# Brief for the CAB — 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%3A6 ## Record - **Collection:** Supreme Court brief - **Document type:** Brief for the CAB - **Published:** January 1, 1949 - **Citation:** 336 U.S. 601 ## Text oP De I or ale ® Wee vw a] ek Se x . mee 4 4 con ha chesite aheabtaaiallite ie Rg neni) “ . 7 ee ~ INDEX Opinions below -.-.-.__-- Jurisdiction. _.-._._- EPR eee Pee Question presented..." ~ ee ee ee Statutes involved. . 3:.- ecco. ois ie Air, Mail Compensation, 216 1..C, - 166.7% ....... 54, 66, 67, 69 Air. Mail Compensation, 222 1. €. C. 602. in ot aainate oes a Air Mail Compensation, 2321, C. C. 608___ - 69 alin, Mail Rates for Route No. 33, fer ORE OF 381. 68 Aiaska Airlines, Inc., Mail Rates (C2. A. 33. Order. Serial No. E-1885, decided August 13, 1948__ iis tees 84. * Ait tmrrican-Ariation Mail Rates, 4 c. a. B. 354- 74° “ -All Ames rican Aviation, Mail Raté for, Route No. 49, 3C ; 4. B. 79 (1941). ce net Atiehoma, Aidiiene, Mail tetas, 3A, B. 323 (1912)... 5, 53,78 American Airlines, Tne. ee Rates, 6C. A. a D67 (1945) 5 “American, Steve: lore s, lac., Vv. "orello, 330 U.S. 446. 4 SA 710 Arizena Groceex: Tichioon Ry., 284 U.S. 370, ; pee | Bluefield, Wt rworks & Improvement Co, v.- Public Service So ho aw - attinisson, 262 UU: 8.679. : REE anf Sate we See yor tw o* i B Oo... * It : i Cases- C ‘ontinued P eat of ei Page . Board: of Public tality Commissioners: taly. New York -. - Telephone Company, 271 U8. 230 22. TRS IRS * 36 Braga ff Airways, Ine., Mail Rates, 3 C. AWB. 633 (1942). «| 74 Branfi : Aitways, Ine.. Mari Rates, 4 C. A. Be S88 (19445. 5 Braniff Airways, Ine... Mail Rates (C. A. Bo), Order No. I: 2129, October 28, 1948 _ . ; eS Capital Airlings, Inc. v. Civil Aeronautics Board, C. A. D..C., decided December 6, 1948__- : ce - 68,98 Cartbbean- Atlantic Air Mail Ratgs, 6 C. A.B. 407 (1945). 75 ee ree Airlines, Tne., Mail Rates. 7 C.°A. b. aE Fe psiroals an 7A Challenger Airlines Compan: iy. Temporary Bait Re tite (C, A. B.), Order Seria! No £°560, decided May 21, LOT o.. S4 Chicago and Southern Air Line s, Mail Rates, 4 ©. A. B. 419 (1943) = Sea, Re 81 . Chicago & Southern Air Lines v. Watergnan S.S. Corp., 333. & ee ere | Fockok, ae ae Colonial Airlines, Matl Rates (C. A. B.), Order Sérial No. 1263 (Mar:.4,-1948, and Order Serial No. E- 1340, Apt. t; 1948)_......_- e org eke Continental . oT Lines, Ine., Mail cola td Routes Nos. 29. ° Sok and 48,2.C. A. B, 683... ee ae Continental Air Lines, Ine.. Mail Rate: s for Routes Nos. 29 . and 43,36. AWB. 395 (1942) ) ee eee Enstern Air Lines, Ine., Mail Rates, 6 ©. A: B. 551 (1945)_. © 5 i i Exssair, Tne.,: Temporary Maii Rate, . A. BL 687 (1946). a4 : Federal: Power ees cae v. National Gas bee Lie Co., r 315 US 8. 575 : amas 3h, 36, 9S” | EER Electric eaaaes ge City of. ‘Galve ston, ut at., 258 U.S. 388. ae _ 35,89, 98 Geergia Railwoe ay and Power Com por. yu, a ‘al v. Railroad . & «= Commission? 262 U.S. 625, affirming 278 Fed, 242. _° 35,98 Kendall v. Stafford, 17S N.C. AGI CLOT 9). Ae Sete et on 49 , Mid-Continent Airlines, Ine, Mail Rates, 1C. A. A. 45(1939). 9 83 Mid-Continent Airlines, Inc., Mail Rates, 3 C. A. B. 4645 — (1942) _. . « G4 |. National Airiines, Ine., Mail Rates, 7 C. A. B. 387 (1946). 8&7 National Airlines, Ine., Mail Rates 1c. A. B.), Order Serial ae . No. “E-1271, decided March 5, 1948 ne ae National Airlines, Inc., Temporary Mail Rates (C. A. BO, ; Ofder Nos.‘ E-2237 and 2285, December 11, 1948_ : ie; nae wlan Vv, ¢ onaqiiept d Gas Company of New Jersey, Zon v. O., 3h y Pie ai Airlines, Tue., Mul Rates C. AL Bo, Order Serial No, B+1250, decided February 26,-1948) - ; ste Northwest Atrlines, lne., Mail Wate x 4 C. ALB. SLD | 1943) — fi Pa Th Nae rican why Meher, luc.. Masha Mail Rate x, 6 . a BB GL Iss. None et ~ i . Cases-—Continued Pay ee het me, - Page Pan Am, Airways’ Co. (Del.), Transatlantic Mail Rates, 1 | ee Ba Ts Be Ch oe nes cc 77 Pan Am. Airways Co. (Del.), U. Ss. -~Asores Mail Rates, | C. A.. A. 650. .....-.-----.----------------------}- 77 Pa an American Airways, Inc., Latin-American Mail Rates, 6 C..A..B. 85 (July 17, 1944, Supplemental ‘Opinion) . - . 77 en Mail Pay, 216 I. Si Wk Re cae iweadeenteaia ss 51 Railway Mail Pay, 1441. C. C. 675_--. 0 - 52 Railway Mail Pay, 15.1. C. C. 734__--- ipniee te bill Pe pee Mee: Railway Mai] Pay, 185 I. C. C. 715. .-.---.--.----. - 61 Skidmore v. Swift & Co., 323 U. S. 134.. 2 80 Transcontinental & W eolerss Air, Ine., Mail Rates, 4ClA. -B: 3 SUS oo sae oe nae 74, 76. - Transcontinental & Western Air, The: Mail Rates, 6 C oA. B. MS Sade ce eae Oh - 4, 38 United A. L. Mail Rate ier Route. Ne: 57, 3 Cc. ‘‘ B. 381 i) eee er ss ate : 75 United Air Lines, Inc., Mail Rates, 6C. ry B. 581 (1945) _ 5 United States v. Alabame Southern Rd. Co., 142 U.S. 615. 79 United — v. New. York Central R. Co. 279 U. 8.:73.. 16, 20, 52, 94 Western Air len: Inc., Mail Rates, ia isl of Tentative Findings and Conclusions (C. .A. B.), Order No. E-2333, December 36, 1948... _ QUESTION PRESENTED "Whether the. Board has authority under. the Civil’ Aeronauties Act to fix a new mail rate to be effective during a period in which’a final rate. previously ‘fixed by the Board was in Sffect and . “unchallenged by the ‘initiation of a ‘mail-rate proceeding. : : = oes g ‘ STATUTES INVOLVED ae The statutory provision which is basie to the decision of this case is Section 406. (a) and (b) of the Civil Aeronautics Act of 1938, as amended, ‘ which will be’referred to as the Act. It provides: ~ Sec. 406. (a) The Authority is empow- ered and directed, upon its own initiative ‘or upon petition of the Postmaster General . or an air carrier, (1) to fix and determine '~ from.time to time, afternotice and hearing, the fair and reasonable rates of compensa- tion for the transportation of mail by air- craft, the facilities used and useful there- for, and the services connected therewith (including the transportation of mail by ay air carrier by other means than aircraft whenever such transportation is incidental to the transportation of mail by aireraft or is madé necessary by conditions of emer- gency arising from aireraft operation), by each holder of a certificate authorizing the tr ansportation of mail by. aircraft, and to ) * Act of June: 23, 1938, ¢. 601, 52 Stat. 977. 54 Stat. 1235 (49 U.S.C. 401, ef seg.). We ascot wer | © ‘ eS oy site & “ x “ AD toe ot aha Ere Rep aE aS A AS le wae ,, he puted TRE SS ee OLR IS Re a og SOR See ee ROP woe oe RSPR RM FSi ato ih ROI ls Sa ® . PRR TODOS rhs Dhaest bei Potten ite HOt ees care make such rates effective from such date as.it shall determine to be proper; -(2) to ’ preseribe the method or methods, by aireraft- mile, pound-mile, weight, space, or any com- bination thereof, -or otherwise, ‘for ascer- taining such rates of compensation for each air carrier or class of air carriers; and (3) to publish the same; and the rates so fixed and determined shall be paid by the Post- master General from appropriations for the transportation of mail by aireraft.. _'(b) In fixing and determining fair_and— reasonable rates of compensation ‘under this “ ‘ section, the Authority, eonsidering the condi- . tions peculiar to transportation by aircraft. and to the particular air carrier or class of. air carriers, may fix different rates for dif- - ferent air carriers or classes of air carriers, and different classes of service. In de- ‘termining the rate‘in each case, the Au- thority shall take into ‘consider ation, among . other factors, the condition that such air carriers may hold and operate under cer- tificates authorizing the carriage of mail only’ by providing necessary. and adequate facilities and service for the transportation | of mail; such standards respecting the char- acter and quality of service to be rendered by air carriers as. may be preseribed by or pursuant to law; and the need of each such air earrier for compensation for the transportation of mail sufficient to insure the performance of. such service, and to- gether with all other -revenuie of the. air $22435-—49.-—-2 4 46 rae carrier, to enable sucheoair carrier under honest, economical, and efficient manage- ment, to maintain and continue the develop- ment of air-transportation ‘to® the’ extent and of the character and quality required for the commerce of the United States, the Postal Service, and the national defense. Other. pertinent, provisions of -the:- Act are ‘set... forth in the Appendix, inf ra, p " 100-108. : : - STATEMENT 5 | A proper appraisal of the issue presented by ‘this ‘case - necessitates an understanding of the facts relating to TWA’s mail rates since January 1, 1945.7 Oi that date the Board directed. TWA, and the three other largest domesti¢ air carriers, to show cause why their mail rates should not be reduced from 60 cents to 32 cents per ton-mile of mail carried, On August 13, 1945, with the termination of. the war, the - Board issued an amended statement of tentative. findings and con- | -elusions substituting a.tentative mail rate of 45 cents per ton-mile for the rate of 32 cents pre-- viously proposed. TWA’ raised no dbjection to this latter proposal. Public hearing -was held on September 14, 1945,-at which the data under- lying the Board’s proposals was,submitted for the record. The ease ‘was then submitted to the , Board for decision, : i sccsinblagoatel Western Air, Iné.. Mail Rates, 64". A: BL 595 (October 26, 1945). ged were | . : ie oe seul peers SR iri este 2 ae nat he aetcdnartey iSite ical ein aa ia hal aceite patie ene whee | | v3 2 . =) ' : In its opinion, the Board discussed the changed _cireumstanees resulting from the cessation of the war betweei the date of its original “show cause . © order and its tinal order; it appended: indices of selected opeyating statistics both actual and estimatéd for the future, and exhibits showitig op- erating results and. investme nt _requireme nts, both actual and estimated for the future: it it considercd the ‘similarity of costs and) operating «patterns for the digrde naaps ‘arriers, and suport such evide nce and other fac tors dee ided to continue 1) _ effect uniform “service” rates” for sich: carrie ys: and finally it considered the cost of the mail service, Mae Sat 2 “ * The Board bal decked ¢ two types of mail rates—the “service” mail rate and the “need” mail rate. ‘The “service” rate bears a direct relationship to the cost of the mail serv- ice for which the rate is to be fixed. The “need” rate, on the other- hand, is concerned with the deficiencies.of the car- rier’s nonmail services and thetamount of mail pay needed Yo maintain it in the sound condition contemplated by the Act. Burt and Highsaw, ——, of Rates.in Air Trans- portation (146). T La. L.-Rev. 1, Ng et seq. :. American lirlines, Liw.. Mail Rates. 3 C. A.B. 325, 337-3381 1942) ; | Brauiff . l/r mays LHe, + Mail Rates. 4 ne A. LB. 5SS- ( 1944.) : Northwest Airlines. Lune. Mail Rates. 4C,. A.-B. 515 ( 145 * Although the cases of: the "Big Four” were not consol- -idated. the decisions in all of ghe « ‘uses Were rendered on the’ same date and fixed fMentic: ‘al “service” mail rates for the carriers involved. See alse “A ine rican Nirlines, Tne. Mail Mite a. 6 ¢ - A: i NOT { 1945} . Unite d lir Line ss dine s% Mail I ate rx. OC. A, B. dsl (1945): Kastern Air Lines? luce. Mail Reites 6C, A. i. Dol ( Io), © tt ce 6 In ‘conelusion,- the Board ‘stated as follows — (6 C. A. B. 601-2): In our consideration of the fair ‘and reasonable service mai] rate we have given } weight to the many. uncertain short-run » factors: related to the transitional period as well as*to the extraordinary circum. stances and conditions in the air-transport ‘industry which will materially affect the — -, problems and attending risks which will confront. management in the immediate | future. A successful bridging of the diffi- cult transitional period will, in our opinion, constitute a major step in the attainment by the industry of a healthy, postwar status. Heine, it is not our intention here- eithe .. to indorse or to enunciate any new phi- losophy or long-range principles’ of wen making. Instead, it is our purpose to fix a service mail rate which will be high enough to provide re: asonable s security. against the risks inherent in the dynamie and un- charted transitional ‘period ahead and which at the same time. will, be Jow enough’ to provide a strong competitive incentive for economical. and efficient management. It is our further intention to fix a service ‘mail. rate which over the transitional pe- ~ riod will provide a fair and reasonable. return on the used and useful investment although on the basis of reported results for selected) shert- periods the- rate) may appear either unduly high o» unduly low. % Be . Py § is ‘og & . a : e 4 ; ” : Sy . : ; ‘ - ; ie 4 a 7 e = \ In order that these objectives may be realized and that the mail rate may be kept — at-a level reasonably, in accord with the- dynamic operating conditions which will pre- vail during the ‘present transitional period and provide an adequate margin: of security igainst the uncertainties and risks which rea- iaae may be encountered, we concludé that a mail ‘ate. of 45 cents per mail ton-mile is : required. 7 | | .* * * Sie oe * _ As shown in appendix Ne:-2;. the inclu- “sion of mail revenue at 45 cents) per ton-mile / “results in an estimated operating profit before income® taxes of. approximately $3,459,000 which, after 40 percent Federal income taxes, represents a return of 13.77 percent. of the ~ _total investment required for the entiré com- mon earrier operations. . Pa TWA did not ‘ask the Board to Cone its ‘ order; nor did TWA seek to have such order. re- : viewed in Court pursuant to the provisions of the Act (Section 1006 (a), 49 U.S. C. 646 (a), infra, p. 107). The order became final on October 26, 1945. From that date until March 14, 1947, TWA performed required air carrier service and received presumably final payment therefor at the rate provided in that order. . No action was taken by TWA, the Board, or the Postmaster General prior to. March 14, 1947, to initiate a change in this rate. : a rape Ns On March 14, 1947, TWA. filed a sation’ with ° the Board alleging that its mail rate had not been ret . ; eet fair and reasonable since January 1, 1946, and re- questing the ‘Board to fix a fair and reasonable rate ** from and after January 1, 19467" CR. 8-13). Public Counsel of the Board moved. to. dismiss © ‘ the petition insofar as it requested relief for, the period from January 1, 1946,. to March 14, 1947, when the siete was. filed, on “policy? grounds | (R..13-21). - After TWA filed. an ans\ye rto theirs aa motion, (R. 29 ST}, Public Counsel amended it to’ oe specify the Board’s lack of “author ity’’ to re- vise TW A's mail rate for the period prior to the institution of the proceeding as an additional ground (Ro). Oral argument was hearfor the: : motion (R. B9-60). ‘ \ On December 2, 1947, the Board entered an order “dismissing the petition ‘insofar as it re- “quests the fixing of-a mail. rate fora period: pr hor to March 14, 1947’? cR. 91). The opinion of the Board stated that its action w as : based on its lack of power to grant the relief requested (R. a Member Lee dissented (R. 92-108). aa on On January 30, 1948, TWA applied for review of the Board’s order to the United States Court of Appeals for. the District of Columbia Circuit. The Court of Appeals’ concluded that the Board ~ “has no power to revise mail rates retroactively to- “ a period-in which a final rate previously entered fi by the Board was in effect and unchallenged, anh. on August 2, 1948, affirmed the order of the \ . Board - 111- 115). 4 apa ted ; er eee o SUMMARY OF ARQUMENT > A. | Congress patterned the ( ‘ivil. Aeron: tuties Act upon its previous regulatory eriactme nts in the transportation field, and sought, through tlrat Act, to apply the usual public utility regulator Y prin- ciples to the air-transport industry. hose pro- -. visions of the Act. applicable to the determination of rates for the carriage of mail ‘embody ‘public utility rate-fixing coneepts which preclude the retroactive superimposition of new rates on rates previously, finally established, for which _peti- tioner here contends. | 7 The Congressional directive that the Board, in fixing mail rates, must seck to-enable air ‘carriers “under honest, economical, and efficient manage- ment,. to’ maintam and. continue the development of air transportation to. the extent and of the character and quality :1 required for the commercé of the United’ States, the Postal Service, and the national » defense’’ (Section 406 (by), does not convert the Board’ s primary ‘function of* fixing rates of compensation for the futnre.into a duty to’award amounts-of, compensation for the past. This is clearly shown by the legislative history of ‘the Act’s mail pay provisions. -Moreover, such a directive is not unique ‘to the Civil Aeronautics Act and is fomnds-in substantially identical form, in other legislation governing the transportation. industry whieh undoubtedly ‘embodies, neverthe- is \ P \ \ aR fermanee’” of such service. all become me aning- less if the’ “make effective’? clause relied upon by “the petitioner permits the. Board to) refix a’ rate for a past period during whie h the prior rate fixed by the Board was in effect -and.- unchallenged. | i si The legislative history of the ‘*make effective’ clause puts its meaning beyond: doubt. At the time of the: principal legislative hearings mm con-~ , nection Ww ith the Civil. Aer onautics. Act, the mem- bers of the Interstate Commerce € ommission were li disagreement: as to. “whether the Air Mail Act of 1934, as amended, authori ine ‘d them to inake /thei ‘ir mail rate ‘orders under the Act effective (rete the. date a proceeding was instituted. This division of -opinién, on the Cominissicii - was . earns * pend time, effort, and money to fix future rates if it construed the statute.as requiring it to re- place all such determinations with the results. taken from audits after-carrier experience ceases to be a matter for estimate and becomes a known fact. * rt Saeed: a | sep “ ig wast prstov i eae? G37 " LED. ste? nb bedi hahha REG eb A hla % ods PMI : . Vic Sty tS aoe See Nate A PA, axe bE ES 42 Rieck om © inet . ie PP TR . wale Sis he ae UR a be RY . . = 15: There are, to be sure, . situations in w Mch a rate order is made effective-as of a date prior to- its issuance. The direction of the ‘‘make ef- fective’? clause, for example, requires the Board to fix fair and reasonable amounts of compensa- tion for limited periods back to the institution. of proceedings. But such retroactive orders do not eliminate, the rate-making method as the primary determinant of mail pay because they do not destroy the finality of previous orders, cover only the limited per lod of time necessary to determine a new rate, and are normally accompanied by the determination of a rate for an indefinite period in the future. None of the incongruities envisaged by the peti- tioner have resulted from, or will follow ‘upon, the Board’s refusal to reimpose new rates on pre- viausly fixed final rates. Sudden changes in. conditions caused by groundings, or other ‘“catas-_ trophes”’ are properly taken into account in. fixing rates; neither the Board nor other public-utility “regulatory agencies treat such risks as operating risks but rather as capital risks.. The Board generally fixes a rate of return commensurate with the risks of the industry, ahd it matters not ; at all that a carrier has.a petition on file when disaster strikes. Other changes in conditions whieh affect the adequacy of the return do not happen overnight, and the right of a carrier te petition for an inerease, when circumstances re- -16 quire, is sufficient protection. The petitioner’s suggestion that the Board's view can be brought eé to naught by, a carrier practice of keeping -on file at all times: is négated ee g tective petitions’ by experience which reveals few such protective _ petitions”, possibly because such a device sub- jects the carrier to recapture of excessive profits. Moreover, there is considerable edoubt ‘as to whether a paper filed the day after a rate has been — fixed constitutes .a ‘petition’ within’ the meaning of ‘Section 406 (ay (1). : 4 Pe re D. pro- ) & The Board’s construction of the Act gives rise | to no constitutional difficulties. dn United States . New York CentraleR. Co., 279 U.S. 73, upon oak the petitioner reliés, jthis Court assumed ‘that the. Constitution does not requre that rates be-refixed ‘for periods during: which they stand, without protest by the carrier. Moreover, there is no con? ulsion on the airlines to carry. the ‘mails equivalent to that in the Railw: w Mail“Pay- _ Aet, involved‘in- the New York Central case and upon the basis of which the Court. suggested ‘that unless rates were-made effective as of the date of application for increase, serious consti- tutional questions might he raised: The true measure of the airlines’ constitutional rights under the Civil Aeronautics Act is) the protection afforded public utilities by the Fifth . - ° and ‘Fourteenth Amendments. Like air mail 4 a 17 3 earriers, public. utilities perform repetitive Serv- : iceS at rates normally predetermined, and they 4 are subject to ‘the same type of compulsion te : render service. This ‘ourt has repeatedly held that the Constitution does riot’ guarantee the re- imbursement of losses incurred by public utilities ae ery Ree item aay eiri-c s eat : ‘prior to an application fora rate increase. : ARGUMENT ; THE Boarp Cannor Fix a New Maiz Rare Yo Br ? EFFECTIVE DURING A PERiop IN Wuich «A FINAL Rare Previousity Frixep py THE Boarp Was 1x EFFECT AND UNCHALLENGED BY THE INITIATION oF A MATL-Rate. PROCEEDING | -. Viewed in this perspective; the basic problem in this case and the materials upon the analysis of which depends its resolution, t take on a wholly ‘different color. It is the Board's view thatthe language of the Act and its legislative history deny the power which the petitioner seeks to at- tribute to the Board. It insists, moreover , that . what might be. wholly legitimate contrary read- ings ef statutory language and quite rational con- trary. inferences from Congressional choice of phraseology were the question less basic, become entirely inadmissible. when the question is prop- erly appr aised.’ » This Court has so approached other cases. In een & Southern Air Lines v. Waterman SS. C orp. 833 CL S.103, 110, this Court held that an order of the Civil nage Board was not subject to judicial review notwithstanding the - Court's statement that “it may be conceded that a literal read- ing of § 1006 {of the Civil Aeronautics Act] subjects this order to reexamination by. the Courts. It also appears that . the language was deliberately employed by Congress, al- though nothing indicates that Congress foresaw or intended the consequences aseribed to it iy the decision of the Court below.” Likewise in United States v. New York Central R. (0..279 U.S. 73.979; this Court, in holding that the Interstate — Commerce Commission had power to fix a railway mail rate back to the date of. petition, stated that it was “quite aware thirt minutiae of expression may be found that ‘show C ONZTLSS , to have been thinking of the future.” and that “we put our i sleision not on any specific phrase. but on the reasonable implie ation of an authority to change the rates of pay which existed from the day the applicatien was filed, * * *° ~ > MEER cae De tic hN OT EIS PD SOO Mn ht SSRI ED SRE Rpt Tie att OSG ™ 7 nh ost 2h = * aathinoies séaias, TL ees nes 221 _ That being so, the meaning of Section 406 (a) (1) is to be. gleaned hot frome a mere’ te ‘Xtual analysis of its language but froma proper under- standing of the entire Aet.. its history and its - purposes. In Point A, therefore.swe shall show that Congress, when it enacted the Civil Aero- nauties Act, contemplated a typical rate regu- latory scheme, not. a method for determining com- pensation -for past services. We. shall, in this . part of our argument, also show that the peti- tioner’s interpretation of Section 406 (a) (1) is flatly inconsistent with the statutory scheme and that, that being so, Section 406 (a) (1) cannot be . read as: accomplishing in one phrase ina’ sub- ‘section of a detailed and complicated legislative enactment what Congress studiously aint purpose- fully avoided doing in the Act as a whole. Tn that light, we proceed, in Point B, to analyze | the language of Section 406 (a3 (1). in its context and to ex umine its legislative history to'show that it affords nothing like’the clear mandate whieh would be necessary to upset what is plainly the Congressional purpose. “We shall show, on the contrary, that the legislative history makes crystal —¢lear that. Congress did’ not intend to confer .on the Board the power for which petitioner con-. tends. That the (Board's administrative practice fully supports the conclusion it reached in this ease and produces te Incongrious results will he deinonstrated in Point .€. And, finally, in Point on a* P ; 22 v C D, we shall show that the Board's. view does not - “render the Act vulnerable toa charge af constitu- tional mavaney. ‘A. SECTION 406 OF THE CIVIL AERONAUTICS ACT ESTABLISHES A SYSTEM FOR THE REGULATION OF FUTURE RATES, NOT MACHINERY FOR THE AWARD OF COMPENSATION FOR THE PAST 1. The origins and the language of the Aet show that it establishes a public. utility rate- making pattern.—Causciously modeled _— the Interstate Commerce Act (24 Stat. 379, as amended, 49 U. S..C. 1,: ct’ seq.), the Motor . Carrier Act of 1935 (49 Stat. 543, 49. U3 S.-C. 301, et seq.) and the Air Mail Act of 1934 (48 Stat. 933),° the Civil Aeronauties Act of 1938 provides for comprehensive regulation of the eco- nomic and safety aspects of the air transport industry.’ , Testimony at the hearings on the bills . “which formed the basis for the Act’ was almost unanimous in requestiffg the establishment of a regulatory scheme. that would afford relief and * For a summary of portions of the lejielative history of the Act supporting this conclusion see ‘Rhyne, The Civil “Aeronautics Act Annotated (1939), p. xiil, note f: see also note 11, infra. * The Act as originally enacted conferred certain functidns on tlie. Authority. The functions of the Authority in con- nection with, inter alia, rates for the transportation by air carriers of persons, property, and mail were transferred to the Civil Aeronautics Board by Reorganization Plan No. IV. which took effect June 30. 1940 (34 Stat. 1255.2 5 FL RR. 2421). Accordingly, the term “Board” should be siibstitutes! for “Authority” in all referenc es thereto, > 2 a ate Ayan SONGHAI Fs Sh SN Ot BS! PS, gm! OF aba beain es ca A, ‘ ee OA hk AN Pip Bait ol cobahy ~ ashe ANY CRAPS ae ANE RS UE i, ae . 38 Pe eA He RE hoe mea Cr An See ees IE ry $ ste They ight Mae hs at Vil aA AT AE ROS aid Bh it Lalas Oc Siiade inh RAL AED iD “RR a8 Snare protection aleng the lines customarily accerded: to public utilities. Thus, witnesses pefore the Congressional committees, making frequent refer- ences to legislative controls over railroad, motor’ carriers and even to electric utilities,” advocated the use of certificates of publie convenience and necessity, the regulation of passenger and prop- erty rates to prevent cut-throat competition, the protection of routes, safety regulation, labor regu-_ lation, control of mergers, ete. The President of the Air Transport Association, and acknowl- edged spokesman for the air transport industry, Edgar S..Gorrell, testified that: The bill before you is more or-less the usual form of’ American regulation of ee - * Hearings before the House Committee on Interstate and Foreign Commerce oreH. R. 5234 and H. R. 4652, T5th Cong., » Ist Sess., pp. 39, 46-48, 66,76; Hearings before Subcom- . mittee of Senate Interstate Commerce Committee on S. 2 and 8. 1760, 7th Cong., ist Sess., pp. 493, 310. ° House Hearings, note 8, supra, pp. 26-27, 39, 40, 46-47, 66, 67, 68-74, 167-214; Senate Hearings, note 8; supra, pp- 51-64, 310, 376-377, 467, 493. Aeamore generalized - view Was e@X-_ pressed by A representative of the National Association of Railroad and Utilities Commissioners: “It is the view of our — association that any important public-utility industry re-_ quires regulation in the public interest and will be regulated sooner or later, and that the-full-purpose of regulation can — best be accomplished only by regulation from the beginning _ of the development of the industry” (House Hearings, note 8, supra, p. 168). This witness urged further that losses and wastes from’ open competition could be avoided: “* * * if the Congress shali at this time prov ide for the i haracter of regulation’ which i is now being given to a ‘public utility enterprises.” 1d. at 164. toe 24 utilities or itunaboviaticl audeernbraces the: points which are common. to a such. types 1 of Tegislation. Jt is not surprising, therefore, that the provisions . of the Act bear a striking similarity to the pro- visions of Giher Federal laws. regulating ‘different- parts of the transportation industry " and public utility statutes generally.” iter The petitioner concedes that. the authority granted to the Board to ‘determine and pre- . Fe e . ° ° e ‘ ® Hearings before the House Committee on Interstate and Foreign Commerce on. 1, R. 9738, Tth Cong., 3d Sess.. p: 297. ~ 1 Commissioner E: astman testified (Senate Hearings, note 8, supra, p. 70): “Now, these two bills you have before | you follow the usual pattern of regulatory bills. And vou will find thet much of the language is similar to language which- is now already.ih the law with reference to-vailroads or with reference to motor carriers.” In the same vein, the Presi- . dent of the: Air Transport Associatiot, Edgar 8. ‘Gorrell, testified (JZouse Hearings, note 8, supra, p. 264): “HER. 5234 [an early form of the bill which became the Civil Aero- “nautics Act] is, in many instances, a Chinése copy of Parts Land II | of the Inter state C ommerce Act ].” “In general the new Act followed the regulator Vv pattern of _ the Interstate Commerce Act, particularly Part IL thereof, comprising the Motor Carrier Act’ of 1935. Many provi- “sions were taken over substantially verbatim.” Ballard, Fede Sic dasaeaias of Aviation aces ) 6O ‘Harv; L. Rev. 1230 i 1257, ” then, for -example VeKinney’ 8 ( Tonsolidated Laws’ for New York, Annotated, Book 47 (Public Service Law), Sec- tion 49. Cf. Section 406 (na) and (b) of the Act relating to mail rates (supra, pp. 2-4). and Section 1002 -(d) and (e) ‘relating to rates. for the carriage of Persons and property. — PP. 105-106. ~ e ie, 2° aes Pe \ seribe "Just and reasonable * © © rates” for \y *the carriage of persons and, , property ‘(Sections aN 404 (a) and 1002’ (d)) 1s typical ofa public ‘utility rate-making authority and inconsistent with uny: power to make adjustments retroactively for un- anticipated losses or unexpected excessive profits (Br. 35). It contends,- however, that the Board’s | - power with respect to establishing compensation. - for carrying mail is of quite a different sort. Although Section 406 (a) authorizes the Board to. “fix and determine” “fair .and reasonable ‘ates’? for the carriage of mai, the petitroner as-. serts that the standards, for pe rates are so different from those for determining. - ‘ates for the carriage of persons. and property £ ° : e ; . aM . . ; . 3 as to make inapposite rules for the fixing of 4g e . > oe ‘ oe » 2 typical public-utility rates (Br. 37-46). ; That assertion may be tested. by a“compari ison ; of the. standards made applicable by the Act for s a the fixing of rates for the carriage of persons and property and rates governing mail transportation: a Standards for Fi ring Rates for the Carriage of Per- sons and Property (Sec-: tion 1002 (e)) “(t)} The effect. of such ~~ rates upon the moveinent of traffic; — 3 “(2) ‘The need in the pub- lic interest '* of adequate | and efficient transportation of- persons and property by air - ‘carriers at the lowest cost consistent with the furnish- ing of such service; 6(3) Such standards _ re- specting the character and ec of service to be ren- ered by air carriers as may \be prescribed by or pursuant —tolaw: .“(4) The inherent advan- tages of transportation by aireratt and (5) ‘The need of each air car ed for revenue sufficient ‘to enable\such air carrier under honest, economical, and efficient management, to. provide adequate and efficient — air carrier service. ” 36 C ompa! ‘able Fixing Rates for the riage of . Mail (Section 406 (b)) * (1) No comparable stand- ard. (See note 18 infra, p- 28.) P 9) “The will of each such air carrier for compen- sation * * ¥ sufficient * * * to enable [them] *. * to maintain’ and continuet he development of air transportation to the ex- tent and of the character and quality required for the com- * - merce of the United States, the Postal Service, and the national defense.” . *(3) Such teniendh ¥o- ‘specting the character and quality of service to be ren- duced: by air carriers as may be prescr ibed by or ‘pursuant, to law: 3 (4y “The conditions pe- culiar to transportation. by. aircraft.” (5) “The need of such air \ carrier for compensation’ for the transportation of mail sufficient to insure the per- formance of such service. ~The full text akiestion 406 (b) is-set forth supra, pp. 3-4. ‘Public interest\is defined, in Section 2 of the Act (49 U.S.C. 402), to include— s “(a) The encouragement and development of an air-trans- /portation system properly adgpted to the present and future needs of the foreign and domestic commerce of the U1 ited States, of the Postal Service, and of the national defense. ” Section, 406 (b) has’ an additional standard which is really included within the standard quoted in the text. The’ additional standard is: ‘(Footnote 15 continued on p. 27. S 6 Seep. 27, Ntandards 24 5 4 x M4 tu ry ees = PY > ae x b : a2 4 x ag ‘4 List * “a 5 s * Te ee, Bo “s 3g bed a % ce = wg iY Jag 4 ze Pe “= SF 4 ix Ss s —_ > ; ~ ? 27 This comparison reveals that, with but one possible exception which we shall now_ proceed to discuss, the Act embodi¢s: substantially ‘the | same rate-making method and . the same rate- ‘making standards for determining the. compen- | sation to be received by air carriers for carrying — and ‘property and for carrying mail. ' 2. The developmental aspects: of the Act: “are - 2 consistent with a -public utility _rate-making pattern—The rate-making standards applicable in fixing mail rates differ principally from those typically applied in that the last clause of Section 406 (b) provides that the mail rates fixed by the Board shall be high- enough so that the revenue expected to'be derived therefrom and from all other sources will permit an air carrier to meet ae anticipated costs of operation tinder **honest, economical, and efficient management’’ and to earn a return calculated to enable it to ‘“‘maintain and continue the development of air transporta-. _ tion to. the extent and of the character and quality required for the commerce of the United ‘States, the Postal Service, and the national defense.”’” a under certificates authorizing the carriage of mail only by | -providing necessary, ‘and adequate facilities and service for 7 the transportation cee ©? SS ** These provisions. are substantially. identical tor wr the pro- visions of Section 216 (i) of the Motor Carrier Act of 19@ (49 Stat. 545, 558,49 U.S. C. 316 (1)) applicable'to common carriers by motor yehicle.. Cf. Sharfman, The Interstate - » Commerce Commission, Pt. TV (1937). pp. 214-120. 7 See note 3, eupra, and the authorities.cited therein s . til . $22425—49-~—— 2 . i . | yA “The condition that such air carriers may hold and operate 2g) ee ° | : - This is. the. so- called “subsidy” provision of the — | Act." As will appear, it does not change, the rate-making method fot determining mail pay. ‘The. legislative history of the Act empliasizes “what is plain from the language of the Act, and its. origins, namely, that the mail pay . provision - was. to. be administered by a “‘rate’ * technique and that the needs of the commerce of the United States, the Postal Service, and the national de- fense Were not to be. met by direct subsidies but, rather, that these needs were additional elements. to be” cinside ed. ‘in fixing “fair and re asonable “se VICE - rendered and that subsidies shonid. be “fixing of man rates. rates.which ¢ are only applicable toa single | of the: United States: to confine. air-mail payments to air-) ‘ates? far’ the Carriage of mail. “Although the Feieral Aviation Commission; had: ree ommended that: “Mail rates ‘should be compensatory . for the sensi laloninntppmanettiteneeniads om . 1s "Pie reison why tlie last Clause of Section. 406 (b) is some- times called a “subsidy” provision is that, it- relates to the eustorierthe Lnited States. Since itis no longer the policy * mail: revenues, as Was-true under Section 6 ¢€) of the Air ~ Mail Act of 1934 448 Stat. 933,.936). it is evident that the. “the. vokn higher i dil rates are fixed the higher will be the revenues of the car ane gaat resiilt in lower rev enues caused by a.dec line in namely, the wbility of trafhie to pay, whie ‘hmakes this standard pattic cutarls heneficial to carriers in the fixing of niall rates -amdLresilts in the stand: ard being called a “subsidy” provision. Not withstanding‘ the results obtained, mail compensation: 1s: amermmed through the rate- making process. : pane wie eo Pee ee iers therefrom. With other types of traffic, rate~ wof trafic which will be offered ut the higher rates. | ef. Section 1002-(e) (Ly of the Act, aH Prd, Py. 26). tis.” therarpphic ability of the usual economic limitation on arate, \ 29 - paid separately, " the bills subsequently considered. 7 hy Congress’ atid not sO provide. Thus, the presi- dent of the Air Transport Assoc lation, Kdgar S. 7 Gorrell, testifie d: ‘Phere ‘are only. two ways whereby. the necessary capital can be provided -to ‘this -industry. One is the way isons wheh'. the governments of foreign. lands increas-‘ ingly tend—tlie way of mounting govern- “mental subsidies, whereby public funds are ‘poured without stint into air transport. | The other Way is the traditional American Way, a way Which invites the confidence, of the investing publie by providing a basic. economic charter that promises the Jiope of stability and security, and orderly and “intelligent growthi under wate ‘hful govern: ment supervision, res . It is the second way, the traditional ’ American way, a is here. proposed.” a op ne ye ” Report ofthe Federal Aviation Commission, Sen. Doe. “Nosld (74th Cong., Ist Sess.), pp. 49-51. ‘The Commission's. * recommendation number (3) was st: ated : as follows: “The carriage of mail ‘should be put on a comnierc ‘ial Siac: “with payinents to lines within the’: amount received by the Post Office. Whatever additional sums are for the time being necessary to ‘maintain and’ develop adequate transport ‘services should be allacated specifically to that purpose by. tlie governinent.” | “Wearings beforea subcommittee of the Ne pate € ‘Onvanittes on Luaterstate Commerce on S, 3G59 (7th Cong. 3d Sess. ). p. ob: see also p. 2h. and House IE arings, Wole LO. suped, p.2olo and pp. 1. Hcl. 169, S37-8. 339, $5, 468 and ors Hs arings, note’ S. vu pra, hp.: 16. a9, 11, vt. 2H: 0S, —~ Oo . 30 Early in, the hearings, Commissioner Bastian pointed out: the siniilarity between the problem of fixing mail compensation , for air carriers and fixing railroad rates. He. stated: 3 Whether that [Sections 304. (e) sik 310 (f) of H. R. 5254] is to be regarded as a subsidy or not, [-am ‘not sure. As a matter -of. fact,-it is much like the’ situation with respect to the railroads.. There the most im- portant part of. the service is the freight service * > * /* they have frequently argued to the’ Commission that it is impos- sible for.them to ‘get a fair return. on the passenger ‘business and therefore the freight must carry that load, if theyare to get the fair-return .* ** ." “thé situation: is much thejsame here * *. * {ff it should be the situation that for competitive and other rea- sons the passenger—part of the business: can- not be made to pay its way, then it ‘follows ‘that the companies cannot operate success- fully from a financial point of view unless they get enough. from rarry ing the mail to cover the deficiency on passengers? ass This analogy to rate-making for, the railroads, ~~ which was already embodied in the: bills before . Congress, was emphasized by the spokesman for: ~ thé air-transport industry, Mr. Gorrell: Before leavi ing the stibjec t of mail compen- sation, I want to refer briefly to ‘the question of considerations involved in fixing compen- ' / ” House Hearings, note 8, supra, p. 36. Sas ars aes A Be Sh ea honk OOr SoU cae SAORI a EARS SBI IARC ARSE RESIS Sead aN Shee Tae Ee ca CASED oe Ss de Sy ooh = Sulan Gs pees =fo! a ee ee | Pte eee 24 t SEC RREEGAR G0 PEI hate ea RRR Oe atic! Sas mrt ot ene SNS ang WER IE OPEN . - 31 - sation. “Phe fundamental consideration in fix- Ing mail, passenger; express, and freight rates is, of course, that there should be a return to = the carrier which will. give at enough revenne to keep going under economie management. This consideration is operative with respect to every form of transportation and’ is. in- deed, tle task of the whole question: of rate regulation of any public utility. In a serise, the problem of fixing rates for particular classes of traffic by ar egulatory agenty re- solves itself into determining what share’ of the total return necessary .to the carrier . “+ should be borne by each particular class of traffic. ; on ) “As Commissioner, Eastman pointed out to this committee, such a consideration. has, iv fact, been dealt with in the case of regulat- ing certain, freight rates for the railroads. — _. Thus, in the last, analysis, the problem is to~ determine what the carrier should ultimately receive from all sources and then to allocate the burden among the various classes of. traf- fie, including. the mail, as may be justified i ee public. interest.” | > Nenate MW arings, note 8, supra, p. 458: see also p. 497, Similar statements were made by this witness to the House Committee: “The end in view ts, of course, a reasonable se- \ turn to the carrier, under economical muthagement, U.. S. 370, 387. 'Phus, this Court has , refused to require the capitalization. of past losses in the ‘rate. base for the purpose of fixing future rates,* or the current reimbursement. cut of new rates of deficiencies arising from a failure to earn a reasonable return in past years,” or the capitalization of costs of: maintaining excess - capacity during the early period, of operation.” Through Chief Justice Stone, this. Court has. stated : | sea 5S ae regulation does. not insure that the business shall produce net revé- nues, nor does the Constitution require that the losses of the business in one year shall ‘be restored from future earings ‘by the device of capitalizing -the Josses and adding s Galveston Electrie Com pany. City of Galveston, et al., 258 U.S.388. 0 . o * Georgia Railway and Power Company, etal. vs Railroad } Commission, 262 U.S. 625, affrming 278 Fed. 242 (N.D. Ga.) where the distric€ court stated at’ p. 247: “The claim that the failure to earn a reasonable return, if established, should ‘now be either allowed as capital investment or amortized under this or future rates we cannot allow.. * * * A rate established as reasonable, whether by the company or by the: commission, is not guaranteed by the commission or-the pub- lic.. Whether it will actually yield moré or less than a fairre- _turn during its continuanée is a risk of the business. We do _ not deny that it is within the discretion of the comnrssion to consider the experience of the immediate past in fixing a just rate for the future, but we hold that no legal right exists to have disappointments or surpfises. in results balanced.” * Federal Power Commission, et al. ¥. Natural Gas Pipe- line Co., et al. B15 U. S. 575. them to the rate base * * *. The de- ficiency may not thus be added to the rate - base, for the obvious reason that. the hazard that property will not earn a profit remains on the company in the case of a regulated, as well as an unregulated, business.” , These rules are applicable equally to mail, pas- _senger and property rates under the Act. This . “rate’? pattern was well established for public: . . utilities,: particularly in the transportation . in- - dustry, when the Act was passed ; it is a _pattern that w as fully elucidated before the Congressional committees’ considering regulation of the :air- transport industry; it is a pattern that’ was plainly specified in the Act; and it is a pattern that has been consistently followed by t e Board in its administration - the mail-rate © ’ of the Act. Petitioner’s arguments in shige of the propo- sition that ‘*the Court of Appeals relied-on a false : analogy. to public utility rate. statutes’ (Br. 27-44) are totally irrelevant to the issue. The. Court of Appeals (R. 114), like the Board (R. 67-70),. reasoned (1) that Section 406 was in-. - tentionally cast -in the’ form of a “uspal public - | 87d. at p. 590. - . Conversely, it is well established that a regulated utility cannot be required to give up excess earn- ings from past operations. Board of Public Utility Commis- _ sioners, et al. v. New York Telephone Company, 271-U. S. rovisions 7 z a ge ge Br? ae . 37 utility rate-determination measure”; (2) that rates under such measures were primarily future rates and were final; and (3) therefore, the rates determined under Section 406 we re of such char-. “acter. In res rching its cone ‘Ansion, the Court of; Appeals did not assert the view that carrying ‘mails is a -. or that it was impractical to..adjust mail rates sé pubic utility function” (Br. 29-30), ‘retroactively’? as was true in the case of other public utility rates (Br. 33-37). At most, peti-_ tioner’s arguments are reasons which might have been pr esented | to Congress as to. why ‘Congress might have legislated differently ‘than it did. They furnish no basis, however, , for construing the Act. . ; Likewise, it is ‘of {ittle signifieshes that Con- j eress has the power to increase mail rates “retro-- _ actively.” (Br. 13-16). That may -be conceded ° (R. 86). The question is not what Congress might have done but what it did. Of this the Act and its legislative history’ leave no..doubt; Congress established a public utility rate-making pattern for the determination .of compensation for carryinganail by air. Indeed, the failure of Congress to provide for retroactivity in the Act _ in the same: clear tertns that it did in the statutes cited by TWA (Br. 13-16), and others (note 34, infra), iS convincing evidence that it: had no In-. tention ef doing so. 4. Acceptance of petitioner's contention woud haart the congressional purpose —The facts of this very case/ ‘serve to highlight the dichotomy between the ubli¢ utility regulatory pattern dis- -~-eerned by the Board and the court below in the Act and Ahe petitioner’s view of the mail rate’ provisi lytis as authorizing compensation awards. In the course of the pr oceeding which TWA now seeks to nullify, the Board, as stated above, p. prepared and introduced into the record of she proceeding indicés of selected operé ating statistics for the future, and estimates of operating results, and ‘investment requirements for ‘the future. - On. the basis of such materials and witha (6 C. A: B. : sa i ce . | : z | | purpose to fix a service mail mite which will be. high enough to provide reasonable security against the risks inherent - in: the dynamie and uncharted transitional period: ahéad and which at the same time will be low enough to provide x strong competitive incentive for economical and _ efficient management,; . Petes ih man the Board concluded “that a mail rate of 45 cents per ton-milé is required.”* Ibid. Although its decision applies in part to a past per lod,” nothing could be plainer than that -the Board Was primarily concerned with the future effect of its order, which it considered to he final and 9 ” The Board's order, issued on Oc ‘tober 26, 1945, Was made effective as of Janu: ry 1, 1945,-the-: date; 2 show cnuse order’ Was issued proposing to reduce TWA’S vr ate from 60 to 32 cents, - This was in accordane avith the Board's usual prac- tice. See infra, 'p: So. OT er as Sa Muar ott th ee a Lae 57 * # PERS $ v4 eH Tas RpRRE EE Shs ER OL IEE Oats ae OI BER PINTO ee Poe ee ‘ae Se ian IEE, Te ae ee Ae el athe Baz ee bape 8) Pin re x9 90) SORT = 3 RD URE ee ah EE aan ee Sa No BF i Gee fe iad cy GAPS pA BEF eon et! a ay eye ath aes ey es es FANORa dnanen ae heres 8 * i“ he, Poe we Swale ee oe ites avdle a ANS Sit eee AS ral DEER TRS Fe mys ee FY RIS Sats i's hg , ‘tute peril a ¥ ie Tee Sy ry OS ere er CANE Se UE sco: TOE A onc en ee a ae EE. bast re Pe ae * ae | a: q & et -.of encouraging a progressive, efficient: management which - wilt be characterized by a constant effort to increase com- mercial revenues, thereby resulting in “the attainment of an ine reasing mreasnre oF commerci:t] self- suffici eNCY. ates’ ‘retroactively in this case, 9» Yeap ree INE PR CTE VT A Canes heart WN Re obi. ue edt aS a y Creager ‘Ee & z 3 g 5 Ke roe ih SPs BFE cae Ele i PS sae tehggg oe 52 Oa eaten gt A, ea Sty he eS ig 44 Fe BO i te Seth, Sine eee ae) PO eG EL abies te ws oS othe 1% Leea sary ESP rt fe Lge Peres an ainline “earns an unconscionpbly high profit from its mail pay’ and ‘‘that/ the airline has made nb disbursements and u ertaken no com- mitments on. the faith of that profit” why ‘ shouldn’t the - Board reeapture 2 ie. 77-90). While this hy potheti¢é a} situation may ie an ih- triguing possibility, it hardly squares with busi- /ness reality.’ What business would cam = very high: profits and undertake: ‘no commitments” of its funds?. Common business practice is to commit. such profits . to: tlie enterprise or déclare a dividend. If the Boar could only recapture when an airline had never *‘changed its position’’, _ it could in fact never re ‘aptur e-at all, The mail _ bay provisions woulds be administered not with bi anes -handed justice’? but with Ope Whanded in- Justice. It i is far more likely that the Board would be‘required to recapture baiehi, i tive of the com- mitments made hy carriers. Thege ‘ffeet of sich recapture. would’ be industry-wic disruption. Whether-or not the Board. finally re ‘aptures ex- cess earnings in a given: ease, there will ajways “be uncertainty ag to what ats action may be. So far as the effectuation. of the: policies of the Act “is concer ned, the. vice of the ‘situation lies. in the existence of the: power as much as An its" “Cxercise, for its mere existence. gives rise to uncertainty. Second, if petitiotier’s view were te prevail, one of the basic techniques for assuring efficient operation, tamely, the fixing of uniform rates for 822435 +494 wa Oo 2 - ° . . ad for ‘‘classes of carriers. 44 a] iF a * ©. ccarrierstwitle sinailting operating charae teristics,” would lose nich of. its effectiveness as ame lean . of ‘furthering the poliey of the Act to develop a sound: air transport sy stem through competition.’ Section 406 (b) authorizes the-Board to fix rates 99 The nig rate Is an important regulatory device | » foree carriers withim a given class to ini an the develop- -ment of reveriug and contrel of costs.” If the fg. characteristics of the. carriers ‘basic* opey -are similar, a uniform rate for a class. of ear- riers can kave an important. effe ‘et in stimulating | good competitive performance. Under the: cost plus system of auditing which TW A reads into the Act, a carrier could always seé Kk relief from the unite ala and: would, therefore, have no incentive to live within it. . Tf the interpretation of the Civil Aeronautics Act urged by TWA is correct, Congr ess gave ‘the ~ Board a blank check and atithorized it to guaran tee the airline industry’ for an. unlimited time . . * : against all losses assuming only that there was economical management. A guarantee of an en-- tire industry against loss could rest orfty upou the ~~ most epertee } anguage from which that intention oe cayhlaheach ? For examples of the use of this technique, see the. cases © cited in notes 1 and 2 of the Board’s opinion in this case, fix- ing uniform service rates for the “Big Four” carriers and the “Little Six” carriers (R..64). Aras +: ® Section 2 (d) vec a Act ( Appendix, infra, p. 101). 4} s se oe “ a tee : ’ ica Bs. ae - R Pr #, ‘* ‘aia be ane beyond | the shall: af a donb There is no such language in ‘the Act. So radiéa and unprecedented’ a departure woh allen have been the | occasion of, conside rable ise ission “qmong legislators. There is no such discussion in the legislative history. The clarity with which, ‘Congress, in other ‘situations, has granted anueh - “more limited power to “ree aptire’) “execssive earnings or retroactively increase “rates” when that has bgen its intention,” le: ids to the cone ‘lf- ‘sion that “retroactive” power to. determine “mail eit ; Saad ] > compensation and “the Sawer to ‘‘recapture’” ex- cessive earnings, both of which powers TWA as- -serts are possesed by the Board, should not be 9 thrust upon the Board without a clearer sanction from the Congress. What Congress did clearly provide was a typical. public utility. regalatery plan whereby air carriers were entitled to, re- weive final future. mail rates which offered a genuine opportunity to earn profits from air var- rier operations asa whole. _ : ao ™ “Bs o * Transportation Act of 1920 (Act of February 28, 1920. T), 41 Stat. 456, Tit. TV. § 422. 41 Stat. 488-491: Merchant ~ Preis Act of 1936 (Act of June 29, 1936), ¢. 858, 49 Stat. 1985. Tit. V. $05 (bh). (49 Stat. 1998). Tit. VI. $ 603 (e) (49. Stat. 2002) ; Renegotiation Act (Act of April 28, 1942. ¢. 247, Tit. IV. § 403 (56 Stat: 245).as amended, 50 UL S.C. App. 1191: see ian ihe examples cited by TWN (Br. 13-16). ’ —_%, oe B. SECTION 406 (A) (4). W AS INTENDED ONLY TO EM- PQWER THE BOARD TO MAKE RATE ORDERS EFFEC- TIVE AS OF THE INSTITUTION OF THE RATE. PROC EEDING oe 4% . Ww e have alre: dy shown that the Act estab- lishes a public utility rate-making pattern for th determination of compensation fer carrying mai by air, and that,, under. this plan,’ mail pay - detesffiined primarily by fixing ‘rates of compen- sation for future services. TWA attempts to pervert this pattern into a cost- plus scheme. of : \ pricing whereby a carrier's hooks ‘will be post audited and it will be awar ded fair.and re: sonable” ! amounts of compensation for services rendered in the past. It seeks to achieve this result solely by’ - reference to the “make effective”’ clause of See- | tion 406. (a) (1) of the Act, w hich. empowers the Board ‘Sto make ‘such [fair and reasonable mail] _ rates [as it fixes] effective been such date as it shall determine to “be proper.” (Br. 9, 16). It is questionable whether, the burden of nullifying - the pattern of the Act could be sustained on the» basis of the “‘make effective’? clause alone even if it could more readily be construed to mean, as TWA conténds, that the Board can make its mail rate orders effective at any time. In any event, when the clause 1s read in the context ‘of Section 406, and particularly. in the light of its legislative history, it is clear that its eo and meaning ‘Was neither to “empower” nor “direct”? the Board, to mi ike its mail rate orders’ e foe tive ' “rete: Cai ee roaetively,? thus. est royinig. the carefully nur- tired pattern of the Avt, but simply to make its “words and plirases used in Section 406 point to tions of Section 406" (a). (1) to “fix” “fair and ties, used and, useful therefor, and the services ‘connected therewith’; (2) ‘‘to prescribe . the . ‘method. or methods, by airer aft-mil., pound-mile, weight, “pace, ‘or any combination thereof, or other rwise, for ascertaining such rates” ; (3) to fix rates upon “Hetition ee “an air car- aA (4) to do so only “after notice and hear- ing’’; and (5) to ‘deter mine rates upon the basis of the. standards specified, are cast in the form, and use the language, of traditional public utility: regulatory measures. Pair and reasonable 1 rates fownd (Re 114), and TWA concedes (Br. 35), look to the future.” Effect may -be given to the foregoing language of Section 4(6, the a only _ if the cone ept of future rates is pi served through the ite paves adopted by the Board and the Court of Appeals, TWA attempts: to reconcile aks mail rate orders effective from the. date a pro-. ceeding Was instituted to change- a rate, a pro- * . cedure wholly cmisonant with the pattern ‘of the - Act. Re aR as ee . AL The language of Section 406. —Many of the the necessity for interpreting the Act as the Board and the Court of Appeals did. Thedirec- | reasonable rates ** for ear rying ‘mail, “*the facili- fixed by such measures, as the Court of ° Appeals | ‘ ee he ae arguing that ‘‘rates”’ "the use of the word *rates”’ in Section 406 with its ‘interpretation of the ‘make effective” clause by js traditional mail pay lan- However, this argument ig- guage ’".( Br. 28. 33). nores the accompan ring language in Section 406, whith is public utility’ rate-making language, and ‘the clear intention of ( cress to establish a typical pablic utility regulatory ‘measure, ” | That the Word * rates ” as used in Section 406 (a) and: (b), and even in the “make “effec ‘tive; zs cl: wise itself, refers to a measure of payment for future operations, is’ borne. out by some of the | lahguage of Section 406 (b), which in_ itself limits, or-etse conflicts. with, the asserted phan meaning of the. tinake effective”’ clause, Thus, Section 406 ()) requires the Board, in fing rates - under Section 406 (a), to take into consideration ~ among other factors ‘‘sueh standards reflecting the character and quality of service to be ren-— dered by fir carvers as may. be prescr ibed by or pursuant io law; and the nec ed of each such air carrier for compensation for ‘the transportation | of mail — to insure the. performance of such service.”’ [Italics supplied. ] The portions ¢ of the above quotation which We have emphasized demonstrate that the rates the Board is: to. ftx are to apply to future operations. Moreover, if * these words’ are ty be. given content they. must limit or else conflict with the asserted meaning. of the “make effective” rd for what is to * : rr F “Ppt vas ¥ A a Pay Act, there Was a: sharp divergence of views en —. > . ° * 48 Stat. 933, 935. . a "49 Stat, Gbt, 616. | a i re _ “ These ‘provisions are also subst: antially ‘the same as Sec- + tion 406 (a) of the Civil Aeronaatics Act except for the. last clause. which differs from the “mi ake effective” clatise of the — enactment. “TWA agrees with these conc}usions (Br. 36-57) exe ep th: at it points to one case (Br. AS, note #2) which it interprets _ a £> 54 °2 ae s 8 s - = ° : f:: rie Seah ee eee within the Luterstate Commerce Conntiiission \a . to. its correctness. In: AirMail Compe waation, "decided June 6.1936, b by "Division 3,” it was held,” in substantial reliance: upon. the Ne w York Cen- ~ tral case, that the Commission | had authority to maké. its mail’ rite orders effective prior to the’ decision date and ba¢k to the date. of commence- ment. of. proceedings. Chaiiman, Mahatfie (lis-: sented on this issue on the ground that the New York Central case Was based one minent domain and. constitutional requireme ntg and on is not a... governing authority under, the Air Mail Act of. > “19: ~~ net On saat the full ¢ iomsaaiesidh, the. deci ision of Division 3° W was sustained. #.¢C ommissioner s Lee “and Mahaffié dissented,. and * Jommiissioners Splawn arid Caskie concurred fla separate opin- ” ion; those who concurred separately pointed out that. the’ New York Central case’ was not nec-.- : essarily a governing precedent for the Commis-, °° as having increased mail pay “ “retroactively.” This case 1s discussed, infra; note 62, p. 68. * Some of the cases supporting these ccasbtianibobin are cited by TWA (Br. 57, notes 70-71). TWA also refers (Br. 58, nete 72) to two cases described in American Airlines, Mail Rates, 38 C. A. B.323, 327 note 12, in.which mail-rate decreases were adjusted retroactively to March 1, 1935: .This action was taken by the Postmaster General and not the ‘Commission and Was apparently based on Section 6 (c) of the Air Mail Act of 1934, as.amended (Pet. Br., App. B, pp: B10-B11), whith specifically provided for retroactivity to March f, 19% & "216 LC. C. 166, ; oe Anes, “9 Td. at P91. |. ee Ree _ * Ate Mail C oniipe nsation, 222.1. C. C, 602 (1937). ? ea ’ i ° ® ey In the first place, the character of the so- called retroactive order involved should be cleayly ‘understood. Senatér McKellar re- fers’ to the same as “‘back pay.”* This ‘seems to me a mistaken deseription. * * * All the Commission. did that Was in any sense retroactive was to make its final order [216 1. C, C4166] effective as of the date of the filing of: the peti- tion * * *. The order did not, grant any “back pay!’ but simply changed the rates in accordance with its decision on the. peti- tion filed June 27, 1935, — - * * * * 2. > * * © unless.“the Commission could | make its order effective as of the date its attention’ was called to the insufficiency of the rates, the carrier would have had to earry mail for an ‘insufficient rate: and possibly might have had to litigate its ¢ saaene in the Court of Claims. +. % _* * * - * *» et there is no ‘substantial doubt but: that the be Gonunirion| is empow nee to put, “1d. at PP. 483,485. _ ~s : Piece tt oe aoe rate order - in effect as of the date when the Commisisan has been formally advised an unjust rate then and thiere e xisted,* i The important point €hote from Colonel Gor: * $: rell’s testimony is that, just as was trué within ye the ‘Interstate Commerce Commission, the only | / disagreement which he attempted to resolve in- volved the question whether the ¢ ‘omission was , “empowered to make air imail rate orders effective _as of the date the rate proceedings were initiated ‘or Whether it was restricted to makiag such , ‘ orders: effective upon their: issuance. | In order to prevent the disdigreement in the Commission And at the hearings from persisting if the pending bills were enacted into law, Colonel | Gorrell, on the same day, offered the following amendment : Pig On: page 31 of the substitute change the semicolon in line 11 to a comma and. in-. .sert thereafter the following: “‘and to’make such rates effective from such date as it ° . shall determine to~pe proper * * *”’ Explanation of the foregoing amendment is submitted to accompany the amendment proposed to pages 46 and 47, infra”. +) * Colonel Gorrell gave substantially identical testimony be- - fore the House Committee on Interstate and Foreign Com- merce on ‘April 8. (1987, House Hearings, note 8, supra, pp. 325—F, ; “3 : = © Senqte He aringe, note 8, supra, p. 523.0 | | eegukdoed + | (May 27, ,193 a 5095-6) and reported to the House (H. 7 he full explanation that. Me gave fottows: 2 ~The . foregoing ‘amendment “and that . proposed at page 31, line 11, are necessary Pe | in oder. to carry forward under the. new ‘legislative jurisdiction any unfinished pro- = ceedings begun under acts repealed by this ~ bill wand continues, any undecided proceed-_ ings in court, Evidence and. arguments _ submitted prior to the enactment. of the bill -" are preserved for appropriate future, use, and the present authority of the Commis: sion-to fix Sissohe 4 the effective date. of its rate decisions. 1 likewisé' specifically pr eserved. . [Itafies. supplied. ]~ ; Pe i & “Colonel. Gorrell proposed the same amendments to 0 the House Bill (H. R.5234) and made exactly the same. comment to the House! Committee.” © - Both the Senate and House Committees accepted Colonel) Gorrell’s amendment and incorporated the “make effec tive” “clause into the bills which they reported outs” : “The Rae PAE pro Bose to pages 46 and 47 prov ided that all orders, reports and regulations made by the Commis- sion under the prior law w ould r remain in effect until modified hy the Commission. ” Senate Hearings, note.8, supra, p. 525. ” House Hearings, note 8, supra, p. 408. oe =) ” FIR. 5234 was reintroduced as H.-R. 7273 (81 Cong. Rec. Rep. No, O11, 7 ith Cong., 1st Sess.). S.2was re rtéd to the Senate on June 7, 1937 (Sen. Rep. No. 686, 75th Cong., Ist pra ) and debated:an August 13; 14, 16, and 18, 1937 ca Cong. Rec. 839, 8882, 8957, 5968, 9202, 9204, 9220, 9226)... - / The Report of the House Comntittee. and the. remarks of the Senate-floor leader in debate make : it abundantly clear that the testimony atid ex- planations of the&proponent of the “make effee- tive” clavse amendment _ were algo accepted’ by the Committees, for the 'V. empliasize the . thesis of Colonel Gorrell that, uider the bill, rates for ; air mail were to be’ treated just as the Interstate Commerce Commission had treated air mail rates and . railway mail rates in’ the, past. Thus, the ~ Hoilse'R R. port stated :. ' 7 ESF Rates for the carriage “of: air “mail. would ‘be fixed by the Commission in the same manner as the Coiimission how fikes the Ss, airmail rates for -all :domestic air-mail carriers.” [i_e., undér vedios: Mail Act is 1935.) eee Sdnator Truman, who was it: charge of the. bill. in me Senate, described it as follows Re ae tes ‘It follows exactly sections 1 and 2 2 of the ‘Interstate Commeree Act so far as that can * ‘* a hé applied-to air transportation. That part of the pill which refers: to air, “mail treats air mail. just as- mail on rail- ~ roads is treated.” . * * * this bill is sinipiy i pegulatoiy “measure. which does for the air carriers -ex-. actly what is done for railroads and ‘for ‘busses and trucks. I cannot too strongly emphasize that fact." - ‘ : V. H. Rep. No. 911, zth Cong. 1st Sess.. p. 18. 38] Cong. Rec. 9202. 581 Cong. Ree. 9204. 28435 —49—-5_ s* At the hearings on the 1938 bills (S. 3845, S. 3659 and. H. R. 97 38);° which had mail rate pro- visions substantially identical:to those in the 1937 bills (S..2 and H., R, 7273), Colonel Gorrell did not testify further,on the ‘make effective’’ clause. At the stiggestion of the Committee Chairman “*(at both House and Senate hearings), he did not repeat those details covered in his testimony on the earlier bills, stating to the House Committee : -“With ‘your permission we will net cover any of the details’ which we covered: last year “and to the Senate Committee : “With ae ‘penitaes: ~~T-shatt cover nothing that would: be repetitious of _tast ye ar’s testimony but shall adhere solely to the essential points now before you.”’” _ This tes- ' timony was given before. the House Committee’ on” “March 30, 1938 and before the Senate Committee on April 6, 1938. . The three bills being considered . at these’ hearings became the Civil Aeronautiés Act of 1938. There was no further merition made of the “‘make effective’ .clausé prior. io the enactment of the Act. Accordingly, the legis- —— lative history of S. 2 and H. R. 5234 is the most important source of information as to Congres-. sional inte ent with respect to the ‘make effective” —clause in Section 406. (a) of the Act. The three bills were fundamentally | the same. 83 Cong. Tes. 6725. * House Hearings, note 10, supra, p. 297. - “ Senate Hearings, note 20; supra, p. vi. % > sk to an as Ses Re 3 Ne hoe el De 5 aes *e, ae ies ch i A Be x es iS e “ ‘The “make effective’ clause was thus .inserted ‘in the hills. which eventuated in the Act m order ‘to resolve a disagreement ‘Among the members of the Interstate Conymerce Commission. and among ‘witnesses and legislators at the hearings con the bills as to whether the Interstate Com- merce Commission had authority to make its mail rate orders under the Air Mail Acts of 1934 and 1935 ‘effective as of the date a mail rate proceed- ing Was initiated or whether it was limited to making such orders effective from their issuance. The resolution of these disagreements was es- senfial to the legislation being considered beeduse | that legislation was in the same form as the Air Maj!’ Acts of 1934 and 1935, and. if left un- changed, would be subject to the same disagree- ments, with resulting une ertainty. The witness’ who offered the amendment inserting the ‘make effective’? clause in the*pending bills explained that thereby “the present authority of the Com- mission to fix appropriately the effective date of its rate decisions is * * * specifically pre- served.’ The same witness had just® previously testified that ‘*there*is no substantial doubt but that the Commission is empowered to put a rate order, in effect as of the date when the Commis- — has been formally advised that an unjust ratéthen ad there existed.” C learly the person. Who offered the “make effective’ clause amend- ment and explained it expressed’ an intention to grant the Commission authority to make its’ mail be considered at all because S. 2 and H. R. 273. were not passed, and that the: 1938 bills which: ultimately became law were “ore; itly reeast.”" It urges that *“the-only \ ‘alid levislative histor v “of See- ° 4. RWS See ae PME eS Ee thee =: ry pe 42% ¥ AS ENE est 7 f ie ss SARL IS Shale gk —_—_——— - the ni: Ub-rate provisig 4 Aree : re tion 406 (a) (1) appears mM the ¢ ‘onference Report * ‘issued in June, 1938" (Br.42, 72-73). This argu- ment wholly ove ‘rlooks the fact that during the hear- | ings on the 1938 bills, which? ultimately became o the Aet t, Colonel Gorrell, at Ane. request of: both the Senate and. House Committees, stated .that he “would nat cover any of the details which we covered last year, > and cited the pages of his previeus’ testimony to the €C ommittees. It is perfectly clear that these statements, made in the spring of 1938 just prior to the passage of the Act, Incorporated by reference all of Colonel Gorrell’s testimony on the 1937 bills. It is apparent also that ‘although the’ Net niay have been ‘greatly recast”? in ‘ome respects, no signifitayd changes were made in and it was therefore un- necessary for Colonel Gorrell to repeat his testi-. mony of the preceding year. Of « ourse; the Con- ference Report on the bills which became the Act is significant to the. determination of the meaning of the Act. However, the “wenerality’ : of the statement in that report relied on by TWA (Br. 45)-shows that it ‘was totally unrelated to the specific problem here at issue: (Br. 72, , note 107). ° | : TWA’s second objection to the use we make . of the legislative history of the ‘make effective’ clause is that “the rate making provisions of the 1937 billy were entirely different from those of the Air Mail Acts. Al the ‘minutiae of ex- 64 ae pression eee that show ‘Convress to have been thinking of the future’ * * > were elimi- mated” (Br, 64-65), and hence the “make effec- tive’? clause’ Was not nec essary merely to confer ve authority to fix rates back ‘to the petition date. | The: meager examples it cites, and apparently there are no others, are both ‘teabaelianes and 58 Q cynac curate.” Both provisions conferred the same basie rate- making authority cand prior to the aes fF cites three instances ( Br. 65 note 83). (1) es states that “rates were no longer to be fixed ‘by order’ which was to — ‘continue in force until changed.’ In fact, Section 314 of © the 1937 bilf&. {Senate Hearings, note 8. supra, p. 31). now. embodied in Section 1005 (a) of the Act, provided that “all orders of the Commission * * * shall continue in force — until its further order.” ~Thus, the. provision referred to by TWA was not_climinated fron:the-#937 billssand the bill and the Air Mail. Acts remained the same in this respect. (2) Next, TWA points to the elimination of the provision “permitting ‘reexamination’ of an order only after a 6-monuths waiting period.” * But the omission of this provision in the bills does not: indicate that the bills were not concerned with the future aspects of mail rates. If the elimination of this provision has any significance. it is far outweighed’ by the elimination of tlie provision in Section @ (c) of-the Air Mail : Acts, which specificatly permitted the Commission to estab. lish mail rates retroactively to March 1, 1935. (3) Finally, ; TWA refers té the provision in the 1937 ills (Section 406 (a) of the Act) that “the Commission was ‘directed’ to act at all times*U pon itsown initiatives “- T his does not appear ° _ to be different in substance from the: 5 cor’ ixions of Sections , 6 (a) and 6 (b) af the Air Mail Ac ‘ts, and the practice there- under. In any event, it can hardly be argued that. becatise + ‘the 1937 bills directed the Commission to: proceed upon its own initiative, the mail rates subseque tly fixed by the Con: mission would not have future application, particulariy sine the Commission Was direc ted to aet from ‘time te: time.” é Gorrell amendment, both were subject to dispute cas tp the power to fix rates back to the petition date.. | In the third place, TWA. ctiticizes our a ahaties on the ground that Commissioner Mahatffie’s dis-", : agreement with the Commission only ‘arose over the question whether. air ocarr iprs were com. pelled: to render service under the Air Mail Acts, - and since there was ‘nv -doubt but that: air carriers were required to render such Services under the 1937 bills the point. of disagreement ° -would not have - been perpetuated by the 1937 bills (Br. 65-66). This is inaccurate. It is ‘true that Commissioner Mahaffie disagreed with _ majority of-the-Commission whe nit relied on the New York Central case in awarding. mail. pay under the Air ‘Mail Acts back to the date of a petition. It is also: true. that his disagreement was predicated on the fact that aif carriers were - not compelled ‘to carry the mail. , However . it is not true that air carriers would be compelled to carry the mail under the 1937 bills, as TWA contends. Under Section 305. of’ the, 1937. bills (Section 401 of the Act) air carriers were, per- 4 mitted to apply for ce rtific ates of convenience and ‘heeessity Without requesting authority, or accept- ing the obligation, to transport marl. Senate Hear- "ings, note 8, supra, pp. 22-24. The suggestion that every certificate should require the carrying of mail, a “situation. characterized as being like ‘that existing for railrodids, Was dise ussed. i in detail or Colonel: Gorryll, whe opponed: such a require- ment for air catriers because ‘the airlines’ ‘eco- nomic situation differed from that of the rail- roads, and the suggestion was never accepted by _ the Committee (Id. at pp. 455-458).” Thus, the airlines’ situation was cts different from that of the railroads; petitioner -concedes._ . that the railroads had no duty to.carry the mail °° (plonel Gorrell described the proposal, which, he said, ‘“seems agreed * * * would be undesirable” . as follows: «“In other words, although with respect. to. applications for certificates to operate a service between any particular points the Commission would be free-to determine. whether a cer- tificate- should be granted for passengers, or for express, or for freight, or for all of such classes of service, the Commis- * sion would not be free to grant a-certificate which would ex- - clude authority to carry mail; every certificate, no matter for what class of traffic, would carry with it the authorization to carry the mail whenever the Postmaster General desired to | place mail upon the craft of that carrier bet ween ‘tie points in question. “This niethod of Healing: w ith the sila’ is, a8 sI have said, substantially the method adopted in the case of the railroads. That is,every railroad is under an obligation to carry the mail if the Post master Gengral desires to place mail upon its trains.” (Senate Hearings, note 8, supra, pp. 455-456.) He summarized his reasons/for indicating why such a proposal was apt for railroads but not, for airlines in the following slanguage: “As T-have said, the method adopted in the case ~ of the railroads is perfecthy appropriate for that industry because of the relatively mitior part that the mail traffic plays. — EveryYailroad, if it is able to enter basiness at all, is able to” carry the mail, and if there is enough traffie generally to j@- tify a.new service the presiunption is that an additional rail- road mail carrier will not seriously affect the position of other such ‘carriers. Among air carriers, however, this situation ‘does not obtain” (/hid., at p. 447) - - prior to the Railway Mail Pay Act (Br. 46-47), but were “compelled to do so by that enactment (Br. 49), unless they discontfined. theit railroad operations. Under the 1937 bills, and the Act itself, air carriers could be authorized to continue all of their existing operatgons except the carriage of-mail,-although practically, in view of the bene- “fit of the mail subsidy to them, a request for stich | limitedauthorization would be unlikely. Commis- sioner Mahatftie could have pointed out the same kind of thing that ‘he pointed out in his dissenting . opinion ‘undey, the Air Mail Act, nam Iv, “The air line is under no legal ‘compulsion to beeome ‘a _ contractor leesietl. * Atr Mail Compensation, . 216 I. C. C. 166, 192.” Indeed; the voluntary. character o a carrier’s operations under the Civil _ Aeronautics Act was recently pointed out by the 7 . 2 ; “ This is also the fallacy in TW A‘s contention that if Con- gress had wished to.codif¥ such power as existed under the Railway Mail Pay Act it only had to copy'the language of | that Act, without adding the “make effective” clause (Br. 45, 72). Since the 1937 bills did not compel carriers to carry thail unless they chose to do so, their-situation differed from that of railroads, It was precisely this difference between in- voluntary carriers under the Railway Mail Pay Act and voluntary carriers uitder the AirMail Acts that led to dis- - agreement in the Commission and between witnesses and legislators at the hearifigs. Recognizing that if it used the same language as inthe earlier acis, it would carry over the ‘eXisting disputes as to what the language meant, Congress altered the language to make clear that under the new Act mail rates could be made effective as of the time a petitien Was filed. 6S Court of © Appeals in another proceeding arising out of the Board’s decision in this case." Jt is evident, therefore, that the disagreement in the “Commission over the Air Mail Acts would have beer per ated had the 1937 bills heen enacted nto law without the addition of the “make effae- tive” clause. is | Finally, TWA. says that our analysis of the _ legislative history ‘of the “‘make effective’ clause . is wrong. because, in, addition to the disagreement under the Air Mail Acts as to whether rates could be made effective back to the date’ of 4 a peti- - tion rather than from the date of issuance of: an ‘order, there was also disagreement as to the power of the Commission. to make rates retroactive gen- erally, and that the disagreement concerning the general. power of the’ Commission was also re- sioner: Mahaflie did not unqu: alifiedly’ dispute. that/yower as ates retro- : he did in the cases where the Commission fixed 4 actively to the date of a petition. In Air Mqil Compensation, "292 [,C.€. GOL, 610, C ommissioner ——— dissented onthe - sole ground that the Commission’ wa¢ without power to fix a- rate retroactively to the date a petition was filed. There is no basis gor concluding that he dissented because “the Com- mission amen fl a 1985 order by a proce eding begyn in 1987, . “so as to insert ¥proviso which had the effect of reducing rates from 1935," as TWA suggests. The amendment inserting the proviso was dealt with summerily by the Commission and not mentioned in the dissefit, Moreover, in Air Mail Compensa- tion, 232 1. C. C. 608 614, the third: case relied on by TWA, where the ¢ ‘omntission “amended the order again and struck lh out the proviso.” Commissioner Mahaftie dissented without opinion. ‘To the extent that the two cases last cited involve wny problem of, retroactivity diffetent from the issue as to whether the Commission was empowered to make its rates - effective as of the date of the filing of the petition, the prob- lem is not unlike that involved in the Board's “reopening” cnses, cliscussed infraApp. 7-78, vo isolated decisions and actions of the Board .in wholly different factual situations to establish that the Board has fixed rates pines to. the date a proceeding was. initiated, or “retroactively, is hoping thereby: to create an inference that the Board has. interpreted the Act as authorizing it to revise rates ‘ ‘retroactively’ in the situation under consideration (Br. 85-97). We shall dis- + cuss these cases on the basis of the classific ation - used by the petitioner: © > | | a. The new route cases.—In these eases, the Gan. / Board fixed an initial rate for new routes from the date oper ations cOmmenc ‘ed thereon even — though that date was pr ior to the‘initiation of the | rate proceedings.” “Since no rate had ever, been _ fixed for these operations, the Board did. not ret- © 471 American Aviation, Mail Rate for Bouts No. 49,3 C, ALB. 79 (1941): United A. L. Mail Rate for Route No. 47, 3B C. A.B. 381 (1942): Caribbean-Atlantic Air Mail Rates, 6 CO. A.B. 407. (1945); Pan American Airways, Inc., Alaska Mail Rates, 6 C. A. B. 61 (1944), where in the same proceed-_ ing the Board refused to revise a rate “retroactively” but fixed a raté for a new route prior to the date the proceeding. was initiated. The Board stated at page 70: “Accordingly. the review of the rates for these routes’ [ Junean- Whitehorse and Whitehorse- Fairbanks] will be confined'to the period on and aftet the date of the filing of the petition. The period review forthe Seattle-Juneau route, however, w ill. comn on June 21, 1940. as that was the date of inaugur ofmail - service on.that route and no rate has heretofore been fixed:” Obviously, the Board did riot think .its new route doctrine “Was inconsistent with its refusal to revise final rates “retro- actively” or it would not have-applied both principles in suc-- cessive sentences in the same opinion. - 822435.-49 7) 76 roactively revise-a final rate prior te the peti- tion date as TW'A secks to have it do here. The finality of a Board rate order was not’ impaired. See infra, pp. 83-85. css Sea | —b. The system cases——In_ these ‘ases,” the Board merely extended the new route «doctrine — ‘to a carrier with old routes, the existence of more than one route necessitating the determination of “need”! on a system basis.” In neither of these ‘ases did the Board’s order/ revise. the previously ° * Western Air Lines, Mail Rates, 4 C, A. Lb. 441 (1945) ; Northeast: Airlines, Ine., Mail Rates;-Order Serial Now E- 1230, decided February 26, 1948. TWA also cites Colonial Airlines, Mail Rates. ‘Ordat, Serial No. E-1263 (March -4 1948) but this casemerely fixed a temporary rate: which is expressly subject to revision when the final rate is fixed. Or- der Serial No. E-1340, April 1, r94s. Section. 406 éb) provides th: at. mn determining a mail rate, the Board must consider the “need” of each * ‘air carrier” for compensation which “together with all other revenue of. the air carrier” will permit the achievement of the statutory ob- jectives. (Italics supplied. ) The examination of the reve-_- nues of the carrier on a “system or over-all basis” is, there- fore, “necessitated” irrespective of whether the rate is fixed ona route orasystemrbasis. As the Board stated in an earlier ease (Z'ranscontinental & Western Air, Inc., Mail Rates, 4 C. A. B: 159, 145 (1945),). ini concluding that TWAS rates should be reviewed on a systembasis: “* * * petitioner re- quested the fixing of fair and reasonable rates for route No. 2 only. . However, under thé provisions of the Act we are required to determine the need of a carrier for mail compen- sation suflicient to enable it. together with revenue from all , sources, to continue to render adequate transportation sery-” ice. Under the present circumstances the Board deenw it: necessary to review the operations of petitioher as 2 whole al- though we may fix a rate fora single route if ‘such a review indicates the nec essity therefor.” divi Bits Patient bs iY SN a ah . He gE LS Set Solan it ; « ; : ® . . fixed final rate for the old route although’ it examined the rates for sich routes im, order to determine the ‘tneed’” of the svstem as a whole. Nor do these cases afford any basis for. conclud- ing that the Board interpreted the Act as, giving . it power to make suc ie revisions. %. The “reopening’ " CUSES, —In one” of the two ‘ases cited (Br. 89-91), the -—Board reopened “merely for the purpose of clarifying an ambigu- ‘ous order and applied the clarification as of the effective. date of the original order: In the other,” the Board” reopened a’ proceeding promptly and then later broadened the reopened’ proceeding to specifically encompass additional issues." In “both cases the reopening wase a °° Pan Am. Airways Co. (Meh). Transatlantic . Mail Rates. 1C.C. A. 220. (1929) ; Pan Am. Airw ays Co (Del. ds U. S.= Azores Mail Rates.1 C. A. A. 650 ¢ L940), ™ Pan. American. Airways, Ine.. Latin-American Mail Rates, 6 C. A. BOSS (duly 17. 144. Supplemental Opinion). * The original opinion was issued on August 28, 1942. Pan wLimeHean Airways, Ine. Latin-American Rate Cc axe, 3 CEA, 3. GOT (1942). Pursuant to the request of the carrier dated October 22,1942. the Board. by-order (Serial No. 2051) dated November 20, 1942, “reopened” the proceeding “for rehear- ing, reargument, and rec olsideration * § 16C. A, B. Sd). “Subsequently it was brouglit, to the Board's attention that certain amounts had been erroneously*included in the computation of respondent's investment upon which a return was allowed for rate-muaking purposes in our original opihion. Accordingly, by order [Serial No, 2726] of. February 28, ‘1944. the proceeding was further reopened so as to permit - revision of respondent's investment in this respect™. (6C. A B..at pp. 85-56). “The modified order was made effective as of the same date as the original order (6 C. A.B. at p. 94). oO proper exercise of the Board's powers and neither case can fairly be. construed as retro-: actively. revising a final rate under: the disguise of reconsideration, — ; d. The “A me rican? case-——This case * was lim- ited to fixin. « rate back to the date of the insti- tution. of the proceeding. The revision.of the rate’ “prior 1 to that date was’ not in issue. The state- ‘ments of the Board so‘often quoted by TWA (Br. 17, 39-40, 51, 61, 76, 83). were directed solely to the power to fix a rate ba¢k to—not a ‘date the proceeding ae Cf. Pet. Br. The nune pro ‘tunc petition device. aw ee . the Board memorandum of June 3, 1942 proposed a limited use of such petitions in a special war time situation for i a limited pe riod of 17 days, no - petitions were actually filed. In making this offer, the Board was not directing: its attention to_ the question of Whether the statute authorized it to revise rates ‘‘retroactively’? but was concerned with. finding a. p ‘acti cal means of fulfilling its. promise to the carriers, made in the memorandum _ of May 22; 1942, to institute rate proceedings as of June 1. If the memorandum of June 3, 1942. evidenced. the Board’s conviction that. it had 7 Sec. 1005 (dd). 49 U.S.C. 645 (d).. This Section pro- vides : “Except as otherwise provided in this Act, the | Board ] is empowered to suspend or ‘modify its orders upon such notice and in such manner as it shall — proper, 8 American Air. Lines, Mail Rates, 3 C. A. B. 32: 3 (1942). ea Bis st Sears fe pe TR oS TROT ee Ra ee, EI Oa ESE ia cases ee Ter Po Agee a a eo, cara toe ¢ e i os Pa & ; | eae | | ‘given weight: in the resolution of a controversy as to the meaning of a legislative enactment.” All of the cases relied on by petitioner were fully presented to the court below. Upon con- sideration of them the Court of Appeals concluded .(R..115): eis Mie ee. 3 TWA * * * urges what it considers * examples of retroactive application of Board orders... But we do not find those instances indicative of the retroactivity Which is necessary to support its position here.” TWA‘ also urges. the - implications - from the Board’s failure, over the: years, to say it had*no -retroactive power. . We - think that the administrative history of: this statute has no material bearing one_ way or the‘other upon the. question of statutory power, Skidmore ve Swift. Co.. 323: U.S. 154. This Court there.stated with reference to the Interpretativ e Bulletins of the Wage and Hour Administrator: “They are not, of course, conclusive, éven ‘in, the cases-with which they Cirectly deal, much’ Jess in those to which, they apply only by analogy” (323 U.S. at 139). - The Court went on to state (323 U.S. at 140) : “The weight of sucli- [a ruling, interpretation or opinion | in a partic ular case will depend upon the thoroughness evi- | dent in its consideration, the validity of its reasoning, its consisteney with earlier and later pronouncements. and al those factors which give it power to persuade, if lac king power to controk”, ; Rus It is apparent that under these standards, opinions of the : Bortrd which do not relate to the question of statutory con- Struetion at Issue. ws is true of the e: “aseS re lied on by T Ww A, are” entitled to no weight. ‘cor ‘ ) e. SI . ra 3. The yeneral practice af the Board in fixing — future rates is tneonsistent with the existence of the power to refir final rates prior to the petition - date.—It hears vepeating that the Board views the Act as establishing a rate-making method for eS the determination of mail compensations eon- ae trasted with TWA ve view that the Act establishes ~* a cost plus system of auditing for such purposes. +, This means that the Beard, is interested primarily in fixing fair and veasonable rates of compensation. for the future rather than fixing fair and reason- , ‘able amounts of compensation. for the past. It means further that the rate orders of the Board have the attribute of finality and are not always ‘subject to revision, | ° 3 _ During the ten years of its éxistence, the Board has been concerned consistently and substantially iit fixing fair and‘reasonable rates forthe trans- portation of mail by aircraft to be applicable in the future.” all of the numerous .similar mail. rate decisions, : ‘At will suffice to refer to the-typical decision in the rate proceeding involving TWA, which TWA “how seeks to. nullify (see pages 4-7, supra), and- It would serve no purpose to examine _ the Board’s statement i Chicago and Sputhern Air Lines, Mail Rates, 4 C. A. B. 419 (1943), Where the Board denied the carrier's request that) © First Annual Reportof the Civil Aeronautics Authority | Boara | ISS). p. YI: cannnal Be port of the Civil Aero newitics Board, 1944. pp. ‘; 15: Annual he port of the Cived Aeronautics Board, 1943. p. 25: Annual Re part of the Civil «Aeronautics Board, 1947, p. 11. = rake a —- &2- a ea a reduction in rates be deferred watil it had an opportunity to accumulate net earnings sufficient to yield a fair return-on its investment from the beginning: of operations. The: Board stated bs 420) : : The mail-rate provisions of the Civil Aéro- nauti¢és. Aet dé not eall for what would -° be in effect a revision of historical earn- ings so as to reimbuse the carrier for in- =~ ade quate profits received in : the past; those provisions require. the establishment - of present and future rates which will enable — the carrier under honest, economical, and. efficient management to dise harge its pub- lic. service obligations as specified by the .Act. The. statutory policy is, not remedial, of past inadequacies; it is instrumental of |. _ present. and future accomplishment. — * 6) * Sine e the Board’s practice has bee n to establish ‘mail rates for - the. future ft*must have construed” the ‘statute as giving those rate determinations finality. It cannot reasonably be ‘assumed that the Board would expend: time, effort, and money to fix future rates. if it construed the statute as requiring | it: to: replace all such determinations with the resulfs taken from audits made after the facts became known. It is submitted that the practice followed by the Board in ‘administe ‘ring, and deciding cases under, the mail rate provisions ~ of the Act shows a course of eonduet whiich is- “only cohsistent with the view that» Its. ‘mutil rate orders have the attribute of finality. aS It. does hot follow, however, -that the Board | never makes a rate order effective as of a date _ preceding its. cigsuanee. ‘As weshave seen in the preceding ser tion uf this n br ie Ty Tie trtke ffee- We tive’ clause Was designed to make clear that the Board had power te make. its mail rate orders — effective’ from the date rate proceedings were initiated, notwithstanding that the order was not issued until a much later date. In its first mail rate decision,” the ‘Board used the discretion con-- ferred by the “make .effective’’ clause, stating: “We find .* * * the fair and reasonable rate of compensation from and after Octo- ber 22, 1938, the date of the filing of the petition herein,is * *% *."" "This practice has generally been followed by the Board,” with the result that in most mail rate decisions the Board is not only | fixing rates for the future: but also for the past. peridd between ‘the initiation of the proceeding: and the issuance of its decision... a . Likewise, the Board’s practice of issuing tem-. porary rate orders under certain circumstances while it is conducting permanent rate: investiga- tions results in a readjustment of the’ ecompensa- tion = to the carrier under the te mporary rate sa * * POY je Continent Airline wdne., Mail Rates, 1 €. A. A. 45. oS (April 14, 1950). Apinnwal Report of the Civd Ae ronautics ‘eed: 1943. pr. AZ: see Continental Air Lines, Ine. Mail Rates for Routes Vos. 29 and 53.3 C..A. Bo 395. 401 ¢ 142). and eases cited therein. 2 > “4 a "on the basis of the final rate-when it is ultimately ~ determined.” In these situations, and others,” *A “temporary rate order dees not fix a timid) rate but merely establishes a conservative basis for payment upon estimated accrued obligations of the Government pending'the determination of a permanént rate which may be either higher or lower. than the temporary rate therétofore ine effect.” National Aittines, lne.c Mail. Rates, Order Ser ial No. E-1271, decided, Mareh 5, 1948, p. 5. Temporary rate orders “are issued in two classes of cases: (1) where a new air carrier without past operating eXperience is involved, and the fail- “ire to establish-a temporary rate and afford some mail com- pensation would result in the undue dissipation of its work- ing capital (E'xsair, Inc. Temporary Mail Rate, 6 Cy A. 6ST (1946); Challenger Airlines Company, Order Serial N E560, decided May 21, 1947) : and (2) where a carrier ans financial necessity. In order that a carrier be placed in this class, “First, there must be a showing that its immediate financial position is éritical, Secondly, it must appear that its existing rate is substantially inadequate.” National Air- lines, Ine... Mail Rates, supra, p: 6. TWA’ s comment (Br, 85. note 124) that a temporary rate is frequently i increased ret ro- actively to a date prior to the institution 6f the proceeding - - brought to change the temporary_rate is accurate but of no significance.. The temporary rate is never made effective prior to the date when the perntiment rate ultimately fixed will be made effective. The temporary rate procedure is de- _ signed to relieve carriers from hardships during the pendency of the investigation of final rates and obviously must be, flex- ible if it is to be of any value. ‘Of course t temporary rates are ‘always adjusted in accordance with the rates finally deter- mined. ‘ - 8 * The Board has interpreted Section 405 (a) of the Aet faz Stat. 994 49 US CL asd (a)) as granting it authority to make mail rate ma effective prior to their issuance in the situations there deseribedt. Alaska Ave lines. Tne.. Mail Rates, Order Serial No, E-18s5, decided August 15, 1948. 4 sitailar situation appears to exist: under the provigions of Section 105 (b) of the Net. . the order of the Board thay be termed **retro- active” in effect. It is important to note, how- ever, that these orders are not “ retroae tive’ ‘in the. sense that TWA uses the term, for none of. . these orders superimpose new rates on rates pre- ‘viously and finally fired. ce ay eae This distinction is mportant because ‘*retro- active’? orders of the kind \the Board admittedly / issues do not destroy. the rate-making method as the primary determinant: of mail compensation, whereas ‘‘retroactive’’ orders ef. the kind con- templated by TWA make all rate orders subject to revision and. result in a c¢ yst plus. system. of auditing becoming the ultimate method -for de- termining mail compensation. , \ For; under ne tioner’s construction, there will invariably be : contention that the fair and reasonable. Pie rate fixed by the Board should be revised by a post-andit after the results of opel rations tnder it beeome known in, order to supple ment or reduce the level of f profit achieved. Undeb these cir- daadan, the rate-making process. would lose all signifieance (Cf. Br, 42-43 saleee: a 4. The practice: of the Manad pr OUNCES | no inCOn- ‘gruons results. ——TWA atfempts to show that the - veneral prac tice of the Board ats set forth above and sanetioned by the € ourt of Appeals, cannot be what Was ‘intended because it produces such. Incongru- ons results, One such result, it is claimed, is the in-. . ability'of the Board te correct its rate “predictions” an or ** prophecies; which are necessarily difficult to make accurately. (Br. 8, 13, 77, 84.) In fixinig a future mail’ rate there is, ‘of course, 2 ‘visk that the estimates made by the Boartl may not be realize dor | may be exceeded. Such risks may be minimized: in — differerit ways. In the Civil Aeronautics “Act, Cou- gress. did so by. providing that rate determinations 3 _ be made by the Board after yptice and hearing, _ followed ey review in the courts, and that such _ Yates could he changed in new proceedings, simi- larly safeguarded, initiated by aly of the inter- + -ested partiés at any time. Clearly, the Act estab- lishes a pro dure giving the Board\a high-degree of flexibility. in correcting its ‘‘prophecies.”’ TWA complains, however, that the device of filing a petition at any ‘time to ‘protect against — changes in circumstances . affecting ‘a mail rate unfairly dise1 ‘iminates hetween ‘arTiers because it makes relief dependent upon the luc ‘ky coinei- dence’’ of having a petition on file when ‘‘eatas- trophe”’ strikes; and hist the rash and penalizes the prudent airline’? (Br. 19-22). -As_. an example of the “lucky coincidence * argument, it points to a situation where airerft used By two airlines are suddenly’ grounded. Qarrier Mey which has a petition on file for other. reasons, will be protected, while ‘arrier Y, with no petition. on file, will be unable to obtain “full redress,”” the argument runs. Actually, there is no diserin- ~ oa ination because carrier Y and carrier X reerive the’ ) same: protection frou the Board against sudden™ — _— . SF. 5 - groundings,” “or cether ‘‘eatastgophes.."" In a recent opinion the Board explained ‘its position as follows:” While costs attributable to the grounding - of aireraft types are neither normal nor / recurrent in nature, such costs are, lever- theless, peculiar to the air. transportation industry and must be taken into corisidera- tion in establishing’ both mail and non-mail . Yates for air carriers. But costs of this 5 nature are neither predictable nor capable of accurate ‘measurement on a prospective basis. No accurate prediction can be made as to-the incidence of the cost with respect that sueh cost may be incurred exists in the case of all carriers.- The ‘imminence and universality of a’ contingency such as _ this cause it to become established as- one of the-risks of doing business which is. re-- flected. as a normal cost of capital rather - than as a normal cost of operations. — - ” Braniff ‘Airw ays, Inc. Mail mis Order No. E-2129,. A betober 28, 1948. > “In National Airlines, a Mail Rates, 7 C. A. Be 887 (1946), the Board ‘held that costs attributable to accidents are not allowable for rate-making purposes. In Va¢ional Air- lines, Ine., Temporary Mail Rates, Order Nos. .E-2237 and _ | 2285, December 11, 1 48, the Board refused te recognize strike losses for purposes of establishing a temporary rate because -they were abnormal. | | \. ’ ,= Braniff . lirirays, Inv. Nail Hides. supra. TW A's. quo- tation of only part of this —— is quite misleading. , (Br. 20, pote 17). > > * to a particular carrier although the risk e ‘eu oaie “The treatment of all carriers, ' whe ‘ther ey ash?” of ‘“*prudent’’ or “lucky” or “untuc ky" in ‘filing petitions, is therefore the same in connection with ‘catastrophes’, “disasters”, or “ealamities”” Such risks are chpital- risks and not operating risks. «The cost incurred as a result theresf are not reimbursed as operating expenses butvin the ‘rate of return which is calculated on ‘thé ‘basis of the long term risks gf the business. The pro- tection afforded carriers for losses because of catastrophes is ifot de pendent - upion the filing ofa petition but upon the pay ment over a period of time of a rate of return comme nsurate with the long run risks inherent in the air transport industry. aN 7 : ee the ined should 6x j a rate im whieh the re- . tarn on investment did not fully recognize those . risks, its order would, of course, be subject to judicial review. -Actually, because of the risk of catastrophes, the Board has ‘given air carriers a high rate of return on their investment. Thus, in the decision‘which TWA now seeks to destroy by a retroactive revision of: rates, the Board fixed a rate calculated to give TWA a return of 13.17. per cent, after taxes, on its investment (see page: 7, supra). : - In considering the risks of the biiedisinins 1 in com- puting the rate of return, the Board was follow- ing the: accepted practice in public utility: rat RU making.“ While ‘tgroundings®”* may be a ‘risk peculiar to air carriers, public utilities are also subject to ‘‘eatastrophes”’ of different? kinds cludmg: strikes, floods, hurri ‘anes’ and explosions. The courts have given no indication that. the possibility of the occurrence. of “catastrophes” ~ affecting a public utility, makes the refusal te reimburse past losses yn a.rate “arbitr ary” and. a “unfair’’. ae Since it appears that airlines receive the same treatment witli respect to disasters irrespective of whether they have a petition on file with the Board, we turn now, to the problem of losses aris- ing from normal changes... Such changes. cori-, cern variations in the volume of traffic, in the level of costs, and similar factors, rather—than ‘atastrophes. They do not change abr uptly from day to day.~~ Nor does’ a reasonable 1 ‘ate become confisc: atory, at a given hour, er on a. given day. ™ Bhic field - Waterworks & Imp? vee nt fo. Vv. Pars Nervice C ommixsion, 262 U.S. 679. “The past. losses which the utility ona to recoup in. Galveston Eleetrie Co... City of Galveston, 2o8 [TL S2 3Ss, resulted from the Galveston hurricane. “In the deci Ision which TWA now seeks to destroy by a» retroactive revision of rates, the Board st: ated it Was fixing a ‘rate.which would provide a fair and reasonable return “al- though on. the basis of reported résults for selected short pericds the rate may appear either unduly high or unduly low” (see ‘page 6, supra). er . i 90 On the other hand, it need not take very. . long for. -a-carrier to file a petition.” The complexity and PR Senemne nature: of “the ‘task of preparing a petition may -be. judged by reading TWA’s petition in the instant case (CR. 8-13). 'Fhis petition is ‘typical. The Board's regulations do not. aeeee that.a petition be sup- “ported by profound economie studies.- All that*is:’ required i is that the-petitioner state the rate which “it be Tigves fair and reasonable. This re ‘quirement, in practic e, las impose ‘dno burden AS Carriers commonlk petition for the hig hest conceivable rate and, should they ert, in the original _petition, the Board has. freely permitted améendmerits. ‘In ‘any event the rate findilly fixed. by the Board must. be. hased upon the evidence of record rather than ‘ the rate asked for inthe petition. ae " TWA also-argues thats new petition may be’ filed by a carrier the day after. the Board fixes a future rate and that the rate. Hixed on the new - Te “Board's » Beco Regulations oie Pequire that — miail-rate petitions | be verified by three officers, im the ase. of uw corporat inn, and that the following information be ih. ¢ rude cl: fo “The petition should, in , accordanc e with the provisions of _ section 406 (ce) of the Act, ine de.a statement of the rate the ““‘netitioner believes to be fair and reasonable. In this connec- lion. the rate- making elements set forth in‘section 406 (b) of the Act should be particularly considered by the petitioner _in the preparition of the petition. Opportunity for argu- ment will be giverat the public hearing.” ‘wil ‘Nerowauties Board, Leonomic caged Part 216.1 at eX 14 Code of Fed. Rég. ( 1S} bal Supp. ), See. 216.1 .-(f)).. ~ 91 petition would govern the period after its filing so that the first Yate would ‘never have beet ‘final’ n the sense of ae been immune fro revision for. any period .« * time” (Br. 76). The same argument. was ee d to, and answered, by the - Board (R. 87-88) : It has been cceoated that it will be the ‘effect of this décision to cause all carriers to keep a {* protective’, petition on file with the Board at all times in order to prevent unpredictable losses. We do not anticipate this development... From managerment’s viewpoint the situation will not be mate-— rially different. from that which has ex- isted heretofore. The carriers have long been aware of our unbroken: policy not to fix etroactive rates. Furthermore, the Board has exactly the same authority with respect to the date from which it can make its mail rate orders ‘effective, whether a new rate be higher or lower than one pre Vi- ously in. effect. Unless a carrier believes that it- will realize less“than a fai and reasonable return frea the date on which it files, there would be little point in filine. Should ‘it file and thereafter earn more -than-a fair and reasonable return, our rate. The order, effective from date of filing, would effect a reduction ‘in mail pay from that date forward. ae fact is that for over ten years. the Board has refused to revise: final rate s retroactively, and - the Board has rece ‘ved only ya handful of protec- 822455 — 49 7 be) 92. tive petitions. Experience-shows that “{‘protee- tive’ petitions. have not converted. the Act into the *‘cost-plus”” pricing device which TWA seeks. to create.” ‘“Reeent actions of the Board in recap- turing excessive profits earned during’ the pend- ency of a “protective’’ petition will undoubtedly &S firther disconrage the filing of such petitions.” * *S Carriers have-been reluctant to file “protective” petitions. Among the reasons why this is frie may be the following: the pendency of a mail rate proceeding creates uneertainty: profitS carned may be subject to recapture: financial -state- ments cannot be final, and the ability to float securities or negotiate loans is impaired. Indeed the experience of the Board indicates that rate finality is dictated not only by the provisions of the Act but by the necessities of business opera-. tions: ? : %° Western Air Lines, Ine. Mail Rates, Statement of Tenta-— tive Findings and Conclusions, Order No. E-2333, December 30, 1948. The Board stated (p: 4): “For approximnately a year and a half following the filing of its petition Western * earned a greater rgturn on its invest ment under the service raté fixed ‘by the Board 6n November 8, 1943, than the Board — is currently providing carriers for past periods, During this — period, the petition, from the point of view of Western, was’ protective. in nature, since the mail rate as established was mores dian adequate to provide a reasonable return, It Would be nore advantageous to Western,. therefore, if. as Western bas informally requested, the Board were only to re- -vise Western’s mai] rate from January 1946, when it first started to incur significant losses, since such a review would not result in offsetting relatively high profits earned from April 1944 to January 1946 against. losses suffered stib-e quently. © * * The effect of keeping the mail rate con stantly in issue through the-+evice of “protective” petitions, is to place the carrier on a cost plus basis. It would obviously be inequitable and contrary to the public interest to provide Protection to the carrier against Josses without. reciprocal - 93 Finally, there may be considerable doubt as to _whether a paper filed the day after a rate has -been fixed constitutes a ‘“‘petition’’, within the meaning of Section 406 (a) (1) of the Act. If it does not, or if it can be regarded as not filed in _good faith, the Board may, of course, dismiss the proceeding promptly without a hearing.. Clearly there can be no warrant for erroneously estab- lishing a ‘‘cost-plus’’ system of auditing for the determination of mail pay because of the theoreti- cal possibility that. ‘“protective’’ petitions may vive rise to limited problems under the Act. P . THE “ACT NEED NOT BE INTERPRETED AS TWA SUGGESTS IN ORDER TO- PRESERVE ITS CONSTITU- TONALITY TWA is not here seeking a declaration of the unconstitutionality of the Act, but is simply seek- ing to have this Court construe the Act differ- ently than did the Board and the Court of Ap- peals oh the ground that otherwise the Act might be unconstitutional.- TWA ar gues that notwitb- 7 standing the fact thatthe Act provides that TWA shall be given a fairand reasonable tmhail rate, that it Tay at any time petition for an upward revi- sion of such mail rate to a fair ‘and. reasonable level, such revision to be effective as of the date of protection to the Suaiianel against excess profits. Under ell the circumstances. we find that it will effectuate the’ poli- Ces of the Ae t to nis ake our rate erder fon Weste ‘Tir eflee tive from May 1. 1904. the approximate date of filing of the initial . petit ion. are “at . y 94 the petition, and that such rate determinations are subject to judicial review, the Act neverthe- less would be uneonstitutienal if it failed to guar- antee TWA a profit at all times. TWA’s position rests on the contention that it ig compelled to carry mail and must, therefore, be paid the *‘just compensation’provided by the Fifth Amendment in accordance with- this Court’s decision in United States v. New York Central R. Co., 279 VU. S. 73. In that ease, as noted earlier (supra; p. 52), this Court -held that the Interstate Commerce Commission was empowered. under the Railway Mail Pay Act of 1916 (39 Stat. 412, 39 U. S: C. .542) to make its rate orders effective as of the date the rate pr oceeding was initiated rather than upon the: issuance of the order. However, the. Court expressed the opinion’ that. no constitutional right aecrued until a feti-- tion or. the rate was filed. It stated (279 U.S. . at 78-19) : | : We assume that while the railroads per- _ form. these services and accept pay without ' protest they get no ground for subsequent ~ complaint. * * * But the filing of an application expresses a present dissatisfac =. tion and a demand for more. * * * Tf the chim of the railroads is just they should be paid from-the moment when the | application-is fled.. *.* [ Italies sip- plied, | . ‘This case, rather ‘than supporting TW A's (posi- tion, looks towards the Opposite eone lusion. 95 There is, moreover, a difference in the legal compulsion to carry mail imposed on -railroads - under the Railway Mail -Pay Act and the pro- visions of the Civil Aeronautics Act relating to the carriage of airmail. The Railway Mail Pay . Act required all existing railway common car- riers to transport mail.” The Civil Aeronautics Act limited the carriage of mail to those author- ized by a certificate of convenience and necessity -to- carry mail.” Existing“air carriers were given the right to seek grandfather certificates authoriz- ing air transportation for classes of traffie other - than” mail and unde separate | conditions the transportation of mail.“ It is thus clear that “A railway common carriers are hereby required to. transport such mail matter as may be offered” (39.0. § S 541). Cee “Whenever xo authorize d by its-certifieate. any air carrier shall * * * transport mail whenever required by the Post- master General” (Sec. 401 (in), 49 U.S: C. 481 (m)). -’ “Tf any applicant who makes application for a certificate ‘within one hundred and twenty. days after the date of enact- ment of this. Act shall show that, from May 14, 1938, until the effective date of this sectiat, it, or its predecessor in interest, Was an air carrier, continuously cperating as such (except as to interruptions of service over which the applicant or its — , _ predecessor in yuterest had no control), the | Board], upon proof of such fact only, shall, unless the service rendered by such applicant for such period was inadequate and inefficient, - issue ‘a certificate or certifieates, authorizing such applicant ‘ to-engage in air transportation (.A) with respect to all classes ’ “of traffic for which authorization is sought, except mail, be- tween the terminal and intermediate points between which it. or its predecessor, sO. cont inuousty operated. between May IS. 1958. ane the effective date of this section. and (BY) : i . ’ . Po - 96 while the railroads operating as of 1916, the date of the Railway Mail Pay. Act, had either to carry’ mail or get out of the railroad business . entirely,” air carriers had the legal option of | ‘arrying passengers and property without earry- ing mail at all.” When IT'WA “sought’’ its certificate to carry mail, it voluntarily accepted the obligation to carry. mail in return for the protection and benefits afforded by the Aet. The - fact that there Was an economic advantage in seeking a mail certificate, because of the broad _ benefits conferred by the need provisions of See-. tion 406, cannot obscure the clearly voluntary nature of the obligation assumed. This is differ- ~éht from the abrupt legal compulsion imposed on the existing 1 railroads by the Railway | Mail Pay Act. See also supra, pp. 65-68. 'TWA’s right to | compensation for carrying the mail is detined by the Act—not by. the Fifth Amendment. with respect to mai] and all otl.er classes of traffic for which authorization is sought, between the terminal and intermedi- ate points between which the applicant or its predecessor was authorized by the Postmaster General-prior to the effective date of this section, toengage in the transportation of mail.” (Sec. 401 (e) (1),49 UL S.C. 481 (e).) [Italics supplied. ] * After the Transportation Act of 120, railroads could “not cease to be such without the approval of the Interstate Commerce Commission. (49°U. S.C. 1 (18). ) * Ina major certificate ssisiciodlhaal indie pending before the Joard. the principal applicants are seeking certificates au thorizing the large Seale tr ansportation of property only: without the transportation of either passengers or mail. #7 Frvight ¢ ase. Douket SW, 97 The significant cases in the determination of the issue raised by TWA are public: utility rate cases, In such cases, the utilities perform repeti- _tive services at ‘rates which are normally pre- determined in aceordance with a prearranged statutory plan, just as is true in the present case. These utilities. operate under certificates of con- venience and necessity similar to those issued to - air carriers and: are subject tu the same type of compulsion to render service. ‘Ehe’ protection — afforded to such utilities by the Fifth and Four- teenth Amendments is the index of the protection such provisions give to air carriers under the Act. If these constitutional provisions do not guarantee profits to ‘Other public utilities there is no reason to suppose that they embody such a, guarantee sfor air. carriers alone.”= No citation of authority is required to establish the view that ‘fair and ‘reasonable’’ rates for public utilities afford the . substantive protection provided by the Constitu- tion. Such rates deal with the future and are net ‘normally concerned with reimbursement of past losses. They are not subject to revision with respect to, completed transactions but are final. Such rates afford an opportunity to earn a fair return but do not guarantee that such a return “will, in fact, be earned. This Court has repeat- * We are referring only to the Constitution and: nogthe Act. The Court below stated, *We cannot find in this statute any language which indicates that Congress inter ided to: gi: arantee to every carrier a profit” (R. It). om edly held that the Constitution does not guarantee the reimbursement of losses incurred by public utilities prior to the date of the petition.” We submit that the Constitution does not guar- antee a profit to air carriers alone. The failure of the Act to guarantee such a profit, therefore, does not render it vulnerable to a charge of eun- stitutional invalidity. The Constitution does not 3 require a different construction of the Act than was reached by the Board and the Court below.” we Fy deral Powe r Conem ianion. et al. v. Natural Gas Pipe - line Co. ef al, quoted supra, pp. 55-36; Galveston Electric Company v. City of Galveston, et al. 258 U.S. BMS: Ge orgia | Railway and Power Company et al. Railroad Commission, 262 U.S. 625. Aon "In ¢ ‘epitel Airlines, Inc. v. Civil Aeronautics Board, supra, decided December 6, 1! O48, the Court of Appeals for the District of Columbia Circuit had occasion to rule on the pre- cise question presented here. We believe that the Court cor- rectly analgzed and disposed of the issue in stating the fol- lowing: “4. The power to increase retroactively established rates, which have prevailed unchallenged is- not needed to vindicate the Constitutional requirement for just compensa- tion (Fifth Amendment), or to fulfill any contractual obli-. gation of the Government to the air lines. The Civil Aero- nauties Act. under which Capital chose to operate, embodies a scheme of just compensation for services rendered to the Government by requiring that fair and r [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%3A6. Public record. Not legal advice.