Amicus Curiae Brief — Hughes Tool Co. v. Trans World Airlines, Inc.

—_"—~—S—<—~;7

INDEX

Interest of the Civil Aeronautics Board ----------

Statement. ---------------------------------- |

1. The Board’s orders- -- ------------------

2. The pleadings--------------------------

3. The decisions below - - - -----------------

Discussion - - - - - ------ anteveeee estas eeeea gee

A. The Board’s orders authorizing Toolco’s

control of TWA and permitting certain

intercompany ‘transactions did not

immunize the conduct alleged in the

complaint and admitted by the default -

B..The application of antitrust remedies in

this case does not conflict with the

Board’s exercise of its powers and

responsibilities under the Federal

Dil BE oe neccekneesnaenneenen

| CITATIONS

Cases: :

California v. Federal Power Commission,

369 U.S. r ane eeeeeeen ne eoseeeeeee

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

(Nos. 443 and 501), 380 U.S. 248__------

Pan American World Airways, Inc. v. United

, States, 371 U.S. 296. --..----------------

Transcontinental & W.A., Control by Hughes

Tool Co., 6 C.A.B. 158_..---------------

Transcontinental & W.A., Further Control by

Hughes Tool Co., 9 C.A.B. 381; 12 C.A.B. p

475-126—72——-1

\

a,

Ir

Cases—Continued

United States v. Philadelphia National Bank, re

374 US. 321_.----------------------_- 9

United States v. Socony-Vacuum Oil Co.,

BO UB, BO concen kcetancnsiswnnen ce 9

Statutes: ©

Clayton Act, 38 Stat. 730 et seq., as amended,

15 U.S.C. 12 et seq.:

Section 3, 15 U.S.C. 14____-___-__ 2 ee 5

Section 7, 15 U.S.C. 18_.__._-___-_____ 5

Federal Aviation Act of 1958, 72 Stat. 731 et

seg., as amended, 49 U.S.C. 1301 et seq.:

Section 401(e)(4), 49 U.S.C. 1371(e)(4)_- 17

Section 408, 49 U.S.C. 1378________.__- 3,

5,9, 11, 14, 16, 18

Section 408(a)(5), 49 U.S.C. 1378(a) (5). 16

Section 408(b), 49 U.S.C. 1378(b)______- 16

Section 409, 49 U.S.C. 1379___________- 18

Section 411, 49 U.S.C. 1381___________- 17

Section 412, 49 U.S.C. 1382_________/_- 18

Section 414, 49 U.S.C. 1384____ 9, 11}14, 16, 18

* Section 1005(d), 49 U.S.C. 1485(d) ieee 7-18

Sherman Act, 26 Stat. 209, et seq., as amended,

15 U.S.C. 1 et seq.:

Section 1, 15 U.S.C. 1--_-_-_-___-__-_ ee

Section 2, 15 U.S.C. 2.--..--__--____- 5

Jn the Supreme Gourt of the Bnited States

OcroBEeR TERM, 1972—

No. 71-827

Hucues Too. Company aND Raymonp M. Hoiiipay,

PETITIONERS

v.

Trans Worip AIRLINES, INC.

OF CERTIORARI TO THE UNITED STATES COURT. OF

ON WRIT

APPEALS FOR THE SECOND CIRCUIT

MEMORANDUM FOR THE CIVIL AERONAUTICS BOARD

AS AMICUS CURIAE

INTERESTS OF THE CIVIL AERONAUTICS BOARD

The Civil Aeronautics Board has an interest in this

litigation to the extent that it involves the scope of the

antitrust immunity conferred by the Board’s orders

permitting Hughes Tool,Company (‘*Tooleo”) to ac-

quire control of Trans World Airlines, Ine. (“TWA”)

and permitting certain transactions between Toolco

and TWA.’ The Boar d’s position is that those orders

did not provide any antitrust or other immunity for

the acts alleged as the basis for TWA’s complaint.

1 We are thus addressing ourselves in this submission to the

issues raised in Part IV of Toolco’s brief (Br. 65-88).

(1)

FEM HR: #2

PION RROD She NETO GES EN

as ot Sees — A 4

FORT Peri nts pe mace Re Rm AO ie pr oo ertens tee ean sneer

——

2

\

Wherr this case was before the Court during the

1964 Term,’ the Board, as amicus curiae, submitted its

views in a memorandum stating that TWA’s com-

plaint and Toolco’s counterclaims (with one excep-

tion) did not raise any issues which lie within the

Board’s exclusive jurisdiction or which should be re-

ferred to the Board for initial consideration under

the primary jurisdiction doctrine. The Board also

stated that, in its view, the Board orders authorizing

Tooleo to acquire control of TWA and permitting cer-

tain transactions between Toolco and TWA conferred

no antitrust or other immunity for the acts upon

which TWA/’s complaint is based. The Board adheres

to these views. The purpose of this amicus memoran-

dum is to resubmit the Board’s prior position on the

question of immunity and any remaining question of

exclusive jurisdiction. We believe that the proceed-

ings below which followed the Court’s dismissal of the -

writs of certiorari have not affected the validity of

that position.* We take no position on any other issues

in the case.‘

*The Court, after argument, dismissed the writs of certiorari

as improvidently granted. Hughes Tool Co. v. Trans World

Airlines, Inc. (Nos. 443 and 501), 380 U.S. 248, 249.

*For the convenience of the Court we have repeated sub-

stantial portions of our prior submission in this memorandum.

‘We have not commented on the antitrust questions discussed

in the Toolco brief because they do not directly pertain to the

powers and responsibilities of the Board, or to its interest in

this proceeding. Moreover, any substantive antitrust issues in

this case appear to be intertwined with the question of the ef-

fect of the default judgment entered against Toolco.

3

STATEMENT

Since the facts have been set forth at some length in

the several opinions of the courts below, and since the

parties have presented the facts fully in their briefs,

we limit this Statement to a brief description of the

relevant Board orders, the initial pleadings, and the

decisions below.

1. THE BOARD'S ORDERS

In 1944, the Board, acting under Section 408 of the

Federal Aviation Act, approved the acquisition of 3

control of TWA by Tooleo through ownership of ap-

proximately 45 percent of the carrier’s stock (T'rans- :

: ‘

continental & W. A., Control by Hughes Tool Co., 6

/C.A.B. 153). The Board ruled that the stock acquisi-

~ tion gave Tooleo control over TWA and that Toolco

was engaged in a phase of aeronautics because it had

the right to purchase a substantial fleet of aircraft, at

least a part of which might be held for resale (td. at

153-156). The Board also found that Tooleo’s control t

of TWA would have no adverse effect upon the public

interest. It expressed concern, however, that ‘‘TWA ¢

might be forced, through the control exercised by :

Hughes Tool, to purchase more [aircraft] than .the

economic operations of TWA require” (td. at 156).

POLAR LIDAR ELIE ABO

; While stating that this possibility was remote (tbrd.),

) the Board conditioned its approval of control by limit-

: ing transactions between the companies to those “in-

: volving complete items of property, the price of which

; does not exceed $200 each, with the further limitation

; that the total annual expenditure involved in such

commercial transactions by either party shall not ex-

t

¢

a

TEE RNIN ATONE ET TET AEP TR

PPO LED DERI: NLA RN I 6 ODOR RNG PET MR AN RL. RRR © 2S) DO Fl MES ote Sy

ceed $10,000” (itl. at 158). In 1950, the Board ap-

proved an arrangement under which Toolco increased

its holdings of TWA stock to approximately 73 per-

cent (Transcontinental & W. A., Further Control by

Hughes Tool Co., 9 C.A.B. 381; 12 C.A.B. 192), sub-

ject to the 1944 limitation upon intercompany trans-

actions (12 C.A.B. at 193).

Since 1944 the Board, upon appli¢ation by TWA

and Tooleo, has entered various orders modifying the

conditions imposed in the basic orders of approval to

permit intercompany transactions in excess of the dol-

lar limitations. These orders permitted Toolco to

sell or lease aircraft and related equipment to

TWA and to participate in the financing of TWA’s

acquisition of equipment. No hearings were held or

adversary pleadings filed when such orders were cn-

tered. The Board found that modification of the eondi-

tion to permit each transaction was in the public in-

terest and, in each order since the end of 1956, that

the proposed transaction ortransactions did ‘‘not vio-

late the original intent of the restriction imposed upon

transactions between TWA and Tooleo.”** Nearly all

of the orders state further that the allowance of the

transaction is not a determination of its reasonable-

5 A-3307-3308, 3509-3310, AX-2031-2032, 2048-2049, 2076-

2077, 2094-2095, 2147-2148, 2157-2158, 2175-2174, 2188-2190,

9202-2203, 2226-2227, 2237-2238, 2245-2246, 2260-2261, 2287-

9289, 2303-2305, A-3403-3412.

©The quoted language, or variants thereof, is found at AX-

2158, 2174, 2189, 2202, 2226-2227, 2238, 2246, 2261, 2288. One

order. in June 1960, specifically stated that the Board's finding

to that effect was made on “the basis of the application and

the representations contained therein” (ACXX-2288).

RARE VERIO BS ALUN RS LATTE MNS BEINN RTR RTT REECE PONE ITE te ITS

BRAS

ee ERAS REP ZRF PERE MARE TOD AITO BSS

, 6

ness for rate-making purposes.’ The last modification

order, entered in December 1960 (A-3403-3412), au-

thorized a financing arrangement under which two

lending institutions assumed actual control over

TWA’s management by means of a voting trust im-

posed on Toolco’s stock.*

2. THE PLEADINGS

In 1961, TWA filed a complaint against Toolco,

Howard Hughes (Tooleo’s sole stockholder) and Ray-

mond M. Holliday (a Toolco officer) (A-1-32), charg-

ing that the defendants had violated Sections 1 and 2

of the Sherman Act and Sections 3 and 7 of the Clay-

ton Act and had maliciously and willfully injured the

business of TWA. The antitrust claims are based upon

the defendants’ alleged misuse of their power to con-

trol TWA’s acquisition of aircraft, including particu-

larly jet-powered aireraft, with the aim of making

Tooleo the sole supplier of aircraft to TWA. The

complaint alleges that in effectuating this purpose the

defendants prevented TWA from acquiring any jet-

powered aircraft for a substantial period (A-13-14), »

7 AX-2082, 2049, 2077. 2095, 2148, 2158, 2174. 2189, 2203,

9997, 2938, 2246, 2261, 2289, 2305, A-3412.

°In addition to those orders dealing with specific transac-

tions. the Board entered an order in 1956 instituting an in-

vestigation to determine whether a “proposed change in

Toolco’s activities in the field of aeronautics”—entry into the

Imsiness of manufacturing and selling jet aircraft—required

further Board approval under Section 408 (AX-2149-2150).

This investigation was terminated in 1958 after Toolco aban-

doned/ the proposed manufacturing project and TWA with-

drew its request that the Board approve purchase of Toolco

aircraft (AX-2425-2426).

6

and that from 1955 to 1960 they barred TWA from

obtaining the financing necessary for acquisition of

such aircraft and allowed only debt financing or such

equity financing as would increase Tooleo’s equity

position in the carrier (A-15-16). TWA alleged that

it was damaged by>its failure to acquire necessary air-

craft at the appropriate time and was particularly

damaged by its failure to acquire jet-powered aircraft

jin 1958-1960; and that it was also damaged by its fail-

ure to obtain financing on more advantageous terms

than were available when it finally was permitted to

do so (A-16, 25-26).

Defendants Tooleo and Holliday filed answers

denying the allegations against them, alleging that the

complaint did not state a cause of action, and chal-

lenging the court’s jurisdiction on the ground that the

orders of the Civil Aeronautics Board dealing with

Tooleo’s control of TWA immunized the challenged

transactions (A-41-51, 99-115).’ (Defendant Hughes

was not served and did not file an answer.)

®Tooleo also asserted six counterclaims against TWA and

additional defendants (A-51-94). These counterclaims, no longer

pertinent, were dismissed by the district court with prejudice

as a result of Hughes’ failure to appear for his deposition

(A-317-323, 32 F.R.D. 604), with the exception of one counter-

claim as to which the district court granted summary judgment

for TWA. The court of appeals affirmed the district court's dis-

position of the counterclaims, except for one which it held the

district court should have dismissed for lack of jurisdiction be-

cause the Board had exclusive jurisdiction (A-344356, 332 F.2d

602, 611-616). This Court’s grant of a writ of certiorari to

review the dismissal with prejudice of Toolco’s four counter-

claims was subsequently dismissed as improvidently granted

(380 Us. 249).

ELLIE LE LEE IIL LE IEE IIT EL ELE LLG LES LST LEP EE ITC OLE

SAIN SURO A a ETO TE ER? i,

|

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7

3. THE DECISIONS BELOW

As a result of the failure of Hughes to appear for

the taking of his deposition, the district court (1)

entered a default judgment in favor of TWA against

Toolco and Holliday on the issue of liability; and

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(2) referred the question of damages to a special

master and retained for further consideration the is-

sues of divestiture of Toolco’s stock interest in TWA

and injunctive relief " (A-317-822, 32 F.R.D. 604, 607-

608). The court of appeals authorized Toolco and Hol-

liday to appeal from the interlocutory order granting

judgment to TWA on two questions: (1) whether the

district court “lacked jurisdiction’? of the treble

damage action by reason of primary jurisdiction over

these matters “residing in the Civil Aeronautics

Joard”™; and (2) whether the Board’s orders with re-

spect to Tooleo’s control of TWA and the various

intercompany transactions constituted a defense to

TWA’s antitrust claim (.A-330, 332 F.2d 602, 605).

The court of appeals held that the Federal Aviation

Act had not superseded the antitrust laws with re-

spect to TWA’s claims, that those claims were not

within the Board’s primary jurisdiction, and that the

Board’s orders had not given Toolco and Holliday im-

munity for their alleged violations of the antitrust

laws (A-333-3438, 332 F.2d at_ 606-610).

This Comt granted certiorari to review the decision

of the court of appeals, but, following argument, dis-

© Toolco’s sale of its TWA stock in May 1966 mooted TW A's

prayers for equitable relief (A-2743, 449 F.2d 51, 56, n. 2).

475--126—72——2

missed the writ as improvidently granted (380 U.S.

248). .

Thereafter, Special Master Brownell conducted a

hearing to determine damages. He awarded TWA

damages of $45,870,478.65 trebled to $137,611,435.95

(Brownell Report, following A-1966). The damages

were awarded to compensate TWA for Tooleo actions

resulting in late delivery and non-delivery of jets, re-

quiring TWA to lease jets instead of permitting TWA

to purchase them, and disrupting TWA’s business.

More specifically, as the court of appeals summarized

the damage award, the damages “consisted primarily

of profits [TWA] lost as a result of (1) diversion of

the six Convairs to Northeast; (2) temporary reten-

tion by Toolco of four additional of the ordered Con-

vairs and the ultimate lease of those jets to Northeast;

(3) diversion of the six Boeings to Pan Am; (4) the

lease, instead of outright sale, of jets in 1959-60; and

(5) late delivery of 47 of the 63 jets ordered in 1956

which would have been avoided if, by the allegations

of the complaint, Toolco had not unlawfully con-

stricted TWA’s financing and acquisition of its own

jet fleet” (A-2763-2764, 449 F.2d 51, 65-66).

Other damage claims were rejected by the Special

Master, and TWA did not seek damages for the con-

tinuing antitrust violations alleged to have occurred

after Tooleo put its TWA stock in a voting trust in

December 1960 (ibid.). The district court adopted and

confirmed the Special Master’s Report over the objec-

tions of both sides (A-2027-2059, 308 F.Supp. 679),

and later awarded TWA attorneys fees and costs (A-

NGF SETA NED PRL A NEEL SVS S ST LYE SOMA LAY IT SIME ER NE LOTTE LE TERE NY TED 2g

9

2060-2072, 312 F.Supp. 478). The district court en-

tered judgment in April 1970 for a total of $145,448,-

141.07, plus interest (A-2073).

On cross appeals, the court of appeals affirmed the

judgment in all respects except the rate of interest

(A-2739-2798, 449 I*.2d 51). The court of appeals did

not reconsider its previous ruling rejecting defen-

dants’ primary jurisdiction and immunity contentions.

DISCUSSION

\. THE BOARD'S ORDERS AUTHORIZING TOOLCO'S CONTROL

OF TWA AND PERMITTING CERTAIN INTERCOMPANY

TRANSACTIONS DID NOT IMMUNIZE THE CONDUCT

ALLEGED IN THE COMPLAINT AND ADMITTED BY THE

DEFAULT

Since immunity from the antitrust laws is not

“lightly implied,” a statutory immunity for specified

transactions does not extend to “other types of agree-

ments or restraints.” Caltfornia v. Federal Power

Commission, 369 U.S. 482, 485: United States v. Phil-

adelphia National Bank, 374 U.S. 321; United States

vy. Socony-Vacuum Oil Co., 310 U.S. 150, 226-227. The

Federal Aviation Act reflects this policy, since the

immunity that Section 414 (49 U.S.C. 1384) grants

for acts done pursuant to Board orders under Section

408 (49 U.S.C. 1378) is applicable only “insofar as

may be necessary to enable such persons to do any-

thing authorized, approved or required by [the

Board’s] order.”’

We submit that neither the Board’s orders author-

izing Toolco’s control over TWA nor its subsequent

“Sane hein ps pes

AGS TTR PRN

7

10

orders with respect to various intercompany transac-

tions provide any immunity for the antitrust viola-

tions that TWA has alleged. The 1944 and 1950 orders

approved the acquisition and the enlargement. of

Tooleo’s control over TWA, But orders authorizing

control do not approve prospectively all things that

may be done in the exercise of control, and the

Board’s orders did not permit Tooleo to utilize its

power as a means of violating the antitrust laws. The

Board's orders did confer antitrust immunity, but

that immunity was confined to the aequisition of con-

trol itself, and did not extend to the manner in which

control was thereafter exercised. As the court below

3

;

;

a

i

B

{ summarized TWA’s complaint, it charged “the outlines

of a tying arrangement, an economic boycott of the de-

tendants’ competitors, and an attempt to monopolize

commeree” (A-343, 332 F.2d at 611). Such conduct

plainly did not constitute acts “necessary to enable”

Tooleo to do ‘tanything authorized [or] approved” by

the Board’s order.

Tooleo now contends that the damage award has

“narrowed the terms of reference from the limitless

realm of the possible to a contained set of facts” (Br.

67) and that this contained set of facts shows that the

Tooleo acts upon which TWA relied to establish dam-

ages were simply normal and natural incidents of the

contro] relationship that the Board approved. We do

not believe, however, that the specifie acts which

served as a basis for the damage award can be exam-

ined without reference to the allegations of the com-

NATE TENA ibe REP Se AT A PRS LIAS

plaint alleging that those aets were performed in

11

furtherance of violations of the antitrust laws. The

damage computations were based upon the assump-

tions that defendants admitted by their default that

the underlying antitrust violations did occur and that

the specific acts which damaged TWA were caused by

those violations. Those assumptions must be deemed

correct for purposes of determining the immunity

questions. Under those assumptions, the specific acts

which damaged TWA were not the normal and natu-

ral exercise of the control relationship approved by

the Board, and consequently they were not given anti-

trust immunity.

Tn any event, we do not believe that an order ap-

proving an acquisition immunizes post-acquisition

managerial decisions under the antitrust or other laws.

The legality of such decisions must be determined on

their own merits,

Sinuharly, assuming arguendo that orders modify-.

ing the basic order of approval ay confer antitrust

1

immunity in appropriate circumstances,” no immu-

nity was conferred by the various modification orders

TWA argues (Br. 145-147) that the Board's subsequent

orders could not have conferred Section J14 antitrust: immunity

on Toolco for veveral ressons: They wefe not issued after notice

and hearing. which is required for >éction 408 approvals; they

did not employ language of approval: and, as modifications of

2 Section {08 order, the only conduet that they could approve

with concomitant immunity would be an aequisition of con-

trol. The Court need not reach the questions which TWA raises

of the Board’s power to confer antitrust immunity through

modification orders, because none of the modification orders in

this case purported to sanction the antitrust violations found to

hove damaged TWA,

12

in this case. The orders approving ‘Toolco’s control of

TWA had prohibited intercompany transactions that

involved more than $200 each or that exceeded an an-

nual total of $10,000. These limitations were imposed

because of the Board’s concern that Tooleo might force

TWA to purchase more aircraft than its operations

required. In waiving this condition for a number of

specific purchases and leases of aircraft, the Board

considered only such matters as the carrier’s need for

the particular equipment and the reasonableness of the

terms of the various financing arrangements as dis-

closed by the applications. The Board stressed the

limited nature of these modification orders by observ-

ing that it was appraising the transactions in light of

the original purpose of the restriction. The modifica-

tion orders were entered solely on the basis of motions,

without hearings or adversary pleadings, and did not

purport to sanction anything other than the specific

transactions involved. The misconduct alleged in the

complaint was no more necessary to the consummation

of those specific transactions than it was to the orig-

‘inal acquisition of control.

Moreover, the TWA charges which Toolco describes

as the “crux” of the complaint involve Toolco’s use of

its control over TWA to prevent TWA from acquir-

ing aircraft from other suppliers and from obtaining

the financing necessary to acquire jets (see A-2762-

2763, 449 F.2d at 65). The complaint states that these

acts were ‘performed in furtherance of the offenses

charged and for the improper purposes alleged”

(ibid.) and were the cause of the injuries to TWA.

_ ————,

13

This restraint upon TW A’s activities was, of course,

neither submitted to nor approved by the Board, and

it was certainly not necessary to carry out any of the

Board’s orders.

Most of the specific items for which damages were

awarded to TWA are unrelated to the various modi-

fication orders. The bulk of the damages was awarded

for Tooleo’s delay in ordering jets from Boeing,

Toolco’s diversion of Boeing jets to Pan American,

Toolco’s diversion to Northeast of 10 out of 30 Con-

vair jets, and Toolco’s actions which interfered with

and delayed the delivery of the other 20 Convair jets

(Brownell Report, Part I). The delay in ordering

Boeing jets, the interference with Convair deliveries,

and the diversions of aireraft to other airlines are not

remotely connected with the subject matter of any of

the modification orders.

The Master did award some damages for profits

which TWA lost by reason of Tooleo’s decision to

lease jets to TWA during 1959 and 1960 instead of

pemnitting TWA to purchase them (Brownell Report,

Part IT). That award was, of course, lased upon the

assumption that this decision was made in furtherance

of the underlying antitrust violations, which were

never disclosed to or approved by the Board.

Although the Board did enter modification orders

permitting TWA and Toolco to enter into short-term

leases of the jets and permitting various limited ex-

tensions of those leases, the Board’s consideration was

limited to a determination that the leases did not’con-

stitute transactions independently requiring Section

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16

munity under Section 414 of the Federal Aviation Act

implies that such immunity must be broadly con-

strued, thereby precluding relief in this case, in order

to avoid an intrusion into matters within the Board’s

jurisdiction, This is not the ease. The Board’s powers _

and responsibilities are only incidentally related to the

subject matter of this antitrust case.

Section 408 of the Federal Aviation Act does re-

quire Board approval before control of an air carrier

may be aequired by another air carrier, by a ‘perso’

engaged in any other phase of aeronautics,” by persons

having other specified transportation interests, or,

since 1969, by “any other person.”’** It was pursuant

to this Section that the Board entered its orders ap-

proving control of TWA by Tooleo, which the Board

found to be a ‘‘person engaged in any other phase of |

aeronautics” as a present or potential dealer in air- |

craft. , |

But the Board’s power under Section 408 to regu-

late acquisitions of control of air carriers does not

oust the courts of jurisdiction under the antitrust laws |

to adjudicate controversies that grow out of or relate

to the exercise of such control. Section 408 requires

the Board to approve only an “acquisition of con-

trol;’’ it does not give the Board continuing responsi-

bility for supervision of a controlling person’s man-

agement of an air carrier. The Board, to be sure, is

cmpowered by Section 408(b) to impose conditions

‘* Section 408(a) (5) was amended in 1969 to require Board

approval of an acquisition of control of an air carrier by “any

other person.” 83 Stat. 103, 49 U.S.C. 1378(a) (5).

17

;

‘if

%

4

b

upon its approval, and it may bar dealings between

the parties or, as it did here, reserve Board supervi-

sion over designated future transactions. Such con-

ditions are ordinarily limited, as they were here, to

specifie classes of transactions, and, indeed, the Board

may approve unqualifiedly, without imposing any

conditions.

Moreover, the Board has no jurisdiction over air-

craft dealers or manufacturers as such, and it is not

generally empowered to regulate the issuance of a

carrier’s securities or its capital structure, or to spec-

ify the aircraft which a carrier can acquire, the tim-

ing of such acquisitions, or any decisions to defer or

refrain from aircraft acquisitions. Indeed, the Board

is specifically precluded from interfering with a car-

rier’s choice of equipment (Section 401(¢) (4), 49

U.S.C. 1371(e) (4)).

Finally, the Board’s remedial powers do not effec-

tively cover the conduct alleged in th complaint. Its

authority to enter cease-and-desist orders (Section

411, 49 U.S.C. 1381) is limited to unfair practices

committed by an “air carrier * * * in air transporta-

tion or the sale thereof,” while the complaint sought

relief against a person controlling an air carrier, and

asscrts unlawful action affecting the sale of aircraft,

not air transportation. Toolco contends (Br, 71-72)

that the Board may reexamine a prior order approv-

ing control and cancel it or otherwise remedy undesir-

able consequences of the relationship if, upon inquiry,

it finds abuses of control which require such corrective

action in the public interest (ef. Section 1005(d), 49

™ =e —— aT

18

U.S.C. 1485(d)). We assume for present purposes

‘that the Board has this power and that it may also

consider a party’s past conduct in the exercise of con-

trol when passing upon further requests for Section

408 approval. But since the Act does not impose any

duty on the Board affirmatively to monitor and super-

vise all aspects of the control relationship, the Board’s

limited authority over Section 408 relationships should

not of itself serve to insulate the controlling party from

antitrust liability or oust the courts from jurisdiction.

Indeed, the availability of antitrust or other judicial

remedies may he regarded as additional safeguards for

the protection of the public interest.

All of this is not to suggest, as Toolceo implies, that

Section 414 is to become an empty assurance to those

who obtain approval. of transactions subject to See-

tions 408, 409, and 412 of the Federal Aviation Act. It

is rather to support the salutary principle that Sec-

tion 414 is not to be construed by recipients of such

approvals as a blanket authorization to conduct their

subsequent affairs with reckless disregard of the anti-

trust laws. Here, indeed, Toolco is not being subjected

to penalties because of its acquisition of control of

TWA, nor, we believe, could it be. The sanctions relate

to subsequent actions, the antitrust aspects of which

were never brought to the attention of or considered

by the Board.

Under such cireumstances, the mere existence of

Board jurisdiction with respect to“some aspects of

aviation neither supersedes the courts’ power to

award relief in this case nor requires that the scope

_

19

of immunity be interpreted in a manner which would

have that effect.

Respectfully submitted.

ErRWIN N. GRiswop,

Solicitor General.

THomas E. KAavuPEr,

Assistant Attorney General.

ANDREW L. Frey,

Assistant to the Solicitor General.

Cart D. Lawson,

GEORGE EDELSTEIN,

Attorneys.

§

FS

*

&

:

eee:

Pas BAG

R. TENNEY JOHNSON,

General Counsel. ‘

O. D. OzMENT,

Deputy General Counsel.

WARREN L. SHARFMAN,

Associate General Counsel,

Iitigation and Research.

3 Rozert L. Toomey,

) Attorney,

Civil Aeronautics Board.

[A ALAA IIOP

: SEPTEMBER 1972.

U.S. GOVERNMENT PRINTING OFFICE: 1972