# Transcript of Record — Transcontinental & Western Air, Inc. v. Civil Aeronautics Board > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386406_0127%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Transcript of Record - **Published:** January 1, 1949 - **Citation:** 336 U.S. 601 ## Text ce eee os Rarey To . LIBRARY: a ‘BUPREMG COURT.U.S > | Supreme Court of the United States, : OovonER, TERM, 1948 Seer No, 387° eon tise 2 s "TRANSCONTINENTAL & WESTERN AIR, INC, oo . cot a me dee ee C Ysreoe Bare sees PRS CIVIL ce See BOARD’. aS Petey OMY ek & writ OF eajeraeetinhiioy UNITED srat&s court oF APPEALS i Wee wa bier” peccrttl pol anata ZS . o i : i = Fd i _" PETITION FOR CERTIORARI FILED OCTOBER 3, 1st 1948... “CARTIORARI GRANTED DECEMBER 6, 1048 foge OE y . pee Ss ; : * SSPE ian voter eee | : SINDEX TOSOLN NT AP PENDIN. ~e - 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 . 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 ’ \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 6 > 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, Po *." 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, nee . e = . & - E . . 2 e : . f . 7 f : 9 ae : we “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 ¢, j« 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: (‘ommission expires March 30, 1949 | i. M8 ef tet 7 ; rar | Fe ‘ ma cd @ . S . . . aie, : ¢ . Q” NGS ay or aes : ‘ * > y er i] _ mc ae : « ~ * s x ? a ta : . é L . ? 4 r ’ e re . Bs ee ° " a 5 y ® . pe tee = . ae - 1» Received Docket~ Section Mar 14 331° PM 4%. * o * = eT. * o* a : * af _* 2 “@ _* , . ie * ’ } ees A ‘ivil’ Neronanities Board } : 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. i 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 os 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, y ~ > 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 ¢ : “ —_ $ , F S50 o 12 a 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- a 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. . ~ e 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: 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). a 4 IS 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 nh 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: 1 ‘The - costs attributable to the aecide nts pe the losses eitahead through the curtailment of service im- > + 7 . IIIS SS ss ss - gs ¥ 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 c a 99 {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. - 23 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- 2 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 l 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 | eo ef 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. i > 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). es _ y 31 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 / o ca 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 34 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 Oo ~ ‘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 - 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 ° ° é | 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. | ; r a 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 44 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- i 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 r 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 * 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 . - 4 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. * 3 C2 e . : » 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- . * a . 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 8 2 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 r] aed | eh ita EES 5 > 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. e ! Airlines Corporatton, Lcnstaatier referred to as PCA, in- - (4 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%). ee Mail Rates, © ¢%. A. m5 @ FO). thre A Is. sills sae hig Four Mail Rite This Yas oS) (1945). (1942 Little’ ienge anes onthern ies, a Wes 4, 6 ones Phis ie SIX «* ts and unchal * no oserviee rate ir, Mail Rates, t rami ff Ra Lay ¢ ser A. tern-A *s Ameriexn A 2A. B. 50D C145 RB . ie, jee rate Airways, Mell Rartes, {. HOP © 1ags Mail ligt s, which “ this hi Mail 69 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 © stipulation, the recerd of four’ months* operations under the new war service 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 vA . / Ch Gos . a a wee s 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 ee ene ee ee 4 : DORE wire LS AF Sk ald: . " 5 a Vw) pi See FRE — favay Re ee CRS Pen Sig Rea Co Peal Poa YRS RAR De Ragin eee 69 ea." i ~ iss discloses that the a ag reicagnie of, — utility regula” | nee ae 10 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 Il! Coorgtac Railway and Pewer Company et al. © Railroml Conmniussiotte: 278 O49 9SF CN Ph hee 19E 2), amrmed- cue. 0. SS. 625 11983): a [a “@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: : 0 . 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 Z spe RS Ae NBS OP aN a NS On ‘e % 4 Se a. SR STs Gad gains Lg tad ‘ : j ; & 1 to confer av retroactive amail rate-fixing © authority.’ 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- y oan 4 “ service but sufficient, together with all other revenues, to 4 — it to achieve objectives of the Act With respect to * ‘transportation generally, “To whatever extent 197... i gidoatiy? * may be authorized by the Act, therefore, it must be ifcluded in’a mail rate fixed vind deter- * inined in accordance with the srovisions -of “the Aet. . It is diffieult to: understand: by” what ‘logic it can be argued that — the Board ‘ean fix a retroactive rate for a past feriod for which.it could not otherWise do so, simply because,. in ar- ) ‘iving at thé amount of the-rate, it is directed to consider Ys not ordinarily considered by other rate- making agencies. | It is, nea, however, that such... retroactins authority is % essential to carry out the purposes of the Aet.._With this 4 contention we cannot agree. Far from being esser tal, we Jy believe that such ,retroactive, authority would be definitely — harmful in"the administration of éhis Act. The effect of ; Such retxoactive rate:making would be to change radically the’fundamental principles upon w hich we believe the Act — is based. * ? 3 ‘ : The respondents ji in effect urge a cost: plus subsidy plan, » Inplace of a traditional prospective rate-making technique. , Under the latter plan there Is a twofold pressure to econ- omy und efficiency caused by the necessity of living within - a known rate and by.the prospect of being able to retain — > earnings which may be effected under the rate. Adminis- * tration of the mail pay provisions of the Act through the - > “instrumentality of a prospective rate is designed totester 3 ‘a-sound air transport system in the interests of the travel- _ ‘ing public, the past office, and the national defense while ~ retaining in .this industry competitive | characteristics which, under our economy, are deemed pureisas ward td — ductive of publie benefit.- Consistent with the principles of the Act, in fixiniew rate for the future we allow a rate designed. to pay the carrier 3 ’ ot LT ee a ° SU. ’ - a reasohable return upon its investment ‘for issue the Visks incidental to operation. Initially, if the ear 198 rier belie ‘Ng's the rate fixed’ by Us to Ive unreasonable, it has the opportunity to seék review of our action. Tiven though the rate be’ deemed initially reasonable, events may, of course, take an unhappy turn and this may result in‘low earnings or even. in losses. despite. the eflici- ency of_the ¢ ‘arrier’s nianagement. But in that‘event, the arrier “has tlre opportunity to petition Contrariwise the’ suggestion Gf the parties to this cae is. that we assume the responsibility of making up losses -in-. curred over a ‘period of time during which Inanagement aa either did not beliey e the rate to be an unreasonable. one or, “& “if.it held such a> position, did not see fit to inform us of that fact. .On its face the s suggestion asks us substantially to put all so-called. efficient ‘ianagenients on va cost-plus basis. his would obviously be a reversal of past poRei ies of-rate fixing for it would have a natural corollary—the corollary that was: freely admitted i in this case—that earn- ines of air carriers in excess of a fair and reasonable rate _ would be. subject to recapture, Such a policy would tend to sap management of those very incentives that in a é ivate economy are essential if we would strive for efficiency To avoid-the cost-plus operatjon of the doctrine now er 3 vaneed, TWA suggests that our power to fix retroactive. rates is a diserttionary one and should only he exercised under “untsualcircumstanees,’’ but such a limitation when examined is either ilusery, er impossible of applic: ition. » Any-cineumstances that had a depressive effect on earnings _ and that were bevond the control. of management F m4 . . “ye s s 4 199) would seem to come within the classification of ‘un- usual.’ The result would thus be thatethe standard e e ee = t ro it . v . ? . ° : : As , . . s ees amines Rdg bn Rea . in fact Would become one of placing elicient nmanagement on a cost-phuis basis. “The other alterngtive would give us a discretion lath to give and take that would be arbitrary and provoci ative of endless litigation, both before us and tle courts. eter . Ee There are further: difficulties with thre: suggested con- struction of the statute. Thesdiser ‘etion of the Board could he appealed to at any time, possibly. limited hy the doctrine of laches, to make up for past losses. Similarly, the Board could at any time exercise its discretion. to recoup past wainis. Finanéial statements’ of air carriers | would thus sever become firm. ‘Similarly, the Post Oftice’s ; 2ecounts would be subjected to the same uncertainties, and sinilar infinmities would, surround the preparation of budgets for the airmail postal service,, Chaos and confusion stretching hack to 1938 would be the result, In. ‘support of their contention as to inusual circum- _ stances, respondents rely chiefly on the Western case,*” but on careful analysis of the facts in that case we can find no support therein for respondents’ position. In that case the carrier had a mail rate applicable to two old routes. It started service on a new route and six months later’ peti- tioned for a system rate. In determining what additional - compensation was required because of the opers 200 tions on the new route, we rev icwed the Peay of the entire system from the date of inauguration of the new rente and found that no jnerease in*the majl com- pensation already payable wgs required because of the ~ new route. Obviously when a new operation is commenced. the question of mail compensation for that operation from 3 To interpret the statutory language ‘smake such rates. effective from sueh date as it shall detgrmine to be proper’! as granting the Proad diseretion here urged raised formidable administrative and constitutional difficulties, There is another construction whieh asoids these diflie ‘ujtiey und yxtt gives heaning taythe language, that is, that i empowers and directs us to make an order effectite from the date we determine te be leaally, proper. ‘So in’ the case wf a new route for whieh ne mail rate aas previeusiv in effect, we are given Huthoerity te make the rate effective from .the date operations edm menced thereon, as is comstitapionsdly hOCOSSE, even though mail rate pro ceedings fra net initiated until later, “See note 32, infra? . I Western Air Lin s, Mail Rates, 4 A.B. 441 (1943). \ setae Se eT ty Oe a ye ee, -? . me ee Siaieai A iS eiase Libya el ected Neos . meres oy RB. S659, Toth Cong... fd. Sess, . PP. *1. a3), . 2 : ® . a tory of the Net. aD rior ucts had beer relatively tempsrary Tue asures, Thee ‘il. gerohattics Agt was, intexded_as pernawgent long-range legislation.- Its: all- important ob- jective was to afford the air traasport industry relief and “protection i the nature: of thint afforded public utilities.** What. was désired was protection against uncontrolled competition by nonqnail operators, and against” cut-throat colip etition in freight and WitSsel rer fares by other trails, opel ators.” What was sought was sufficient stability un- the industry to attract the private ‘apital n necessary for its developuiciit. It was clearly-recognized that-a “‘rate structure’? founded on tr adifional ‘ate-making prjnciples Was- necessary as one adjunet ‘of thy sprotection inherent in common ¢arrier and utility regulation? YO. Al though there was ‘some discussion of direet sub- “sidy, the proposal was clearly rejected: in favex of the plan whereby the tieeds of commerce and the national defense were merely, additional elements to be considered, ares The Air Mi } Actef 193th. was, designed as a temporary sekcaks: _ frans of its brovisions are ambiguous: others definitely contradictory ; and still others are not: susceptible, of © ration] understanding. "4 ‘Senator MeC; arrap,> “Cong. Ree. 6634 (May 11, 1938)" (Emphasis supplied.) ‘*Indeed,. the * pred. Aet itse if recognized its te m porary nature by providing for the appoint- ing all phases of aviation god the relation of the United Stages thereto. (Empbisis supplied.) Gortell, Mearinas, before Housé Committee on Inter: state and Foreign Commerce on HW. RB. 5234 ape HW. ai 46: 02,7! oth Cong., Ist sess., Pp. Ge, . . ; tS The extended’ diseussion @f certificates of publie convenience od neces: sity, ‘regulation of passenger: fares to prevent cutthroat competition protec: tion of raghes, safety and labor regulations, control of accounts, mergers, interlocking ge iationships, ete., cle arly indicate that it was desired ‘to replace the emergency measures of the - Air Mail Act 6f 1934 and the 1935 amendment | with legislation involving permanent publie utility regulation pof_ airlines. no" Nolte 27, supra, pp. 51-64, 70, 310, 377, 4678" Note 28, » Supra, Dv: 27, 30, 39, 40, 46-8, 66, 68-9,°74, 765 1°3, 164, 167 Hd, and 280," * Note 28, supra, pp. 69, 74, 81-2, 164. ° ictal” s i gett ate he fore subeotam tlee ie Senate Com mi thee “an Interstate Com- . 4. Note 27, spray pp. 438, 496 7: Oe SO & fe ‘s @ = ‘ der] public utility type regulation to-make it possible for— ’ 4 2 aa 3 , ‘% * ‘\ Xe, / wid a - ment of ‘a Federal Aviation Commission te recommend ‘a’ brog policy eover- |” , 99: » p. 446. +. 6 ‘ oF” dication whatever of any”: intention -to. change. the tradi- tional rate-making provedure of the 19354 Act The prin cipal substantive ghanges apparently” “sought - -in the mail rate provisions of the Act were ; 1 removal of the. Prov iSions. for. disregard .of nen- “mail losses atid those proyisigns - -fix- lng maxbntin limits to mail rates and relating’ total mail _—pay to total postal revenues from air ‘mails*. | There is not one indication i in all'the legish itive history or in the Act itself that a guarantee of carriers~against - ¥ losses under rates found fair and -reasondable by tra- 205 "+ ditional public ytility rate-making . procedures were ~intended. or ‘thought | necessary, to accémplish the de- "-velopmental purposes of the Act. There i is 40° doubt that. ‘the Congress could have prov ided a statute which embodied such a guarantee, but it is clear that-it did not, and did not — . intend to do. so. ‘ vs Se ~ Our conélusion makes the date of filing ot a rate petition. in many cases 6f great importance. But fhis is. not a mere . __ - a - 42 Ft edeaver, the-bill does not provide’a subsidy in the gqnse mail subsidies -were provided under the old s¥ stem of ocean mail contracts! Those contracts set up an arbitrary dole to be paid to the shipping companies solely on the Wasis of mileage sailed, even though virtually*ne dnail was earried. . 7.0 -This “2 dole increased year by year and Bore no necessary yelation te: the mail ser- vice. The present bill makes no such provision . . . Instead,. it leaves the way open so .that*the Commission can apply the most suitable method as the facts warrait, with an effort to adjust the amount of pay to the service ren(fered from: timé-to. time as the public intetest may dietate.’* Gorrell, note 28, supra, at p. 316, and note 27, supra, at p. 468." Mr. Haley, Director of the Bureau of Air Mail, Interstate Comaieeth Com? ‘mission, distinguished the ‘‘direct; subsidy’ duetrine as follows: ‘But the commission does. not do that [add:to an existing mail rate operating losses }.. If that’ were the legislative policy of the Congress” perhaps -it' should be a expressed - in’an act similar to the Maritime® Act, where ‘the. subsidies are specifically provided, Jt is not im thig act. ie owrey supplied.]- There is no,reference to subsidy in this Air Mail Act.’ Note 27, supra, at‘p. 251. Hee ako Note -28, supra, pp, 36, 79, 151, 243, O44, 308, and Note 27, supra, pp. 75, 76, 121, 169, 337-8, 339, 465. 43**The bill now before you. Provides “wht it seems to us the appropriate method of detérmining Compensation, t iq @ method quite. similar to that” . wmlopted in the case of transport: ition of mail by the railroads, and since the a “Commission is to fix other rates, which themselves will have sonie’. effect upon the cost of transportation of mail, it would seem that the same. commission should determine reasonable pay for mail earriage.’’ p. 307.. ‘*The provision is very largely copied from the Railway Mail Pay Act. I refer you to 39 U. a ‘ A. section OAD, * “Gorrell, Noté 27, supri, 44 Note. ie stake pp. 233, 308, 30955 ; es : : coy : sy ; @: aes 4 AD Gorrell, Note 28, supra, Ce worm , “ “ mentioned pr eviously, that case was né2nore than an appli- cation of the principle that where there,is ho rate-in effect arising as a.result of the new operation from the date “nail service begins thereon, irrespective of the date. mail-rate proceedings ‘are initiated, The decision does not require us to make a carrier whele for past losses on its System sim- *- petition date” asystem basis. Consistently therewith, .in determining the peal pay requirements for a new operation, we review over- ments, Tf the total mail compensation is adequiite, we need v the commenicement of proceedings. Tf total mail compen- gp extent to which such inadequacy. ¥ ras attributable to . the new . operation, and we would provide the additional ee weeks after the filing of the earrier’s, petition for a rate en’ a new route, a insiyuration: of service on the new route, | During the 7-week period a pre 4 viously: fixed rate was in effect for the balance of the system. A show eause order later was issued proposing a syvstim rate effective from commencement of HAW Treute operations, and this: rate was later put inte effect as a te tT Le rary rete. In the pending Colonial rate case, Docket Nol 2724. the earrier filed a‘petition for a sy¥stem rate some eight months after commencing oper j tions’on vt new routé, During the S month period a preCiously fiwed fate was a in effect. for the balance: of the system. \ ten porary evstem orate was sed 2 by the- Roard effective from commencement of operations on the earrier's * - new roltte. ‘The proper treatment of the quest jons: “raisg¢] in these ‘cases will f wus. The contertions of respondents appear to rest Gn “ ekg misconception of the Western ease. “As we have | " for a. new route we must consider mail pay requireme ts” ply because a new route Wis placed in ope ration prior to In fixing mail rates it is our general policy to do.sa ona all operating results and determine total mail pay require. net allow ariv additional. compensation for the new service, whether or not the operation of such service may antedate | sation was inadequate for the entire past operation, 209 “linéluding the new operation, we would determine the —— In the pending Northeast case; Dockets, Nos. 1932 and 1890," some four . Bogrd order .was issued proposing a s#istem rate « Meetive. back to the date of - be decided when final rates are fixed therein. - ° -. © “Ja CS Ee ee BN S ie ma. ee et. SE a MR, Ree Ses ay : cal pay nee ceded to compe usate for these wy, service. in the } absence of uw proceeding: putting in igsue the 4: ates On. the 7 balance of thie =¥stem, we do patcislives that we ‘should re- jieljust rates jowmake up for mail pay: inadequacies meident Ope rations other than the new service... — F-(- he prince iple of the Western case could i inno eve apply b PCAs sith: ition, The Wester case applie mT to a situa- ‘ion where | ype ‘ration. Was begun on anew route for cvate had neve. been’ previously fixed. Inthe case o the December 16, 1942 order specifitally fixed r tes: > suspended routes. TWA is likewisé, excluded fyi QUY pos- | sible application of the IW este rn ease by the express terms of the order which fixed the 45-cent rate for its domestic sys- tems. In that order we specifically provided that the. ate Was not to apply? to the international operation, for whieh ve subsequently, Ina separate proceedin&, fixed a temporary raie. This has the effect. of a determination that TWA‘ domestic and international operations areseparate units for r ate: making purposes. Under these circunistane ex there is ne "hi: ‘isis for the. apyilics ition of the Weste ri case, ‘Inw iO Wiseafe? the foregoing, we hold that-we have no powek Me to fix ane W rate for an operation to apply to a period dur” “Stig Which a final rate for that operation was in effect:and not challenged by the initiation of a proceeding looking iowards its-revision. We, therefore, are of the opinion, thet Public Connsel’s motions m these proceedings must be eranted: and that respondents’ petitions. insofar-as they-re- nest. the. isi of mail rates effective pr ior to the date. oie which réspondetits filed their mail rate petitions mimst » he dismissed. Sti. wWNecordingly, Pubhe Counsel’s motions to dismiss pe ouneienke? mail rate’petitions in so far as they re- quest the fixing of mail rates to he effective prior to the - Fling dates of those. petitions are ¢ranted and said petitions are to-that extent dismissed. Mvipropriate orders will be entered. 2 aot . | | : Liindis, Chahanan, Ryvansand Branch, Members of the . Board, concurred in the abové opinion.” Lee, Meenber, filed e the attached dissenting oe. as |S ae per See e gone : oe eral Number F. 1033 ° UNITED STATESXOF AMERICA = “3 ) ) * CIVIL AERON: AUTICS BOARD “WASHINGTON, PD. C. e _Adepted by the Civil Aeranautics: Board at it s office in Washington, D.C. ow the 2nd di: V of De cm ber, M47. | docket” No. 2849 Jn the matter of cotipensation “for the transportation of § —anail by aireratt, the facilities used and useful therefor,- and the services connected therewith of. ~ =... | | Teaskoon th: NEN NTAL & Western Aur, Inc., Pet | Over Routes vhs. Ze 38, 44 and 58. Baek ke | ; : Order Dismissing Petition in Part’ a Public Counsel having« moved to dismiss the: ¢arrier’s -petition: in: the above entitled proceeding insofar as it re- quests the fixing of a niail rate for a period pricr.to March HM, 1947,-the filing date of the petition; oral argument hav- ¢ ing been held thereon; ‘aid the Board upon consideration | — thercofshaviug issued its opinion contéining its conchisions / and decision, whic h cis” attached hereto and made. a part | hereof; Pha . FR a GO DOI EL, Fo a ee lv Is Onper ED, That the petition of Transcontigental & Western Air, Ine. filed Mareh 14, 1947, insofar as it re- quests the fixing 6f a mail rate for a per lod prior ‘fo Mareh 14, 1947, be.and it hereby is dismissed, 5 os by the Civil Acronauties ‘Board: . oe /8/ M. . Mv LLIGAN, (Seal) | s, eretary. : 212 : i Lee, Member, Dissenting: qQ . ‘ bh I disagree with the majority’s fiuding that the Board has io power to’set a retroactive rate. Such a finding is con ‘trary to the long-established poliey of the Board, and is in- cConsistemt with the express provisions of the Civil Aero- nautics Act. The ‘Act contains plain and unambiguous lan euarge as to the Board's. power to establish rates-retroae- tively, and the mi jor ity has cone to considerable length to’ rs re ad into the Act language which is not there and fo place upon ‘the Act a strained interpretation ‘which. is contrary to: previous “Board decisions and which Congress never’ intended., : ' : Section 406(a) of the “Act provides that the Board ‘is empowered and directed ... to, fix and determine... the ‘fair and reasonable rates of compensation «for the trans-: Janguage of subparagraph (a) (2) thereof.”’ portation of mail’... and to niake such rates effective prow such date as it shalt determine to be proper.” There is nothing ambiguous ‘about this kinguage. Jf states simpy that the Board in ‘its discretion may determine; the date aS upon whicli its rate orders shalt become effective. “'T he in: terjiretation of this plain language is not edpend@it upon legal theories; it requires nothing more than a workine knowledge of the English language..-The Board itself o ies recognized and adopted a clear rule of statutory construc- tion in the Unifed-Western Interchange case’ when it said: “Tt is an established principle of statutory. construction that it is not permissible to interpret thé oo unane biguous language of a statute. [citing cases} Althongh the title of Seefion 408 does not refer specifically ’to leases, that’ fact cannot be relied upon to create an otherwise absent ambiguity or to modify the meaning of the unambiguous « 213) This rule of statutory construction is “equally ap- plicable: to fhe instant proceeding i in whieh the mi- jority seeks’ to, “interpret”? Section 406(a). Rok die Ss ; Mm [tis of interest to note that Section luvz(d) of the Act directs the Board in certain’ cases -to“preseribe the lawful bate tor the tratisjiortation of persons and property “there: after’? to be chareed.. Here Congress intended to limit the Board's retroactive power, and it has done so by express cand,unimistakable language wherein rate orders should be prospective only. Again in Section 10Q2Ur) the Board is, viven the power, upon complaint Or Upon, its own initiativ e, to prescribe cae of rates ‘from thie date of filing the complaint or entry of order of inv estigation, or such other dat [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386406_0127%3A1. Public record. Not legal advice.