Brief for the Petitioners — American Airlines, Inc. v. North American Airlines, Inc.

Supreme Court brief1956

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Opinions Below... .. back eN eee bis ae BU eared ee 1

Jurisdictiogy ..-.... ee ee ey GPR Ce 2

Questions “Presented ey a 4

Statute Involved. 2.00020. / ; oar Bop - 5

Statement ..... se at SRG eri D Ae he nd Ga ee oe 4.

Summary of Foe IPR or ae een Ona i. aera

* INDEN

I. The court below erred in holding that section 411 “af

the Civil Aeronautics Act is confined to practices ine

volving fraudulent intent, palming off hy deception,

and “injury to a competitor Paine aCe se re phew

| IL. An unfair practice or method of competition is abun-

; dantly disclosed by. the Bourd’s findings...-......

. e “3 . / .

ITT. The court below exceeded preper bounds in holding that.

: it could review and rejeet the Board's determination

’ that this proceeding “*would be in the interest of? the

eae NE Bar ples Cows Seolee eres VeReere ee

A. What is the Klesner WET ic eae a ees ree

B."The rule of the Klesner case sitould/ be SN PG

and in no event should it he applicable to Spetion

411 of the Civil Aeronautics Act .....0..0006.2..

/ “ . .

" ©. Even if the Klesner’ case were applicable the lower

Cg ee PE ee Peed Pere

* Conélusion bites cake aes luteeen vite eae Sees

; CITATIONS

Air America Section 111 Proceeding, CAB

E-8470. June 24, 1954 ........-. CRC Ee new

‘All-American Certificate Renewal Case, CABS ¢

E-7294, April’ 10, 1953 2... 0.0... aug aes PO algek ba.

All American, Pick Tp, Delivery Service, 2 'C.A:8 133. 134

Spe, SPACE a eee ee aes Due Kae a SES CS pata bae ks

“Oy N

- Federal Trade Commniission v. Motion PRture pod

Ste ~ .. Index Continued

a oe ack aks age : ou Page

All American Suspension Case, 10 C.A.B, 24, 25-: 26, o6-36..... - foes

Amiérican Home Benefit Assn. Tne. v. American Bene fit Assn.,°

Ine., 63 Idaho 754, 761-763, 125 P.2d 1010, 1013-1014. . 27. 28

American Oil Co. v. Norkus, 358 Pa. 407, 57 A: 2d S68 ere 28

American Shops v. American: Fashion Shops, 13 NJ. Super. \° °°

** 416, 423, 80 A.2d 575, 578, cert. ‘denied, ‘ Nu. 976, 83 A2d,

379 Tete ea “48 60 Ree 8 Sh SRG RADEA SOO ONS BO Eres tar 28 .

American Thread Co. v. North American Thread Co. 33 F.

EC ree ere err ee re

American Waltham Wateh Co. v. United \81 '

_- 173 Mans: 85, 53 NIB. 141 ose eee .. wataes ne : _ 28

Bank & Thust Co. .Y: Gearhart, ‘45 Cal. :

OE WING: WN Gea ae Gh sickens C8 tg Ri A RRS Ronan Cs 7

Bunte Bros. v. Standard Chiecsbeies, 45 Vr. Supp. 478, 481. 25°

GC. & W. Thum Ce. v.,Ackirman, 257 Fed. 394 eons 5 eee ee

Charles of the Ritz v. Federal Trade Commission, 143° F2a°

a ee re re oa a oes cre iad are oe Gi aie oh 26

Corde Nast Publications v. Vogue School of Fashion M., 105

ee eS Berra Et LPGts ca aeceess “28

ppb Corp. v. Federal Trade Commission, 125 oF 2d 679, G82 22

_ Dennison Mfg. Co. v. Thomas Mfg. Co., 94 Fed. G61 .....5.. 27

Esquire, Inc. vy. Maira, 101 F. Supp. 398, 402 ............%. 25

_» Eugene Dietzgen Co. v. Federal Trade Commission, 142 B.2d-

$21, .327,. cert. denied, S53 U.S. F30 . ow... ieee. 23

Fashion Guild v? > Trade Commission, gf JS. 457,-566...... ame

_ Federal Communications Commission V..- Pottsville Broad- r

casting Co., 309. U8. 134, 141-144 2.006.000... Petes i

Federal Tratle Commission v. ‘Algoma Co., , 291. US. - me:

= eee Se ua Pore er eer eee 30,

Federal Trade Commission v. Gratz, 2! 53 U.S. 421, 427....... 20 2

Federal Trade Commission V . Keppel at mh 291 U.S. 304, ©

I ae ON ca vek dee bas 20, 21-2 22, 24

Federal Trade Commission v. Klesner, 280 U.S. 19, 23,° 24,

hee Chic iuic cans hae tu ts fe kkee ves 19, ho 33, 34, 35

Federal Trade Commission v. Klesner, 25 F.2d 524, :

Bh S. 392, egpians Poo a'saeeeeee da cS saw ese ncncaws tess

Index Continued a , ii,

, Page.

Galter Vv. Federal Trad: Commission, 186 F.2d 810, 814, cert.

denied, 342 U.S. 818 ......... fale a's WEE cP CT,

Gehl. v, Hebe Co., 276 Fed. 271, 272-988 oo oe... ee es

Gimbel: Bros, v. Federal Trad Commission, 116 F.2d 578, 579 § 22

Gray ¥, Poseutl: S14 US, 402. ee SOs ss bac vactetereans 40

Household Finance Corp. Vv. Ge neral ’ Finance Cre dit Corp, 6

49 F. Supp. = RE. fo Serres Mb sSNA AAD RCCL SSS -. 27

Jecab Siegel @o. . Federal Trade Commission, 3: 27 U.S. 608;° .

ME A chi cased baeak ch ek Pree ees ere eee Pe Oe 15 —

Koeh v. Federal Trade’ Commission, 206 F.2d 311, 319 99

La Touraine Coffee Co, . Lorraine Coffee Co., 157. F. 24 115. ae

cert. denied, 329 Us. ur eae pak cotta ete ATW eee eS ot

Majestic Mfg. Co. v. Kokenes, 67 .. Supp. 282, eee err lal

Mastererafters C. a v. Vacheron & Const. Le C. W.,

291 F.2d 464, 4 aented, 350 U.S. 832 .. 2.6. eee 26

_Moretrenth (jorp, v. wes Trade Comprission, 127 PF. 2d i 792,

K5 (> kaa wou LLoe eee eee STC eee Te TC Le Pre Te ee ee ee 3h

Natgnal Biscuit Co. v. Sheridan, 44 F.2d 987, 988 0.0... 28

Navy Clab & AU Navy Club. 85 F, Supp. 679, 682... ..: nen ae

New A merican Library of W. L. v. Federal Trade Commis-

sion, a Big Be ERE ES Dae hake shhe tans 6 26

Ore gon- Ww ashingtan Plywe od Co. v. Federal Trade Commis- |

eee, WOE AO sek cis Coss gah cx Se Rane pee te 29

Parke, Austin & Lipscomb’ y. Federal Trade Commission, 142°. -

‘F.2d. 437, 441, cert. denied, 323 U.S. 753......6.......050: 36

Pep Boys.—- Manny, Moe and Jack v. Federal Trade Commibs-

_ . om, 122 F298 156, 161 .........., eee sere Pee ~ 22, 25

Reilly v. Pinkus, 3838 US. 269, 277 0.0... ey ee 22

‘Rosenberg v. Rosenthal, 135 Mise. 282, 284. 265, SS N.Y. tz

Baie. G2 O608 2.5)... ccc. cas tare ee nee ede teckel 28°

e : a Johnson & Son v. Johnsen, 28 F. ‘Sana e744, 749,

relief mod. on ae gk ES y GUY eeerras ae

~Seattle Taxicab Co. v. De Jarlais, 135 Wash. 60, S, 236 Pac.

EE oan oc akcs ce Sich GARE ThE ROE ORs Sas ae ae

Shaver Vv. Heller & Merz Co., 108 Fed. “821, 824-895. OF

Standard Bran&@v.-Smidler, 151 F.2d, 34, 87 ...0000.00020..0°:« D5)

Stork Restaurant vy. Sahat, ee ee a ng a Secaaucuhs 25, 27

Tillman & Bendel vy. California. Packing Corporation, 63 F.

2d 498, 505: i, cert. denied, 290) US - 638 ockpke Veemek 29.30

iv Me Index Continued

' United Drug Co. v. Obear-Nester Glass Co... Hl. F.2 d 997.

Page

1000, cert. denied, 311 'U.S: GR 2... ee le, “, ao

United States v. Morton Salt Co.. 338 TS, 632, 640 et seq. 36

Universal Gamera Corp. v. Labor Board, 340 U.S. 474, 488 40

Statutes: eo: io % .

Civil Aeronautics Act, $§$-401, 411, 416, 49 USC §$481,

491, arcades hae tl nek een ee Oi eask ak

Federal Trade. Commissiong Act, “$5, 15 v S.C, | Teepe 4

Lanham Trade- Mark Act, S$ 8, 15. “y I US.C, S$ 1058, 1065,

Seer arc c ans OE ee og area a Reha toa Lae ee oe, ee

Wheelertea Act of 1g 2 Stat. W1........... eee 23, 24

Cal. Civ. Code 2406 “ame ..........: Civ iasnGnccneeess EN

‘Miscellaneous: - oe et .

Beer, Federal Trade Law and Practice, 79 (942) 00.0.0... laay

Business \Name Regulation: of Civil Aeronautics Board, 14 -

C.P.R-AS8 202.8, 291.28 2.22... Paks Satay eh a) S

83, Cong. Ree. 6726, 6431 (1988). oo. .s. 66. c ike eee eres

II; Rep. No. 1613, 75th Cong. Ist Sess. 3 (1987). 3.0005. eg

Handler, Unfair Competition and the Federal Trade Com-

mission, 8 Geo. Wash. lu. Rev. 399, 404 0... . Sees euKs 20, 33

Hearings before the Subcommittse of the Senate. Committee

on Interstate Commerce on S.°3659, TAth ene», 3d Sess.

WD BROOD ws tsenias en alae Wal FEET CET PCE hee 23

Henderson, The Federal, Trade Coinmission. 53-54 (1924). 7

‘Nims, °U nfair Competition and Trade. Marks 1048, (4th Ba. a

: 1947). tetas Win ake OL ae REE La OR Sere coe 2a

Trade Name: Confusion Cases at Federal Trade Commission.

. 16 O.F.R. §§ 3.2240, 3.2246. oe. ee Syeoe ocak 2

Saat 4 Pe, ; ¥ ae

° i

an, “ of

IN THE

Supreme Court of the United Stites.

OcTroBER TrERM, 1955

No. 410

AMERICAN AIRLINES, INc., Petitioner,

*NorrH “AmMericAN AtkRLINES, INc., Respondent.

(ON WRIT: OF CERTIORARI TO} THE UNITED STATES COURT OF

APPEALS FOR THE DISTRICT. GF COLUMBIA CIRCUIT

BRIEF FOR THE PETITIONER

OPINIONS BELOW

The opinion of the Court of Appeals for the

District of Columbia Circuit, not yet reported, -ap-_

pears at pages 411-435 of: the Record. The. opinion |

of the Civil Aeronautics Board, together with ..

those i -of its Examiner’ as were ‘specifically.

didopted by-the Board, ‘appears at pages 199-229 of the

Record, and the full Initial Decision of. the. Examiner |

. appears at. pages ‘183 “199 of the Record.

: ire cy ee

ee eo JURISDICTION...

7 The judgmeut of the Court of Appeals was entered

on une 238, 1955 CR. 437). The ‘petition for writ of

certiorari: was ‘filed on September 21, #955, and was |

granted on November, M4, 1955. Bae jurisdiction of

this Court: -is based on 28° Lise S.C. § 125401).

é:

AAS. one _ QUESTIONS PRESENTED. Shae os

Under Section 411 of the Civil hernsacdivn Act

(49 US... § 491), the Civil Aerénautics Board “may,

_ if it determines that such action by it would be in

the interest of the public, investigate and determine

* whether any air carrier... has been or is engaged in

unfair or. deceptive practices or unfair methods of

competition: If, after notice and he: ing, the Board

finds that the carrier-is engaged therein the Board

shall order the varrier ‘‘to @ease*and desist ‘from

such practices or methods of competition.’” Here, fn

‘a Section 411 proceeding, the Board ordered the re.

spondent ‘‘to cease and desist from engaging in air

transportation. under the name North “‘Ameniotn

or any other name which ine'udes the word American.”’

The order was based.on subsrantial evidence and. find-

ings disclosing that respondent ’s recently adopted name

of ‘*North American Airlines’? is confusingly similar

to petitioner’s, long-established and -well-known yame

of ‘American Airlines”? and that respondent's use of

such name causes the public serious and widespread -

confusion and inconvenience by chee king in with the

wrong -earrier, attempting to purchase transportation

from the wrong carrier, meeting flights of the wrong

carrier, and otherwise. The questions presented are:

Did the findings of widespread and serious

public confusion from the use of a similar name

a. ic ' ie) 3

«fall short of showing ‘unfair or deceptive prac-

-tices or unfair methods of competition’’, and is

it essential to such a showing that it be found that -

respondent wa@@ruilty of fraudulent intent to de-

..ceive'or of -palming off and had injured a com-

petitor? Nene Rey sie : | ;

2. When reached after full and fair, hearing

and argument, with the factors affecting the public

explicitly weighed in a considered ageney opinion

fully supported by the officer who heard the evi-.

* dence, is the Board’s determination that-this pro-

ceeding is ‘‘in the interest of. the publié,”’ in that

its object. is to correct and avoid wasteful and

harmful] inconvenience to passengers and prospec-

tive passengers in the operation of air carrier serv-

ice, open to veto by a court where the administra-

tive action is taken by an ageney especially

charged by Congress with responsibility for. pro-

tecting the public interestgin air transportation ?

. a» “Se . :

. | * §TATUTE INVOLVED

Section 411 of the Civil Aeronauties Act, 52 Stat.

1003 (1938), as amended 66 Stat. 628 (1952), 49 U.S.C.

"$491, reads as. follows: :

“) “The [Civil Aeronautics] Board may, upon its

own initiative or upon complaint by any air carrier, |

foreign air carrier, or ticket agent, if it considers

that such’action by it would be in the interest of

the public, investigate and determine whethey any

‘air carrier, foreign air carrier, or ticket agent

has been or is engaged in unfair or deceptive

practices or unfair methods of ecompetitien in

air transportation or the sale thereof. If -the

Board shall find, after, noticé and hearing, that:

‘such air earrier, foreign air earrier, or ticket

agent is’ engaged in. such unfair or deceptive

—thesnargin:

practices or unfair methods of competitipn, it

shall order: such air carrier, foreign air carrier

or ticket agent “to cease and desist from Such

practices or methods ot competition.’

Pertinent excerpts from the similar Section 5 of

the Federal ‘Trade Commission Act are printed in

| STATEMENT re es ae

. os . 2 x ‘ P) F .

The petitioner American Airlines, Inc. (here inafter

American”) and the respondent North American

‘Airlines, Ine (hereinafter ** North American’ ) “are

competing airlines (R. 171, 220). American is a

scheduled airline operating pursuant to certificates of

1 See, 54 (a) Unfair methods of competition in commerce, and.

unfair of dec ‘eptive ucts or practices in commerce, are declared |

unlawful,

‘*The Commission. is “empowered and directed te prevent .per-

Sons, partnerships, or. eorporations, except ‘banks, common car-*

riers subject to the Acts. to regulate commeree,. air carriers and

foreign air carriers .. from using unfair methods of compe-

tition in commerce and unfair or deceptive acts ‘or practices in

commerce. ,

‘*(b) Whenever the Commission shall have reason to’ believe that

any such person, partnership, or corporation has been or is- using

any unfair method ef competition or unfair or deceptive act’ or

practice in commerce, and if it shall appear to the Commission

that a proceeding by it’ in respect thereof would be to_the interest

of ‘the public, it shall issue - . . a complaint stating’ its hares

If upon such hearing the Coniission stral be of the

opinion that the method of competition or the act or practice

‘in question is prohibited by this aet, it shall make a report in

writing ... . and shall issue... . an order, requiping such person,

partnership, or corporation io cease and desist from using such

method of competition or such uct Or practice."" 38 Stat. 719:

(1914), as amefded, 52 Stat. 111 (1938), 52 be TO28 (1938)°

64 Stat..21° (1950), 66 Stat. 632° (1952), U.S.C. § 45.

public convenience and necessity issned under Section

401 of the Civil, Aeroniuties Act %49 USC. » 481)...

‘and- it provides botli low eost ay coach or air tourist

Service and Sr st cl@&s service (R172. 232, 240). North

American is a large irregular airline operating air -

coach service (Exh. AA-10; R. 175, 181) pursuant to’.

: letter of registration issued under Section 416 of ~

Civil Ae ronguitic s Act (49- U.S.C, § 496) (R171, 290),

American and North American contpete betweene

New York, Chicago and Los Angeles (R. 2: 20), one of

the most. heavily travelled air routes in the nation.-

Both: carriers operate frequent and daily ona aiea

tinental air eoach service (R. 104-105, 172, 277).

Los Angeles they) operate, from different aoe

North American operates from the Burbank airport

(R. 104) where’ its transcontinental service has been |

quite substantial. (R. 104-105). American | majntains

a ticket office’ at the Burbank airport (R..41) bit its

planes operate frgm the Inglewood (7.¢., the Interna- °

tional) airport’ (Exh. AA-4; R. 103, 157).

North -American also operates between New Yorks

and Miami (R. 117 American. does not se Ive Miami

(Exh, AA-5; Re 103, 160).

The petitioner was incorporated in 1934 under its”

present name,-and ever since has engaged in extensive

alr carrier service under the name of American Airs,

lines (R. 220). Hs- predecessor. ‘ope rated under the

* Section 416 empowers the Board to exe mipt air carriers from

any reqdirement.of Title IV of the Act. The Board has exempted

carriers operating irregular’ Service from. the requirement of a

certificate of convenience and necessity in Section 401 of that

Title. Such carriers operating taree tratisport eraft are styled

large irregular carriers. They are issued letters of registration |

as evudg@ce of their exemptions.

; } 6

> name American Airways, heginuing in 1930 and con-

tinuing: up to the incorporation of the petitioner (R.°

i In 1949 petitioner registered the words ** Amer-

‘an Airlines’? on the Pate nut Offic e's Prine ipal Reg-

-ister’as a service mark used in air transportation.” In

ithe words of respondent’ s' counsel, American Airlines:

is” ‘considered, J think, bya great part of the travel-

—

$Phis: mark now has the protection afforded by the incon-

testability provision in Section 15 of -the Lanham Trade-Mark

' Act, 60 Stat. 433 (1946), 15 U.S.C. $1065. This Act, which

vastly e xpanded the federal protection afforded to-registered marks,

did not becéme effective witil July. 5, 1947, and the processing’

of ‘applications was at first slow. Petitioner's application, for

registration was filed July 27, B48 and was vranted on August

Te 1949. (Exh. AA-3; R. 147- 148, 171). Immediately affer—- >

registration, Section 33(a) of the det, 15 U.S.C. § 1115(a), makes |

the registration certificate “prima facie evidence of registrant’s °

exclusive right’? to the mark and thereby puts the burden of

proof on the one who is denying the validity of the mark, even

though All “Tegal or equitable defenses’? are not foreclosed dur-

ing the ftxst five years. That was the situation here at the time

‘of the hearing before the Examiner in March 1953. But the five

year period of continuous use after registration required -by Sec-_

‘tion 15 has now expired, and public documents at’ the Pate.at

Office indicate that petitioner on January 14, 1955, complied with

the necessary filing requirements of Sections 8 and 15 of the Act

‘which -bring the incontestability provisfon into effect. © Section

33(by of the Act; 15 U.S.C. §11145(b), provides that where,

as here, a mark has become incontestable under Section’ 15, the

Yrtificate of registration ‘‘shall bé conclusive evidence ef the

t to use the registered mark’’ Nee

revistrant’s: exe lisive rig

cordingly, since st could never even be suggested that the name

‘*Ameriecan Airlines’? was registered fraudulently or 4s otherwise

‘defective as set. forth in the provisos to Section 33(b), in a judicial

proceeding any contention that the mark ‘‘American Airlines”

is invalid, or is **merély a geographical” term and does not have

a secondary meaning re fering: to petitioner, would be precluded

as a matter of law:

ing public the top airline, the best. known airline, in

the. United States’* (R83).

The respondent is a North Carolina corperation, but

its: principal office is at Los Angeles, Califoriia (R. 1)

The respondent applied to the Civil Aeromiutices Board

for, and was issue d on July 22, 1947, a letter of regis-. -

3 tration in the name of ‘Pwentieth Century. Airlines,

Ine., which was then respondent’s corporate name (R.

“O-4).

Without making any effort to change és name in

the “letter. of registration and without notifving the

it aarti respondent on April 24, 1951, hegan Ri

Bees Hane at North aeeks Sine (R. be 308-

309). In accordance with a California law, respond-

ent-on May 21, 1951, filed in the Office of the Clerk

of the County of Los Angeles a certificate of conduect-

ing. business under this fictitious name (RR. 1), but-it

was almost a year later, on Mareh 3, 1952, when its

articles of incorporation were amended so as to change

its name to North American Airlines, Ine. (R. 1,

309). Thereafter, respondent sent the Board a letter.

dated, March ‘11,°1952, advising of the change in: cor-

porate name and suggesting reissge of the letter of

registration in. the new name (R.173).

On August 19, 1952, the Board adopted its eee ee

Name Regulation. The validity of this regulation is

not here in question. Insubstance, it provides that an

air carrier$in de: aling, with the publie and in perform:

* Cal. Civ. Code § 2466. _ This law was dedeued to pr png: fly-

by-night debtors from ese aping their lawful obligations. _ Bank

& Trust Co. v. Gearhart, 45 9 Cal. App. - 421, 423, 187 ay 1d. 990

(Ist Dist. 1920) | | |

. . ‘ z i a3

-& ing air transportation services, must secure permis-

“sion of the Board to use any nante differe nt from the

hame in its ope rating authority.” :

In the preamble of the regulation, the Board ob-

/. served that, tintil the relatively recent -past, * ‘most

‘carriers were in fact doing business under their official

name Without any cormpulsion to do so”’ .(R. 295). The

Board noted that there had been an “‘incréasing tend-

ency, particuarly among some of the large irregular

‘arriers, to-use names differeut.from those in which

operating authority is granted by the Board’’, a prac-

tice which the Board found had ‘¥esulted in con-

‘fusion in the minds of the public, an. increase in the

administrative burden of the Board, and @reater dif-

-fiefilty in achieving adequate enforcement of the Act

and the regulations’’ (R. 295). The Board announced,

however, that where.a different name had already been

used by a carrier to build up good will, such name.

would be barred only if its use were found after rioticé

and hearing to contravene Section 411 of the Civil

Aeronautics Act (R. 297 )." . ogi

The segtion of this: reguiation Ne involved apflcars as Part:

291, 28 of S Board’s Economic Regulations (14 C.F.R. § 291,28),

and is ‘printed in. the Record at. pages 295-298. “Several regula-

tions, substantively” identical, were adopted simultanedisly, each -

rexulatidn: being applicable to a different type of carrier in @e-

cordance, with the different types of operating authority. Thus,

one regulation applies to carriers holding certificates of convenience

and necessity (i4 C.F.R. § 202. 8),- whereas ‘another reguiation

governs Jarge irregular carriers holding . letters of registration

(14 CFR, § 291.28).

®The full. text of this preamble to the regulation appears ai

pages 295-297 of the Record. | The .preamble was omitted when -

the regulation wa’ compiled into the: Code of Federal Reguiations,

14 C.F.R. § 291.28.

On October6,-1952, pursuant to this regulition, re-

spondent applied to the Board for permission to use

the bame Nerth Amevigan Airlines, Ine. (R. 1),-and

the proceeditig. on such application wa assigned

Docket NG. 5774 (R. 3). The petitioner objected to

the graft of the application and filed a memorandum *

dt complaint alleging that the use of the name North

American Airlines caused public confusion between

respondent and petitioner and constituted aw unfair or

deceptive practice or unfair method of competition im

violation, of Section 411 of thé. Civil Acronauties Act ;

tlie petitioner- also: submitfed supporting affidavits’

(R.5).

| The. Boag considered the: petitioner's: complaint

and concluded that: it raised ‘*important issues of fact

~ and Jaw which can be decided only. after a heating’

(R. 5.). Accordingly, on January 28, 1953, the Board

‘issued an-order directing the commencement of a pro-

ceeding to determiné whether ‘‘ North. American hag

been and is engaging in ac tivities and practic eS in vio-

Jation of Section 411 of the Ac t, and if auy such viola-

tion is established, whether the Board should issue an

order directing North American to cease -and: desist

fréur such violations’? (R. 6)... This -proeeeding was

assigned Docket No. 5928. -In° this same order, the

Board consolidated the Seetion 411 proceeding with.

the preceeding in Docket No. 5774 on respondent’s

applic ation to change its official name, and both pro-

ceedings were set for hearing hefore one Ex xaminer

(R.. 6). In another order, the petitioner was per- .

. mitted te intervene and become a party to support the

allegations in its complaimt to the Board (R?.6- 7).

The Boartl also. provided that, pe nding final decision |

in the pros eeding, "1 respondent? - continued use of the.

« -

North Jmeriea an name oil not constittite av lolation:

of fhe Business Name Regulation CR. Dp)» It is clear

that the only issues. in the proceeding were those

arising wider Seetion ALLof the Aet Ck, 209 n. 10).

At theensuing | hearing, both the petitioner (R. 221)"

and the respondent CR. 223) introduced evidence CM

teen Witne8ses_ testified oie numerous exhibits were ©.

reveived: in evideiice (R. iii-x). Likewise traffie ‘sur-

-vevs, “carrier -reports, schedules, and other statistical

) ‘and documentary material were incorporated in the rec-

ord by reference pursuant to stipulation (R>+72).° The

Board’ s Enforcement Attorney appeared (R. 7) and

actively participated throughout the. proceeding .in-

eluding its briefing ané argumeiit, although he did not

.° sponsor any Witnesses or exhibits.

After receiving briefs the Examiner issued an ex- «

haustive Initial Decision finding that respondent’s use —

and advertising of the nage North American violated

Section 411 of the Act CR: 184-199). Accor dingly, the.

Exdminer recommended that an order be entered re-

quiring respondent ‘to cease.and desist doing business

in air transportation under the name North American

Airlines, Ine. or any variation of the name ‘Ameri-

ean’ ’’? (R. 199). ° . ees

ris ;

The ‘respondent tiled exe ceptions with the oe] and

‘after the normal procedure of briefing and oral, argu-

ment @R. 200), the Board issued its opinion (R. 199-

229). It specifically adopte A(R. 201) and set forth

in an appendix (R. 219-229

‘yimerous of the findings

made by the Examiner, and the Board made additional

findings ‘and conchisions of its own.

x On the egridence the Board: “found that the public

confuséd the respondent with the petitioner. because of

| in

_ the res onde nt& use of the uames North, American and

North American Aiflines and thetr similarity te the.

names American and American Airlines (R. 201- 204).

This confusion e ‘xisted not onl? among: passengers. and

“persons - ifquiring - ‘for flight information, but even :

among merchants and cyeditors (R. 301 -202)—sthough

ads, & he bulk of the confusion ‘shown in the ree ‘ord was on

the part of persons rez isonably identified as prospective

or actual, purchasers of air transport tation” CR. 2002).

‘The Board further’ found, that. there Was -no poe

‘that the erent s log use and extensive adyertising -

of the name AmeNcan and American Airlines, and the.

common reference to the pe titioner by the newspapers

.as ‘American, had created a public - understanding that,

as used in connection with domestic air services, : -the

words -Anierican and American -Airlines signify the

‘petitioner (R. 206-207, 220- 221, 227). =

Likewise, the Board squarely. rejected the respor:d-

ent’s contention that: the confusion was “not **sub--

stantial or widespread” (R. 204-205). While the

Board’ found:it unnecessary to.endorse thé Examiner’s

numerical estimate that’ the. instances of confusion-in

the Los Augeles area ‘alone amounted to some 200 a

week, its analvsis‘of the evidence show ed that the con-

. fusion was, indeed, substantial in amount and was not

de minimis as the respondent had contended (R: 205-

206) -the evidence of confusion at both Los Angeles

and New York was‘abundant is (R. 201).

The nature of this widespread confusion was found

‘by the Examiner, in findings adopted by the. Board,

as. s follows - re

o ° BD

“The above evidenve wenerally inv olved nnmer-

ous Anquiri es on the part yf the public. made to

f : 12 : D x

American employees -coneerning service, rates,

routes, and schedufes wf North Amegican under

the mistaken impression that North American sands

American were one atid the same airline.” hare

“An officer of American testified that he had

received: from emplovees under his supervision

numerous inquiries indicating confusion between

American Airlines and North American Airlines,

and that * * * his office had received a telephone

call from a representative of a trade union, com-.

_ plaining that an American sign was being painted

by non-union painters, and upon ipvestigation ‘it:

was fonnd that the sign was tWat of North

‘American. Thee were instances of air passengers |

-holding. Nerth American tickets attemptirig to

check in for North American flights at American

ticket coutters—in fact, at the Burbank office this

was a. daily ocgurrence—and many “yf * the

passengers were. still confused ‘after an explana- |

‘tion had. been made that American and North

American were4wo different airlines, There were

instances where. North American passengers

attempted to claim their -haggage at the American

counter; also other ‘instances: where prospective .

- -passengers insisted they were entitled to a discount

for transportation on American because they held

‘a ‘Buyers LeagnesSttip Book.’ Upon an in--

vestigation hy the passengers os the

inquivies, it was learned’ that it was North

American instead of American whiidh offered :

discount. a | es

“There. were other instane ‘es of persons ‘meeting

incoming North Américan passengers who made

inquiries at& the .American ticket counter at

Burbank to.determine time of -arrival. - Other

inquiries were made of American-agents at Tos

~~ @ Angeles concerning an #80 fare from Lov Angeles

, . to New °York, which the persons had héard

oe ady ertised on television, and upon investigation it

>. meaiee

3 Z |

Was found that it was North Americanethey were |

referring to. and not American One, witness

testified that she had. heard people state that they

were under the impression that North American

and, American were the same or affiliaged com-

panies, Anether witness for Arerican testified

that one person insisted that American flew from

New York‘to Miami because she had heard a radio

program to that effect, whereas the program: in

question was that of North American. There were

instances where-mail addressed to-North American

was delivered to oAmerican -Airlines’ | office.

Tradesmen haye | dunnéd American for. bills, owed

by North, American and hotels have ‘requested

American’s advice as to billig for hotel charges

incurred by Nort h American crews,” A Witness, for

American stated that at its Burbank office the

president of North Ameriean, who is on duty af

the North American ticket counter at Liovkheed

air terminal, informed her that Thany, persons

woild stop at his counter and request tiekets, 16

Dallas, Oklahoma City, or Tulsa, points whieh. -

North American did not serve, and he ‘would

realize that the passengers were confused and that

they were umler the impression it was American's,

‘ficket counter. The presidend fiirther stated tothe

witness that if the passengers were destined ta

New York or Chicago he would do everything ke

could to #steal? them.

“There were many other instances: similar to

those referred to above that need not be repeated

here. In general, they indicate that’ certain cone.

‘fusion exists on the part sof the opublie in

distinguishing: the services of the twe airlines in

question.” ‘ _ 224-2: 23) (Einphasis added).

"Finally the Board found : Pass

ogee a record is convincing that the public

interest requires this, action im ogder ta prevent

\ +

red bd : — 14

farther publie confusion between respondent and

public is expected of common earriers, and the

_ public has a right to be free of the inconveniences

which flow. from: confusion between” carriers

engaging in the transportation of persons by. air.

‘The speed. of air travel: may well be diminished

When passengers check in. for: flights with the

wrphg carrier, or attempt to pure chase transporta-

tion from the Wrong | earrier, or direct their

inquiries to the wrong carrier. Friends, relatives

or business associates planning to meet passengers

‘or seeking Sulceisitiat on delaved arrivals are

subject to annovanee or worse When confused as

to the carrier involved. The proper handling of.

complaints-from members of the publie is impeded

-by confusion as to thé earriér to whom the com-

phaint should be presented.c The transportation

itself may differ’ from what the confused pur-

chaser. had anticipated (e.g., in terms of eqiup-

ment), even though the time and place of arrival

may -be about the same. [t is obvious that publiv

contusion betw een air carriers operating between

the same cities is adverse té the public interest,

and Wwe have determined that the publie should be

protected from the effects of the confusion shown

intervenor due. to similarity of ames, -The

maintefance of high standards in dealing with the |

on the record by eliminating what we find to be .

the cause of such confusion.”? (CR. 208- 209)

‘The. Board cone luded, as had its Examiner, that the

respiondent’s use of the name ‘*North American Air-

lines??, “North American” or anv. combination of the

word *!American’’ constitutes an unfair or deceptive

-practiee and an unfair methed of competition (R. 210-

211). Aécordingly, if determined that the respondent

and. its agents should be ordered to cease and ‘desist

from engaging in air transportation under such names

aN Be

, oe

(CR. 211).- and an appropriate order was entered

CR. 229-2 930).

fe |

“'Tfie eee diuily. petitioned the Sileisy court to

review the Board's order. The petitioner intervened

(R..311).. * so

~ a

The issues on the appeal were precisely defined by -

prehearing stipulation approved bythe court TR. 306- |

311). They were limited to the following: «_.,

. Did any-combination of the Board’ s findings -

cgeiee a violation of Section 411, beeause of

the use*hby the [respondent] of the name North.

a Ainerican’ Airlines, Ine., North American Airlines

| or North American’ ef :

. Did the Bead’s findings “establish a see ond-"

ary meaning connoting American Airlines, Ine.,

in the words ‘American’ and ‘American Air-

y se

lines 9

Dia the Board find that the respondént’s use

of the North American name was fraudulent ?

= °

The oily other issues set forth 3 in the aaveed statement

related te whether various of the findings. as to the

existence of confusion, its probability, ete, were

supported by substantial evidence. : : .:

The lower court had the ¢ ‘ase under consideration for’

just over a vear. It did not age ee » with the respondent’ s

* It will be observed that-on the petition for review vO issue

‘was tendered hearing | on the scope of the Board’ s ordet or, its

appropriateness as a means. for remedying the Section 411 viola-

i 2: 2

tion if stich a violation were properly found to exist. ° Hence this.

'. case does not present the problem dealt with in Jacob Siege}. Co. vy.

Federal Trade Commission, “327 US. 608, 613 (1946), as to

whether some alternative forr of order should have been entered,

16 ° ee ae

attack on the findings of fact. Indeed, it quoted some

of ‘the findings and paraplirased others, and referred

in summary toa part of the evidence (R. 413-416, 418).

Rather it found that the. Board erred in “the applica-

tion.of criteria which fell short of the public interest

-tindings demanded by the law’” CR. 418).

In essence, ‘the lower court’s view of what the law

-requires is disclosed “in one paragraph, of -its opinion

opening with:a quotation of the following. finding by

the Examiner:

“There is no evidence of record that North

American. adopted-its name with infent-to deceive

sae tlie public or trade whee the gi odwill and business

reputation of. At ‘ay, or that American has —

been injured by eo operation . . .”? (R. 417)

~ (Emphasis added). : has

This negative finding of the Examiner had not been

adopted by the Board, but the lower court concluded,

from. its. examination of the, record, that ‘the

Examiner was correct’’—and it’ was the lack of

> findings and of “evidence that North American palmed

itself. off as American’’, or that North. American’s

‘advertising was intended.to or did entice American’s

‘passengers . . . or that American.was harmed", that

led the lower court to hold that the Board’s order Was

not supported by ‘‘the public interest findings

demanded by the law’? (R. 417-418). i

It is quite true that there was ne attempt. in the —

evidence to prove that the respondent had adopted its

name with fhe intent to trade upon the petitioner’s

reputation or that it had. deliberately sought to

simulaté petitioner through such devices as_ simi-

larity: of advertising format. The respondent had

‘argued that therefore it could not be held to be

afoul of Section 411 of the Act. In response to this

argument the Board commented, that when the

respondent, had adopted its name it Wis fully aware

of the petitioner's reputation, that operations. between.

major cities served by the petitioner loomed large in

respondent's contemplation, and that it. was obvious

that the name similarity ‘*might well cause confusion’

(R. 207): .-Henee, said the Board, the respondent’s use

of the name ity question *‘was not accidental or in-

advertent’? (R, 207). In other words, the case-is not

- like one,where two companies in- different areas have

‘innocently adopted similar names and later-come into

the sanie market. But unquestionably, | as the

Examiner and the lower court observed, there was no:

effort to prove conventional fraud or palming off.

It is also true that there was no effort to prove that.

any specific passengers had actually purchased tickets.

on respondent intending to purchase tiekets on peti-

-tioner. Rather the evidence and findings dealt w ith

such situations as that’of persons seeking reser vations

and fight information from the petitioner under the

impression that the respondent and the petitioner were

= same, coming to the petitioner’s counter to check

1 for flights under the same ‘impression, claiming

gee at the w rong office under the skme impression,

“Indeed, the Board noted that the respondent's own evidence

showed that in its radio commercials it referred to itself by name

“as one of ‘‘the nation’s four great. airlires’’ and that this was not

even remotely true of the respondent, whereas it was true of the

petitioner, which is one of the foug carriers ‘‘commonly referred

to as the ‘Big Four’ ** (R. 207-208 aq. §). The radio commercials

had been introduced by the respondent in the form of recordings

which’ it was permitted to withdraw subject-to call (R. 114).

18-

and soon. From all of this evidence it might well have

beer found that the petitioner had actually lost business

to the respondent as a result of this confusion, but

the Board made no such express finding and the ease

was not de alt with by the Board on the theory that any

such finding was nec ‘essary or particularly material.

In fact the Board's findings evince little interest in.

any question of. the extent of harm to the petitioner;

they are concerned. wholly with the confusion and

inconvenience caused-to the travelling public.

| SUMMARY OF ARGUMENT

— It is agreed that Section 411 of the Civil Aeronautics

_ Act, under which this;proceeding is brought, is at least

as comprehensive as-is its prototype, Section 5 of the

Trade Commission Act.

The lower court relied on a rather ancient obiter

dictum of this Qourt fo the effect that there could be

no ‘‘unfair method of eompetition”’ within the meaning

of Section 5 of the Trade Commission Act wiless there

were a showing of fraud. This Court has long since,

repudiated that dictum by its decisions, and a long line

of cases under Section 5 deny the necessity, for any

showing of fraud or of palming eé in the conventional

common law sense. The lower court also erred in itg

determination.that the Board’s order was defective

heeause not supported by a finding that the similarity -

gi the respondent’s name to tin? of the petitioner had

caused loss of. business to the latter, The Wheeler-Lea

-mendment to Section 5 of the Trade Commission

~ Act, which is incorporated in Section 411 of the: Civil

Aeronautics Act,/was specifically intended to legislate

out of the law the requirement of a showing of com-

petitive injury. |

Trade name confusion. is an accepted subject of

concern to the Trade Cominission.. Nor is it necessary,

to support a cease and desist order, that there be a,

showing even of actual confusion. Probability of

confusion, is sufficient. | | Sighs

The lower court also misapplied this Court’s decision

in the Alesner case.” It viewed that case as warranting

a court to substitute its own judgment for that of the

Board in determining What is to the interest of the

~ public. ees a cette

F > : e

Actually the A/esner case meant No more than that

the Trade Commission,. in initiating Section 9 pro-

ceedings, should be motivated by concern for the publie |

and should not lend its processes simply to the settle-

ment of privaté grudges. This Court should reconsider

the holding in the Klesner ease that-the administra-

tive determination ‘as to what-is in thé interest of ‘the

public is reviewable ina. court. sut, in arty event, that

case should not be applicable to,Section 411 of the Civil

Aeronauties Act, for that Act confers upon the Board, -

to a special and peculiar extent, the: responsibility for

the determination of the public interest in matters

affecting air transportation. Section 5 of the. Trade

Commission Act, under which the “Alesner caSe was

decided, imposes no such degree of reliance upon the

special competence of the Commission.

— However) even . though the. Klesner case were

applicable here, the lower court plainly exceeded |

proper bounds for judicial review. The Board care- -

fully and explicitly weighed the public’s interest in the

problem with which it dealt, the considerations moving

it to action were of real public concern, and a court

cannot override them with its own conceptions, .

’ Federal Trade Commission v. Klesner, 2980 U.S. 19 (1929).

never heretofore’ regarded as .... deception; - bad ~

Cubes 20

‘THe COURT BELOW ERRED IN HOLDING THAT SECTION 411

OF THE CIVIL AERONAUTICS ACT. IS CONFINED TO

"PRACTICES INVOLVING FRAUDULENT INTENT, PALMING

_OFF BY DECEPTION, AND INJURY TO A COMPETITOR,

‘The long dog-eared dictum from the’ Gratz case"

was freshened up by the lower court and became. its

prine ipal reliance in striking down the Board’s order

(R. 423). The diétum was the well known remark of

Mr. Justice McReynolds that the phrase ‘unfair

method of competition” in Section 5 of the Trade Com-.-

mission .Act was ‘‘clearly inapplicable to practices

faith, fraud or oppression...

While that dictum was over-reaching obiter," it

provided. for ‘some years effective ammunition for

assaults upon the efforts of the Trade Commission. ?

But after the October 1933 Term of this Court it was

thought that the Gratz, dictum had been laid quite at

vest. Fifteen years ago Professor¢ Handler” stated

‘ategorically_. that Fedérat ‘Trade , Comnedssion v.:

Keppel & Bro., 291 U.S. 304 (1934), had overruled the

Gratz remark. J’nfair Competition and the Federal

Trade Commission, 8 Geo, Wash. iL. Rev. 399, 408

” Federal Trade Comunission v. Gratz, 253 U.S. 421, 427 (1920).

— Usually forgotten is the fact that what the Justice actiually

held, on behalf of a majority of the Court, was simply that insist.

ence on selling together ‘*such closely associated articles as ties and

hagging”’ was in itself not wrongful, and that a complaint stated

ho case under Section 5 where it did no more than te allege such

sales “without deception, misrepapsentation, or oppression, atid at

. fair prices, to purchasers willing to take it upon terms openly

-announeced.”? 253 U.S, at 428. 5 :

wer

+>]

(1940). Plainly the lower court formd its guidance in -

the wrong precede,

Even be ‘fore the Keppel cane, Mr. Justice Cardozo’s

opinion fora unanimous G ‘ourt, dur Ing the same Term,

in Federal Trade Cominission N. “Algoma Co., 291 US

67 (1934), head: ald beet buried the Gratz dic tum. There

-aT rade C ‘ommission order hi id heen entered —s

“fornia white pine’ ‘The order was sttacked? under

the Gratz theory, onthe ground, among others, that —

adoption of that name had been entirely innocent of -

any intent to-decejve. 291 U.S. at 79. It was shown.

that the name had been-extensiv ig used in one seetion

of the country for some thirty ears and that even |

- the mene os Standards had ienine its use, 291

US. at 71, But Mr. Justice Cardozo’ stated that,

however. innoe wes thre name had been. adopted, Where

it was found that it had the ‘capacity to deceive’’ the -

Commission could prevent its use. even though the

practice does not amount to fre ud’, 291 U.S. at 81.

Then, in the Keppel case, Mr. Justice Stone, again

for a ananimous Court, squarely rejected the Gratz

theory. There the Commission had ordered a stop: to

the sale of penny candy involving an element of

chance. The order was” assaulted on the ground that

there was no violation of any anti-lottery law and that *

everything was fully explained and above ‘hoard so

that there was not the slightest: element:of deception:

and the Gratz dictum was the authority cited: to the:

Court. \ The Court accepted, for the sake of arguinent,

the proposition that there was no violation of any anti-

lottery law and. no element of deception. 291 U.S. at

B09, 313. But: it held, the © commission was pot contined

a ¢

to striking down practices, amounting to common law

unfair competition | the very purpose of using the

phrase ‘unfair method of COMP gfition’’ in the Trade,

¢ ommission Act was to reach beyond the tradition: i

concepts of proscribed trade methods.’ 291 ULS. at

810-512. The Commission had a broad discretion, and _

its “judement was to be given great weight. 291 U.S |

at 314. Hence the Commission: was not limited to

striking at practices involving fraud or deception.

Consistently, in déaling’ with Trade Commission

orders, the Courts of Appe: als, since the Keppel ease,

have rejected argument that Section 5.of.the Trade:

Commission Act reaches only cases of fraud or paliming

off or similar deliberute dec ception. Pep Boys—Maniy,

Moe and Jack v. Federal Trade Commission, 122 F 2d

158, 161 (3rd Cir. 1941) ; DDD Corp, v. Federal Trade

Commission, J25 F.2d.679, 682 (7th Cir. (1942): Charles

of the Ritz vy, Federal Trade C ommission, 143 F.2d 676,

680 (2nd Cir. 1944) ; “Gimbel Bros, y.-Federal Trade

Commission, 116 F. 2d a78, 579 (ond Cir. 1941): see

Koch v. Federal Trade Commission, @06 F.2d 31%, 319

(6th Cir. 1953). And see Reilly v. Pinkus, 388 U.S.

269, 277 (1949) toa aoe ae

The lower. court’s effert to introduce into Section

411 of the Civil Aeronautics Act limitations rejected

under the Trade Commission Act is error.”?

Palpable error, too, is the lower court,’s holding that

the Board’s 6rder is defective because there .was no

2 That Section 411 of the “ Civil ‘Aeronauties Act is at least-

as broad as Section 5 of the Trasie Commission Ace is, Of course,

apparent ommthe face of the two statutory provisions. It was so

found by the Examiner, (R. 190), the Board (RB. 224). and the |

Courtof Appeals (R. 432), and the legislative history, leaves no —

room for doubt (R. Sei. 422). And see note 14; iafra, p. 23.: ;

es - ; ') -

—- _

s_—

showing of ac ctual loss Of businéss sutfe red. by the peti-

tioner, It missed the siguitic ‘anke of the Wheeler-Lea

Amendment té the ‘Frade Commission Act, for not

only does the court cmipnatay the absence of a-showing

of competitive Harm but it@even summarizes Federal

Trade Connission Maladain -Co., 233° US. 643"

(19g1). Which ies a showing of competitive:

i dis though that case remained the law. See the

lower court’s summary of the Raladane case CR. 433).

But ethe competitive injury requirement of the

Raladam ease was legislated out of Section 5 of the

‘Trade Commission” Act by the ee a Amend-

ment in 1938," the substance of which: was teluded

in the. wording of Section 411 of the Civil Aeronautics

“Act a few weeks thereafter.” Since 1938. an argument

that an order suc ‘h as is he ‘re in question should Ye set

aside because no competitor thas been hurt is ‘‘hardly

worthy of serious or extended consideration.”? Eugene

Dietzgen Co. v. Federal Trade Commission, 142 F.2d

$21, 3827 (ith C iv. 1944), cert. denied, 323 U.S. 730

(1944). | | :

a: Oo Rep. No. 1613. 75th Cong., ‘Ist Sess. 3 (1937); Brrr,

-Exberat Trapy, Law axp Practice 79 (1942).

“1452 Stat.111 (1938). On April 6, 1938—a few days after the

enactment on March 31, 1938 ef the Wheeler-Lea Amendment’

to the Trade Commission Act- Senator Truman, Chayrnian of the

subcommittee holding hearipgs #11 the ‘aviation bills, introduced a

‘bill swith gn ame ndme mt.to the counterpart of Section 411 so that

the secti¢n ‘‘eanforms to the recent amendments of the Fede ral

Trade Commission Act.” ° Hearings’ before the Subcommittee of .

the Senate Committee on IntefState. Commetce on Ss. 3659. Fath

Conig.,. Bd Sts. 5 61988) + 83 Cony. Ree. 6726 -(1938). See also,

83 Cong. Ree, 6431 C1938). }

: | 24

I.”

AN UNFAIR PRACTICE OR) METHOD OF .COMPM@@ITION Is’

ABUNDANTLY DISCLOSED BY THE BOARD'S. FINDINGS, -

Section 411 of the Civil Aeronautics. Act, in its

- second sentence, provides that if the Board finds an

unfair or deceptive practice or unfair method of eom-

ae 6 ed - e F . 2

petition it nen order the carrier to cease and

desist.

In the areas Section 5 of the Trade Com-

- mission Act the phrase ‘‘unfair method of competi-

-tion’’.eovers not only common. law unfair competition -

but a much wider range. This Court has been at pains

to point out that Congress - deliberately adopted a

phrase that would not be held to the. limits of. the

common law. Federal Trade Commission vy. Keppel.

~d& Bro., 291 US. 304, 310-312 (1934). Quite recently

it again observed :

cee: ‘unfair methods of competition’ which

are “condenmed by §5(a)-.of the Act, are not. con-

“fined to those that were illegal at common law or

that were condemned by the Sherman Act . »-.

Congress advisedly left the concept flexible to be

defined with particularity by the myriad of cases

from the field of business.”? Federal Trade Com- -

inission V. Motion Picture Adv.Co., 344 U.S. 392,

394 (1953) i

ae by the Wheeler-Lea Amendment of 1938,

Section 5 was extended to inciude unfair or deceptive

practices, as well ‘as unfair methods of competition, the

Commission’s power to proseribe. was. still further

broadened. ‘Section 411 of the Civil Aeronautics Act,

‘especially when considered in its context of special

regulation of a common carrier industry peculiarly

‘20

affected with a public inte rest, is at least! as compre-

hensive as is Section 95 of the Tr ide Commission Act.

Advertising, however innocently adopted, which has”

the ‘tcapacity to deceive?’ is within the Commission’s

power to curb under Section 5. Federal Trade Com-.

mission Vv. Algoma Co., 291 U.S. 67, 81 (1934). oud

usé of a trade -na¢e is simply a form of advertising

and is am aecepted subject of Commission se rutiny.”

Moreover it-is not necessary, to sustain a Commission

prder, that there be a show1 ing of actual deception of

the public; the likelihood of the publice’s being misled -

suffices. Pep Boys—Mann y, Moe and Jack v. Federal

Trade Commission, 122 F.2d 158, 161 (3rd Cir. 1941) ;

‘Charles of the. Ritz V, Federal Trade C ommisston, 143.

F.2d 676, 680- (2nd Cir 1944)." And such likelihood .

Vin 16 CFR. § 3.2240, there are listed 43: Trade Commis-

sion cases involving ssagripoens trade names: of business .con-

cerns, and in 16 C.F.R. § 3.2245 there are 34 cases, which include

some repeats from the above category, of confusing trade names.

of products,

16 The rule is the same Jin common law unfair. competition and

trade-mark law. E.g., Standard Brands vy. Smidler, 151 F. 2d

34. 37 (24 Cir. 1945) (SIt was enough -that an appreciable num-

her of prospective purchasers were likely to be thus misled.’’) ;

U nited | Drug Co. v. Obear-Nester ag , 11° F.2d 997, 1000

(Sth Cir. 1940), cert. denied, 311 U. ” 665 (1940) (‘It is. suffi-

cient if the proof shews that beasdeit are likely to be deceived

or confused.’’); Bunte Bros. v. Standard Chocolates, 45 F.Supp.

ATS, 481 (D. Mass. 1942) (°°... the hasie question involved in all

of them is whether there is likelihood of confusion.’’) ; Esquire,

Inc. v. Maira, 101 F. Supp. 398, 402 (M.D. Pa. 1951) (‘‘ Evidence

of Specifie instances of confusion js* unnecessary.’"). -See_ also,

Stork Restaurant v. Sahati, 166 F.2d 348, 359 (9th Cir. 1948) ;

Majestie Mfg. Co. v. Kokenes, 67 F. Supp, 282, 287 (N.D. Alia.

1946}; Nuts, UNrar Competition axp TRADE- Marks 1049 (4th

a¢

‘Ss

“may properly be determined by the Commission with-

out testimony frorf consumers themsélyes. Cliarles of

the Ritz v. Federal Trade.Commission, su pra ; ef. Neu

American Library of W. L. x. Federal Trade Com-

mission, 215 Fi2d 143 (2nd Cir. 1954). Actually, in

making a judgment as te the-dikeHhood. of consumer

confusion, the testimony of persons observing can-

» sumer behavior ‘is efpecially revealing, and ‘‘without

7 one a

wee

ed. 1947). Moreover, in one of the most recent ca&es in this

fielel the Court of Appeals reversed the District. Court’s refusal

to enjoin ‘because the ‘‘wrong thus ‘consisted of the-fact’ that

‘such @ visitor [at the honie of a purchaser] would be likely "

assume that the clock Was an Atmos. clock.”’ Maste rerafters C. &

R. Co. vy. Vacheron, & Const. Le C2 W., 221 F.2d 464,°466 (2d

Cir. 1955), cert. denied, 350 U.S. 832 (1955). 1

The Lauham Trade-Mark Act, 60 Stat. 7 (1946), 16 U.S.C.

§ 1051-1127, embodies the concept of probable publie confusion as

the key to registration and protection of trade-marks. Sec ‘ion

2(d) prohibits registration of any mark which so resembles a

prior mark Yas to ¥@ likely, when applied to the goods ‘of the

applicant, to cause e¢ nfusion or mistake. ..’’ Similarly, Section

16 authorizes an interference " proceeding on an application when-

ever the applied-for mayk so resembles a prior mark ‘‘as to be,

likely . . . toyeause coyfusion or mistakeé’’ ks

In this sarhe connection, it is abiorthey that. this’ “Court, in

- dealing with the’ Trade Commission Act, has emphasized that it

‘\

was the hope of the sponsorstof the Act that its ‘‘effeet might be |

prophylaetic’? and that it would stop in their incipiency’ prac.

tices which, full- blown, would cause actual harm. Fashion Guild

. Trade Commission, 312 U.S. 457, 566 (1941); Federal Trade

Getta v.\Motion Picture Adv. Co., 344 U.S. 3892, 394-395 -

(1953). These. teachings of this Court mean that the reeord need:

-not contain the corpus delicti before the Board can enter -a

cease and desist order, Rather, there need “be only wa probability |

of confusion. The revord here woes far beyond that.

4 \

Ls) ° * ®

this type of. proof it would be difficult “to show

‘Confusion.’7* ; os. ceo iiaats

. oe “

Even .the common law of unfair competition has.

“always been concerned with the tise of a business name

sufficiently, similar-to a previously established name:

as to. create likelihood: of corisumer confusion. In-

junctive relief is afforded, as distinguished from

damages, even thongh the junior user is quite innocent

of fraud or intent to: deceive,” The very name

“ American’’, where it has come to signify a particular

company, service, or product, as*was shown to be true

in this case (supra\ p. 11), has often been protee ‘ted

aga tinst. confasing similarity of use by othprs.”

- S, ©. Johnson & Son v. Johnson, 28 F. Supp. 744, 749 (W.D.

N.Y. 1939), relief mod. on appeal, 116 F.2d 427 (2d Cir. 1940). °

- See also, Gehl v. Hebe Co., 276 Fed. 271, 272-273 (7th Cir. 1921)

(consumer testimony ‘‘is not easily available, nor indeed necessary

_where the words themselves suggest it. ’) Particularly apt to the

“instant case is Seattle Taxicab Co. v. De Jarlais, 135 Wash. 60,

66, 236 Pac. 785, 787 (4925), HAE the court emphasized,

considering an argument based on ‘the paucity of direct con- .

sumer testimony, that it must be ‘‘remembered that users of taxi-

cabs are largely tourists and nonresidents, that no one likes to.

make complaint, and few will glo so if the result is likely: to in-

volye them im matters which may interrupt their movemenits or.

delay the execnition of their own plans 22.” ; L ‘

1S B.g:, Stork Restaurant v. Sahati, 166 F 24 348, 359-360 (9th

Cir, 1948); Navy Club v. All Navy Club, 85 F.Supp. 679, 682

(D.R.T. 1949); Hotisehold Finance Corp. v. General - Finance

Credit Corp,,. 49. Supp, oad, 542 (DN. 1943). | oe

™ Shaver. v. Heller & Merz. C o., TOS Fed. 824, 824-825 (8th Cir.

/ 1901) (American Ball Blue and American Wash Blue) 5. Americar

Thread Co. «. North American i ayn Co., 33 F. Supp. 616, 618

(S.D.N.Y. 1935). Dennison: Mfg. ¢ . Thomas: Mfg. Co., 94 Fed.

~ 651 (C.C.)Del. 1899) (American xpress) ; ‘American Home Bene-

fit Assu.., Ying ¢, a an ‘Benefit Assn. Ine., 63 Idaho 794, 761. |

“” .

28 ,-

ih short, there was nothing trail blazing in the

Board’s order--as. the lower court seemed to feel

(R. 414-415). The practice proscribed was, indeed, a ~

very close kin to common law unfair ian: tater

pill coneieeinptecsntlshnc gira tutasteiea gece eleitlieacntatata apt dinmnieeatndciao

763, 125 P2d 1010, 1013-1014 (1942); American Oil Co. ¢.

Norkus, 398 Pa. 407, 67 A.2d 868 (1948) (American Oil Company

and American Oil ee Service) ; American Shops v. American

Fashign Shops, 13 N.J: Super. 41.6, 423, 80 A.2d 575, 578 (Super.

Ct. 1951), cert. denied, 7 NJ. 576, 83. A.2d, 379 (1951); Rose n-

berg v. Rosenthal, 135 Mise. 282, 284-285, 238 N.Y. Supp.

62, 64-65 (S.) Ct. 1929). See National “Biscuit Co. vy.

Sheridan, 44 F.2d 987, 988 (C.C.P.A. 1930) (An rican Beauty). -

Here the words ‘‘American Airlines’? do not five a mere geo-

graphie meaning because, as Judge Ryan once. observed, **words

in the public domain may, through continued application to a’ spe--

eifie . . . commercial activity; acquire an association with the,

user and the product or field so. as to create a syndetic meaning

for the word.’’ Conde Nast Publications v. . Vogue School of

Fashion M., 105 F. Supp. 325, 330-331 (S.D.N.Y. 1952).

- Other leading caseg on the use of geo; graphic’ hames as trade

names are, La Tourdine Coffee Co. vy. Lorraine Coffee € 0., 157 F.2d

115 (2d Cir.- 1946), cert. denied, 329 U.S. 771 (1946); C. & W.

Thum Co. v. v. Ackerman, 23K Eed. 3894 (6th Cir. 1919); American

Waltham: Wateh CS" v. United States Watch’ Co., 173° Mass. 85,

53 N.E. 141 (1899) (opinion by Judge Holmes).. °

Though the argument was' rejected by the Board, th® respond.

ent argued. that the name American is not entitled to protection f

because that word has been used in the names of three other. air

carriers (R. 206- 207). The three uses referred to give no suppert

to the respondent's argument, :

(a) One such case was: ihe. jise of the name ‘‘ Air America’ si

by another Jarge irregular carrier like ihe respondent. As to

this, the Board pointed out that-it had a Section 411 proceeding

pending in that case (R. 206), Since the Board's decision herein,

the hotly contested Air America procerding terminated with an

order to cease and desist gwhich was not appealed. The Board's

findings in that case ar@ worth examination, for they further -

delineate the seriousness to the public of the consequences of name

similarity. See Air America Section 411 Proceeding, C.A.B.

Nor can there -be doubt that the findings disclose

confusion of. fhe public. On oeeasion even a labor

union, merchants. and the Post Office spicata

mixed up the tweg@urriers, and there was revealed i

coustant streain- of. confused passengers and would- i

Onier No. ESET), ae a4, 1954; . mimeogeapked Oppnion pp

5, 7-9, Appendix, pp. 13-22, 47-45). ‘ |

* (b) A sécond instance of Uy was that of ** All American Air-

ways” (R. 206). But that carrier is.a’ small loe al sérvice carrie

(R. 206) and while using that, name operated only quite limited .

feeder services emanating from Pittsburgh (R. 172, 300). Further-

more during most of the tine during which it used that name it

carried nothing but may and express--and no passengers with

an experimental pick-up device (R. 172,, 286-289). Some time

after it began a regtlar passenger operation it changed its name

| fo Allegheny Airlines «(R.° 202), *See AIL American Certificate

Renewal Case, C.A.B..Order No, E-7294, April 10, 1953, mimeo-

eraphed opinion p. 4on. 1, Appe 2 iB, pp. 7-8; ALL Anperican

Suspension Case, 10 C-A;B, 24, 25- 56, 35-36 (1949) ; All American, .

Pick-Up, Delivery Service, 2 CLA.B. vA 134-137, 151-152 (1940).

Whatever problem. may have been created, by its ase of the name

SCAN American’? was eliminated before it became of any impdr-

tance. Cf. Oregon- Washington Plywood Co. v.. Federal Trade-

Commission, 194 F.2d 48 (Oth Cir, 1952).° f

(¢) The third use cited by redponder nt was that “of * ‘Pan Ameri:

can World Airways’? (I. 206-207). That carrier, operates only

international and overseas service in areas quite distinet ‘from

the areas served by petitioner (lt. 206-207); actually Pan Ameri

can World Airways and American Airlines do not serve a single

pair of cities in common, Mereover the former und the latter have

heen ope rating under their respec tive name s since the very earliest

’ days ‘of ir transportation the record here is. Silent as to the,

-extent, if any, of public confusion between the: wn but it is reason.

able to assume tliat, with thei ‘ie long standing operations ‘in dis.

tinet areas, any ste ‘hh confision would have become insubstantial.

Itsis protitiess to- speculate as to ‘what might be done were a real

problem to eme rge. Cf. Federal Tr: ade C OMMTNISSION v. Algoma Co.

24} TLS. 67, 79. SI (1934) ; Tilbnan x Bendel v. California Pack

‘

passengers, with some persons insisting even after

_ explanation that the two carriers were the —. In

a ae re ce a i cag = a que 3 ene

ipa Corporation, 63 bd 498, 505-507 (9th Cir. 1933), cert.

We nied, 98 TUS. 638 (1933). eee . : - |

In any event the fact of use ofthe name by others, as it was’

squarely held in Galter v. Federal Trade Commission, 186 F.2d"

810, 814 (7th Cir. 1951); cert. denied, 342. U.S. 818 (1951), is

no bar to a cease and desist order under Section 5 of the Trade

ney Act. And ste Federal Trade Commission v. Algoma

.. 291 U.S. 67, 80 (1934). A fortiori it is no bar liere. |

gee without the abwadant evidentiary support that this reeord

pravides for the findings: of the-Board on the point, it is alto:

gether apparent that.the public understands that thé. petitioner’s

name, when used to identify an air service, nfeans the petitioner

‘and, as the Board found. doe vot merely signify ‘‘the airlines

of this nation or continent generally’? (R. 207)

Finally, it is pertinent to observe that the Board does . not

purport to prevent Tespogdent from making use . of the words

‘*North -Ameri&n’’ in theit geographic sense. If the respondent

wishes to advertise tu the public. that it operates in North America

or in America or that it is an airline gf North Ameriean or of

American nationality. or location, it is fully privileged to do so,

= The findings ofthe Board are themselves quite extensive CR.

201 -205, 221-223) , but they summarize only a part of the evi-

dencesof actual piiblie confusion established in the record. Thus,

although the findings do summarize the incident in whieh an

official of a labor tnion threatened to picket American because

North, American employed non-union labor (R- 222, 224, Exle

AA-4; R. 108, 154-155), the findings do not inelude the ‘unchale »

Jonged fat that a San-Bernardino attorney threatened: to com-

plain tothe Federal Commimications Commission about Ameri:

can’s false advertising of fares nntil he subsequently discovered

_ that hehad heard radio advertisements of North he OE which

he had confused with American (R. 20-21; E xh. AA-4; R. 108,

151-154). Similarly, the findings indicate that newspapers

typically refer to petitioner as ‘* American”’ (R. 206, Exh. AA-2;

R. 102, 137-140), but they do not refer to the fact\that three

newspapers in Los Angeles erroneously reported thaf an Ameri-

~ ean: ticket office had been robbed, whereas in fact it was a North

the practical world of business, and specially in the

rush of air transportation, it would be difficult to con-

ceive of a clearer or inore harmful case of -publie —

confusion from name. similaritv than is revealed in

this case. "eee =

The Board did not speak idly when.it held,

“The maintenance of. high. standards in 1 dealing

‘with the public is expected of common carriers,

‘and the public‘has a right to be free of the incon-—

veniences which tlhw from confusion between

carriers engaging in the transporta Goh 1 of ; Persone |

by air.” (ik. 208). . =

In fact, a basic objective Of Common carrier regula-

tion is provision not only for publi¢ nee essity but also

for public convenience, and Section 411 is to serve that |

purpose just as are otper provisions of the Civil

Aeronauties Act.

American oftice - cK. 28). Nor do the findings set fo¥th the incident

in which a group of men called American to settle a wager of

money as to whether 7% rican and North American were, or were |

not, affiliated airlines (R.91), and omitted is the incident in which

a lady purchased a ty on American, thinking it was North

American, because a friend had: told her that American in the

past, had taken three days, instead of ‘the scheduled“few hours,

to make. a Chicago-Los Angeles trip ‘(R. 61-63, Exh. AA-4; R.°

103, 158-159). In short, the- record is replete with case after case

of actual confusion, and the Board's findings of confusion (R.

201-205) and. probable. confusion’ (R. 210) cannot be challenged.

—,

‘ Ill

THE COURT BELOW EAC EEDED- PROP ER BOUNDS IN Hol DING

THAT. IY COULD REVIEW AND) REJECT THE BOARD'S

DETERMIN ATION THAT THIS PROC E . DING ** WOULD =

IN. THE INTEREST OF THE PUBLIC’

The opinion of the court below reveals that it was

- moved by Federal Trade Commission v. Klesnér, 280

UNS. 19 (1929), improperly to substitute its judgment

For that of the. Board as to what is ‘‘in the interest sof

the pubbie” |

Section 411 of the Civil Aeronautics Act contait.: two.

sentences. The first sentence states that the Board -

may, either on its own: initiative or. on coniplaint,

“Tf it considers that such action by it would be in the ¢

interest of the -public,”* investigate: antl determine -

whether a carrier is engaged in unfair or deceptive

practices or unfair methods of competition. The

second sentence is mandatory: -if, after hearing the

case, the Board finds thatgthe carrier is engaged in

such practices er methods the Board shall order such

‘arrier to cease and desist therefrom.

The lower court read these sentence ‘es as though they

stated that, the Board might institute a proceeding

and then, if it found an unfair practice or method, it

should enter a cease and desist order only if such order

is in the. public interest. The court then interpreted

the Klesner ease to give it, the “court, free reign to

determine what is in the public interest.

We urge that the Klesner case, even if it still has —

vitality under Section 5 of the Trade Commission Act,

is not applicable to Section 411 of the Civil Aero-

* . ale 2 i

nauties Act, or, iti any event, that the lower court

erred in its interpret ation “of the Alesner case,

A. WHAT IS THE KLESNER CASE?

Doubtless beeause the Alesner case has been

generally regarded in recent yeas as of minor if any.

importance” there is a tendency to treat it rather

loosely, and this tendency plainly led the lower court

astray. Never until the present case has it been applied

im any significant way. leaner should be precisely

‘measured. 9 >

The case arose under Section 5 of &.. Trade Com-

mission Act. Subsection (a) of that Section directs

the Commission to prevent unfair methods of competi-”

tion (and, since 1938, unfair or deceptive acts or

practices). Subsection (b) provides that when the

- Commission has reason te believe that a person is using

an unfair method *tand if. it shall appear to the Corfi-

mission that a proceeding by it in respect tlrereof would

be to the interest of the public’’ it shall make charges,

hold-a-hearing, and, if it finds sueh an unfair methog

issue a cease and desist order. ;

In the Alesner case: a. vendetta was W aged between

two merchants in Washington, D. C., which began in

November, 1915,” a little over a year after adoption

of the Trade Commission Act. Their controversy

grew out. of an admitted violation of an agreement

hetween them resulting in threats of personal violence

and leading to one’s s having the other arrested. Out

21 See Handler, Unfair Competition and the: Federal Trade Com-

mission, 8 Gro. Wash. i. Rev. 399, 404 (1940).

22980 U.S. at 23.

FO re get Ie

_ order**—nearly nine } ‘ears after the fuss arose.

of petty spite the latter began to’use the trade name

long in use by the other". The senior user of theiame

promptly. brought suit in the courts of: the - District

of Columbia to enjoin the junior user. But on

Decenthber 25, 1915, after -gypswer to a rule to show

cause and argument gt counsel, the rule to show cause

Was dismissed. No. further proceedings. were had: in. —

that suit and it was finally dismissed four and a half

years later, in May, 19202 Then in “December, 1920,

the senior user of. the name turned to the Trade Com-

mission.” The ‘Commission issued a complaint against

the junior user, proceedings were held, and.an order

to cease and desist from using tle name was entered.

in June, 1922." It was not until May, 1924, that the

Trade Commission brought action .to enforce its

; 1

The Trade Commission’s order was based-on- findings

that customers had been confused. The Supreme

Court, however, in holding that the Commission’s order

should not be enforced, pointed out that the Commis-

sion’s action was not taken until vears of this petty

squabbling had elapsed and held:

23280 U.S. at 24, 28. See also Federal Trade Commission v.

Klesner, 25 F.2d 524. (D.C. Cir, 1928).

24 280 U.S. at 29, n. 7. There was an obyious question as to

whether the _particular ‘trade name was anything other than

descriptive of the business the parties were engaged: in and there-

fore not entitled to protection. See Federal Trade Commission vy.

Klesner, 25 F.2d 524, 525 (D.C. Cir. 1928). .

895 F.2d at 524: 286 U.S. at 23.

“26.980.U.S at 23.

27 280 US. at Be.

3 or

ede) *

“Whatever confusion had originally resulted from

Klesner’s use of the words must hive been largely

dissipated hefore the Commissiow first took action.

If members of the public were in 1920, or later,

seriously interested in the matter, it must have

been beeause. they: had become. partisans 1

the private controversy between Sammons: and -

- Klesner.’’ 280 U.S,-at 29.

~The Court then determined that under Section 5 of

the Trade Commission Act a complaint could be issued

only if it appeared to the Commission that a proceed- .

ing ‘would be to the interest of the public’? and that

if at any time during the proceeding it developed that

the facets show ‘th@ the proceeding which it authorized

“is not in-the public interest‘? the Commission should

dismiss the complaint. 280 U.S.at sv. In this case the

Court held. that the facts’developed at the hearing

“show affirmatively the private ‘character of the con-

troversy”? and therefore that the complaint had beei |

improvidently issued and should have’ been dismissed.

Idem.

At most, therefore, the AJesner ‘case holds merely

that, when ‘the facts as developed disclose only’ a

private squabble and an effort hy a disappointed

litigant to find a forum after his appeal to the civil

courts had failed, the Commission should drop its

proceeding as improvidtntly begun. |

THE RULE OF THE KLESNEK CASE SHOULD BE RECONSIDERED

AND IN NO-EVENT SHOULD IT BE APPLICABLE TO SECTION

f11 OF THE CIVIL AERONAUTICS ACT..

There can be no question as to the wisdom of the

rule that the Prade Commission should be actuated by

a desire to protect the public and should not lend its

process simply to the settlement of a private grudge.

” of

‘&

; | 7 eu. 36 fae Se. *

The difficulty with the Alesner case, however, is that

it asserts the power of judicial review on the issue as

to whether a Commission investigation would be ‘to

‘the interest of the -publie’’.: This would inject the

tive in character and inappropriate. for judicial

examination. .In a sense the Commission's function in

applying the statutory phrase—‘if it shal] appear to

the Commission that a proceeding by it in res rect

}

thereof would be to the interest of the publie’ is not:

unlike the function of the Department of Justice in

- determining whether an anti-trust proceeding should

be instituted, Compare United States v. Morton Salt

—Co., 888 US. 632, 640 et seq. (1950)... The function, in

short, is one essentially executive. in character and

hardly, if at all, susceptible-to the kind of determina-

tion which courts are equipped to make. ~

This is the reason, no doubt, that in thé quarter

century since the decision in the. Alesner case® it ‘has

been of little, if any, significance save to evoke an

occasional form of words in judicial opinions. See,

eg., Parke, Austin & Lipsegmb v.. Federal Trade Com-

~misston, 142. F.2d 437, 441° (2nd: Cir. . 1944), cert.

denied, 323 U.S..753 . (1944), And-it is not hard to

unlerstand why Judge Learned Hand observed, of

the Alesner case, that **. >. it is doubtful whether

today the same answer would be given’’. Meretrench

Corp. v. Federal Trade Commisston, ¥27 F.2d 792; 795

(2nd Cir. 1942).

- It is suggested, thérefore,’ that the decision in the

Klesne r ease that the issue of what ‘would be to the-

interest of the public’ is justiciable should now be

_ reconsidered. | .

In any event, it surely: would be going too far to

hold..as did tue lower court, that such an issue under

Section 411 of the Civil Ae ‘romauties Act is justiciable.

That seetron is in a context very different from that .

of Section 5 of the Trade Commission Act. - The

difference ii context. is strong reason for refusing to

apply the Alesner prec cedent to the Civil Aeronautics

’ Act. °

Whereas the Federal Trade Commission, under its

Act, is dealing with miscellaneous business enterprises

throughout our economy, under the Civil Aeronautics |

Act the ¢ ‘ivil Aeronautics Board applies itself to the

izhly specialized questions of the air transport in-

dustry and is intended by Congress to have an expert-

ness and to be relied upon in the application’ of the

Act to a degree which could never be possible of an

agenev such as the Federal Trade Commission having

only a’sort of roving commission over the whole field

of business. fe ate

One of the very premises of the Civil Aeronauties

Act is that an air carrier and its way of doing ‘business

ave necessarily of concern to the public to a degree not

at all true of ordinary commercial eompanies. That is.

the reason for the require ment of certificates of public

coavenience and necessity, for the detailed regulation

of rates, practices; services, interlocking relationships,

and so forth. “That may be the reason, Ingreover, that

under, Section 411 provision is. made. for a_ private

viewed, the public “interest issue -as’ not subject to court review.

Tie Fevers Trape Com Mission 93-54 :

. _

carrier to become a complaimant, a provision for whieh .

there is no counterpart -in Section 5 ot the Trade Com-

“missron Act.

Moreover, it is one thing to say that a court minht-

he equipped, to dete rmine whether there is any interest

on the part of the public in a squabble between two

shade shops in Washington, D. C.; it is quite another

thing to suggest that a court is equipped +o measure

the extent of the publics: interest in a particular

practice affecting the complex, dynamic and esoteric

air carr rrieY industry with which the Civil Aeronautics

Board is concerned every minute of every day. It is

submitted that the lower-eourt undertook to cope with

a question with which it.is not equipped to cope and

with which Congress never intended that it should be

| concerned, * oe

C. “Er EN IF THE KLESNER ‘CASE WERE APPLICABLE THE LOWER

coU ai MIS APPLIED IT.

— if the Klesner case were to have pen

on a Section. 411 proceeding the lower court plainly

misconceived its appropriate application. .

At most the K lesner ease could mean only that when

Section 411 savs that the Board may proceed Sif it:

_ considers that such action by it would be in the interest

of the publie’’ the Board's determination must be made

in good faith and it. must be inspired by considerations

relating to the public rathe ry than responding simply to

a private grudge. eet

The facts in the present case as found by the Board

and as disclosed -in the reeord ‘overwhelmingly.

demonstrate that, in good faith, the Joard was

prompted by, considerations of publie concern. |

As shawn in its Business Name Regul: ition a serious

public qNoblem chad arisen, especially among large ~

irregular cardiers, of: which thie respondent is ‘one,

affecting thy”publie very directly. See supra, p. 9.

Then~ken the question of respondent's use of the

North American name came to the Board’s attention,

tha Board considered the matter forssome three months

before’ determining to institute its investigation, a-

consideration which dealt not only with the various

pleadings but. also. with. ‘“tevidence by way of

affidavits’? (R. 3,5). ‘This determination to commence:

the proceeding was not contested by the respondent in

the court, below. Indeed, the .particular issue dealt.

with in Stk Klesner case —that is, whether the

facts disclose that the initiation of the proceeding was

warranted—Wwas not even presented by the respondent

to the lower court. (R. 307; see supra; p. 19).

Then after au exhaustive hearing and in agreement

“With its Examiner, who had observed the witnesses and

heard the evidence, and whose Initial Decision dis-

closed a full realization that t#e Board is coneerned .

with the interest of the public (R. 197-198, 418), the

Board specifically and in much more than formal or

-casual det ail retited. the interest of ‘the public to the

problem it dealt with, See supra, pp. 13-14.

That interest is manifest. Air transportation does

not work even today with the smbdothness of older

forms of surface transport ition, as the scene at Any

airpart will testify. Thousands upon thousands—evey

millions—of passengers are either wholly or relatively

unsophisticated in’ the ways of the airtines> whether

the older scheduled carriers or the ne wer irregular »

carriers. The rush and confusion at airports, the

: anes | ee :

difficulties of making reservatious on overtaxed tele-

phone lines, the.ever present uncertainty as to exactly

when a plane wil! leave or arriye, or whether, because

of weather or otherwise, it will have to land at an

‘alternate’ airport instead of its regular airport,

these and+many other characteristics. peculiar to’ the

air ‘carrier industry. present altogether — suffici

difficulties. To inject into this picture the Bete

@lement of confusion, delay, misunderstanding, and ~

inconvenience, resulting from name similarity, and

leading to. calling the wrong carriér, checking at the

wrong counter, meeting the \ wrong plane, and the other

problems recited b\ the Board, is certainly of sufficient

concern to the public to testify to the Board’s good

faith in instituting and carrying through this

proceeding. ate a : Poor |

The lower court, “however: eX xamined the case, and

applied the Klesner decision, without any regard for —

these ‘considerations. It read Section 411 as though

that section stated that the Board could enter a cease’

and desist order only ‘if it finds a practice or method

of competition coutrary to the public interest’’. That

is not what the statute savs—but-even if it did neither

it nor the Klesner ease gives a court any warrant to-

substitute its judgment for that of the Board as thie

-Jower court did in this ¢ ase, Compare Federal Com-

munications Commission v. Pottsville Broadcasting

('o., 309 US. 154, HHi-144 | "i94b) - Gray Vv. Powell, a

U.S. 402, 412, 415 (1941); Universad Camera Corp,

Labor Board, 340 U.S. 474, 488 a Ameer:

= a aes

41.

em CONCLUSION >

For the foregoing reasons, it is respectfully sub-

mitted that the jndgment of the court below must be

reversed and the order of the Civil Aeronautics Be ard

affirmed.

J. RaANpdoL?H WILSON,

Attorneys for Petitioner

CovINGton & BURLING > | ;

Of Counsel, -

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