. fact that, a rate hid not yer

been fixed for the international division, beginning ‘in

March 1946 losses-in TWA’s operations began to decline.

' Although losses stil were sulfered:during April and

120.) May they, were’ still declining, In June the -turn

came and operations Were protitable.

On July 11, 1946 the first Catastrophe occurred avith the

grounding of the Constellations.

Suppose, at that time, service on the international routes

had net been inaugurated and suppose also that the Board

had not previously said that, as a matter of poliey, you

would not adjust rates effective prior to the ‘initiation of

"proceedings, which you’ have never said. In that event,

Mr, Burt maintains that you have absolutely no power to

consider - whether TWA shpuld be compensated for the dire

— results: which followed. becaute at 12:01 A.M. on July Se

- somehody wasn't at your doorstep with a paper, called :

petition for an inerease in rates based upon what might

happen depending upon the duration of the Constellation

erounding and the effectthat it would have on gener ral pais:

senger acceptance. But remember, at that time the entire

TWA system rates were open to review by your own pro:

nouncements by reasonoft the Inauguration of service on

the new international routes. commencing February 5.

Moreover, in the entire history of air trausportation in the

United St ates, there had never been a more ‘tunusual cir-

cuiistahce affecting any air-earrier or group 6f capriers

than the grounding of the ( onstens ition aud the subsequent

pilots’ strike. ;

‘To have filed a petition on July 11, 1946 based upon the

catastrophe resulting from the Constellation grounding -

would have disregarded and flaunted Section 406 (@) Which

requires that any petition shalk include a statement of tlie

rate the petitioner believes to be fair and reason.

21 able. No of could know what rate.was fair and

reasonable until the Constellation ultimately got |

back in service and some knowledge was had of the dam.

age done in the publie’ s estimation of the safety of that’

airplane, Section 406 (¢) is in specitie language and

nieans something, Surely Mr. Burt does not mean that

~~ this language should be disregarded although he does want

you.te give effect, in your construction of Section +06. (a),

to language which isn’t even in the Act. ‘But events made

such an appraisal of a fair and reasonable rate impossible,

at that time, because before all of TWA‘s Constellations

were back in service the pilots* strike occurred as a result

of which TWA’s operations ceased eutirely throughout .the-

world. There are two things that we should keep in mind

in connection with these two catastrophes. First, that the —

erounding of the Constellation occurred as a result of the

Governmental order issued by the ivil Aeronautics Ad-

ininistration and the strike occurred because TWA put

into effect the rates of pay. recommended by the highest

Governmental. tribunal.on labor matters under the, Railway

‘Labor Act, the special fact finding board, appointed by.

President Truman, after every procedural step under the

Act had been exhausted.

I refer to the fact that the ¢ ‘onstellations were grounded

hy order of the Civil Aeronautics Administration on July

llth because at that time the: Civil Aeronautics Board, as.

Well as the carrier, could not possibly have anticipated the

duration of the grounding or the extent of the damage that.

- the carriers affected would suffer. If vou had, as a conse-

quence issued an order in anticipation of the effect

122 hoof the grounding, you would have been exercising

the diseretion or the power_in discretion that I think |

you have under the Act.

Well, despite, the fact that. — of 1946 was a good

monthy the grounding of the Constellations and the pilots’

strike ruined the balance of the year. With the annual

- audit completed and the internal situation ine TWA some-

What résolyed, it was possible to appraise the loss result-

ine from the grounding and the pilots’ strike ‘and thus form

some basis fora petition for review of the rates, since ac-

Pee . ah,

~ oy) a oa

~ *

ad .

tion on the permanent rite for the foreign routes was

something that apparently would not tome up for sonie

‘time. Actually the figures showed that the losses during

1946 resulting from the grounding and the strike alone

exceeded ten million doHars (10,000,000) and it was pos-.

sible to formulate some idea of what a fair and reasonable -

rate would be in complianee with Section 406 (@) of the

Act. Consequently, the petition for a-revision of the “do-

mestic rate, effective as of January 1, 1946, the date as of

which we believe we can establish it to be unfair’ and un-

“reasonable and the vores for an increase in the tem.’

porary rate being paid fgr the transportation’ of inail on

‘the foreign routes were hed on March 14, 1947.”

There is no such thpr& as-an estoppel which would de-

prive the Board of its jurisdiction on its Own Jnith itive, or

upon application of the Postmaster General, or Upon ap:

plication of an air carrier, to review rates over a past

period, to determine new rates.and to make such rates ef.

fective from such date as it shall determine to be proper.

The carrier is entitled ta fair and reasonable rates:

-123—o of compensation for the transportation of the nail

5 and sufficient to enable it to e: irry out its obligations,

“and the Government is obligated toe pay fair and reason.

able rates in order to accomplish that purpose.

The very idea of: estoppel depriving the Board of its

jurisdic tion-is negated by the provision of Section 406 (a)

which énipowers and direets the Board to fix fair and rea-

sonable rates on its own initiative. This does not mean

that the power and responsibility of the Board to initia-

tive proceedings is limited to a proceeding looking toward

the reduction of a rate because the ultimate responsibility

of the Board is to encourage and develop a system of air

* transportation contemplated by the Act.

Moreover, in this-case particularly, the carrier had be:

fore if, on which to rely, the past decisions of the Board

that With the establishment of a new route the rates of the

entire system are subject to ‘review ahd the declarations by

the Board that it is policy, and poli¢y alone, which has de-

termined their decisions in previous cases, . — .

The question has been raised as to the constitutionality

of any action by the: Board in refusing to adjust unfair

and unreasonable rates which becauie such prior io the

iuMiation of proceedings, 1 - personally believe that the

Tnere analysis of the Act itself reve als arguments so over-

-Whelming that the coustitutional point ‘an be considered

as cumulative rather than the main support of our position.

di Hlowever, 1 believe the constitutional point is absolutely

sound, TWA tiad a-contract withthe Government, under

the Air Mail Act of 1934, for the’ transportation of

i24 the mail-and agreed also to furnish passenger cand

express service in cotnection therewith. Under that.

contract at could abandon its responsibilities without pen-

alty on sixty days’ notice. The Civil Aeronautics Act held

oat to it the promise that if it assumed the obligations.of a:

_ eertifiente of convenience and: necessity it would receive

fair and reasonable compensation in accordance. with the

standards preser ‘ibed i in Section 406 (b). Moreover, in giv-

ingupa contract from which it could, have withdrawn vol-

titarily on sixty days’ notice, the carrier assumed the ob- -

liggtions of a certificate from which it cannot withdraw un-

loss permitted by the Board under Section 401 (k) of the

Act. Bey ie a .

In fact, any carrier which assumes the responsibilities .

~of a certificate does so on the promise of the benefits of ne

Section 486 (by aud these cannot be denied the carrier ax

a matter of Jaw. ; ; ,

It is of no consequence that you may call Section 406 (b)

aenbsidy, It is part of. the promise to the carrier for per:

forming its obligations under honest, economical and offi:

cient rannagement. The decision of the Supreme Court in

United States v. Northern Pacifie Railway (6., 256 U. S.

“141921) establishes this beyond question, In this ease,

the court held that a grant of lands by Act of Congress Ao

thé railroad in exchange for its agreement to extend Its

lines was a promise binding on the government and thie

dands so promised could-not be diverted by the goveraun ent

to other uses, ‘The court Said that ‘Such rights are withit

the protec tion of the ‘due process of law clause of the Con-

stitution.”’

cal * 2 = ° * * * > * sd

133 : | woud like to comment if 7 may, on thie baaeaek

made in the early part, of Mr. Burt's arguinent. 1]

think you will agree this is a purely jurisdictional ques-

tion. After the motion was made, Mr..Burt made what |

thought was a frantic attetipt to get us into some kind of”

a hearing on a limited question as to whether the Board

“should exercise its policy. in this matter.

; There is no such thing as a limited hearing on this ques-

tion because you can’t decide this. If you agree that you

have the power and it is a matter of discretion, then every-

thing that goes into a rate ¢ ise is material me you can't

pick out an issue here and one there. ° Tie motion was not

our motion; it was his, and frankly, 1 don’t think it ever,

should have been made, but that is neither here nor there.

I was a little disturbed if not annoyed at the comment that

full and fair opportunity had been giv en us for a hearing. -

That is not so. : ,

Mr, Ryan: Are-you referring to this last motion? |

Mr. Brophy: I am referring to. the motion that raised

first the policy question and as amended, to raise the juris-

dictional question. ” ;

Mr..Rvan: So that your position procedurally: would |e

if you went-ahead after this motion could only be disposed

~ of —I mean the amendment to this motion is the only thing

; to -be disposed of -at this stage so fhen you would

134 have left the rest of the motion, the motion as ‘to the

.* ° exercise of policy and-also the merits of the rate

‘proposed, eae ae

Mr. Brophy: I think the question of the motion relating

to policy has to be dismissed aS a matter of law because

- -

we are entitled to a hearing aud that invalves the Morgan

Case and everything else and cases long before the Mor- - -

. fan case, : . | . 7 ;

Mr. Ryans Fagree with-you personally that he can't dis-

pose of that policy motion_in that case: [instance ]. ee

My. Brophy: And you can't do it in any small hearing

hesatise. there are no issues to segregate. Everything we

suyoon that case is bearing on the issue whether you should

exercise yous discretion, |

a --* * * * *. ae : * ee — *

, ee

135 Mr. Ryan: You ‘referred to the Constitutional

—\ question. Is it your position that the Constitutional

question involved here is one of substantive confiscation or |

is it the question of the denial of the carrier of the benefits

preseribed by the Statute? In other words, the

136 Board denied due process by uot adhering to ‘the

provisions of the Statute. |

Mr. Brophy: It is the latter. Sis

Chairman Landis: I have difficulty in reconciling that

point of view if you put’ it on a Constitutional basis and

then say—well we have the discretion to go in. If it is on”

a Constitutional basis, you almost eliminate discretion on

"our part. Tf you establish the Constitutional basis, then it

hecomes almost mandatory on your part to go in.

Mr. Brophy: Remember, [ am speakingto this motion,

Mr: Chairman, and this motion—

Chairman Landis: I recognize you didn’t drive the Con- -

-titutional point. T always have had difficulty in seeing

how you can have ou one side a flexible policy and on the

other hand an. inflexible. Constitutional obligation. The

two don’t jibe: rose oe = |

Mr Ryan: ‘Would the question of the Constitutional

vight to look a eift-horse in the mouth be involved here

alse? Thatcis, whether or not you ean have a Constitu-

tional question where a subsidy is involved,

Mr. Brophy: This isn’t a gift horse, Mr. Ryan. We un-

dertook the obligatidns under the Aet and were promised .

benefits of the Act that you have available to give us and.

that is not looking @ gift horse in the mouth and IT think

the Sup. eme Court case that I cited ‘shows that sery

clearly.

* a . « a . . « Ps *

140 Oral Argument of Roy C. Frank, on Behalf of

ore the Post Office Department |

Mr. Frank: Mr. Chairman and ittembers of the Board,

the. Post'Office Department doés pat intend to make a legal

argument at this time. The legal points have been ade-

quately covered by public counsel and by Mr. Brophy, rep- |

resenting TWA. The Post Othee ee does wish to

state its position, however. oes.

We wouid iike to see the motion granted. We feel that

the Board does not have the legal authority under the Act ’

to take the action that TWA requests. _ We would like to’

coneur in all of the legal arguients made by publie counsel.

We agree with the points made by him, and we would Jike

to adopt as fan as we can the legal argument made by him

‘as our arguinent. ? :

The, Post Office Department does have certain practical

difficulties in this matter, thai I believe the Board ought to ,

take into consideration, not in determining what the policy

should be, but in determining what the law méans. I ean

" see a difference between practical effeets that go to poliey

questions, and practical effects of a law that goes to inter-

_ pretation of the law.

I believe the rule is that. in construing ambiguous law 3

that the court, or in this ease the Board, has to de

141 termine and has to decide’ the. ambiguity in such a

way that the law will be given its practical effect

and will not lez id into any administrative or practical dif-

ficulties, fs . : .

A construction here as contended by TWA will lead into

a number of practical adniinistrative difficulties: not only

for this Board, but also for Congress and for the Post

Office Department, particularly the-Post Office Department.

e . : » <r Jo * %

if the Board should decide that it has the power to fix.

rates previous to the date of the- filing of the petition, it

“will mean that. the Board will never grant a final rate.

“Every rate that the Board grants will be a temporary 1 rate.

And in eflect, after 2 certain period of time has elapsed,

, Whether it be <ix*months or a year or two years, depending

upon when the Board -on its own initiative opens. up. thie

question, ‘or a carrier petition, or the P ost Office Depart-

iment comes into the case, the Board will then haye to da

termine what the rate should have been for that particular

“preceding period of tine. That is the only way that* the -

Board then will ever be able to establish a final rate. 1

nay say even that rate.will not become final because there

Inay be certain ¢ ircunistances overlooked at the time of that

licaring, that the carrier or the Department or the Board -

could show, and the further rate would be established.’ a

The practical difficulties confronting the Post Oflice:De-

oo and Congress in this mattér would he i in connec-

tion with then Budgetary appropriations. *, It would be im-

possible for the Post Office Department to approach —

‘T4200 Congress and make recommendations as to what the

Budget should be-for any particular year. At that,

the. Department would have to tell Congress that we an-

ticipate it will be so much, but we never know what‘air line

caryiers are coming in asking for additional inéreases. of

$11,000,000, $14,000,000, $20,000,000, we are only giving a

eles, and that is nota very good guess. It would be worse

than the guess we are giving today.

Congress af the present time is véry impatient at the

prese nt system of granting temporary rates, and a vear or

two later eranting ile. permanent rates as now fixed. I

think that was brought out : BY Commissioner, Branch to

some extent.

lL have a quotation from C Lemnibtow Report No..597 under

date of June 11, 1947. .T think that is the report referred

ro by Connnissioner Branch to some extent. I would like:

-to read it, however, to get it into the fecend to show whiat

the present ‘eaten of -the Appropriation Comunittee in

“Congress ‘is under the preseitt system. T venture to say if

the system were opened up so we could gd back. three or.

five or six or seven or eight or nine or ten years, that Con-

wress Wwould* look with even nore alist avor Upon that kind

of a policy ¥, ;

I bring that out, gentlemen, not for any other reason ex-

cent ae think we have acright to look at the present —

interpretation and the present. sentiment jn Congress as to

what Congress means by this Act, what Congress, means

by the language in this Act; what: the standing is of our

eee lawmakers. ‘

145 * The quotation | warited. to read is as follows: It

has to do with the various items for foreign air mail

trensportation which total $33,000,900. The, quote is. as, —

; ‘ 1"

follows: =° - Or Ey a t aes |

“The committee regrets exceedingly that the Post igo

Donartment is not able to présent a definite statement: ;

(o the amounts that will-be involved in final settlement of

these items. The Post Office Department cannot, however,

_-tvake this determination until the Civil Acronauties Board

lins made.: il det ermination of the amount to be allowed to -

the carriers... Lt is disconcerting, to say the least, to be

faced with this situation two yearssafter the close of fiscal

vear 1945. The rates covering that period are not vet de-

termined, and the present amount is appropriated on the

- hasis of temporary determination by the Civil Aeronautics

Board. The only reason: for making the ap propriation i is in |

order to make payments, on account to the ¢arriers so they *

may maintain service. The committee feels very strongly,

rate making is entirely out of. line with the necessities of

the situation, and that the rates can be more readily de-

termined .with adequate safegnards for the feder: al treas

ury.,

that the poliey of the Civil Aerenautics Board i in deferring -

oa : : = : \

The Post Office Departnient, if rates’ could be fixed back

of the date of the petition, could never close its hooks. It\,

would have to keep its books open. for a very indeti--

144 nite’ period of time. We would never. know what

deficit we had for the year, or what surplus, if amy,

e had fora partic ular year. We would never be able to

vo before Congress und stute that we feel that the 5 cent

rate of today ‘should. be’ reduced to 4 cents on the basis of

the operating costs for 1947, er that the rate should be

raised to 6 cents on the basis of the losses ‘for 1947, -We

would have to say, ‘We do not know, what the loSs-is going

to be, we don’t know what the profits aire coll, to be, bes

cause in’ 1950 the Board@ can open this matter ip and can

stute for 1947 we have to pay out another £10, SLO -or FOV.

milliou.’? We will never know where we are at any par-

tiendar time.

A further diffic ialty that: the Post Office SCO will

he placed to is in the cost ascertainment procedure. The

Post Oflice Department has built up over a period of mauy

“Years a very elaborate sy stenr of cost ascertaimnent. That.

system is used in these cases. ‘We come in, we tell the

Board, and we present figures to the Board to show that in

“the year 1944 the cost of various serv iges is such, The

Board then relies upon those figures for 1945 in determin-:

ine the rates that they will fix in the futures If the conten-

tion of TWA is accepted, it would result in that kind of

situation, The Board relying on the’ cost scasitsiveait

fieure for 1945 would fix rates for 1946, jet us say, or 1947.

In 1948 the Board ‘would go back to 1945 and would allow

another $10,000,000, which would mean that the figures that

‘You used to fix the 1946 and 1947 rates were false figures.

Chairman Landis; T have never seen a case where

145 the Board has used the .cost ascertainment figures -

of the. Post Office. =

Mr. Frank: T had assumed that a good many of the

fivures that we haye relied upon in our exhibits and ficures

th: at we have furnished the carriers in Shese v ‘arious. Cases

have been taken from our records and from our cost ascer-

tainment figures. For example, our costs in various sys-

teus. | have been informed that, Mr, Chairman, and I ive-

lieve in some cases that hag been. used. In fact, I believe |

have sten, some exhibits... Iam trying to-recall which ones.

Thereshas been a footnote to the effect that the exhibits

were based on figures submitted by the Post Office Depart-

inent, Which woutd have to have been taken from their cost

ascertainment figures. I say that as a matter of recollec-

tion and not being able to point to the specific example. -

Chairman Landis: The cost ascertaimnent figures show

this, do they not, they shew the actual cost to the-Post

Office? | r : \

Mr. Frank: That is right. eek

Chairman Landis: Of carrying this mail’ .

Mir. Frank: That is right.

Chatman Landis: And they are worked up or the: basis

af your surveys every three weeks at odd inte ‘vals?

Mir. Frank: That is right.

Chair an Landjs: Actually, the cost of: caeeien ‘the

tail, exe ‘ept where this Board goes into an ov eral service

rate problem, is not of much importance | in the rate

146 making picture, — :

Mr, Frank:- Except that. this Hoard stated in the

‘Helicopter (‘ase in Los Angeles, that they thoucht the cost

was adittle high, but they would give it a test. —

Chairman. Landis: That is right. Where the cost ascer-

‘tainnient figures-seem-to me to have great importaneé is

wot so much in the mail rate cases, mail pay cases, perhaps

where they ought to have far greater emphasis than they

are viven by the Board at the present time is in your route

‘eases, how ntuech-is this going to cost the government of

the United States.

Mr. Frank: To get'back to that, Mr. Chairman, that ex-

actly emphasizes the point I was making, regardless’ of.

whether’ the cost ascertainment figures are used in route

eases or rate cases, if.the Board relies upon a false figure

Sy yes ves a Mi Re y a Vedat ;

LBS in ie PERRET Re bras of VOHIRY hen Wiese ne SA

. aS

in a eS

era Te has &

we te

that is furnished by cost ascertailiment.te establisly a route,

the Board is at the same disudvantage, and the currices are

at the sae disadvantage as. though it were used in a rate:

case. [1 dogs not make “ang difference what type OF cause it

is used in, The mere fact that these figures can never be

relied upon as being the actual cost for this particular year,

because -they can always -be increased .subsequent tb the

time you have used them. » eo <8 .

“Chairman Landis: J was not trying to argue with you

o-your point, but, rather, was perhaps indicating that the

cost ascertainment figures ought to- be used by the Board

nich more than it does.” ’

Mr. Fratk: 1 certainly appreciate that statement,

The Post Office Department also faces a further

‘practical difficulty. ‘In yrecomputing the amounts’ due the

carrier under any. future increased rates, we would have

io vo back, and, we, would have to tecompute the amounts *

of mails that have been carried. We would lave to recom-

pute the amounts that are due to the air carriers. “Itisa

difficult and expensive operation. Some of these cases, i

am informed, by the second assistant’s office, that thre biisic

data used is not available or in proper use in: connection

“with the new rate. After a period of time it has been used

for other purposes. It has been sent heyy and ‘there and

the exact figures have not been kept : as a matter of perma- |

nent record, ”

It vould appear to me that. these difficulties that. we.

would be faced with ought to be came & in connection

with the determination of what Corgress had in mind at

the time this Act was passed A ao not think Congress

had in mind that the! gover nment agency that was footing

the bill, so to speak, would be placed in a position where

it would never know when its liability ceased, when it would

always have to- keep its hooks open for additional costs,

when it could never determine’its own budgetary require:

ments for the earrying out of these payments at any par-

~w-G~-.

2 Pere) et ee 60 wee

tye, ’ on : hae : S Bs , ie f : ae | al :

oo. tin, and When gene ‘rally the w e- qe ‘ustion would

be Leet’t up in the air amd the final rate fever determined, <I

cannot CONCE ive thie it Coueress ever had that in mind.

oe ‘Phere may be answers to ‘the problem as to how

Lis the rm carriers caf, secure the losses that they have.

ewer » Te Aurred,. losses: that they did not expect. - I do not

tHiitik wh are concentieds, at’ this time as figuring out that -

eh proble ta. That isa bridge that we have to cross when. we.

ipa Aes ee, bridge. as to whether this ‘Board hére cat make rates ret.

2. voae tive front thesdate of the petition. 1 think af we CrOSS:

that bridge; we will be doing w ell and we should not worry

: ‘ athont the future, > Paik) ata

ee it ae: g there arecany further quostions, I wonld he wh: i to,

ee AUSWwer ‘them if E can, if” uot, I have -said everything that +

* the P os Office Department Wishes to say at this time:

. S Sere ee aig ee, CMe Oo pae cae once, eGeke ons te

A OE MB a se CS ee + |

: set a i 1022 -

son UE i

oe ae ope UNITED. STATES GFLAMERICA :

: aed a et - o e G re

- CIVIL, AERONAUTICS “BOARD:

WASHINGTON, D, Cn

¥, ee oe xs Served : Dee. 5, 1947, es |

; fe e ee Mer Aan Es Docket N ga “7 : ply ;

5 i EN NAVEYAN INC ENTRALS > Aagttay hs ‘* OLPOH ATION

a oe = ry : ay ot Docket No. 2849,

ae Te ANSCON TINEN T AL x Wi ENTERN. Min, Ixc

Devided Decenthed zie 2 1947.

Ve my test “tHe fixing of mail rates to lie effective prior to peti-

ton lilies dates granted, a gees

{

é y, . : . a :

Se get fone Phe only Gridiane we -hi ve to cross teday is w

» Motions to distiiss anail rate petition: insofar, as they ’

retarn will, in fact, be éarned,. (p. 11)

The first sentence of section 406 of. the Civil | Aeronautics:

Act is substantigiy identical to the -rekated statutory” en-

actnionts in the “fields éf railway | and air. carrier, mail pay.

found in the Railway Mail Pay Act of 1916 and in the Air-

. *

ere ey ah h

The Cis i} Acronatdties Board does not have the legal au-

thority to’ Lik whew rate tor an Ope ration during a pe riod

in Whieb a tinal rate previous sly fixed by. the Board was in

efiect and. unchallenged by the initiation of a mail rate.

‘proceeding: (p. s)

The language of section 406 ol ihe Act is similar to that

normally used in grauting authority: to make, public utility

rates Which-are traditionally applicable only to the future,

Sud is almost identical with the language of the earlier iii

"ay acts which language has never been viven the. rétro-

achive, coustruction conténde d for ‘by respoudents: herein.

eo.

eas we? oma on *:

5 ‘onsideration of the provisions of the Civil Ae ‘ronautics

Act of 1938 indicates-that a auajor purpose thereof Was the

application of publie utility regulatory’ principles ‘to the

airline industry. (p. 10).

It is: firraly established law thatoa ‘public utility rate ‘deals

OnLy Ww Uh ‘the future and is not concerned with’ reiniburse-

make ate of Jpast losses nor recapture of past profits whieh

have proved exe eSsive, It offers only an opportunity: to

earnoa fair return, and it does-net guarantee that sucha

mail Acts, of 1934 and 1935. None of these acts has

is aa be en held to. confer r-a retroactive mail ratecfixing -

. ~ authority. (p. Ses tte Raat es ot ae

There ix nothing in the legislative history of the Civil

Aeronautics Act to indicate an intention that the’ Act eon- *

templated a retroactive rate-making authority such as is

contended for b¥ the respondents. (p. 14)

Phe fact that the Board is directed4n fixing mail 1: utes

% consider the need of the carrier for revenne sufficient

lovether with: all other revenue to enable it to achieve éer-

alt statutory ob jee tives does not confer retroactive power

iat ere ly directs the Board, in fixing a rate tor uny pe

‘riod, to consider i actors lol ordinarily cousidered hy otlies

rate making agencies, -¢p. 22):- * 38 ; tA

‘The contention that such retrodetive Power is esseutial

to carry out the purposes of the Net, caunot’ be seeartag

Such retroactvie authority. would he de ‘finitely tiarmafal t

the administration of this Aet and would radically 5. apo

the fundamental principles upon which the ‘Act is. based. °

(p. 22 : . |

Authority to reimburse for past losses would carry with

it authority in the. Board to recapture exce sive profits.

op) See : chs an

Where there is no mail rate in effect for a new route the

‘Board must consider mail pay requirements arising as a

result oft such new operation. from the date mail’ Service

begins thereon, irrespective of the daté on which mail rate

proceedings are initiated. (p. 26) he ger

While this Boyrd has consistently | recoenized the de

-velopmental responsibilities placed upon it by the Civil

— Aeronautics Act of 1958, its-adniinis stration of the mail pay

provisions of the Act has uniformly recognized that basic

principles of public utility rate-making apply to the fixing

of miail rates. “(p. 26) :

. In its rate decisions the Board has always assumed that

aie of loss, should rates prove inadequate, would fall upon

_the carrie r, and it has allowed a rate of, return Commensu-.

“rate with the risks that appear to be volved. This éon-

cept of prov iding payment for risk in the rate of return is

diametrically opposed to the principle of reimbursement as

for past losses... (p. 27)

178. There is no indication in the entire legislative his-

\ tory of, or in the ¢ ‘ivil Aeronauties Act itself, th: ata

enarantee of ‘arviers against losses incurred under rites

found fair and reasonable by traditional public utility vi ate

making procedures was intended or thought necessary. to

accomptish the development purposes of the Net. (p20).

The Western case did not held that the Board would fix

ee ey

aed | eh ita EES

> e

cretroactive rates.in aby case of unusual. circumstances batt

only that where there is ue tail rate in effect: fora new

route the Board will consider mail pay requirements aris

ing asa result of such new operation trom the date mail

service begins thereon, This agi is not applica le. to

thie petitions of TWA and PCA. (pp. 24 4 and M4)

Motions of P ublic ( ‘ounsel to dise Uss bees its’ mail

rate petitions insofar as they request the fixing of mail

rates to be effective prior to the filiig dates of those peti-

tions granted, and said petitions to that extent, disuiissed.

|). He)

Ay pearances

bry rald Rh; Brophy and George A. Spate r for Transcon-

tinental & Western Air, Inc. sowie

Charles I, Murchison and. Robert Hankins for Pennsyl-

~ Vanla-¢ ‘entral Airlines “Corporation.

Frank J. Delane ‘i, Roy C. Frank and Lows J, Doyle for

‘the Postmaster General.

William C. Burt. Jerome 3 acai and Robe rt E. tee ling.

Publie € ‘ounsel: -

179 i. OPINION.

By tne Boarp:

This opinion disposes of motions by Public Counsel in

two proceedings. The first is a motion to dismiss the peti-

tion filed on January 14, 1947, by Pennsylvania- Central .

sofar as it requests the fixing of a mail rate retroactively

Trom June 1, 1942, to Janmary 14, 1947, -the filing date of ‘its

‘petition, ‘The s second i is’a motion to dismiss the petition. of

Transcontinental & Western Air, Ine., hereinafter ‘referred

to as TWA, insofar as it requests the fing of'a mail rate

retroactively from January 1, 1946 to March 14, 1947, the

date of filing its petition. ets eae

Although the two petitions present superficial differ:

ences and although the motions were argued separately,

Wwe are-of-the option that the basic considerations applica.

! Airlines Corporatton, Lcnstaatier referred to as PCA, in- -

ble in each case are- substantially the same, and we are,

therefore, disposing of both in this opinion,

Tie TWA pet ition is a siinple request to fix a a

for its domestic operations on and after

During the period between Jjantary 1,-P46 and the cdgite

of its petition it was reéciving mail pay for these opera

tions im the amount-of 45 cents per toniinile under a

theretofore fixed by final order of the Board (Order

Under this rate,

No. 4151) issued October 26, 1945.!

continental & Western Air,

. amount of approximately $3,541, 000 for operations between

, Janhary 1, 1946 and Mareh U4, 1947, the period for whic!

it here seeks additional mail pay in the amount of er:

mate ly $11, 157, OOO,

Ine, received mail pay in the

January

rate

1, 146.

rate

Serial

Trans-

180 PCA’s petition in terms asks for reconside’ ‘ation,

rehearing and reargumuent with respect to the 60-

cent per ton- mile’ rate fixed for its operations by Order

(Serial N

riod Sane’,

». 2007) issued De comber 16, 1942."

1942 to January 14, 1947,

For the pe

PCA requests aye

proximately $5, 000,000 «mail, pay in aildition to approxi

mately S1,.700,000 already received for this period under

Public Counsel considered

that Order:

Despite its form,

— the petition of: January 14, 1947, as an original petition, 10 |

fix rates on and after June 1, 1942. :

Public Counsel's initial motions proceeded on the ‘orausa

ixing of a new mail rate for a retroactive period

‘ihat the {

for which a fitial mail rate had been in effect

lenved woukl violate acw elléestablished policy of the Board.

By subsequent amendment of his: motion in each proceed-

ing, Public Counsel questioned the B oard’s legal authority

to fix a rate for stich a past period. |

1TWA Mail Rates, 6 C. A.B.

wus. fited at this time for .ench of

64. ALB. 567 (1945); Eastern

United A. L.,

2PCA Mail Rates, 4°. A. B.

wiks inde applicable to the soe

Rates, 4 CLA. Bo OSS CIEE

(s AL B.599 (1943): Delta An

Northwest Air, Vath Rates, 4° A

1A B. 441 (194%).

m5 @ FO).

thre

Is.

sills

sae

hig Four

Mail Rite

This Yas

oS) (1945).

(1942

Little’

ienge anes onthern

ies,

a Wes

4, 6

ones

Phis

SIX

«*

and unchal *

no oserviee rate

ir, Mail Rates,

rami ff

Ra Lay

ser

tern-A

*s Ameriexn A

2A. B. 50D C145

ie,

jee rate

Airways,

Mell Rartes, {.

HOP © 1ags

Mail ligt s,

which

“ this hi

Mail

In our Opinion, the position taken by ¥ ‘ihtic Counsel with

respect to the nature of PCA’s petition is correct, That

petition must be considered as initiating anew proceeding,

rather than cas a ceneaentaos of the proceeding whieh res

sulted inthe opinion and order of December 16, 1942. PC A

relies onthe following language in that opinion, ids giv ing

ita right to reconsideration upon. petition filed January

14, 1947, more than four vears after that order and opinion

were issued : ar . 2.

6 ee eedinny we shall fix rates herein to hecome

efetive June 1, 1942, with the understanding that upon

respondent’s. request filed pursuant to rule 8 of the Rules

-of Practice, they will be subject to- reconsideration. from -

_and after that date.’’ (p. 22) But Rule 8, referred

Isl to in the opinion specifically prov ided that a petition

for rehearing, reargument, or reconsiderdtion was

required to be filed within fifteen days of the order sought

to he vaeated or modified. }

PCA contends. that applicability of the 15- day limitation

could not have been intended; that if applicable, the lan-

vuage accomplished nothing, since it conferred no right in.

addition to what PCA would have liad in any event under

Rute &. This analysis fails to note the. very substantial .

right which the Janguage in fact conferred on PCA, In

June, 1942, cirenmstances affecting the commercial air

transport industry, and arising out of military requjre-

ments, caused the Board to adopt measures and follow pro-

cedures designed’ to afford the carriers partial assurance

agen

% Rule 8 of ‘the Rules of ‘bisce issued — 28, 1939, and in effeet De-

eemter 16, Bory provided :

q “Any party ngey? Petition for relies aring, re arg ument or reconsi@eration of any :

final order by freHuthority [Board] in a proveeding, or for further hearing

be fore decision; ww the. Aiithority. [Board]. ;

> * * - .

“Such petition far rehearing, reargument, or reconsideration must be filed

“within fifteen days aftyr sofviee of the order sought tobe vacdited or modified

and shall he served Ds the prtitigner ypon all parties to the proceeding: or

their attorneys Of record.’ A

te ale =:

ag aiist substantial but unpredictable losses incident to en:

‘forced curtailment of commercial operations!

182 * Consistency with the amiouneed procedures of the

Board * requited that POA Ss rate be reconsidered by

the Board upon request therefor within 15 days after issu:

ance of the Board's final rate order, By the language of

the opinion, PCA had an absolute right to reconsideration

of its iat Yate upon request therefor filed within 15 days.

This was a different and substantially ereater right than

that conferred by Rule's to petition for reconskleration, a

request Which might be denied in the proper exercise of the

_Board’s discretion. Since PCA’s right to. reconsides ‘ation

upon petition filed therefor was limited by.the J 15- -day pro-

*2e seindcplias culades iting in the ate opinion of December 16, 942) Was’

begun by order dated October %, 1940, The hearing was-conducted four

“months, prior to Pearl Harbor. In May 1942, the urmed forces took over a

substantial portion of the planes of the domestic carriers, and sévere restric.

tions affecting service patterns of all ‘carriers, including PCA, were, imposed.

In order to protect carriers against unduc losses which might be o¢easioned Wy

these restrictions, we issued two ‘penerdl memoranda to the industry, the: first

on May 22, 1942, and the secdnd on June, 3, 1942. The first memorandanr

proposed that all rates after May 31, 1942, be temporary, .This was. super,

seded :by the second nicmorandum, whic h provided that a any carrier With no.

pending rate ease could file a petition’ Withini-two weeks sfter June 3, 1942,

and such. petition would be considered filed asctef June 1, P42. Should a

petition be filed, it) was proposed ?thet a show’ eause order would issue, after

sufficie nt experience had. been accumulated under the Reg rig ryiee pattern,

proposing a new rate back to the petition date, June Xs to those

carriers, like PCA, who had cases ponding, we stuted a we would proceed

to fix final rates. ‘

The’ proposal under the second inenotandnm might conceivabix have been

unfair to a carrier with a pending cise if insufficient experience under the

new service pattern had been accumulated at the time nal rates were fixed

for if, since any petition. theresfter filed for a uew sate conld only result) in

relief from the date of the petition, and net from Jume 1, 1942. Under these

circumstances per petitionc|l to have ij: tumpordry rate fixed for the period

after June 1, 1942. 2

At the time the December 14, 1942 order was issued we had before: us, by

pattern, We aceordingly proceeded ‘to fix a tinal rate for the period after

June 1, 1942, despite the petition of PCA fora temporary rate. However, to

place PCA in as faverable ya , position as those carriers whieh had ne ense

pending on June t, 142. we pre wided that PCA might have reconsideration ri

the final rate for the period after June 1, 142. upon request filed under Rule

Under this prevision, if. POA shouht beteve that ie experiqnes lpon whieh

the post June 1, 1942 final rate was Aixed lind: not ne quate lv refleet the new

patte rn of Operations, it could, if i! niade Peau ~f ro ah Ww ithgn 15 divs,

have recomside ration of that rate as « / right. ite Wiis. thus ib Ineed nous favor

nhle oa position us the earriers shich:] tatte id te ie Hither pe? radine an June tT, i942,

and who .were given two weeds in Wy hich t peti ifiow for a new futeafter Jenne

1, 2942. a ae :

4 See note 4, supra. ; ‘

; oe

. /

Ch Gos

wee

67 /

vision of Rules, its petition of January 14, 1947/ niust he

construed as initheting a pew proceeding to fix a/rate fora

retroactive speriod, ‘At accordingly raises the same basic

issucs-as does the TWA petition.

Fs a After full consideration of thet-Act, and of its

legislative history,” and of the arguments of Counsel

on the motions, we are of the opinion-that asa matter of

law we do not have the authority. to fix a new rate for an

operation during a period in which a final rate previously

lixed by us was in effect and unchallenged by the initiation .

of amail rate proceeding. wae : ® a

Section 406 of the Act,;which sets forth our mail rate-

making duties and powers contains two provisions which.

are linportant “in determining our authority. The first.

“cmpowers and directs’? as upon our own Initiative or

upon petition-of the Postmaster General ®r an air carrier, :

“to fix and determine fromctime to tine, after notice. and:

shoarife, the fair and reasonable rates of compensation for

the transportation of mail by aireraft."’ The second em-

powers and directs this Board ‘*to make sucli rates ettee-

tive from such date as it shall determine to be proper.’

The respondents in effect contend that the second provi-

sion is a clea and unambiguous grant of authority to fix -

new rates forsany retroactive per iod even though ‘previ-

ously fixed final rates may have been in effect.and may have

‘constituted the basis for .presumably final payment to the

exrrier, and that the statutory language therefore leaves

“Tn ed@sidering the legishitive «his tory we are concernéd not only with the

bills introd neetl in th ues 7 ith Con gress, ; tl Reuston, i. Ry hae and SS, = 50 nnd

S. 3845 (whieh bills were’ ** fund:ments iy the sume,’’ Cong. Ree. Vol. 83, part °

Hp. e725), which became the Civil Aeronautics \e tof 19% 8, but with ik sets

of earlier bills in, the Ist Sessio mn of the 75th Congress, T. -RY old. amd S. 2,

Hientien! bille cove ring economic reeulatiron, and TH. Ro 4652 and Ss, 1760,"

identier ] Aan cove fing safety peguletion. After extensive hearings had been

held oy the earlier bitls. which | yorosed te vest the repuintory poker in the —

Trte rXtrate Corrine re eet om PLISSION o: nd before they eould be brought fo a2 vote,

the later bilis, embodying most of the substantive previsions of the earlier

Hilts. but placing fhe regulatery power-in an ind: pendent -agenev, were sub

Stifted thopefor The hearings on the later hills were devoted largely to the

tesirubtiitwce this change ond-soust. te rend dn commeection with thee history

of the enrlies Dbilis to chtain a cemctete fegislative history of the Civil. Aero

noutices Act of JAR8, :

. ’

ff.

‘ |

68 =

no room forinterpretation and permits no resort to

IS4. the help of legislative history or other aids to con-

struction, But to whatever extent it may be neces-

sary tovestablich ambiguity before properly resorting to

levislative history,’ such ainbiguity is clearly present in

section 406, The langiiage of the first provision is similar

to that usually used in, granting public utility rate-making

powers which are ‘traditionally applicable only to the fu:

ture and fs almost identical to and is copied from the lan-

enage of earlier mail pay ‘acts * which were never given the

retroactive construction contended for by the respondents_

_ herein. , |

The respondents’ .;osition that because of the language

of the second provision, the section must be interpreted as

vesting in the Board authority to reimburse every earrier.

in the industry to the extent to which any such earrier may —

in the past lave realized less than a fair rate of return is-

so substantial a departure from any prior regulatory plan

in any related field that ft clearly raises the question

whether the section was not intended to have a somewhat

narrower meaning. Inquiry into the field of public utility

regulation, into Interstate. Commerce » Commission deci-

sions under closely related statutory enactments, and into. ‘

legislative listéry ® discloses that the Act was never in-

tended:to vest in the Board the retreactive rate-mak-

185) ing power urged by respondents.

Reference, to the. Civil Aéronauties Act of 1938

and to the legislative history which preceded its .eni vet

deg It would be anomalous to close our nil to persuasive evidence of inten

tion on the ground that reasonable men could not differ as to the meaning

of the words .°. .) The meaning to be ascribed to an Act of Congress ean

only be derived from a considered weighing of every relevant aid to construc:s

tion.’? United’ States vy. Dickerson, 310 U.S. 554, 562 (i980).

& See Footnote 15 >. infra. i ete ?

g6er | theré. is’ wise ly na rule of law forBidding resort to expl: in: itory

legis!: itive history wo matter hew clear the words may appear or supertici al

examination. ’? - 1: iTrson v. Northern: Trust Go., et abk.. 317 U.-S: 476, 479

(1943). . Aecord: Church of the Hoty Trinity ve. United- niga 143 3.6:

4$67- (1892); Pde ‘yas and Paeifie Railway Co. vo Inéerstate’ Commerce Commis

sion, 162 UT. S.°187, 2E8 C1886): Boles v. Commissioner of internal Revenne’

67 8. Ct. 1489 (19497). ; Tacs

ene

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DORE wire LS AF Sk ald:

. " 5 a

Vw) pi See FRE

—

favay Re ee CRS

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iss discloses that the a ag reicagnie of, — utility regula” |

nee ae

on ine of the + ongress,'" P rovision ilk the’ roby cer-

“tilieates of public convenience and necessity; regulatory

control over rates, fares, chi irges, and practices in the car-

riage of passengers and property as well as mail; restric-

tions On agreements, inergers,. interlocking relationships, ;

and. acquisitions of control; requirements with respect to

tarifis and niyuerous other traditional utility regulatory -

provisions demonstrate that. fundamentally this Act was: ~-

intended to apply public utility regulatbry Stig er to the

air dine industry. ;

It is firmly established law that a public utility rate de: ils

only with the future. It is not concerned swith the reim-

bursement of past losses nor with the recapture of past

profits which have proved excessive: It offers only an op-

portunity to earn a fair return, and it does not guarante

that such a return will, in fact, be earned. The first sen-

fence of section 406 simply empowers and directs the Board

to fix rates. In no other public utility statute has such lan-

_cnage been construed to contemplate a_ retroactive rate-

taaking authority. | ei

lu the leading case of Galveston Electric Company =.

Cityat Cratii ston, ef al." Justice Brandeis held that a com-

mission is not required to capitalize past losses in the rate

base to he used 1 in fixing av future rate. In the Geor-.

ISG gn Raihtay ease, the utility, alleging a failure to

cari a reasonable return for the past four years un —

der -eOmanission- fixed rates, asked that such deficiency he

reimbursed currently in the new rates or. be meets }

Th F pajecting the east the F eder al Court ay

te nyt hee ‘vin chefore vou is mare or less the “su: al form of hase Tivan re g-

inti noof utilities or ty: ems pert: ition cine eh res the points’ Whit th are com

hon fo ‘all such! types of slecdislution,. Gorell, Hearings before. the louse

lot ratate ane bors yeyne Canpmerce ex Wititlee an IT. R. 93 biN Toth Cong., ore

Sess. YOTL The legislative history ts divenussed hereinafter in this opinion.

HSS TLS, Ne C1922),

@. * * ® ‘. . “es Sa - D- mee

O49 9SF CN Ph hee 19E 2), amrmed- cue. 0. SS. 625 11983):

“@A rate established as reasonable, whether Dy the con.

__pany or by the comméssion, is: not guaranteed by the coin-

Inissioh or the public. ~ Whether it will actually vield more

or Jess than afair return during its continuance is a’ risk

of: the business. We do not deny that it is within the dis-

cretion of the commission to consider the experience of

the immediate past in fixine a just rate for the future, but

we hold’that no legal right pon to have disappointments

"or SUrprises, in results balanced.’

The doctrine Was reaffirmed as recently as the Naturg! |

Gas Pipeline case’ where, in denying the utility's elaitin to”

‘apitalize costs of inaintaining excess capacity during the

oe period of operation, Chief Justice Stone said: :

. But regulatiotr does not insure that the business

shall: ‘produ net revenues, nor does the Constitution re-

quire that.the losses of the business in one vear ‘shall be

restored from future earnings by the device of capitalizing

the losses and adding them to the rate base... . The de-

ficiency may not be ‘thus added to the Fate base, for tlie

obvious reason thit the hazard that’ the property ‘will not

earn a profit remains on thetecompany in the case of a regu.

lated; as well as an miregulated, business?’ ch ‘

Comparable | and related sti itutory enactments and deci-

sions thereunder in the fields of railway and air carrier

mail pay tend additional support-to the conclusion

IS7- . we havt reached: None of these acts * has been held

13 Federal Power Comniission, et al. v. /Natnral pate peigae Co, et al. 3150

U.S. 575, 590° (1942)6 ¢

14 Conversely it is well established that a regulated utility e¢: innot he re quire ]

to give up excess earnings from: past operations. Board of: Utility Commis

stoners, et al. ve New York Telephone Company, 271 U.S. 23, 31, 32. (1926),

Newton v. Consclidated Gas Compingot New Jersey, 258 U. 8. 105 6 (1922).

15 July 28, 1916, e1 261. 39 Stat. 412 (Railw: ay Mail Pay Act of 1916) which

‘provides at-page 429 (See. 5) that:

.° ** The Interstate Commerce Commission is hereby. empowered and direeted

as soon as practicable te fix and determine from time to time the fair and

reasonable rates and compensation for the transportation .of sueh mail’ matter

by railway common carricrs andthe service connected therewith, preseribing

the method or methods hy weight, or space, or both, or otherwise, for aseer

taining such rate or compensation, and to Aublish the same, and orders so

spe RS Ae NBS OP aN a NS On

‘e

Se a. SR STs Gad gains Lg tad

‘ : j ; &

Iii none of the IS mail rate cases under the Railway Mail

Pax Act or the 26 mail rate cases under the Air Mail Net.

of 1935, decided by the Interstate Commerce Commission

* prior to the pussage of the Civil Aeronautics Act of 1938

did! the Commission refix a rate for a period prior

ISS’ to the initiation of the proceeding." -The degree to

which the Interstate. Conunerce Commission -felt

bound. by this limitation is best iMustre afed in the Reilieay

Mail Pay. ease, 44 LC. ('. 676. (1938). “Tn that case

erotip of carriers filed petitions for reexamination of mail

rates, After preliminary investigation, the Commission

broadened the proceeding to include the rates of a much

larger group of railroads.. After inv estigation and hear-

oan 4 “ < 3 .

a ; ; . $e

made and published shall continue in force until changed by the- commission

after due notice and he; — a x

June 12, 1934, “ Atids 4 Stat. O33 (Air Mail Aet of 1934) whieh provides

‘at page 935 (See, oA i ‘that:

“The Tnterstate Conpneree ‘Commigsion is hereby empowered and directed,

after due notice and Ten ring, te fix apd determine by order, as soon as prac.

tienble and from timecto t} nites, . the, fuirsand reasonable rates of ‘compensation

for the transportation of tar ‘mail hw airplane and i service connected

therewith over eaéh nircmadl route, but net in exeess of the rates provided for

in this Art, pres®ribing the met} vod . ar methods-by weight or space. er both,

or otherwise? for ascertaining sugli rates of compensation, and te publish the

J same, which shall continue in: fdree until ehanged by the said Commissivtt

after due notice and hearing.’’

August 14, 1945, «. 530, a9 Stat. 614 (Air Mail Aet of 1935) which provides

at page ole (See, Aye) = : ; os

“1 Subsection (x) of section 6 of stich Act is amended to read as follows:

£8 * See, Ofn ). The Interstate Commerce Commission, is hereby empowered

and Price after notice and bearing, to fix and Cetermine hy orde r, as soon

us practicable ond from time to tie, the fair and ieasonable- rates of com-

pensition within the limits tis of this Act for the tranAportation of air mail

byairplane and the service nneeted therewith over cach airmail ‘route, ana

over each section” thereof Mant a- separate contract, preseribing the

method or methods by weight or spree. or both, oy otherwise, for ascertaining

such rates of compensation, and to publish the same, which, shall eontinue in

force until eb; anee ad hw the aco any rivers Sion after ne notion and hearing, and

so omueh-ot subsection () of section 3° of this Act as is in conflict. with,

this sextion- is hereby repented." "" . J ae :

Ander specifies provisions .of the 1935 Aet which became law on Angust

14, 185 (Soe 8, 4 Stat. 14), the first rates fixed thereunder eonld he

retroactively fined ascof Mareh 1. 1935, but this type of retrosetivity under

weeitiv strtuitory authority is.met here invelwed, °7 ;

See also “Rarhw: is Mail Pay, 16571. CC. 774-1930).

LMS} the Com Inission found the 1 rates not fair and. reason-

Sie and ordered a reyiew. But, although it ‘found ,the

rates to be inappropriate. for all the carriers duriiig the

period under review, it made the higher rates effective

from the date of the petition only for those carriers whiel:

had petitioned. for the other carriers, the adjustment was

made ouly from the date the proceeding was broadened to’

include them. Such a holding is consistent only with the-

conclusion that the Railway Mail Pay Act of 1916 did not

authorize a rate to be-fixed prior to the date on wien arate

proceeding was initiatefor a carrier. The Act directed

the Connnission to fix fair and reasonable rates, and it

found the rates for the non-petitioning carriers to be not

fair and reasonable prior to the date on which they were’

included in the proceeding, Under ‘these circumstances, it

would have been highky arbitr ary for the C ommission, wa

it been empowered ta fix rates for the period involved,

have refused to make such rates effective during this, pe-

riod for which it had found previously. fixed rates to be not. 1

fair and reasonable. Se ps

Isso Tan vrew of the similarity between the first provi-

sion of section 406 and the language of these earher

vets, the consistent constructions of those aets by the Inter-

state Commerce Commission is highly’ isignificant in inter-

preting section 406 and raises a: strong presumption

against the existence of any such retréactive power as is

claimed by. the respondents herein.’’* Supporting this in-

A si suche kone is the fact that there is not one word in all,

: 1S c nited States Steam Navigation Co. Vv. Cunard Stea nship Coe.; Ltad., ef al.

284 U.S. 474, 48Q 481 61982): A point tas heen minde by the earriers in

-argoment that the Roilway Mail Pay Act of 1916 and the Air Mail Acts of

T9834 -and 1935 contain the following. language wot found in section 406

“Go. . Orders so made and -published shall eontivne in ferge until etiam get by

the commission’nfter dne notice and hearing ’’ and that, therefore, the eon

struction of these cartier acts is not controlling sin determing retronetive

power under seetion 406, We note thet ao similar provision with respect tote

orders is contaitied in seetion P05 (a) of the Civil Aeronoaties Aet af Laas

- Tn our opinion such a provision dees ne more than state an obvious. faet with

regurd ‘toe the ordars of an administrative ayeneyv, pamely, that oxeept whore

otherwise. Limited they Continue in effeet nntil anodified by further order

ef the ayeney. That sneha provision. is noWdeterminatiow “with respect

the refreetive: purse of og pte moking bad wis settled in. fhe Mew Yer!

Cs ntral Cine, infra, ’

Peo le Pw tau eae

rae.

Sy ey” .y

«ent EE

i ea

Bhat RD swat Dial Sake ony

a Sree a eo

mney

Free oe

the legislative history of thre ¢ ‘wil Aéronauties Aet of 1938

to indicate an intention or understanding thatthe Civil

Acronautics Act contemplated a retrodictive* rate-making

authority such as is contended for by respondents.” There

ix no inidi¢ation that 'e authority of the Board was to be

wreator, with respect” to the periods for. which mail rates

ited be tixed, than that. which Was exercised by.’the Inter:

state C ommnerée! Counnission under the. Railway Mail P ay

Act of 1916 and the prior Air Mail Acts.”

=o urthermore, there is a clear and adequate explanation

of the second: provision of section 406 upon which respon-

dents rely. It was added in order to etfect a.spe-

“190” cifie purpose, and that: purpose, was not to enable tlte

Board to tix retroactive rates, or to exercise any

author itv with respect to the’ periods for: which rates could

he fixed whic ly had not been theretofore exercised by the

Interstate € ommerce’ Commission under the Railway Mail

‘Pay and Air Mail Acts already referred to.

Prior to the decision of the Supreme Conrt inthe iv ue

whether the Interstaté Commerce Commission, under the

Railway Mail Pay Act, could: make its mail rate orders

elfective-prior to the ‘date of the final order and back to

‘the date of the initiation of a mail rate proceeding, This

“doubt: arose out of the fact that the provision conferring

nail rateanaking authority upon the Interstate Commerce

Commission was in traditional publie’ utility rate-making

language-which had theretofore been construed generally

toauthorize the fixing of rates prospec tively from the date

} .

The report of the Aviation Conimisgic n_ set ny uM ler ection’ 4 of the

“Air Mail Act of 1934, whieh was largely responsible for the consideration of

the tegislationawhich evoentdated in the Civil Acronauties Act ‘of 1938, recom-

rep te that ti mail rate- should be adjasted tre a cpropesed commission

tly os — rites far ¢ ary ings mail by rsif are prescribed by the Inter

st te (orm “Commission.” Report of BPederal Aviation Conmmnission, T4th

Cone, Ist Re. sa., Senate Doe. No. 75, Panuary SO, 1905. p, G4. _*

“" United States \. ‘New York Central Railroad mpany, 278 tT. .&. 4°75

- (18905, The eourt Ny re scids ** We assume thst while the railroads perform

— 4 service aad uyeapt pay without protest they get me. ground for stibsesguent

cmp taint. "But the fling of an vapplicatton expresses a present dis

<etisfaction jand & demand foro more. * * " Tf the elsim of the railroads

s just they ishenld be paid from the moment the. applieation is filed.’

York Central case there ‘existed considerable doubt as to,

Me : { : i re 9 2 f eo:

ora utility coniinission’ s final deci$ion. In the New York’.

( ‘eutral case, the Supreme Court found that the « ‘Ongres

" N i intemled that the Interstate C ommerce -Comniission

mcr ale fix mii] rates effeetive prior. to the date of final de-

—eesion and’ back Yorthe date of initiation of proceedings. In

ye ine bingthis’ \lecision, the Supreme C ourt found that Con-

tevess: had ‘utilized the power of eminent doinain in requir-

ing ‘ull railroads to” éarry niail under the Railway Mail Pay

“Act of 1916. The Court forfnd that the ¢ ‘arriers were con.

" Stitutionay entitled to fair-and reasonable compensation

from the date.on which they had-instituted. a proceeding;

that unless the ¢C‘onmission had. authority to make {ts rate ae

orders effecdiy ¢ back to thet dateéno provision would be

nit ve tor certain constitutional rights of the ¢: urriers. °°

It will be noted thateconsiderable, similarity « har-

11 AY acterizes the language in. Section 5 of the Railway

Mail Pay Avt of L906 and Section Ga and 5 of the:

A aad Act of 1934 and the Aimail Act of 1935, respec-

tively.. One might have assumed, therefore, that the prin-

viples ‘applied in the New ork Central ease would be_

: inade applicable to the interpretation of the Air mail Acts’

of 19% and 1935.. Differences, however, exist/to sothe de-

ereeas to the extent to which ajr carriers, as/distinguished

from the railroads, could. be. obliged Gadet these “Acts to

erry the mait These differences led.to a divergence gf

Views. among “the ‘members of fhe. Interstate Wommeree

a ee ‘ow the question as to whether the Airmail Act

wave them authority similar to that contained i in the Rail-

wi ny Mail Pay Acts to fix - rates that. could be made retro: :

tive to the date of filing a petition.

Vision mei wis hi dSa substantial réliance upon the New

, ark Ceontral Crise, that th

oT Mike its mad. rate orders effective. prior to the decision

date aun hack te the date.of commencement of, proceedings.

(:h); atrin an Mahafie diese — ‘in part on | the xrou nd. that

“wae 4: « _€. 166. (19@6).. ~

Commission haved authority fo

nan thy aes te te RUS ay

SON Sine Ue

yee een. at ae

¥ = - SSSR ok a i ys a

CEPOELRR aE ERC ERO AN Rt EO Sage

tat Ben be PNG TS oh ese nate ONT APN

PRS eee eat tae

‘

Bip a REPRE a6 A

ae)

es al SE

ioe 9

7 -

° oe em

tie New York Contd eye was based on eminent ‘dotuain 7

aud constitutional requirements ful Was uo sound, author

ity ucla, the Air Mail Act of 195 ‘On Ph eal to- the full

Commission, thy decision of Divis ision’ 3 oW sustained, ‘i

Commissioners. Lee — Mahatlie dissented,

ae C ‘ommnis-

bat they pitted: out. in ehels opinion that the. iy oe Vork

Central case Was not necessarily a governing pree edent for

the C omission ’s action.

—_

_—

which was issued after enactment of the Civil Acronautics

Act of 1! 38, Thus, during the entire period during which

“the Civil Ae ‘ronauti¢s, Act of 1938 was under consideration

by C ONRTeSS, a difference.in views over the meaning of cer-

att language in the Air Mail Acts continued. Since sub-

: ne idegitic: al language - was being considered for in-

clusion in what later became see tion. 406 of the Civil Aero-

juautics Act, clarification of Céngressional intent was ad-_

\visable. To- aceomplish this purpose, the last dane of

section 406(a) (1) was added.”

Colonel Gorrell * explained the, Verw York ‘Central “case”

to House and; Senate € ‘ommittes * ‘and cone luded ; i

3 pea

Raa aby | my

\s2 Air Mail. Con vensation, 209 BE, &, “oe (1937). TY. °

. 42 ee

; bare ore eS me ike sue h rites: a de from such dite as it Shall deter-

rsiple to be proper.” &

24 ( ‘olonel Corre Hi, at that time }?’ reside nt aft the i Air LY Ansport Assoc ‘tation,

- Was oye Jf the principal witnesses at the hearitigs in both Tous af Congress. ‘

Commissioner Mahaffie continued to dissent on

this point) in sgx. separate. proceedings, the last of </

*The enrriers have contende ad that-we ean: give na conside mn to the .

test imony of witnesses at the hearings: before Congressional Committees con®

sidering the bills which whtims ttely srvesulted in the’ Civil Aeronautics Act of

1938. .On this point we $nd that the‘use of committee he: arings as aids in

legislative construction ‘has long been accepted as, proper? In She last term

of the Supreme Court such use’ was made of le wrislativ ve he arings in at. len

seven cases: United Sta#es vy. “Ogitvie HWardware Company, Ine., 67 S.Ct. 997

£1947); Rice, ef alo. Santa Fe Elevator Corporatidn, et-al., 6778, Ct. 1146

(1947); United Brotherhood af Carpenters and Joiners of “America v. United”

States, 67 S: Ct. 775 (1947).; United States v. Hoy, 67 S..Cr, 1004 (1947) ;

*Levinsen vy. Spector Motor Service, 67'S. Ct. 931 (1947); United States, et al.

¥. Seatrain Lines, Ine., 67 8. Prag (1947); “American, Stevedores, Ing.

" Parello, et al., 67 S. C(t. 847 (1943 eas . ane

- (Karhier aeceptanee of the sme te izile is found in: Church of. the Holy

Laeger es u nited States, supra: United States v. MeGowan, et al, 302 T. 8

eo TOSS): Brooklyn “Bank v. O'Neil, -324-U) S. 697,700 Seige Oregon*

Washington hts tilrond & Navigation ¢ Beer 't. MeGinn, 258 U.S, 409 (1922)

C hited States ve Rehwakd, et al., AAR. (2d) 663° (8, De Cnlif, 19 XO),

nite Pete: i ee

os. there ig no substantial doubt but that the Comins.

‘sion is empowered: to put arate order jn effect as of the

dates when the Comtuission has been formally ad

4193.) vised an unjust rate then and there existed.’ "+

-Ile later suggested | the new language of section

» 406, 1 i.e,“ .., and to make such rites effectiy e trom such

date as it shall determine to be proper,’ 2? and stated tliat

by this change ‘‘the present authority of the | dnterstate

“Comnierce} Commission to fix appropriately the’ effective

‘date of its .rate decisions is likewise specifically pre- &

~ served’? =" 3 ;

— Phere does not appear any other cotnment on or informa. —

tion coneermig this language i in the entire legis

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